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6. konferenca DAES
Orodja za podporo
odločanju v kmetijstvu
in razvoju podeželja
Krško, 2013
6. konferenca DAES
Orodja za podporo odločanju v
kmetijstvu in razvoju podeželja
Krško,
18. – 19. April 2013
Orodja za podporo odločanju v kmetijstvu in razvoju podeželja
Uredil:
dr. Andrej Udovč
Programski odbor:
dr. Emil Erjavec (predsednik), dr. Jernej Turk, dr. Andrej Udovč, dr. Miro Rednak, dr.
Martin Pavlovič, dr. Stane Kavčič
Izdajatelj:
Društvo agrarnih ekonomistov Slovenije – DAES; zanj dr. Jernej Turk
Prelom in priprava za tisk:
dr. Andrej Udovč, Maja Mihičinac
Oblikovanje naslovnice:
Grega Kropivnik
Tisk:
1. izdaja
Naklada 250 izvodov
Ljubljana, 2013
Prispevki so recenzirani. Za jezikovno pravilnost in vsebino odgovarjajo avtorji.
CIP - Kataložni zapis o publikaciji
Narodna in univerzitetna knjižnica, Ljubljana
63:005(082)
338.43.02(082)
DRUŠTVO agrarnih ekonomistov Slovenije. Konferenca (6 ; 2013 ; Krško)
Orodja za podporo odločanju v kmetijstvu in razvoju podeželja / 6. konferenca
DAES, Krško, 18.-19. april 2013 ; [uredil Andrej Udovč]. - 1. izd. - Ljubljana : Društvo
agrarnih ekonomistov Slovenije - DAES, 2013
ISBN 978-961-91094-7-2
1. Gl. stv. nasl. 2. Udovč, Andrej
271247616
Agrarna politika držav
zahodnega Balkana
6. konferenca DAES »Orodja za podporo odločanju v kmetijstvu in razvoju podeželja«.
Krško, 18.-19. april 2013, s. 101-109.
POSSIBLE SUPPLY CHAIN MODELS FOR SMALL
AGRICULTURAL PRODUCERS IN SERBIA
Vlade ZARIĆa, Zorica VASILJEVIĆa, Danijela PETKOVIĆa
ABSTRACT
Agricultural production in Serbia is one the most important segments of the
national economy. Serbia is exporting more agricultural product than importing. Food
processors who are responding to the wholesale and retail demand are looking for
commodities with specific attributes. Industrialised agriculture grows and makes the
rules on the market. In contrast, it has been recognised for some time that small
agricultural producers in Serbia have been under huge economic pressure. As a
result of impressive changes in market demand and in agricultural policy small
agricultural produces in Serbia need to adjust their production structure. Market
developments provide niche opportunities for small producers that are able to
differentiate production and respond promptly. To capture these opportunity small
farmers could use appropriate supply chains and supply chain strategies as well as
decision making strategies for the development of partnership, especially planning
for successful marketing. The aim of this paper is to analyse the supply chain models
for the small Serbian farmers. The results show that small producers in Serbia face
increased competition by big player in the market. The wholesale and retail
permanently increase criteria for suppliers. Small producers have possibility to use
niche opportunities in approaching consumers.
Key words: supply chain, agricultural producers, Serbia
MODELI MOŽNIH PRESKRBOVALNIH VERIG ZA MALE
KMETIJSKE PRIDELOVALCE V SRBIJI
IZVLEČEK
Kmetijstvo je v Srbiji ena njpomembnejših gospodarskih dejavnosti. Srbija izvozi
več kmetijskih proizvodov, kot pa jih uvozi. Predelovalna industrija , ki pokriva tudi
grosistično prodajo in distribucijo zahteva dobrine s specifičnimi lastnostmi in v
sodelovanju z industrijsko usmerjenimi pridelovalci določa tržna pravila. S tem so
mali pridelovalci že dalj časa pod precejšnjim ekonomskim pritiskom in se morajo
stalno prilagajati zahtevam na trgu. Razvoj trga jim omogoča vedno nove tržne
vrzeli, ki jih tisti, ki hitro reagirajo uspešno izkoriščajo. Da bi lahko izkoristili tovrstne
priložnosti lahko izkoriščajo primerne oskrbovalne verige in oskrbovalne strategije
preko razvijanja partnerstev za uspešno trženje. Cilj tega prispevka je analizirati
modele oskrbovalnih verig za majhne Srbske kmete. Rezultati kažejo, da se mali
kmetje v Srbiji soočajo z naraščajočo konkurenco velikih ponudnikov. Mali kmetje
imajo možnosti, da izkoriščajo niše v pristopih k svojim kupcem.
