REPORT ON CROATIAN AGRICULTURAL PRODUCER PRICES
Prepared by:
Ramona Franić and Ornella Kumrić
University of Zagreb, Faculty of Agriculture
Department of Agricultural Economics and Rural Sociology
Zagreb, 2008
Contents
Introduction
Methodology
Data sources and availability
Analysis
Trends in producer prices of agricultural products in Croatia
Price analysis by sectors
Comparison of average agricultural producer prices between Croatia and EU countries
Agricultural commodity prices in Croatia and other Western Balkan countries
Conclusions
References:
Annex
Introduction
Since the beginning of 1990s, prices of agricultural products in Croatia were determined predominantly by market influences, and less by the state intervention through a system of production support and guarantee prices (for industrial plants, wheat and milk), and other forms of state intervention (tariffs and import duties). From 1995 to 1998, agricultural price policy was based on a combination of producer and input subsidies, and high levels of tariff and quantity-based import protection. The system of floor prices and subsidies remained fairly stable and support measures focused on wheat, oilseed crops, sugar, tobacco, milk production, and fertiliser and seeds. Consumers bore most of the cost of these policies, in that they were obliged to pay high prices for raw and processed agricultural commodities. The budgetary cost to government was small, even if the economic cost was high.
Price policy reform was initiated in 1998, in conjunction with the reform of trade policy required for WTO membership. To compensate farmers for the reduction of import protection and associated floor (producer) prices, area payments were introduced for most major crops.While the thrust of these reforms are an improvement in policy, with the price distortions from domestic support being removed to a great extent, and consumers theoretically benefiting from lower food prices, there are still significant problems which have not been addressed at all. Price distortions still exist because of the highly variable levels of external protection referred to above, and the numerous changes associated with the design and implementation of these reforms has inevitably created uncertainty among producers. Administratively, the complexity of these policies, with more than 50 different forms of crop payments and 70 different forms of payment for livestock production, has also raised administration costs.
In 2003 new price and subsidy policy has started, trying to adjust as much as possible to trends of the Common Agricultural Policy of the EU. The main purpose of this reform was to increase competitiveness of Croatian farm producers by stimulating commercial producers and larger production units. The system of area payment was therefore modified by additional criteria (production units, farm register) and the capital investment model was introduced as a structural support measure. However, these measures have not resulted with greater increase in price competitiveness till 2005.
In this report we analyse the producer prices of the main agricultural commodities in Croatia and compare it with EU average, producer prices in neighbouring countries (Slovenia, Hungary) and Western Balkan countries, trying to understand the position of Croatian agriculture and its chances on current European and future (enlarged) European market environment.
Methodology
The first part of the report provides official data of the Croatian Bureau of Statistics (CBS)on average producer prices of agricultural commodities. Average producers’ prices are calculated on the basis of collected data on quantities and values of agricultural products.These data have been collected,analysed and compared with the FAOSTAT database for the period 1995-2005, and so for the main agricultural commodities: cereals (wheat and maize), oilseeds (soybeans, sunflower, rapeseed), sugar beet, potatoes, apples, cattle meat and cow milk.The prices were expressed in EUR/t, by the official average annual exchange rate of the Croatian National Bank (see Annex, table 1).Short comments on trends of agricultural producer prices in Croatia in the period 2006-2007 are added at the end of sections.
In the second part we compare Croatian agricultural producer prices with European average and prices in neighbouring countries – members of the EU (Slovenia, Hungary). The prices were collected and price averages calculated for three selected years (1995, 2000 and 2005) for soft wheat, maize, tobacco, sugar beet, potato, apple, chicken meat and cow milk, and expressed in EUR/100 kg, as in EUROSTAT database, which was the data source for this analysis.
The final part of the analysis is comparison of Croatian producer prices with prices in Western Balkan countries: Bosnia and Herzegovina, Macedonia, Serbia and Albania, in the period 2000-2005. The analysed commodities in this part of the report are: wheat, maize, oilseeds, sugar beet, tobacco, potatoes, apples, grapes, cattle meat, pig meat, sheep meat, chicken meat, eggs and cow milk. Prices are expressed in EUR/t.
Different analysed periods (or chosen years for the analysis in the case of Croatian-EU comparison) and also commodity coverage in all three parts of the report are the result of data availability and different data sources available at the time of writing the report.
Data sources and availability
The data analysed in the first part of the report are provided by the Croatian Bureau of Statistics (CBS), and compared to the FAOSTAT database. FAOSTAT provides rich database, however in some cases these data do not follow the CBS data, especially in the last year of the analysed period. The differences arise probably due to a change in data collection methodology of the CBS. In 2005, the CBS has for the first time gathered the mentioned data concerning private family farms by using the interview method done by interviewers on a selected sample. This meant abandoning a long lasting method of collecting data by using the estimation method done by agricultural estimators on the basis of cadastre data.
The data source for the comparison with the EU prices was EUROSTAT. Due to limited data availability, the average EU prices were calculated only for commodities and countries covered by EUROSTAT.The same source was used for comparison with Slovenian and Hungarian agricultural prices.
