Dairy Production Subsector

L A M P
Linking Agricul tur al Agricultur tural Markets to Producers
Dair y Production Dairy Sub sector Subsector

Market Profiles and Competitiveness Inventory Report
Subsector Profiles September 2004 Revised October 2005
PREFACE The Dairy Production Subsector Profile is 1 of 10 in-depth assessments of different agricultural products conducted by the Linking Agricultural Markets to Producers (LAMP) Project team. This subsector profile is available in its original form in the compendium Market Profiles and Competitiveness Inventory ReportVolume 2, A Subsector Analysis, published in September 2004 under the Rural and Agricultural Incomes with a Sustainable Environment (RAISE) Contract No. PCE-10099-00001-00. Complete information about all the subsectors that the LAMP Project team examined appears in the Volume 2 report. Individual profiles of the other nine subsectors are also available on request. For more information about the LAMP Project, please contact: USAIDLAMP Josipa Stadlera 24 71000 Sarajevo Bosnia Herzegovina 387 33 273 590 ARD, Inc. Ms. Jennifer Ward, Project Manager 159 Bank Street, Suite 300 Burlington, VT 05401 Email: jward@ardinc.com Tel: (802) 658-3890
ACKNOWLEDGMENTS This report was prepared by the USAID LAMP Project team. Information contained in the report was gleaned from many sources: Personal interviews with producers, processors, producer associations and cooperatives, Institute of Agriculture BiH, donor organizations, Chambers of Commerce, FBiH Custom Administration Office, relevant complementary projects, and others. EC Agribusiness and Textiles in BiH, Phase I Agribusiness Report, prepared by Agrisystems and RES&Co. Development Studies for Sectors with PotentialFood Sector Study, Bosnia and Herzegovina, prepared by GTZ. Bosnia and Herzegovina Agribusiness StudyFinal Mission Report, prepared by IFC South East Europe Enterprise Development (SEED). A Market Intelligence Brief for the Agribusiness and Food Processing Sector, prepared by USAID Business Consulting Sarajevo. Reports prepared by the U.S. Department of Agriculture (USDA). Various information available on the Internet. Extrapolation of data and conclusions drawn by the LAMP Project team.
Dairy Production Subsector

1.0 OVERVIEW Milk production is considered to be strategically important to the agricultural industry and the people of Bosnia and Herzegovina (BiH). More than 80% of the territory is suitable for raising livestock; hence milk production. Livestock rearing is the most prevalent form of agricultural production, employing a large percentage of the farming population. Improving conditions for the dairy sector has been a priority of the BiH government since the war, with an aim to provide for domestic consumption, products for export, and overall economic development. 1.1 Prewar Status In prewar 1991, total annual milk production was estimated at 875 million liters (L). Annual average consumption of fresh milk per capita was estimated to be 110.9 L, 6.3 L of yogurt, 7.4 kg of cheese, 0.6 kg of butter, and 3.6 kg of cream. (See sidebar and Table 1 for other characteristics of prewar milk production in BiH.) Main Characteristics of Prewar Milk Production
Small milk producers dominated. Most farms had no more than three cows. Low milk production per cowabout 1,400 L/year (3.8 L/day). Limited organized collection and marketing of milk from small farms (1216%). Most milk was for family use and the sale of homemade products in local markets. Genetic potential of native cows for milk production was very low. Cattle selection and genetic improvement were not developed in the private sector. State farms had higher production per cow. These farms supplied only a small percentage (29%) of total milk production in relation to public consumption; see Table 1. State farms received government subsidies. Small private farms were not a development priority and received no assistance. A great part of agricultural resources and production was organized through large agribusiness conglomerates (agrokombinats). These conglomerates integrated inputs and services with agricultural production, processing, marketing, and exports.
Table 1. Prewar Milk Indicators in BiH Development Indicators Amount Number of cows 623,000 head Total annual milk production 875,000,000 L Annual milk production per cow 1,410 L Milk bought from agrokombinats 105,000,000 L % of total milk production sold to dairy processor 12 State farms share of total milk produced 29% Farmers share of total milk produced 71%
Source: BiH Statistic, 1991.
Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile
1.0 Overview (continued)

SWOT ANALYSIS FOR DAIRY PRODUCTION Strengths Foreign direct investments in dairy industry Strong existing processing capacity Favorable conditions to enter milk production Consumer preference for domestic dairy products Regionally recognized cheese types Economically competitive forage production Readily available labor at competitve cost. Weaknesses Small farms and segmented land holdings Farmers lack of knowledge of improved practices, such as feed formulations and herd management Poor infrastructure (roads) Poor quality of raw milk; poor sanitary conditions Low income and, hence, buying power of general population Low production per cow Obsolete milking technology Under-used processor capacity at current levels of production Processors lack of management know-how Insufficient cold-chain capacity and poorly organized milk collection in some areas Expensive milk production (per liter) owing to uncaptured economies of scale Lack of quality management systems Undetermined legal status of producer/farmers makes it difficult to get loans Late or lack of payment to farmers for milk produced Poor connection between extension services and producers and between agriculture institutions Nonexistent programs to improve cattle breeding and breeding centers and markets for selling cattle with improved genetics. Opportunities Processing capacity available to support increased raw milk production Potential to replace imported dairy products Exploit the market for recognized cheese types Low-cost potential to increase milk yields and quality Geographic advantage for producing short shelf-life products. Threats Rural populations migrating to cities Aging farm population Poor rural sector liquidity Competitive equalization price supports for domestic products not likely to develop Institutions for quality control (export-import) and regulatory oversight are not developing adequately All levels of government jurisdiction will continue to delay unifying milk price and quality legislation (i.e., FBiH floor price for raw milk). 2 Market Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile
1.0 Overview (continued) Impact of War on Milk Production

Number of cows reduced by 60%. Total milk production reduced by more than 60%, in parallel with a decline in milk production per cow. State-owned dairies not able to modernize their processing facilities. Dairy sector infrastructure (e.g., barns, feed mills) destroyed, as was more than 80% of farm equipment. Significant farm holdings not accessible because of land mines. Four large state farms with 2,100 cows were destroyed. Milk supply chain (collection stations, milk cooling tanks, vehicles) ruined. Most of the specialized institutions that supported the dairy sector ceased operation.
1.2 Current Situation
In recent years in both entitiesthe Republic Srpska (RS) and the FBiH dairies have collected from 10% to 12% of the total milk produced. Reasons for such low collection rates are related to high levels of milk sold locally and calf feeding. The prevalence of subsistence milk production further accentuates this situation. However, it is likely that collection rates are much higher in the more developed dairy areas (perhaps 30% or more) and much lower in the mountainous areas. See Table 2.
Table 2. Quantity of Milk Produced and Processed in RS and FBiH, 2004* Collected No. of Productivity Total Production Collected Quantity (L/yr) Cows per Cow (L/yr) (L/yr) (%) 2,900 131,000 385,000,000 65,500,000 17 1,948 153,000 298,000,000 56,640,000 19 4,848 284,000 683,000,000 122,140,000 5,889 23,965,000 141,129,885,000 128,428,000,000 91 3,928
RS FBiH Total EU 25 Yield variance
*Updated figures obtained from both entities statistical departments. European Commission (Eurostat and Directorate General for Agriculture-D1).
In 2004, collected quantities increased significantly over 2003, with RS collection increasing 15% to 65.5 million L/year and FBiH collection increasing 30% to 56.6 million L/year. Overall, milk collection jumped from 94.7 million L/year collected in 2003 to 122.2 million L in 2004, an increase of 23.5% within one year. BiH yields are relatively low compared with other European countries and have considerable margin for improvement, as shown in Table 2; also see Graph 1 (p. 4).
1.2 Current Situation (continued)