Ključne besede: preskrbovalne verige, akmetijski pridelovalci, Srbija
a
University of Belgrade, Faculty of Agriculture, Nemanjina 6, 11080 Zemun, the Republic of Serbia
[email protected]
© DAES 2013
Vlade Zarić in sod.
102
1 Introduction
The supply chain models in Serbian agri-food branches presently are under high
interest of policy makers, public and consumers. There are many reasons for these
trends, but the main reason is the raising consumer awareness regarding health.
The modern consumer wants to have precise information regarding the farming,
marketing and distribution practices used to put agricultural products in the shelves
on supermarkets. The rising consumer conscious about health cause additional
regulation and market driven standards. In the following steps an already complex
supply chain would have addition requests to the suppliers. This complexity is even
higher in the case of supply chain that includes two or more countries. As Serbia
liberalised the trade, international competition will increase and switch focus from a
single participant, such as the producer, to the efficiency of the whole chain.
Primary producers have to adjust the production and marketing practices. In
Serbia industrialised agriculture grows and makes the rules, while the small farm
enterprise try to survive on the market. In Serbia there is no evidence of decline in
small farm enterprise, but there is evidence that the number of rural household is
going down. It is estimated that under current practices, even the largest group of
small farms, having more than 15 ha (Table 1) would have difficulties to make a
profit in the future.
There are many initiatives proposed in Serbia to help and to save the family
farms. However, usually all of those initiatives do not help farmers. Almost all
activities have been developed from a policy point of view and not from the farmers’
point of view. Very rarely the bottom-up approach and modelling is used. A positive
impact could be made on small farms by development and implementation of
models that include basic needs of farmers and opens new market and production
activities. This paper gives an assessment of the supply chain models for small
Serbian farmers. In this paper we focus on models targeted to be used by a single
user, which is in our case a farmer. A single user could be agricultural company, too.
In this paper we focus on agri-food supply chain models from the perspective of
individual farmers or group of farmers.
There is numerous literature related to supply chain and marketing of
agricultural product and review of application of planning models in the agri-food
supply chain. In reviews from Glen (1987) models of crop and livestock production
we analysed. In the focus of Lowe and Preckel (2004) review were main modelling
approaches used in crop planning in the context of agribusiness. The review by
Lucas and Chhajed (2004) focused on the topic of allocation analysis applied to
agriculture related to location of warehouses and processing plants. The models
applied on the micro level were reviewed by Ahumanda & Villalobos (2009). In this
review authors make distinction between models using different criteria presented in
the following table:
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Possible supply chain … producers in Serbia
103
Table 1: Micro modelling approaches:
Factors to classify the
models
Storability of products
Scope of modelling
Uncertainty
Models applied on
perishable or non-perishable products
strategic, tactical and operational
deterministic – liner and deterministic or stochastic – stochastic and stochastic
dynamic
In the second step of the classification as a criterion authors used particularity of
the modelling approaches used and analysed the models using linear and
deterministic programming, as well as stochastic and stochastic dynamic
programming. Figure 1 presents factors to distinguish models and possible field of
application.
Non-perishable
Perishable
Agricultural
products
Scope
Operational
Tactical
Strategic
Models
Deterministic
Linear
programming
Dynamic
programming
Stochastic
Stochastic
dynamic
programming
Stochastic
programming
2 Background
Supply chain models of agricultural products in Serbia continue to be important,
in terms of consumption and monetary value. In 2011 agricultural sector made up
over 10% of Serbia’s GDP. Contribution to the GDP of some agricultural sectors is
actually expanding, like fresh fruit and vegetables which accounts for 22 % of
agricultural production (SORS, 2012). A quarter of the country’s employment, is in
agriculture, whiles in rural areas, agriculture remains the largest employer of the
economy (WB, 2006). Some 23% of merchandise export is agricultural origin. Since
2002 foreign trade with agricultural products in growing, and since 2005 there is a
positive trade balance with agricultural products. Within agriculture, cereals and
fresh fruit and vegetables are of strategic importance, contributing respectively with
29% and 25 % to total agri-food exports by value in 2011 (SORS, 2012).
At a primary level in the supply chain, farms structure is highly fragmented with
a large part of small agricultural producers being semi/subsistence, and with a small
part of industrialised competitive agricultural enterprises. In the food processing
industry, the level of competition is low, because a few producers account for a
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104
major market share. However, a different study shows that there is not market
power (Zaric et al., 2010). Concentration in the food processing industry varies
across branches. The food wholesale and retail chain responds to the customer and
demands products with at competitive prices. Serbian consumers are being more
aware of product quality and safety and there are growing requirements and
standards along the food chain. Requirements of EU consumers, being the main
export market for Serbian agricultural products, are higher and even Serbia’s large
food processors are not able to meet it. Therefore, only a small number of Serbia
dairy and meat companies have a licence to export to the EU.
