CROATIAN CEREAL MARKET IN CONDITION OF WORLD MARKET
GLOBALIZATION
Lončarić, R., Tolušić, Z., Zmaić, K.,1
SUMMARY
Republic of Croatia since indipendence proclamation declared for open market model and
integration process of transition. Considering tightness of internal market and a loss of
traditional markets, Croatian economic developement is based on export orientation with
important agriculture role. The aim of this paper was to analyze cereal market importance and
to give some advices for better adaptation in new and future conditions.
Data about customs tariffs for terms of trade analysis between Croatia and main trade
partners based on current multilateral and bilateral agreement were used in paper as well as
other data were published by Croatian statistical Department, FAO publications and Ministry
of Economy.
Cereals in Croatia participate with 2/3 seeded areas. In 2001. the most freequent crop was
maize (56%) and wheat (33%) and private sector dominated in total production. The
merchandise coefficient was very low (about 20%) what point on faulty market organization,
narrow distributional channels and high degree of autoconsumm. Relative share of cereals in
import and export was about 10%. Croatia manage better terms of trade with EU, EFTA and
CEFTA what is based on free trade, MFN customs, and for some products were prescribed
quotas with prerogative customs.
KEY WORDS: cereals, globalization, external-trade change, tariffs
INTRODUCTION
Croatia should implement transformation and reform in agriculture with purpose of
approaching to the European Union standards as in other economy branches. Agriculture as
the most delicate sector in European Union is supported by Common Agriculture Policy
(CAP) and its acts with aim to increase competition of european farmers and agriculture
enterprises. As a member of World Trade Organization and Stabilization and Association
Agreement (SAA), Croatia is obligated to liberalisation of all agricultural production (and
cereals too). It refers to tarrifs and subsidies decreasing, abrogation of export subsidies etc. It
will facitate entry of Croatian products to the foreign market as well as it will increased
presure of foreign products on Croatian market. It will lounch the basic principle of
globalization process giving absolute priority to the economic efficiency and competitiveness.
The basic difference between more and less successful ones is products competition
advantages which is defined with price and quality. It makes as a priority a solving problems
in Croatian agriculture by agricultural policy measures with aim to increase competitiveness
and preservation of domestic agricultural resources.
Solving this problem in cereals production is very important for improvement agricultural
situation in Croatia because cereals dominate in sowing structure.
The aim of this paper is to analyze importance of cereals and to give some advices with the
purpose of better adjustment of cereal merket to the new and future conditions.
1
Faculty of Agriculture in Osijek
MATERIAL AND METHODS
Source in studing this problem was all available literature related to cereal market in Croatia,
EU and some transition countries, foreign trade, integration process and the other data related
to influence of integration process and Croatian cereal market.
Custom tariffs data in terms of trade analysis between Croatia and main trade partners based
on current multilateral and bilateral agreement were used in paper as well as other data
published by Croatian Statistical Department, FAO publications and Ministry of Economy.
Methods used in paper were structural and chronological analysis, mathematical-statistical
methods (correlation and regresion) and syntesis method.
RESULTS AND DISCUSION
Cereal production is traditional very important agricultural production in Republic of Croatia.
In sowing structure cereals participate with more than two thirds and wheat and maize
production with 60%. Barley, rye and oat production were less presented.
From 1997-2001 wheat was produced on 219.000 ha and maize production is in increasing
(significant increasing between 2000 and 2001). Weak, but constant increase in barley and rye
production was present, whereas oat production is constant (Table 1.). Average yields are
unpermissible low (20-30% lower in relation to our most important trade partners1, FAO
Trade, 1999). The reason is actual cereal unorganized market situation including rensom price
problem, high input prices in agricultural production and factors which limit productivity
(land-owner structure, old agricultural machinery etc.). Farmers decrease input of neccesary
amount and quality of components and this is reason for lower average yields.
Table 1: Cereal production in Croatia (average 1997-2001)
Wheat
Maize
Barley
seeded area (ha) 219.000
404.800
43.800
production (t)
881.802
2.006.280
137.964
yield (t ha-1)
3,98
5,22
3,16
Source: State Statistical Department, 2002
Oat
21.000
51.699
2,47
Rye
2.534
6.577
2,59
Foreign trade exchange of cereal primary products (Graph 1) was very unstable (disability of
conducting any statistical standards). Import-export exchange (total cereal average) mainly
was positive, except in 1997, 1999 and 2001 because of very adverce climatic conditions what
resulted in low wheat export 1997 and extremely negative maize bilance in 2001. Wheat and
oat netto-export were positive and barley and rye negative (Table 2). Foreign trade exchange
for maize depended on production level in respective years, maize prices on domestic market
and meat and maize prices relation.
Relative share of cereals in agricultural import and export was about 10% (State Statistical
Department, 2002).
1
calculated on the basis of average wheat, maize and barley yealds in 1999 in Hungary, Slovakia, Slovenia,
Czech, Austria, Italy, Germany and France.