Graph 1. Total Milk Produced and Collected in RS and FBiH, 2004
Million Liters of Milk
400 350 300 250 200 150 100 50 0
Source: RS and FBiH statistical departments.
RS
Total Production
FBiH
Collected Quantity
1.3 The Situation in Neighboring Countries
As Graph 2 shows, a significant percentage of milk in Croatia and Serbia Montenegro (SM) is collected for sale into commercial channels, which is on par with the EU. These countries also have more developed processing industries that collect and process large volumes of raw milk.
100 80
Percentage
Graph 2. Percentage of Raw Milk Collected in 2002 by Entity/ Country (except as noted for BiH before the war)
60 40 20 0
Prewar BiH
RS
FBiH
Croatia
SM
EU
Farm gate prices are equivalent in all neighboring countries (see Table 3). However, Croatia and FBiH have the highest prices: 0.63 and 0.64 KM/L, respectively. Some cantons, though, have additional subsidies (e.g., Sarajevo Canton, 0.10 KM/L).
Table 3. Farm Gate Prices by Entity/Country Support Farm Gate Entity/ Cost to Dairy (KM/L) (KM/L) Country (KM/L) 0.43 0.11 0.54 RS 0.50 0.14 0.64 FBiH 0.45 0.10 0.570.59 SM 0.48 0.15 0.63 Croatia 0.54 0.52 Germany 0.48 0.54 Holland 0.48 0.54 EU average
Source: Updated figures from RS and FBiH statistical departments.
1.4 Structure of Dairy Industry Production
In more advanced markets, dairy products typically comprise a mixture of high-volume, fast-turnover, low-margin products like fluid milk and value-added products like aged cheese. In BiH the market structure tends strongly toward lower margin, fast-turnover products. According to informants in the sector, this situation derives from cash flow constraints that prevent most Bosnian dairies from tying up working capital in products with longer-term returns, such as cheese. Consequently, as milk production grows, seasonal imbalances may skew production by causing cyclical surpluses in the spring/early summer season. The poor quality of raw milk going into the processing plant in turn limits the quality and scope of their dairy industry so that BiH dairies can only produce short shelf-life products and UHT milk. Graph 3 shows the percentage of dairy products produced by entity/country.
100 90 80 70 60 50 40 30 20 10 0 Other Powdered milk Hard cheese UHT milk Short shelf-life products
Source: Dairy production in Bosnia. Mlijekoprodukt doo and Larive Bosnia, Sarajevo, 2003. Ministry of Agriculture, Water Management and Forestry, RS and FBiH (financed by IFAD).
Graph 3. Product Structure of Dairy Industry

Percentage
EU
SM
Croatia
FBiH
RS
2.0 DEMAND PROFILE 2.1 Summary of Trends
The dairy industry is experiencing a severe postwar crisis. Its products cannot compete with imports, and the industry struggles to regain its prewar productive capacity. With about 90% of fluid milk and 50% of dairy productsand growingshares of domestic demand being met by BiH production, there is a window of opportunity for the BiH dairy sector to compete with foreign products by producing quality domestic products at a competitive price. BiH dairies are at a point where strategies to establish and build market share are of paramount importance. Some positive trends are emerging: the dairies have been privatized, dairy farming is currently profitable (when subsidies are taken into account and farmers are actually paid), and there seems to be general agreement among politicians on the importance of the dairy sector. Under these conditions, milk production is poised to be the engine that develops important agricultural regions and provides employment for a large number of agricultural households and processors. Strengthening the competitiveness of this sector would be a strategic investment by the government. Foreign investment in domestic dairies is also helping to stimulate improvements in domestic milk quantity and quality. For example, when Meggle (an international German-owned dairy) bought Bihac Industry of Milk Products, Meggle educated suppliers and invested in lacto-freezers and equipment for the most productive farmers.
2.2 Current Subsidies
The minimum purchase price for cow, sheep, and goat milk of 3.6% fat content in the FBiH is 0.50 KM/L. In both entities, 1 L of milk containing at least 3.2% fat receives a subsidy of 0.10 (RS)0.14 (FBiH) KM/L. Some cantons also have their own milk production subsidies. Moreover, there are subsidies for cattle breeding (multi-jurisdictional) and milk testing (RS). Total agricultural subsidies in the RS are currently budgeted at 32,969,611 KM for 2005. Premiums for cow, sheep, and goat milk are: 0.10 KM/L for cow milk with a minimum of 3.2% butterfat and 3% protein. 0.15 KM/L for goat milk with a minimum of 2.8% butterfat and 2.50% protein. 0.15 KM/L for sheep milk with minimum of 4% butterfat and 3.80% protein. When calculating the premium, all quantities of produced and sold milk are averaged at an estimated butterfat content of 3.2% for cow and goat milk and 6% for sheep milk. Total amount is 7,500,000 KM. Incentives to improve livestock production in the dairy industry are equivalent to 8,683,000 KM in 2005. This amount includes 7,500,000 for milk plus the 983,000 KM shown in Table 4, plus 200,000 KM to support the upgrading of dairy industry technology. The table also shows how subsidies shall be allocated.
Table 4. Allocation of Herd-Improvement Incentives (2005) Amount (KM) Type of Premium (Improved) Planned Number * Heifers Sheep Rams Goats Buck goats Total
*Unit for all herds is by head.
Republic Srpska
300.00 for 1st 180.00 for 2nd 60.00 for 1st 36.00 for 2nd 100.00 for 1st 60.00 for 2nd 36.00 for 1st 100.00 for 1st
class class class class class class class class
1,000 1,000 5,000 4,000 300 200 200 100 983,200 KM
The RS government plans to provide 200,000 KM of support for dairy industry technological improvements through its Rural Development Program by promoting the purchasing of equipment in unfavorable areas. Federation of BosniaHerzegovina In 2005 the FBiH has allocated 15.74 million KM of its budget for primary agricultural production subsidies; this figure does not include each of FBiHs 10 cantons own subsidies. The total amount set aside to strengthen the dairy industry (firms) in 2005 is 6,887,900 KM. The funds will be distribMarket Profiles and Competitiveness Inventory Report: Dairy Production Subsector Profile
Federation of BosniaHerzegovina (continued)
uted among the 10 cantons according to their share of total agricultural production. Farmers can only apply for subsidies if they have a business plan (e.g., contracts with buyers). Payments will not be made in advance. FBiHs incentive structure is shown in Table 5.
Table 5. Dairy Incentives Type of Incentives KM/Unit Amount Total Production of raw cow, sheep, and goat 0.14 KM/L 46,000,000 6,440,000 milk (4th quarter of 2004 and 1st3rd quarters of 2005) 100,000 500 head Raising quality heifer herds of up to 30 200 KM/head cows Raising quality heifer herds of more than 72,9000 486 head 150 KM/head 30 cows Raising breeding sheep 200,000 20 KM/head 10,000 head Identification (marking) of breeding sheep 45,000 1.5 KM/head 30,000 head 30,000 Support of livestock development by 3,000 KM/canton 10 canton cantonal selection services Total 6,887,900
Cantonal Government Support for Agricultural Production
Besides FBiH subsidies, each canton typically provides its own subsidies for dairy production. The total amount of this planned expenditure for 2005 dairy industry support in all cantons unfortunately is not precise; it is estimated to be near 3 million KM, particularly significant in Sarajevo and Tuzla cantons. Every year each canton government, in or- Table 6. Canton Subsidies (Production) Canton Amount (KM) der to use the federal budget for 166,400 subsidies, must support agriculUna-Sana ture and allocates funds for pri96,340 Posavina mary production. Table 6 pro Tuzla vides known production subsidy 390,000 Zenica-Doboj levels for the cantons for which Bosnia-Podrinje information is available. 109,500 Middle Bosnia
Herzegovina-Neretva In prior years, both entity West Herzegovina ministries similarly supported Sarajevo dairy production with subsidies Hercegbosnia (Livno) for raw milk. The subsidies in the 762,240 Total RS were based on 3.2% fat and 3.0% protein; in the FBiH, 3.5% fat. The subsidized quantities1 (in liters) in 2003 and 2004 were:
2003 RS: 55,696,522 FBiH: 39,067,271

