Why invest in Agriculture?
The basis of any country’s economy is agriculture, the ability to feed its population. If that ability is compromised the country will be forced to buy/import food to feed its people. In order to do that, they will have to lose many other valuable resources in order to acquire the food needed to carry on. By being dependent on food imports it becomes exposed to the fluctuations of food prices around the world and inflation is more likely. Nobody wants to have a Yo-Yo economy in which you are forced to borrow money to buy food from outside sources.
If you are serious about farming and want to settle in a beautiful, safe and fertile country, come to Croatia.
Croatia has significant agricultural resources. Its agricultural sector is characterized by vast amounts of unutilized agricultural land, water and fantastic climate. Let us add first class road, sea and air logistics.
In June 2013 Croatia is set to become the 28th member of the European Union. While that will bring many positive trends for its economy it will also mean that the Croatian farmers will have to compete with a tough European competition.
In order to take advantage of the EU incentives it is advisable to register as a farmer in Croatia sooner than later. When Croatia joins, all the farmers in the registry will automatically be able to tap into the EU funds. Farmers that have failed to register will then have to wait a couple of years before they will be able to be eligible for the funds and will automatically become less competitive.
For that reason and others, which will eventually limit the number of new entrants in the market, this is the right time to invest in Croatian Agriculture.
That does not mean that investments in other types of agriculture are not needed. Of course they are.
Croatia has a varied agriculture. The coastal areas are characterized by olive oil and wine production. Certain regions are famous for citrus fruit and rice. Others for all types of fruit and vegetables (including kiwi and berries), other regions are famous for their lush pastures which are suitable for sheep, goat, dairy and beef farming. The low lying areas bordering Hungarian borders are suitable for grain and cattle farming. And let us not forget fishing, beekeeping etc.
All in all there are many opportunities.
Croatia is a beautiful country bordering the stunning island dotted Adriatic Sea. The climate is great, often called the sunniest region in Europe. Fresh water is in abundance. Current agricultural land prices are low and very negotiable. As a foreign investor, in order to purchase Agricultural land, you need to establish a Croatian company. When thinking of investing in agricultural land, knowledge of every region’s specifics is imperative. Cooperation with local communities is recommended.
The Croatian dairy sector
Croatia is a central European democratic republic. It will officially join the EU mid 2013 as the 28th member state. The population of Croatia is 4.3 million. The country is divided into 20 counties and the main city, Zagreb, has a population of 792 875.
Croatia has a very high life expectancy, literacy, education, standards of living and income equality and it ranks high among Central European nations in terms of education, health, quality of life and economic dynamism. The IMF classified Croatia as an emerging and developing economy, and the WB identified it as a high income economy. Croatia is a member of the UN, NATO, the WTO, CEFTA and a founding member of the Union for the Mediterranean.
Croatia covers 56 594 km2 and it has a mostly Mediterranean and continental climate.
Croatia is world famous for its beautiful crystal clear Adriatic sea, dotted with a thousand islands. Less known and equally beautiful is the interior, specifically the highlands and the fertile lowlands.
Croatian culture is western, the labour force young, multilingual and educated. Croatia is a very safe country. In 2010 there were 58 murders in the whole country and only 4 remain unsolved. The rural areas tend towards a zero crime rate.
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Croatia was one of the wealthiest republics, all together six, which formed part of the former Yugoslavia. Since it was a socialistic system, all investment was channeled towards government owned agricultural co-operations where most of the research was done and all the experts were employed. The result was that the smaller traditional family owned farms were marginalised and because of traditional property rights, the land was inherited down to the children and parcels became smaller and smaller.
Today the agriculture still consists of smaller farms in the ownership of mostly older people. The young generation is migrating to the city and those that are willing to stay in the rural areas are looking to diversify in other non-agricultural business such as Country tourism, artisanry, farm stalls etc.
The older generation is usually poorly educated in farming science and unwilling to change their ways and introduce newer technologies. They also do not have the funds to employ experts to improve levels of production.