Comparative analysis with other Western Balkan countries was made on the basis of papers presented at the 4th Conference of Slovenian Society of Agricultural Economists (DAES, 2007) except Albania. For Albania, the price estimation was made on the basis of FAOSTAT data, relative to a Croatian price trends, and expressed in EUR. Due to a lack of data, Montenegro was left out of the analysis.
Analysis
Trends in producer prices of agricultural products in Croatia
In the period 1995-2005 producer prices of agricultural commodities in Croatia show constant rise, due to input price increase and exchange rate trends (EUR/HRK, see Table 1 in Annex). Basic indices of agricultural producer prices are shown in the following table:
Table 1: Basic indices of agricultural producer prices in Croatia, 1995=100
1995 / 1996 / 1997 / 1998 / 1999 / 2000 / 2001 / 2002 / 2003 / 2004 / 2005 / 2006 / 2007100 / 103.3 / 107.2 / 105.5 / 102.9 / 106.2 / 115.0 / 116.7 / 115.4 / 121.6 / 122.3 / 120.0 / ...
Source: CBS
As it is shown in the Table 1, more rapid growth of producer prices is registered after 2000, as a result of Croatian agricultural price policy and greater influence of international markets (market liberalization) after the accession to the WTO.
Price analysis by sectors
After a short period of growth till 1996/1997, average producer price of wheat shows decline in the past decade. The highest purchase prices have been registered during the periods of the highest purchase (July, August), opposite than economic logic suggests. Until becoming them member of the WTO, Croatian Government applied high tariff protection for wheat, enabling high price of wheat on domestic market, but since 1999 the price decreased (also because of higher production as a result of reintegration of Western Slavonia after the war).
The greatest share of maize production is spent as livestock feed. Rather big part of maize production is stored on family farms, and less is offered on the market. With certain annual fluctuations, the maize price rose till 1996, and than again after 1998. The prices of wheat and maize in the whole analysed period showed decreasing trend, while for barley they've been increased.
Fig. 1: Wheat prices, EUR/t
Source: FAOSTAT and CROSTAT
Fig. 2: Maize prices, EUR/t
Source: the same as in Fig. 1
Prices of cereals in 2006 in Croatia were somewhat lower than previous year (with an exception of rye, whose price increased for about 27%), and so for about 10% in average for wheat and maize. On the contrary, in 2007 the prices of cereals increased for almost 40% compared to 2006 (24.1% for wheat and even 97.5% for maize), due to higher production costs and bad weather conditions that caused decreased yields.
The prices of oilseeds (sunflower, soya and rapeseed) decreasedin average during the whole analysed period (1995-2005), with some annual oscillations. The sunflower price fell for more than 30%; the rapeseed price was about 25% less in 2005 in comparison to 1995, while the price of soybean fell for almost 20%.
Fig. 3: Soybeans prices, EUR/t
Source: the same as in Fig. 1
Fig. 4: Sunflower prices, EUR/t
Source: the same as in Fig. 1
Fig. 5: Rapeseed prices, EUR/t
Source: the same as in Fig. 1
Although fluctuated considerably, Croatian cereal and oilseed prices have been more dramatically declining in the period 1995-2000, whichin part reflects the change in the support mechanism, though in its first year of operation the new, lower, floor price was not approached, whilst in previous years the average market price had been determined by the official support price.Unlike of cereals, oilseeds register continuous increase of producer prices in the next two years (in 2006 the prices of sunflower rose for 4%, and of rapeseed for almost 32%; in 2007 the oilseed prices were increased for about 50% in comparison to 2006: the sunflower price growth was 101.38%, for soybeans 57.13% and for rapeseed 5.01%).
The guarantee price for sugar beet has formally been applied till 2000, but in practice the state has never purchased sugar beet to correct the price below the guaranteed level. After 1999, the producer price of sugar beet rose till 2004 for about 36%, as a result of increasing production costs.
Fig. 6: Sugar beet prices, EUR/t
Source: the same as in Fig. 1
However, since 2005 the prices of sugar beet have been decreasing, so the price index 2006/2005 was 98.8 and 2007/2006 it was 94.35.
Agricultural policy for tobacco has been based on determination of guarantee price and production support. Since the guarantee price was considerably lower than market price, the guarantee price has never been applied in practice. The production price remain the same in the period 1995-2005, but with the period of declining till 2000, and rising after thattill 2006 (price index 2006/2005 was 106.01). However, in 2007 the price decline was registered for almost 30% (price index 2007/2006 was 70.14).
Data on producer and market prices of vegetables show the trend of constant rise, but, the numbers differ significantly if compare FAOSTAT with CROSTAT sources. For example, FAOSTAT registers very high growth of tomato price in the period 1995-2005 of 268%, or of about 82% in the period 1998/2005, while the CROSTAT registers less rapid growth in the same period (1998-2005) of about 14%. The situation for potato is even more confusing, showing price growth of 141% by FAOSTAT data, while Croatian statistics show opposite trend – declining the potato price since 1997, resulting in price fall for about 8% during the analysed period.