1
2004 RS: 65,509,551 FBiH: 56,641,317
The quantities given are adjusted to the 3.2% (RS) and 3.5% (FBiH) fat contents. These production figures are only for milk delivered to dairies. There are no data on the real production of raw milk in BiH.
2.3 Domestic Production
There are roughly 55 dairies in BiH, mostly private, with a total capacity of approximately 1.5 million L/day. Only 36% of that capacity is actually being used. The ownership structure of these dairies has changed in recent years. There is now just one state-owned dairy, which is in litigation. Some of bigger dairies with capacity of 50,000200,000 L/day (e.g., those former state-owned dairies in Sarajevo and Zenica) have old facilities and equipment. Two-thirds of dairies are small, privately owned with a daily capacity of 2,00010,000 L. Some small dairies are earning money by offering cooling equipment and services to farmers. Dairies buy milk directly from farmers or at collection points and then transported to a dairy. However, farmers do not sell all of their milk to dairies but also sell directly to households and on green markets. Farmers who cannot sell to dairies usually sell fresh milk and processed milk products (e.g., sour cream and cottage cheese) at outdoor markets.2 Current factors in the BiH market that impact domestic dairies: Significant imports of dairy products, especially from neighboring countries. Imports have remained stable since the free trade agreement (FTA) became fully effective 1 May 2004. Exports have doubled since the FTA went into effect (from 5.5 million KM in 2003 to 11.8 million in 2004). Many milk products that receive export subsidies are legally being sold in BiH. This is especially the case for long shelf-life milk products like cheese, butter, and powdered milk. Concerned industry representatives have suggested certain mitigating measures to withstand negative influences such as those described above: Implement and enforce stricter milk quality standards. Introduce systematic measures (e.g., countervailing duties) by which domestic producers can compete against subsidized imports on a level playing field.
Allow dairy cattle to be imported with fewer restrictions to increase the quantity and quality of dairy cattle. (Animals must meet certain veterinary and health conditions.) Improve BiH dairy industry technology and productivity through technology transfer and training in improved practices so that the dairies can catch up. 2.4 Imports According to estimates provided by the statistical departments in RS and FBiH, 22% of milk and related products are imported. Some key products (among them fresh and condensed milk and powdered milk) are being imported at the 1015% customs regime. For the new FTA partners, they now exportoften subsidizedmilk without any tariffs.
A Product Profile lists the major domestic dairy producers appears as Appendix 1.
2.4 Imports (continued)
Through this subsidized milk trade, these trading partners have captured substantial market share in BiH. Some BiH processors are importing these subsidized products and then reconstituting this milk for in-country sale. Croatia, Slovenia, and Germany supply the largest share of imported dairy products, which account for over 60% of all imports, bringing in primarily yogurt and fluid milk. Germany supplies most of the imported cheese. Imports from other countries account for the rest (see Table 7).
Table 7. Countries Exporting Dairy Products to BiH, 2004 Country Import (thousands of KM) Share (%) 31.8 Croatia 36,260 25.4 Germany 29,012 24.0 Slovenia 27,418 5.6 SerbiaMontenegro 6,436 3.3 Hungary 3,802 3.1 Austria 3,536 2.3 Czech Republic 2,673 1.7 Netherlands 1,948 0.8 United States 956 0.8 Denmark 945 0.9 Others 1,034 100 Total 114,020
Source: Foreign Trade Chamber of BiH.
Officially, 57,500 MT of dairy products were imported in 2004 valued at 114 million KM. The export value of dairy products in 2004 was approximately 11.8 million KM. Dairy products from the EU often benefit from an export subsidy. Raw milk and milk powder imports from the EU are minor. Graph 4 shows the market share of dairy imports to BiH by the country of origin.
Graph 4. BiH Dairy Import Market Share by Country of Origin
25%
24%
Croatia Germany Slovenia 6% Serbia and Montenegro Hungary Austria Czech Republic Netherlands United States Denmark Other countries
3% 3% 2% 2% 1% 1% 1% 32%
2.4 Imports (continued)
Most of the foreign companies have established a representative office locally for marketing (e.g., for Croatia, Lura/Dukat ZagrebLura Sarajevo) or have a distributor (e.g., for Alpiko Sarajevo and Megamix Sarajevo). Also, some foreign investors have established their own in-country operations (e.g., MeggleBihac and Ljubljanske MlekarneTuzla). Dairy products are usually retailed together with other food products, and there are only a few specialized retail stores (e.g., the Slovenian dairy products distributor Alpiko has a few specialized stores).
Tariff Rates
There are no quantitative restrictions on imports of dairy products for key trading partners (Croatia, SerbiaMontenegro). Tariff rates for dairy products are: From non-FTA countries, milk and cream up to 1% fat content and packaging less than 2 L, the tariff is 10% + 0.15 KM/kg. From non-FTA countries, milk and cream up to 45% fat content and packaging less than 2 L, the tariff is 10% + 0.45 KM/kg. An additional 1% of customs fee is applied to all imported goods. BiH has FTAs with Albania, Bulgaria, Croatia, Macedonia, Moldova, SerbiaMontenegro, and Turkey. BiH is not yet a member of the World Trade Organization but, as of September 2005, is in accession negotiations.
2.5 Exports
Export opportunities are limited in the dairy sector for the following reasons: High floor price for milk in FBiH. Poor quality of raw milk limits the export potential of exportablequality dairy products. Lack of a veterinary certification system that is capable of monitoring and enforcing product safety. Hygiene and sanitary conditions inside milk-processing facilities. Outdated and/or obsolete equipment and processes. Lack of modern packaging equipment and machinery. Poor financial condition of companies, coupled with weak business acumen. This situation is unlikely to change in the near future, given the time required to correct the deficiencies listed above and the slow privatization process that delayed earlier investments and improvements. See Table 8.
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2.5 Exports (continued)
Table 8. Exports of Milk and Milk Products from BiH, 2004 Country (thousands of KM) % Croatia 9,032 76.2 SerbiaMontenegro 1,771 15.0 Macedonia 694 5.9 United States 196 1.7 Slovenia 134 1.1 Other 7 0.1 Total 11,834 100
Source: Foreign Trade Chamber of BiH.
2.6 Demand (Domestic)
Per-capita annual consumption of dairy products for the BiH population of 3.7 million is approximately 120 L of milk (on a fluid basis). Of that, approximately 100 L are consumed as fresh milk. The dairy sector has not yet recovered from the livestock lost in the 19921995 war, which decimated numbers. There are approximately 284,000 dairy cows and average yield is low: about 1,9002,000 L per lactation. Table 9 shows that, according to FAO, BiH in 2003 produced approximately 476,000 MT of milk and milk products in a market that consumes 533,000 MT/year of commercially processed milk and milk products (i.e., about 11% is imported).
Table 9. Dairy Sector Market Indicators Milk and Milk Products Year 1998 1999 2000 2001 2002 (thousands of MT) 538.7 588.1 556.0 515.9 475.8 Total BiH production 9.17 5.47 7.21 7.78 Average annual production growth 26,300 34,780 31,780 74,240 68,714 Total imports 32.24 8.63 133.61 7.44 Average annual imports growth 1,000 4,000 2,000 600 825 Total exports 300.00 50.00 70.00 37.50 Average annual exports growth Total domestic production + imports 565.0 622.9 587.76 590.1 544.5 10.25 5.65 0.41 7.74 Average annual market growth
Source: FAOSTAT database.
2003 475.8 0.00 57,593 16.18 614 25.58 533.4 2.04
Growth (%) 2.26 26.72 38.38 0.95
Until recent years, a significant portion of domestic dairy consumption was imported, including fluid milk. Most local dairies produce pasteurized milk, yogurt, and fresh/cottage cheese. Domestic, long shelf-life (UHT) milk is now over-supplied, which is a major change of circumstances from 2003. Compared with UHT milk and yogurt, the production of hard, aged cheese is low because of low-quality raw milk. Long shelf-life products account for 34% of total dairy production. Cheese accounts for 10%. Production of cream, spreads, flavored milk drinks, butter, and flavored yogurts is almost nonexistent.
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2.6 Demand (Regional)
In general, BiH is unlikely to ever be a significant exporter of most dairy products. Currently, domestically produced quantities are small and cannot even satisfy local demand. Until the last two years, BiH products have rarely been available in regional markets. However, there has been an increase in BiH exports in the last two years, relative to imports, particularly of BiH cheeses (about 5% of cheese import volumes in 2003). Regional trade disadvantages include difficult transportation conditions through mountainous terrain and the lingering political problems and conflicts in southeast Europe. There is also strong competition from Italian and German products in the Croatian and Slovenian markets (especially for milk and cheese products). It would seem that the best opportunity for future dairy product exports would be to supply niche products for specialized markets (e.g., goat milk and cheeses made from goat and sheep milk).
2.6 Demand (EU)
BiH dairies do not export to the EU because it is not registered as a third country. BiH does not have registered processing facilities, nor can it demonstrate that required disease control mechanisms are in place. The main Central European countries exporting food products to the EU are Hungary, Poland, and the Czech Republic. For the export of animal products, a certifying body at the state level and slaughterhouses certified to EU standards are needed. Key competitiveness factors of milk products include their packaging, quality, ancillary services, marketing, and supply-chain management. Ten to twenty private dairies sell UHT milk in Tetra-pack packaging and in fat contents of 1.5%, 2.8%, and 3.2%. Almost all fluid milk is sold in the form of UHT products. Tetra-pack packaging is imported from Austria, Slovenia, SerbiaMontenegro, or Sweden. PVC cups for yogurt and sour cream are produced in BiH (Sarajevo); their quality is very good and they are sold at prices competitive with imports. Packaging design and advertising material are often developed with the support of local packaging suppliers and commercial artists. Production is outsourced to local marketing companies, graphic designers and printing enterprises, or, in some cases, to Serbian and Croatian companies. The law on Quality Control of Imported and Exported Goods (BiH Official Gazette No. 13/03) states that a label must clearly indicate the name of the product; the manufacturers complete address; name and address of the importer; and important information such as net weight in metric units, ingredients, instructions for use (if necessary) and storage, and any important information and warnings. If an original label is in English (e.g., standard U.S. label) or any other language, the seller must prepare translated stick-on labels for the imported products. The importer is responsible for sticking these translated labels onto their products prior to retail
3.0 BASIS OF COMPETITION 3.1 Packaging (size, types, graphics)
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3.1 Packaging (size, types, graphics) (continued)
distribution. There are no specific packaging requirements. Table 10 shows the type of packaging used for most dairy products.
Table 10. Commonly Used Packaging Package PET folio, 1 L; carton box, 1 L Carton box and plastic bottles, 0.5 and 1 L; PVC cups, 180200 mL; PET, folio 1 L Sour milk, 3.23.6% fat PVC cups, 180200 mL, 400500 mL Fruit yogurt PVC cups, 159200 mL AB yogurt Carton box, 0.5 L; PVC glass, 180200 mL Kefir, 3.2% fat Carton box, 0.5 and 1 L; plastic bottle, 0.5 L; PVC cups, 180 mL UHTsterilized milk, 1.53.2% fat Carton box, 1 L Sour cream, 1220% fat PVC cups, 180200 mL and 400500 mL Fresh cheese and krika sir PVC cups, 0.5 kg; PET vacuum folio, 0.5 and 1 kg; plastic canisters, 1020 kg Hard and semi-hard types of N/A cheese: Edamer, Kackavalj, Trapist Cream cheese PVC cups, 70100 g Kajmak PVC cups, 70250 g Butter Alufolio, 250 g Item Milk, 2.83.2% fat Yogurt, 2.83.6% fat
Source: Dairies in RS.
Other types of packages in use include: Carton box: Pure-Pak 0.5 and 1 L Carton box: Brik-Pak 0.5 and 1 L (UHT milk) Plastic bottle: 0.3, 0.5, and 1 L Ecolean: plastic bag for liquid milk products Polietilen and other plastic folio PVC plastic cups: 180500 mL Plastic boxes and canisters: 320 kg. 3.2 Quality (grading, quality control/quality assurance) Dairy processors are responsible for the quality of products in BiH. The BiH law on Food was adopted by the parliament and published in the BiH Official Gazette No. 50/2004 on November 9, 2004. This law provides the basis for the assurance of a high level of protection of human health and consumers interests related to food. It establishes common principles and responsibilities as well as institutional arrangements and procedures to ensure the safety of food and feed. The law follows the principles of the EU legislation regarding food and feed safety. The detailed rules and regulations needed for its implementation are not yet drafted. Therefore, the law is not yet implemented. As long as the regulations according to the new BiH law on Food are not yet in place, the law on Food Safety Control, including the regulations on the quality of milk and dairy products inherited from former Yugoslavia, are still in force. In addition, the State Veterinary Office and the Enti13
Governmental Quality Control Oversight
Governmental Quality Control Oversight (continued)
ties Ministries of Agriculture issue specific requirementsthose requirements are in accordance with the Office International des Epizooties (OIE) requirements (e.g., imported products must originate from areas free of contagious diseases that must be reported to the OIE). The present system of food control is based on laws and regulations from former Yugoslavia. The ordinance on Microbiological Wholesomeness of Food stipulates maximum content of different micro-organisms in food products. The Public Health Institute at the state level is authorized to control food safety. Furthermore, there are some similar institutes in both entities and in the cantons in the FBiH. Because not all of these institutes have sufficient laboratory capabilities, other laboratories can be contracted for testing. The exporter/importer covers all expenses of product testing. The Veterinary Inspection Service is responsible for microbiological testing, and the veterinary labs are performing the analysis. Currently these institutions do not coordinate their activities efficiently, and they are not funded adequately to carry out these responsibilities. The BiH law on Food regulates the official control of food safety, hygiene, and quality. The control includes inspection, review of declarations and documentation, sampling and analysis, review of records regarding the traceability of food and feed, and enforcement and efficiency of selfverification systemsthat is, HACCP for food operators and GMP/Good Agricultural Practices (GAPs) for agricultural producers. The law also stipulates the establishment of the BiH Agency for Food Safety, which plays a key role in the governments policy on food safety. The agency, in collaboration with the entities competent bodies, will be in charge of developing the needed rules and regulations for the implementation of the law. The BiH Council of Ministers issued the decision on the establishment of the Agency for Food Safety, and a budget for 2005 was allocated. Since October 2005 the agency has a temporary director. As can be inferred from the foregoing discussion, the currently applied system does not support a consistent policy on food safety and creates considerable confusion for the food processors. A new and EUcompatible system is not yet in place.
Dairies QA Measures
Dairies, left largely to establish their own quality assurance (QA) measures, have used this freedom as an opportunity for competitive market positioning. For instance, some dairies have gone to extraordinary lengths to introduce EU standards into their value chains and improve their suppliers practices; other dairies have sought to compete on cost, with minimum attention to QA. This will change with the full implementation of the law on Food. The dairies have to install HACCP systems and farmers have to apply GAPs. QA starts with the condition of the cows from which the milk comes. Dairies that are seeking to establish a reputation for quality are working with their farmers to improve the dairy cows health condition. Training sessions are organized to teach farmers better milking practices and milk hygiene in order to improve the quality of the raw milk. Some dairies are now starting to analyze raw milk for bacteria and somatic cells and are
14
Dairies QA Measures (continued)
introducing quality-based payment systems. The analysis for bacteria and somatic cells are either done in company-owned laboratories or in public veterinary laboratories. Buyers conduct acidity tests on site. Their agents use acidity tests to detect adulteration and low milk fat. By law the dairies are allowed to reject milk that contains less than 3.2% fat. Dairies report that problems are usually with the smallest producers who have just one or two cows. Such testing ensures that the milk meets basic processor requirements. Because the milk is paid based on milk fat and protein content, dairies are testing milk for these parameters. This analysis is done by the larger dairies themselves or by veterinary laboratories. Another qualitative factor is farmers adoption of the dairies preferred practices. Many dairies prefer that their suppliers follow feeding, cleaning, and other practices that will reliably yield a certain standard of milk. The sanctity of contracts in BiH is not assured, which makes it difficult for processors to enforce standards. However, in lieu of contracts, some dairies are increasingly active in establishing supply agreements with farmers that specify buying conditions, including quality, price, payment schedules, and purchase quantities.
3.3 Services
At present, services provided for and by the food chain in general are quite limited. For example, professional market integrators such as advertising and marketing agencies are generally not available for the small- to medium-sized dairies. Refrigerated warehousing, product tracking, qualified independent laboratories, and trade associations provide very limited services. The larger dairies initiated the establishment of a BiH Dairy Processors Association as a lobby group for their interests. Dairy processors themselves are only now beginning to recognize the need for upstream support to their farmers and downstream services for wholesalers and retailers.
3.4 Marketing
The new regulations coming into effect regarding labeling requirements will require some additional processor investment. For those processors who are responsive to consumer/market-driven demands, the investment will be well rewarded. The labeling requirements are standard in any developed market, and are only a first step in effectively marketing any food product. The more daunting tasks will be those related to identifying the appropriate target audience for the dairy processors product lines and/or adapting their product line to their target audience. The new law on Food Safety and the corresponding secondary legislation will affect producers quality standards. The producers will be forced to implement quality management systems in line with EU requirements. This will secure markets in neighboring countries already applying EU quality and food safety standards as well as open market opportunities for niche products on the large EU market.
15
3.5 Market Movement
Overall, the BiH demand for food has decreased and its structure has changed. The drop in demand is due to a decrease in population by approximately 15% and a decrease in purchasing power by about 40%. The average per-capita income of the 3.7 million inhabitants is about 1,530 KM/year (World Bank GNI estimate, 2003). Despite this decline, domestic production is far from satisfying domestic demand (i.e., the internal market continues to present opportunities for locally supplied production). But domestic production must also meet the requirements of consumers, processors, traders, and supermarkets regarding consistency, stability, quality, food safety, labeling, packaging, and regular supply. In this regard, BiH still lags behind competitors such as Slovenia, Croatia, and Hungary. Processing is now being done strategically by companies (e.g., Meggle) that are operating more broadly within the free trade area, shifting processing of fruit yogurts, for instance, to one country and processing of liquid yogurt in a different country. The domestic consumption of milk is estimated at 134 L per capita per year. Consumers in BiH have demonstrated significant demand for aseptically packaged UHT milk and for stable fermented products. Increased demand is also observed for fruit yogurts, sour cream, soft cheese, and milk in 0.5-L packaging. The main competitors are coming from Croatia, Slovenia, Germany, and Hungary.
16
APPENDIX 1
Dairy Name and Location Mlijekoprodukt Kozarska Dubica Meggle Bihac PPM Tuzla Inmer Gradacac DTD Snjegotina Teslic
Table 1.A Major BiH Domestic Dairy Processors