They lack management skills and inherently the farms are poorly managed or not at all. This makes them uncompetitive. They are also not knowledgeable about how to take advantage of available EU funds and deal with all the regulations and legislation the EU farmer needs to comply with.
Croatian farmers are open to SHARE-MILKING and in fact it will be a logical solution to the above mentioned reasons currently hampering the development of Croatian agriculture.
The younger generation is more than willing to expand their operations but they very often lack funds and expertise. Currently, under EU directive, the Croatian government is working on land consolidation to make the farms more productive and competitive.
There are EU funds available (Common agricultural policy) that are used to encourage land consolidation (€320 per hectare).
Why invest in the Croatian Dairy sector?
The first reason that comes to mind is that Croatia requires approximately 1 billion kg of milk per year and it currently only produces 60% of that. For all the above mentioned reasons, milk production and beef production is falling. Imports are soaring (Croatia already imports 33% of its butter). Croatia receives around 10 million tourists every year and a huge part of its revenue is offset immediately for payment on food imports, needed to feed those visitors!
Projections are that the consumption of milk, dairy products, meat and meat products will only increase in next few years.
Average yearly consumption per Croatian inhabitant is 103L milk , 77L dairy products = 180 L per capita, which means that Croatia currently needs 260 million L extra on top of its current production. The consumption of meat is projected to increase from 12kg per capita per year which works out to 68 000t of meat required, current production being 40 000t. The shortfall is dramatic.
There are currently 15 000 milk producers in Croatia. The current price for a kg of milk paid to farmers is 2.3 KN (R3,1).
The most common types of dairy cows used for milk production are: Simmental: 65%, Holstein: 26% Jersey 2,74%.
There are two dairy giants dominating the local market for Dairy products and a few smaller ones that do not have a significant market share.
Cattle farming (dairy & milk) in Croatia is currently experiencing a downturn. We have already mentioned some reasons: lack of funds to expand and improve the process, older uneducated farmers not willing to embrace new techniques and technology. Another important reason is restructuring of traditional family owned farms. The older farmers are scaling down or completely getting out of labour intensive cattle production and young people are migrating to the cities. Cattle farming is time consuming and it takes some time to develop the production to a level that will start being profitable.
Opportunities for investment in the Croatian Dairy sector
It is straight forward. Croatia needs more milk, meat, fruit, vegetables etc. (They import 80% of their frozen fruit). The market is there, but the supply is flawed.
Tourism is another untapped market which can be used as a vehicle to promote your products: build Croatian brands and start exporting niche products to the EU.
There is a big need for Milk Sharing in the country and the local farmers are happy to be part of it.
Croatia is soon to be an EU country and residency is available. Living is safe, the climate is sunny and it harbors the largest fresh water reserves in the EU.
There are big opportunities to expand laterally into Country tourism and there are EU funds to encourage farm tourism.
There are EU and Croatian government subsidies for agriculture available.
The European markets are on your doorstep, no export duties to the EU. Transport of goods to EU from South Africa is expensive. Shorter distances from Croatia means less expense.
Privatization, opposite to nationalisation in South Africa is the current trend in Croatia.
In the EU, the production and manufacturing of agricultural products is in the hands of farmers. In the case of such dual ownership, there is always certainty of demand/supply.
There are no extra costs of transport since the products are manufactured at the same location as the milk.
Organic farming. Some Croatian agricultural land has not been exposed to pesticides or fertilizers for a long time. Therefore there is a great opportunity for organic milk/ agricultural production. A liter of organic milk is 30% more profitable than normal milk.
There is need for education. There were previous attempts to develop so-called teaching farms in Croatia as well as educational workshops in cooperation with local governments.
Croatian agriculture is currently at a crossroads. It needs investment funds, know-how and entrepreneurial people to take advantage of the many opportunities and at the same time contribute to the local communities.
(My sincere thank you to Mr. Dragutin Vincek (Head of the Agricultural Department of Varazdin County, Croatia), for allowing me to use his articles as a source of information and being my co-author of this article.)
Sanja Hanekom Bcom