The Small Farms in Serbia
The total number of small-scale family farms in Serbia amounts 779891 (Census
2002, SORS), of which only 278351 are registered by the Ministry of Agriculture and
could benefit from the state support skims (Directorate for Agrarian Payments,
published on 10 may 2011).
Table 2: Number of smal scale farms in Serbia
Agricultural land in ha
Without land
< 1 ha
1-3
3-5
5-8
8-15
> 15
Total
Number of holdings
6,288
208,100
254,832
135,161
96,843
62,326
15,341
778,891
Source: Census 2002
Of the total agricultural production on small-scaled Serbian farms, one part is
used for consumption on farm and remaining part is direct sales, usually in the
informal market. This model of marketing of own products means that those
farmers have a very short supply chain and are not integrated into modern agri-food
supply chain.
If those producers intend to sell products to the retail chain they have to have
sustainable commercial relationships. To have a stable position farmers have to
have contracts and meet the requirements of the retailers. Their market position is
critical as they have to complain with the requirements of an increasingly
demanding retail chain. Market developments provide niche opportunities for small
producers that are able to differentiate production and respond promptly. This
means that traditional patterns of farming will change because more products will
be produces for international taste or for niche markets.
© DAES 2013
Possible supply chain … producers in Serbia
105
3 Method
Farms have to take decisions that have some similarities to the “classical”
production and these are on the operational, tactical and strategic level. First of all,
the question is how to operate the business that includes for example how to
distribute, transport or store inventory. The next, tactical level includes decision on
area to be planted, the choice of product to be planted, e.g. GMO or not, application
on pesticides, fertilisers, irrigation, choosing the mode of transport from the farm to
silo or market. Those two levels, operational and tactical, could be discussed only
after the strategic decisions have been made. To make a strategic decision farmer
have to now external market demand. For him this is given variable that he could
not change and have to adjust his tactical and operational decisions that he could
influence. The strategic decision is related to the customers and how to serve them
successfully. The strategic decision means to select the most efficient, profitable
supply system to the customer (Jang & Klein 2011).
In this paper we used the conceptual micro model approach as presented by
Ahumanda & Villalobos (2009) on the strategic level, supported by supply chain
model integrated into complete enterprise model as shown by Jang & Klein (2011).
This model will allow small farmers to take the best decision regarding supply chain.
In introduction we discuss about possible micro level approaches and on this point
we briefly describe the model used for taking a strategic decision. The basic
questions regarding choosing a supply chain is to sell product directly or participate
in a group with other farmers, and if join the group, the question is how large to
make this group. Small farmers could benefit from belonging to a group, but there
are several open questions, e.g. contracting and pricing policy. The strategic
decision is not simply and not uniform for all situations.
To make a model authors (Jang & Klein 2011) made assumption such as
homogenous farmers, deterministic demand and a single product type. Each farmer
sells product directly, demand is stochastic, and the demand and price do not
depend on other suppliers like supermarkets or industrial farmers. Because of small
quantity no one homogenous farmer has access to larger customers like wholesale
or supermarkets.
If farmers would have a marketing group, and change a supply chain they could
have more stable demand. However, by accessing larger stable market, the
uncertainties of local direct market disappear, but the sales price per item will be
lower than the price of the local direct markets. The further assumption is that total
production of group of farmers is larger than demands of larger customers, so each
farmer is selling one part within the group and remaining part in direct marketing.
Decision rules for the small farmers is not to change supply chain models and stay
in direct marketing if the expected marginal price of direct selling is larger than the
price obtained in the group. If farmers produced quantity is larger than certain
threshold value he should be group member. In other situation decision of a single
farmer depends on the size of the group. The describe approach we use to analyse
situation of Serbian small agricultural producer.
© DAES 2013
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106
4 Results and discussion:
The describe model we applied to analyse the small agricultural producers of the
most important export products cereals and fruit.
Case 1: Wheat and Corn
Wheat is traditionally grown in Serbia and farmers do not organise themselves
into marketing group and have a very short marketing chain. As the farmers do not
have storage capacity, just after harvest wheat is transported to the next silos and
sold to the silo keeper. Only some farmers use the possibility to keep it at silo and
sell it later after harvest while the wheat price is rising. Very small semi-selfsufficient farmers in the remote areas do not sell wheat at all, but use for feed on
the farm.
The reason why farmers do not organise group in marketing of wheat is not only
because of the price relation, but mainly because of different product quality and
uncertainty regarding the selling price. The state in the past often passed the
regulation that violates economic rules. For example, if the market price of wheat
was high, the state prohibited international trade, which reduced demand and price
were quickly falling.