Current Operations (L/day) 120,000 Maximum Processing Capacity (L) 200,000 Capacity Utilization (%) 60 Product Line Assortment UHT milk Short shelf-life products Cottage cheese type UHT milk Short shelf-life products Cottage cheese type UHT milk Short shelf-life products Powdered milk UHT milk Short shelf-life products Cottage cheese type UHT milk Short shelf-life products Cottage cheese type Hard cheese Short shelf-life products Pasteurized milk Cottage cheese type UHT milk Short shelf-life products Cottage cheese type Hard cheese Hard and semi-hard cheese UHT milk Short shelf-life products Semi-hard cheese Short shelf-life products Cottage cheese type Short shelf-life products Cottage cheese type Short shelf-life products Cottage cheese type Semi-hard cheese UHT milk Short shelf-life products Cottage cheese type Semi-hard cheese Hard and semi-hard cheese Continued on next page
85,000
220,000
39
60,000
100,000
60
30,000
100,000
30
22,000
25,000
88
Milkos Sarajevo Natura Vita Teslic
20,000
100,000
20
18,000
20,000
90
Livno Dairy Livno Mljekara Banja Luka Vlasicka mljekara Travnik ZIM Zenica Bianka Zvornik Milko Culic Prijedor
16,000 15,000
30,000 95,000
53 16
15,000 15,000 6,300
60,000 50,000 50,000
25 30 13
12,500
20,000
63
Vita-Vi Capljina*
10,000
7,000
143
*Vita-Vi Capljina produces 10,000 L of milk per day; however, because that quantity exceeds the dairys processing capacity, it sells excess milk to Konjic Milk.
17

