Analysis: What Will Croatian Agriculture Look Like by the End of This Decade?

Smarter, a specialized consulting firm for agriculture and the food industry, developed the proposal for the Strategy of Croatian Agriculture – Strategy of Turnaround by 2030 back in 2018, and we established the primary goal of the agricultural policy of the Republic of Croatia. According to our  strategy, agriculture in the Republic of Croatia should grow by 14 billion kuna by 2030, and the total value of production should reach 30 billion kuna. The two central axes of this growth should be achieving self-sufficiency and increasing the competitiveness of Croatian agricultural products.

– By raising self-sufficiency to a higher level, agriculture in the Republic of Croatia can grow by 8 billion kuna by 2025, and there is also a planned and necessary increase in the production of competitive agricultural products for export, which will increase the value by an additional 6 billion kuna by 2030. Necessary investment in Croatian agriculture is planned at just over 600 million euros in the first three years of implementing the Strategy of Turnaround for Croatian Agriculture, along with investments in research and development, employment and education, and other measures through the CAP, as well as other European Union funds –  experts from Smarter note.

In 2020, the Ministry of Agriculture, in its proposed Strategy for Croatian Agriculture “More than a Farm,” which was developed after analyses of the World Bank’s state, also determined that Croatian agriculture would grow to a value of 30 billion in agricultural production by 2030. When the financial package secured for Croatian agriculture in the new multiannual programming period of the European Union was announced, we should not have any doubts that the conditions for ensuring the set, or planned strategic goals have been created. Moreover, for the period from 2021 to 2027, 5.17 billion euros should be paid into Croatian agriculture from the European Union budget, which is multiple times more than the necessary 600 million euros of investment funds.

But is it really so?

Croatia, like all EU countries, is now in the final phase of developing the CAP Strategic Plan for the Republic of Croatia, which is the most important document for the medium-term period, determining the financial envelopes, measures, and interventions that will be implemented and how financial resources for agriculture will be directed. This plan will largely determine the direction in which agricultural production will develop by the end of this decade.

In the Strategic Plan, in the part related to the Rural Development Program, out of a total of 3.42 billion euros, 9.95 percent, or 340 million euros, is allocated for investments in agriculture for the entire five-year period. In the programming period from 2014 to 2020, only from the rural development measures for investments (Measure 4 and Measure 6) directly intended for agriculture, 644,806,046.77 euros were approved, and a total of 437,015,181.36 euros have been paid out so far, but the expressed needs for investment in agriculture, through requests for investment support, were multiple times higher, amounting to over 2.18 billion euros.

Increasing competitiveness and productivity cannot be achieved with such low investments in investment and development. Therefore, it is questionable whether the goals of the Strategic Plan for Agriculture for the period from 2023 to 2030 can be achieved with such planned investment amounts. Why such low investment funds are planned in the Strategic Plan is a big question. The answer largely lies in the Common Agricultural Policy itself, which has been discussed in Brussels for the last three years and which has become even more “green and rural,” and less oriented towards production, emphasize Smarter.

Croatian agriculture, by all calculations and indicators, lags the most in productivity and competitiveness, while in environmental-climate issues related to agriculture in the Republic of Croatia, better results are achieved (in biodiversity, greenhouse gas emissions, pesticide use, mineral fertilizers). Rural areas, on the other hand, are facing negative demographic trends, depopulation, and a lack of basic infrastructure.

Experts from Smarter believe that only by increasing agricultural production, increasing the income that farmers earn, stable incomes, and stable jobs in agriculture can the possibility of stopping negative demographic trends be opened. If residents can live well from their work in agriculture, they will not leave rural areas. It is unlikely that building communal infrastructure will influence the decision to stay in rural areas. People need jobs, employment, decent and stable incomes from agriculture and other rural activities.

Farmers expect that the Strategic Plan will take into account all the needs of the most important sectors of agriculture and that through it, well-planned measures will determine the direction of agriculture in the period from 2023 to 2027, with the aim of increasing productivity and competitiveness to achieve the plan of raising the value of agricultural production from the current over 19 billion kuna to the planned 30 billion HRK by 2030. Stakeholders in the agricultural sector largely agree that the Ministry of Agriculture has made efforts to meet all the needs of key sectors and that future measures should be directed towards those sectors that can be a lever for the development of agriculture in the next programming period.

At numerous consultations with key players from the sector, many dilemmas were expressed, and among the three key topics that were intensely discussed are designing eco-schemes for farmers, how funds for production-related support will be distributed, and how much funding will be allocated for investments in agricultural production, as well as in the processing of agricultural products.

Will the funds be well and fairly distributed?

Experts from Smarter believe that the Strategic Plan can be better adapted to the needs of production, especially when it comes to investments. It is expected that even during 2022, when the Strategic Plan will be aligned with the European Commission, it will be possible to influence and define and adjust individual measures, around which there are currently different thoughts, or that by the end of next year, the Republic of Croatia can receive a quality Strategic Plan for the distribution of European Union funds.

The entire sector faces many difficult questions, and the answers to them are not fully defined by the presented Strategic Plan:

How to achieve complementarity between improving competitiveness and improving ecological performance while simultaneously supporting sustainable rural areas and resilience to climate change?

How to achieve a value of agricultural production in 2030 amounting to 30 billion kuna with an increase in livestock – cattle and pig farming, while reducing greenhouse gas emissions?

How to ensure further strengthening of the competitiveness of crop production with reduced use of pesticides and mineral fertilizers?

Where and how to increase organic production?

We are convinced that there are enough funds, but they need to be allocated very well, smartly, rationally, and effectively to be able to say that Croatia will have competitive agricultural production by the end of this decade.

– If the potential of the agricultural-food sector for the national economy is to be fully realized, it would be important to improve all productivity factors in agriculture and in the integration of the value chain. Improving productivity means increasing yields and reducing costs, increasing the value of production per unit of labor. Furthermore, productivity growth can reduce large trade deficits for both primary and processed products and improve the utilization of production capacities, while simultaneously creating economic opportunities for the development of rural areas. Productivity, in general, affects the standard of living and well-being in society and usually increases the overall national income and the income of those participating in the distribution of newly created value. For this, the most important measures are investments in agricultural production, investments, and in this direction, the proposed Strategic Plan needs further adjustment – is the conclusion of Smarter.