WHO NEEDS BREAD

expensive bread

Wheat harvest, "wheat scandal" and expensive flour

Long-term policy of merciless exploitation of farmers in the "national interest", salvation of industry during sanctions and the preservation of social peace in towns have resulted in the collapse of agriculture, and the bread prices have gone up drastically.

AIM, Beograd, July 14, 1996

With the approaching wheat harvest in Serbia late this year it is becoming increasingly clear that the yield will be the smallest recorded in the past 40 years with the lowest average crops in the last 20 years. Experts claim that this year the average yield will not exceed three tons per hectare, meaning that something over 1.7 million tons of bread wheat will be harvested from the 756,000 hectares of area under crops.

That the harvest is not proceeding well shows the fact that the bread prices went up by 30 percent when the harvest was in full swing. Consequently, a 600 grs. loaf of average quality bread now costs 2.40 din. (about 80 pfennigs), which will exert additional pressure on the living standards of the broadest strata of the population.

Namely, calculations show that with the average salary below 600 din (about DM 180), and consumption of two loafs of bread per day and five kgs. of flour per month, food costs of a four-member family will increase by approximately 100 din. (DM 30), which is not insignificant.

From the macroeconomic point of view this is happening at the end of a year which will be recorded in the world economic history as a year of a drastic price hike of wheat at the world market. Hence, at the end of a season in which the world wheat price went up from USD 120 to over USD 200 per ton, FR Yugoslavia decreased the production of this commodity by over 50 percent.

Scramble for Profits

There is a wide spread conviction that ministers of the Government of Serbia and high officials of the republican state reserves in this year when wheat is in high demand, engaged in export speculations and took greater effort in scrambling of wheat profits than in investing the surprisingly high profits into the rehabilitation of agriculture.

Even in the hyper-inflationary year of 1993 the farmers practically got nothing for their wheat, while in the year after that, 1994, they managed just to cover basic costs with the purchase price of 15 pfennigs per kilo. Last year, when the yield reached 3,5 million tons, the Serbian Prime Minister Marjanovic told them almost insolently that the offered purchase price of about 10 pfennigs per kilo was in their interest and at the expense of the state which, allegedly, before the harvest last summer had stocks of over 1,2 million tons of old wheat.

As it turned out later Marjanovic from his prime-ministerial position, but on behalf of the foreign-trade firm "Progres" of which he is the General Manager, applied for export licence for one hundred tons of wheat showing that it was possible to make a 100 percent profit on state wheat at the world market.

Later it continued with a well-known scandal when the Democratic Party published a public note accusing Marjanovic as a "plunderer" of Serbia and trials of Zoran Djindjic who took all the responsibility for the said notice. At the trial, the accused pointed out that this year's price of 26 pfennigs per kilo, by the very fact that it was 150 percent higher, proved that the last year's price had been too low and that middlemen and the state had made a profit on speculative transactions.

It seems that after this year's poor wheat harvest, this scandal will become even more complicated. Namely, in order to reassure the public the new Agriculture Minister, Nedeljko Sipovac, stated that in spite of the poor yield of wheat there will be enough bread next year. His calculation uses some rather problematic figures. For, as opposed to the annual requirements of 1.8 million tons he announced that this year's yield will amount to some 1.87 million tons and that the mysterious last year's reserves amount to one million tons. However, experts have determined that his estimates of this year's yield are incorrect, and are very suspicious as of the existence of old wheat reserves.

Even with such off-hand assessment of the wheat balance Nedeljko Sipovac will undermine the prosecutor's arguments in the proceedings against Djindjic when it turns out that last year the FRY exported approximately two million tons of wheat, while only yesterday Marjanovic's government claimed that less than 600,000 tons were exported.

Elections and Shortages

In case of bread shortage ordinary consumers will be additionally angered by the mysterious wheat export involving the leading men of the Serbian government. For, the shortage seems practically inevitable as it is quite probable that a million tons reserves do not exist, and those which do exist are certainly not in the hands of the Republican Directorate for Commodity Reserves. Actually, reserves of old wheat are theoretical and would have existed had not the farmers fed it to the cattle last fall as the last year's price did not motivate them to sell the wheat to the state.

The main problem lies in the fact that last fall rather small area in the state agricultural sector was sown with the wheat so that no more than 350,000 tons should be expected. And that is the only quantity of this year's wheat that the state can count on with certainty. Anyway, that yield has practically been sold already this spring through Serbia's governmental treasury bills already at a favourable price of 50 paras per kilo. Thus, the only thing certain is that what the state will have in its hands has already been sold abroad. The quantities the population here needs should be purchased from the farmers, while they, as can be seen by the situation round silos, are dissatisfied with the three installments payment of their crop and are counting on the middlemen to get better prices and cash for it.

The Government of Serbia tried to prevent this by a series of decrees, among which the most important allows the selling of wheat to only state flour-milling firms, as well as fixes that the upper limit of the flour prices and puts them under state control. Such decrees are not a novelty in the Serbian practice, but as it happened they are hard to implement without much police repression. Naturally, in case of a serious bread shortage in cities, the authorities will not shrink from undertaking the harshest measures against the farmers - but at this moment it is impossible to foresee the results and consequences of such an action.

In any case, in the election season both the bread shortage and the pressure of farmers could be lethal for the party in power. It is more probable that the Government of Serbia will consider possible intervention imports of wheat. Those who follow the developments on the world food market think that the world grain production will significantly increase this year as compared to the previous - somewhere between four and six percent. In that case the price of wheat could also fall on the world market sometime during winter, so that Serbian governmental experts probably think that they will manage to save the situation by imports when that time comes.

Therefore, there is no reason for panic or fear that Serbia will be left without bread, notwithstanding Vojvodina, but it is obvious that a chance has been missed to ensure economic rehabilitation of agriculture with a sound agricultural policy, as it is becoming a dominant economic field and industry is hopelessly lagging behind.

Dimitrije Boarov (AIM)