Dairy Name and Location Saraj Milk Maglaj Pudja perkovic Livno Agrocentar Gornji Vakuf Smajic Celic Mljekara Sipovo Sipovo Capacity Current Operations Maximum Processing Utilization (%) Capacity (L) (L/day) 9,000 9,000 8,000 7,500 4,200 20,000 15,000 10,000 8,000 20,000 45 60 80 94 21 Product Line Assortment Short shelf-life products Cottage cheese type Hard and semi-hard cheese Short shelf-life products Cottage cheese type Short shelf-life products Cottage cheese type UHT milk Short shelf-life products Cottage cheese type Semi-hard cheese Short shelf-life products Pasteurized milk Cottage cheese type UHT milk Short shelf-life products Cottage cheese type Short shelf-life products Cottage cheese type Semi-hard cheese Short shelf-life products Pasteurized milk Whey Short shelf-life products Pasteurized milk Cottage cheese type Hard and semi-hard cheese Milk Short shelf-life products Cottage cheese type Semi-hard cheese UHT milk Short shelf-life products Cottage cheese type Short shelf-life products Semi-hard cheese Short shelf-life products Cottage cheese type
Pedjeni Bileca Milksan Capljanka Sanski Most ZZ Kupreska Kupres Dule Dragaljevac Sirko Gracanica Susa Livno Sanmilk Prijedor
4,000
8,000
50
3,500
15,000
23
3,000
5,000
60
3,000
3,200
94
3,000
10,000
30
2,500 2,500
3,000 3,000
83 83
Jezerka Jezerski
2,500
20,000
13
Glogovac Nevesinje ZZ Pavlovica Rostovo Novi Travnik
2,500 2,000
5,000 3,000
50 67
18