Similar to wheat, small farmers sell the corn in direct marketing. The big
advantage is that farmers have a storage capacity and could decide on the time of
selling. As the demand on the local level is usually from the small livestock farmers
the join a group would not have advantage. The rule is that farmer that has a high
quality corn would be the first one who will sell, and the others will follow. As a rule
the local corn price depend on the corn quality. So the single small farmer is more
stimulated to have a high quality and yield and not to join a marketing group.
Case 2: Apple and Raspberries
Both products are export products and depend on international demand.
However, in the case of apple the domestic demand plays an important role, while
by raspberries not. The possible supply chain for fruit is presented in the following
graph.
Producer
Natural consumption
Broker
Green market
Cool storages
Processing
Retail
Export
Consumers
Figure 2: Possible marketing chain for fruit
© DAES 2013
Possible supply chain … producers in Serbia
107
In the case of apple, the farmers usually organising the storage and marketing
group. On this way they succeed to change the supply chain and have stable
demand. One part of product is sold true the group and other in direct selling. The
reason for organising a group is to build a common cooling storage and keep
product to the point the price is the highest.
However, after we remove the assumption of the stable demand, what actually
happened in Serbia in 2013, because implementation of the agreement with the EU
and opening of the Russian market, the supply chain model for small apple
producers would be mo complex.
Raspberries are product which supply chain is going to broker, cool storages,
processing and retailer. The small farmer sells the product to the broker or cool
storages, so it has a very short marketing chain. Those farmers do no organise a
group because they are very fragmented and on the local level there is only demand
from one buyer, broker or cool storage. Natural consumption does not play
significant role, as well as marketing on green market. The product is perishable and
without cooling is not possible to keep it after harvesting. Possibility to change a
supply chain would be that small farmers organise a group which would invest in the
cool storage.
The future supply chains models of small farms
Previously we discussed the existing supply chain models of small agricultural
producers under assumption that made situation more general. At this point we
discuss the future supply chain model for the small farms in Serbia.
Processing industry and trades ask for quality requirements, which also mean
use of specific inputs, like fertiliser and crop protection chemicals, investment in
capital assets, e.g. packaging houses and cool storages.
At the present situation in Serbia the organisation of processing and export
marketing is separated from the organisation of the production.
This mainly because of the high transactions costs that exist in the case buyer
have to deal with small farmers. However, common activity by small farmers, would
allow buyers to deal with organised groups and decrease transactions cost.
In some situation small farms enjoy a competitive advantage over large
commercial farms, in the form of their low transaction costs in accessing and
supervising motivated family labor (Binswanger & Rosenzweig, 1986; Eastwood,
Lipton, & Newell, 2004). Small farms usually have high local knowledge and could
have high reputation regarding product quality. However, small scale leads to high
unit transaction costs in almost all other transactions that are not connecting with
labor, e. g. in accessing capital, market and technical information, inputs and output
markets, and in providing product traceability and quality assurance of products.
Small agricultural producers still have some advantages on the local level.
Domestic consumers believe that products of small producers have a high quality.
Consumer at the local level purchase smaller quantity which is suitable for small
producers. However, this advantage will be lost by liberalization of international
trade.
© DAES 2013
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108
The select appropriate supply chain model for small farmers in Serbia could build
on existing informal arrangements between small agricultural producers. Those
agreements work in practice and typically are between already most advanced
farmers at the local level.
Choosing a supply chain models, and be member of the farmer group depends
on the decision making on the small farm. If on a small farm, younger farmers are
not evolved in decision-making process on the farm and do not have independence
and a sense of ownership, they may leave farm and seek job opportunities outside
of the family farm. Such farm probably would be not able to change supply chain
models.
Some specific aspect that influences the supply chain models in Serbia is
subjective opinion on “good farm manager”. The large numbers of Serbian farmers
are born on the farm and their farming knowledge got doing agriculture. Their
understanding of agriculture depends on their social and cultural environment.
5 Conclusion
In this paper we analysed the possible supply chain model for small agricultural
producers in Serbia. Modelling in usually applied to industry and to agricultural
enterprises. The model presented here is a step in developing the tool for decision
makes on the micro level. This should help small scaled farms to be competitive and
stay in agriculture. Choosing the best supply chain would help producers to reduce
costs and increase quality and service to the consumers and get higher value of
production.
6 Acknowledgments
This paper is supported by the Ministry of Education and Science of the Republic
of Serbia, project No. TR31086, project No. III46001 and project No. TR31034.
7 Literature
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© DAES 2013
Študije potrošnih navad
Agrarna politika držav zahodnega Balkana
Ekonometrične analize in matematično modeliranje
Empirični modeli v podporo odločanju kmetijske politike
Modeli v podporo odločanju na ravni gospodarstva
Organizacije pridelovalcev, potrošne navade in poslovno
odločanje
Pravo in razvoj podeželja
© DAES 2013
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