Fig. 7: Potatoe prices, EUR/t
Source: the same as in Fig. 1
According to official Croatian statistics, the growth of vegetable prices continued during the next two years. So in 2006 the prices of potatoes rose for 23.44% with regard to 2005, and slightly lower they were in 2007. The prices of other more important vegetables (carrots, onion, cabbage, tomatoes, paprika) in 2006 rose for 16% (unless the prices of beans, where the price decrease were registered for about 16%), and in 2007 for about 20% compared to previous year (although the prices of tomatoes were lower for about 10%, and of cabbage even for 25%).
Fruit prices show modest increase in comparison to the vegetables prices. Apple, as the most important Croatian fruit, shows the production price decrease till 2002, than rise till 2005. In the analysed period 1995-2005 the FAOSTAT recorded the apple price decrease for about 6%, while Croatian statistics for the same period recorded decrease of almost 16%. Differences between FAO and Croatian statistics are not so big if we compare lemon prices (decrease of 30% or 37% respectively), as well as prices of oranges (where considerable growth is recorded, see the excel files in the Annex).
Fig. 8: Apple prices, EUR/t
Source: the same as in Fig. 1
In the next two years the prices of apples fell for about 10%, and it was also registered the prices decrease for oranges and lemons..
The price of grapes shows constant growth during the analysed period, but Croatian statistics show the producer price growth of about 150% in the period 1995-2005, (till 2007, the prices of grape fell for about 5%)while the FAOSTAT registers the increase of 89% in the same period. By introducing the capital investment support, we expect the fruit producer prices to decrease in a longer period, showing growing competitiveness.
The meat producerprices show different trends during the analysed period, as between commodities, so between the data sources. Data that FAOSTAT provides on cattle meat prices are slightly above the level provided by Croatian statistics (with the exemption of 1995, where the situation is just opposite), and only in past few years these differences were disappeared, probably due to harmonization of statistical methodology for data providing and better data availability in Croatia. Consequently, the trend in prices by the FAOSTAT is increasing in the analysed period (+13%), while on the basic of CROSTAT the trend is declining (-36%).
Fig. 9: Cattle meat prices, EUR/t
Source: the same as in Fig. 1
Considerable different data are provided by different sources on sheep meat prices: FAOSTAT gives from two to three times higher level of producer prices during the analysed period. As a result, conclusion on the basis of FAO data is that sheep meat prices rose for 28%, but due to Croatian data, prices fell for 17%. For chicken meat there is also great difference between the price level recorded by FAO and CBS: although the trend is similar (decrease for 20-30%), the level of chicken meat prices provided by FAO is for more than 30% higher than by CROSTAT. Similar situation is noted for pig meat, as well.
Except for the first year of the analysed period, producer prices for cow milk are rather harmonized, if we compare different data sources. However, the FAOSTAT prices are somewhat higher than of CROSTAT, and the trend of price growth is higher (growth for more than 22%, while according to CROSTAT this trend is 14%).
Fig. 10: Cow milk prices, EUR/t
Source: the same as in Fig. 1
Croatian statistics show rather stable producer prices for cattle meat and cow milk also in 2006 and 2007. The price of cattle meat decreased for less than 10% in 2006 compared to 2005 and remains at this level in 2007. The cow milk price were in 2006 lower for about 2% compared to 2005, but in 2007 it rose again (for 4% in comparison to 2006, or for 2% in comparison to 2005).
The prices of other livestock products also fell in 2006 for 5-10% in comparison to 2005, and, with an exception of sheep meat, sheep milk and hen eggs, continue to decrease slightly in 2007 as well (for example, the price of pig meat in 2007 was for 12% less than in 2006 and for 18% if compared to 2005).)
In average, producer prices for crop products increased in general between 2000 and 2005. The highest increases in this period were recorded for citrus fruits, wine grapes and tomatoes. With regard to livestock products, price increases were the highest for cow milk and sheep and goat milk (according to ARCOTRASS Consortium, 2006). Since in 2005 the CBS adjusted the reporting forms to the EU standards (by the Handbook for the EU Agricultural Price Statistics, 2002 version), it is reasonably to expect the greater compatibility in databases, even with FAO statistics.
Comparison of average agricultural producer pricesbetween Croatia and EU countries
On the basis of available data from Eurostat, average producer prices have been calculated for EU countries, which enabled rough comparison between producer prices in EU countries and Croatia (using the Croatian Bureau of Statistics as a data source). Basic findings are as follows:
CEREALS
Average soft wheatproducer pricein Croatia was equal to the price in EU countries in 1995 and in 2000. In 2005it rises to 12.59 EUR/100kg,which was for about 2.4 EUR/100kg higher than the price of soft wheat in EU countries.
Fig. 11: Average Soft wheat prices (EUR/100kg)
Source: CROSTAT and EUROSTAT
Due to available data, we can conclude that Croatian wheat production is rather competitive in comparison to EU average, but not so competitive in comparison with neighbouring countries, especially with prices in Hungary (see Fig. 12), probably due to a problem of land use (the UAA per capita in Croatia is 0.27, which is under the average level of UAA in the EU-25 where it is 0.36 ha, Rednak, 2008)).