Dairy Name and Location Mljekara Sokolac Current Operations Maximum Processing Capacity (L) (L/day) 2,000 3,000 Capacity Utilization (%) Product Line Assortment Short shelf-life products Milk and yogurt Cottage cheese type Soft cheese 33 Short shelf-life products Pasteurized milk Cottage cheese type Semi-hard cheese UHT milk Short shelf-life products Cottage cheese type Milk Yogurt Short shelf-life products Pasteurized milk Whey Short shelf-life products Cottage cheese type UHT milk Yogurt Cheese Short shelf-life products Cottage cheese type Semi-hard cheese Butter UHT milk Short shelf-life products Soft and hard cheese Short shelf-life products Pasteurized milk Cottage cheese type Semi-hard cheese Cottage cheese type Semi-hard goat cheese Goat milk and cheese Continued on next page
Milgor Gorazde
2,000
6,000
Eko milk Begov Han Euromlkjeko Kljuc Mlijekoproduct Brcko Perfetto Plus Nevesinje Mlijekoprodukt V. Kladusa Agroplod Odzak ZZ Promilk Prozor Milko Miljkovac Doboj Ekomlijeko Bijeljina Vitmark Teslic Bukovica Tomislavgrad ZZ Zmijanjka Celinac Signamilk Novi Grad
2,000
8,000
25
1,500 1,500
20,000 3,000
8 50
1,500 1,200
2,000 16,000
75 8
1,100 1,000 1,000
1,500 6,000 5,000
73 17 20
1,000 900 600 500 500
1,800 3,000 800 3,000 2,000
56 30 75 17 25
19

Dairy Name and Location Matic Bijeljina Gaj-Gradina Gacko Maja Gacko Ad-tipo Olovo Ex-Prom Ilijas Ruja Hrasnica Orman Livno West Milk Sarajevo Sappit* Posusje Dramon Pale Stolac d.o.o. Visegrad Totals 532,800 532,800 1,618,300 1,318,300 33 40 Current Operations (L/day) 500 Maximum Processing Capacity (L) 800 Capacity Utilization (%) 63 Product Line Assortment Short shelf-life products Pasteurized milk Cottage cheese type Yogurt Yogurt Yogurt Short shelf-life products Cottage cheese type Hard cheese UHT milk UHT milk Data not available Data not available Counting West Milk and Sappit Dairy Not counting West Milk and Sappit Dairy
500 500 500 500 500 500 0 0
800 800 600 8,000 500 500 150,000 150,000
63 63 83 6 100 100 0 0
*Although Sappit Dairy has closed and its facility is idle, it could be purchased and become operational again. Note: All data are based on LAMP estimates. Processed milk in the dairies was calculated on the basis of standard whole milk with 3.6% fat.
20
APPENDIX 1 (continued)
Table 1.B Milk Aggregators

Name Andjelika d.o.o. ZZ Konjic Milk PD Butmir Farm ZZ Gradacacki Farmer ZZ Zenica ZZ Agrosemberija ZZ Gracanka PO Vrbas ZZ Agrojapra ZZ Mala dolina PD Semberija ZZ Tarcin ZZ Bioprodukt Association of women in agriculture ZZ Poljar ZZ Novi Pocetak ZZ Obudovac ZZ Pavlovica Rostovo MK Modrica ZZ Rubus ZZ Bobar Irgos d.o.o. Bazilika ZZ Progres ZZ Guraca ZZ Sprecanka ZZ Eko Posavina Cooperative Union USK PO Kalin PD Mladen Stojanovic/Farm Land ZZ Agroman ZZ LAN Susa Kemefah Location Kalesija Konjic Sarajevo Gradacac Zenica Bijeljina Gracanica Gornji Vakuf Donji Agici Tuzla Bijeljina Tarcin Mostar Tesanj Zeljezno Polje Teslic Obudovac Novi Travnik Modrica Sapna Bijeljina Banovici Donji Vakuf Odzak Kladanj Kalesija Derventa Una Sana Canton Bugojno Nova Topola Tomislavgrad Derventa Visoko Kiseljak Daily Milk Suppy (L) 13,300 3,500 7,000 6,800 3,000 4,000 7,000 4,000 2,500 4,700 2,500 2,500 1,000 4,000 3,500 2,000 1,800 1,500 1,500 1,300 1,200 1,700 1,000 500 800 1,500 500 2,000
17,500 2,650 1,400
21
Table 1.C Service Providers

Name SAMAX Jambopet SANO Proven Plastika Bozic DeLaval Krehic Brovis UNAVET Bosnavet Cattle Breeding Centre Veterinary Service (private veterinarians and public veterinary stations; only FBiH) Association of Farmers, Agric Engineers and Technicians Agrokomplex Nutrition Mix d.o.o. MMB Inex Coop Rakic d.o.o. Mlin Ljubace Agrocentar Agrosemberija Andjelika Ismet Hodzic Milk Processing Gelux Location Banja Luka Laktasi Laktasi Sarajevo Doboj East Sarajevo Zenica Visoko Bihac Zenica Banja Luka Countrywide Gracanica Gracanica Orasje Samac Batkovic-Bijeljina Ljubace Tuzla Bijeljina Kalesija Sarajevo Sarajevo Gradiska Service Farm machinery Plastic bottles Feed Plastic cups PET bottles Milk equipment Feed Feed Semen Semen, feed Semen Animal health services Dairy herd improvement Feed Feed Feed Feed Feed Agricultural machinery, milk equipment Cattle import, milk equipment, feed Cattle import Cattle import Milk equipment Milk equipment (Westfalia)
Training Institutions
Agricultural Faculty Banja Luka Technological Faculty Banja Luka, HACCP team Agricultural Institute Banja Luka Extension Agency Republika Srpska Selection Service Republika Srpska Agricultural Institute (Zavod) Bihac Veterinary Institute Vaso Butosan Banja Luka
Municipality Extension Services (few municipalities in Western RS and Una Sana Canton) Agricultural Institute (Zavod) Tuzla

22
Agricultural Institute Bijeljina Extension Service District Brcko Extension Service Posavina Canton Veterinary Institute Tuzla Veterinary Institute Bijeljina Veterinary Institute (Zavod) Orasje Agricultural Faculty Sarajevo Agricultural Institute Sarajevo
APPENDIX 1 (continued)
Extension Service Zenica-Doboj Canton Extension Service Sarajevo Canton Extension Service Bosansko-Podrinjski Canton (Gorazde) Agricultural Faculty Mostar Agricultural Institute Mostar. Banks Federal Investment Bank Micro-finance Institutions Leasing Institutions (Volksbank, HYPO Alpe Adria Bank, Raiffeisen Bank).
Financial Institutions
APPENDIX 2 FBIH Milk Subsidies by Canton
Table 2.A Unsko Sanski Canton (dairy sector)

Subsidy Type Incentive Amount Unit Planned Number Total Amount (KM)
Breeding heifers Selection work for heifer
Head Head
250 6
650 650
162,500 3,900
Table 2.B Posavski Canton (dairy industry)

Subsidy Type Unit Per Unit (KM) Total Amount (KM)
Artificial insemination of cows Milk production
Pregnancy head Liter
20.00 0.06
22,000 74,340
Table 2.C Middle Bosnia Canton (livestockdairy industry)

Subsidy Type Incentive Amount (KM) Unit Planned Number Total Amount (KM)
Breeding heifers Breeding sheep Breeding goats Total
250 20 30
Head Head Head
300 2,250 150
60,000 45,000 4,500 109,500
Table 2.D Zenica-Doboj Canton (dairy industry)

Subsidy Type Unit Total Amount (KM)
Breeding heifers Support to dairies for buying up raw milk Total
Head Liter
240,000 150,000 390,000
23
APPENDIX 2 FBIH Milk Subsidies by Canton (continued)
Table 2.E Sarajevo Canton (livestockdairy sector)

Subsidy Type Unit Registered Farm (KM) Unregistered Farm (KM)
Breeding heifers Keeping herd of milking cows Keeping herd of milking sheep Keeping herd of milking goats Production of raw cow milk Processed raw milk Total
Head Head Head Head Liter Liter
400 150 20 20 0.10 0.03
400.00 50.00 10.00 10.00 0.10 0.03 Unknown (approximately 1,500,000)
Table 2.F Hercegbosnia (Livno) Canton (livestockdairy) industry)

Subsidy Type Unit Planned Number Total Amount (KM)
Breeding heifers Breeding sheep Premium for cow, sheep, and goat milk Total
Head Head Liter 1,000,000
Table 2.G District Brcko (livestockdairy industry)

Subsidy Type Unit KM/Unit Total Amount (KM)
Milk production Breeding heifers Total for dairy
Liter (min.: 2,000) Head (min.: 2)
0.15 250.00 Not precise
Note: Funds for district Brcko government support for agriculture provided in the Districts budget. This year, the district has allocated 988,830 KM for all incentives in agricultural production. As compared with last year, more than 50% of the total budget is for dairy production.
24
APPENDIX 3 Entity Agricultural Subsidies
A schedule for all 2004 subsidies is shown in Tables 3.A and 3.B, indicating the extent of BiH support to the dairy sector in relation to other agricultural sectors.
Table 3.A FBiH Distribution of Subsidies in 2004
Livestock Subsidy Unit Maximum Amount Total Subsidy (KM)
Production of cow, sheep, and goat milk (4th quarter 0.14 KM/L of 2003 and 1st3rd quarter 2004) Beef calves fattening 0.70 KM/kg Lamb fattening 0.60 KM/kg Pig fattening 0.52 KM/kg Raising of heavy-breed chickens 2.50 KM/piece Raising of light-breed chickens 2 KM/piece Raising fish (trout) 0.07 KM/kg Raising fish (sea bass, gilthead) 0.09 KM/piece Honey production 1 KM/kg Raising queen bees 5 KM/piece Raising heifers 200 KM/head Raising sheep 15 KM/head Identification (marking) of breeding sheep 1.50 KM/head Support of livestock development by cantonal 3,000 KM/canton selection services Total livestock production
47,000,000 L 1,700,000 kg 476,667 kg 350,000 kg 105,000 piece 20,000 piece 3,500,000 piece 500,000 piece 110,000 kg 10,000 piece 1,000 head 4,000 head 30,000 head 10 canton
6,580,000 1,190,000 286,000 182,000 262,500 40,000 245,000 45,000 110,000 50,000 200,000 60,000 45,000 30,000 9,325,500
25
APPENDIX 3 Entity Agricultural Subsidies (continued)
Table 3.B RS Distribution of Subsidies in 2004

Livestock Unit Amount (KM) Planned No. of Heads
Raising quality heifers Raising quality guilts Raising quality boars Breeding sheep Breeding rams Breeding nanny goats Breeding buck goats Breeding fillies Breeding hens and roosters
Head Head Head Head Head Head
300 for 1st class 180 for 2nd class 60 for 1st class 36 for 2nd class 100 for 1st class 60 for 1st class 36 for 2nd class 100 for 1st class 60 for 1st class 36 for 2nd class
900 600 1,200 600 50 3,000 2,500 200 300 200 100 80 30,000 20,000 300,000
Head 100 for 1st class Head 500 Chicken 2.50 for heavy breeds 2.00 for light breeds
Raising 18-week-old egg layers Chicken 0.50
a) Premium for cow, sheep, and goat milk: KM 0.10/L for cow milk with minimum of 3.20% butterfat and 3% protein KM 0.12/L for goat milk with minimum of 2.80% butterfat and 2.50% protein KM 0.12/L for sheep milk with minimum of 4% butterfat and 3.80% protein. b) When the premium is calculated, all quantities of produced and sold milk are averaged at butterfat of 3.2% for cow and goat milk and 6% for sheep milk. c) Subsidy for purchase of queen bees is KM 5/queen. d) Subsidy for determining quality of milk on EU standards is KM 5/ sample. e) Subsidy for supporting development and improvement livestock reproduction centers in cattle production. f) Subsidy to semen suppliers for veterinary units and other entities capable of performing artificial insemination is determined at KM 3/ dosage of semen.
26
Cantonal Agricultural Subsidies
In 2004 the government of each of BiHs 10 cantons decided to support agriculture with 8.55 million KM for primary production subsidies (see Table 3.C). Funds from the cantons will be used to support the livestock sector and crop and fruit producers as well as for subsidizing interest rates for agricultural loans. An example of how agricultural subsidies are distributed is shown in Table 3.D.
Table 3.C FBiH Cantons and Their Agricultural Subsidies (2004)
Canton Amount (KM)
Una-Sana Posavina Tuzla Zenica-Doboj Bosnia-Podrinje Middle Bosnia Herzegovina-Neretva West Herzegovina Sarajevo Hercegbosnia (Livno) Total
1,000,000 1,200,000 700,000 1,050,000 250,000 650,000 50,000 50,000 3,500,000 100,000 8,550,000
Table 3.D Sarajevo Cantons Agricultural Subsidies (3,500,000 KM)

Sector Amount
Livestock Raising quality heifers (with pedigree) Raising quality heifers (incomplete pedigree) Raising breeding sheep (2 years old) Production of cow milk Raising egg layers Raising fattening chicken broiler Beekeeping Plant production Commercial production of cereals Fruit Growing New orchards New berry orchards (strawberry, raspberry, blackberry, and currant)
500 KM/head 300 KM/head 20 KM/head 0.10 KM/L 1 KM/piece 0.30 KM/piece 10 KM/beehive 50 KM/0.1 ha 300 KM/0.1 ha 300 KM/0.1 ha
27

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L A M P

Linking Agricul tur al Agricultur tural Markets to Producers

Dair y Production Dairy Sub sector Subsector

Dairy Production Subsector

1.0 Overview (continued)

1.0 Overview (continued) Impact of War on Milk Production

1.2 Current Situation

RS FBiH Total EU 25 Yield variance

1.2 Current Situation (continued)

400 350 300 250 200 150 100 50 0

Source: RS and FBiH statistical departments.

1.3 The Situation in Neighboring Countries

1.4 Structure of Dairy Industry Production

Graph 3. Product Structure of Dairy Industry

2.0 DEMAND PROFILE 2.1 Summary of Trends

2.2 Current Subsidies

class class class class class class class class

1,000 1,000 5,000 4,000 300 200 200 100 983,200 KM

Federation of BosniaHerzegovina (continued)

Cantonal Government Support for Agricultural Production

2003 RS: 55,696,522 FBiH: 39,067,271

2004 RS: 65,509,551 FBiH: 56,641,317

2.3 Domestic Production

2.4 Imports (continued)

2.4 Imports (continued)

2.5 Exports (continued)

2.6 Demand (Domestic)

2003 475.8 0.00 57,593 16.18 614 25.58 533.4 2.04

Growth (%) 2.26 26.72 38.38 0.95

2.6 Demand (Regional)

2.6 Demand (EU)

3.0 BASIS OF COMPETITION 3.1 Packaging (size, types, graphics)

3.1 Packaging (size, types, graphics) (continued)

Governmental Quality Control Oversight

Governmental Quality Control Oversight (continued)

Dairies QA Measures (continued)

3.5 Market Movement

Table 1.A Major BiH Domestic Dairy Processors

Milkos Sarajevo Natura Vita Teslic

15,000 15,000 6,300

60,000 50,000 50,000

Table 1.A Major BiH Domestic Dairy Processors

Glogovac Nevesinje ZZ Pavlovica Rostovo Novi Travnik

Table 1.A Major BiH Domestic Dairy Processors

1,100 1,000 1,000

1,500 6,000 5,000

1,000 900 600 500 500

1,800 3,000 800 3,000 2,000

Table 1.A Major BiH Domestic Dairy Processors

500 500 500 500 500 500 0 0

800 800 600 8,000 500 500 150,000 150,000

Table 1.B Milk Aggregators

17,500 2,650 1,400

Table 1.C Service Providers

APPENDIX 2 FBIH Milk Subsidies by Canton

Table 2.A Unsko Sanski Canton (dairy sector)

Breeding heifers Selection work for heifer

Table 2.B Posavski Canton (dairy industry)

Artificial insemination of cows Milk production

Pregnancy head Liter

Table 2.C Middle Bosnia Canton (livestockdairy industry)

Breeding heifers Breeding sheep Breeding goats Total

Head Head Head

300 2,250 150