Graph 1: Cereal foreign trade exchange in Croatia (1992-2001)
Croatian cereals - foreign trade exchange
million US$
40,00
20,00
32,17
23,10
35,64
29,40
7,05
29,02
4,91
0,00
-1,77
-20,00
-29,57
-40,00
-3,85
y = 0,5602x 2 - 9,06x + 40,87
R2 = 0,2189
years (1992-2001)
World cereal prices (total) have been decreased in a past ten years. This trend is stopped, but
more because of US$ relation and a fact that wheat prices in USA have the biggest influence
on total world prices. During the same period, domestic cereal prices were 15-100% (wheat)
higher than world prices (Žimbrek et al., 2002).
Table 2: Wheat, maize, barley, rye and oat foreign trade exchange in Croatia (1992-2001) in
US$
Foreign trade exchange
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
average exchange
Wheat
9.303.496
1.893.794
5.258.117
31.103.619
19.881.274
-24.904.558
-6.184.773
1.151.235
33.299.180
30.564.246
10.136.563
Maize
Barley
21.964.777
22.138.802
4.750.570
10.204.911
13.461.125
3.062.760
18.567.914
4.056.726
-2.381.170
-24.121.877
7.170.454
2.564.187
357.547
-1.055.034
-2.448.269
409.298
-2.305.542
-2.118.953
-1.891.286
-849.930
-5.302.952
-1.264.093
Rye
64.729
28.301
113.545
-96.701
-51.289
-410.281
-186.524
-69.069
-151.596
-69.617
-82.850
Oat
311.988
211.594
139.986
-51.795
177.396
40.030
29.128
37.656
-5.869
-220.443
66.967
World market globalization and liberalization process since Uruguay Round Agreement 1987
includes agricultural product. Briefly, it implicate "Tarrifs only" principle, relatively to
obligation of cancalling quotas, plafons, prelevmans and other foreign trade protection
measures with agreed rates and dynamics. It depends of country development level. Beside
tarrifs prefering, the most important liberalization measures of world market are decreasing of
domestic support and subsidied export.
Croatia, as WTO member since the end of 2000, is obligated to respect basic principles of
multilateral trade system (Boban, 1997):
1. undiscriminating trade (Most Favoured Nation clause),
2. predictible and increasing market access,
3. propagating of liberal competition and
4. promoting of development and economic reforms (distinctive treatment of the most
undeveloped countries).
Croatia subscribe Stabilization and Association Agreement (SAA) and some bilateral
agreements with the most important trade partners (CEFTA and EFTA countries). Croatia
menaged better terms of trade based on free trade, MFN tariffs and for some products were
prescribed quotas with prerogative tariffs. According to SAA, Croatia has unreciprocal terms
of exchange what implicate more acceptable Croatian foreign trade status in relation to EU.
Croatia participation in actual worlds trends and organizations helps Croatia in opening to the
world market what implicates easier access to the export destinations. At the same time, it
means foreign competition entry to the domestic market.
EU countries have high selfsufficient level for cereals (except maize) – 102%
(http://www.hgca.comc.stats/data/eu.xls). It results with market saturation what has
unfavourable reflect to the Croatia exported cereals. Low competition chances of Croatian
cereals is determinated by high price and weak differenciation of processed cereal products. It
is result of mentioned problems – land owner structure, narrow market (distribution) channels,
unsufficient and old machinery and unmotivating price and subsidy policy of Croatia
Government.
At the other hand, opening of Croatian market for foreign products make space for cheaper
products which have better competition chances. Mentioned agreements defined quotas and
"in quotas", prerogative, tariffs. Imports entering under the tariff-quota (up to 1.000 tons) are
generally charged 10%. Imports entering outside the tariff-quota are charged 80%. Under the
Uruguay Round Agreement, the 1.000 tons would be based on actual imports in the base
period or an agreed “minimum access” formula.
Tariff quotas are also called "tariff-rate quotas".
Picture 1: Imported goods charging by in and out of quotas tariff rate
Tariff
rate
Out of quota
80%
Charged 80%
In quota
10%
Charged 10%
Quota limit
1000 t
Imported quantity
Source: http://WTO.org/english/thewto_e/whtis_e/tif_e/agrm3_e.htm
Import protection for cereals and some cereals products is shown in Tables 3 and 4. There is
initial tariff rate defined for all products (MFN tariffs) and for all WTO members. Those
tariffs are limited in a two ways: only as ad valorem (valued) and/or quantity tariffs (in money
per unit of imported product, 100 kg in this case). Meanwhile, Croatia signed bilateral
agreements (as it is shown in so called appendixes). In these, quotas are defined for some
goods and in (prerogative) and out of quotas tariffs (Table 4).
Data in table 3 and 4 show as it fallows: the strongest protection is installed for competitive
products – wheat, wheat flour, barley and maize flour. It is proscribed quotas for EU product
import (rye and wheat flour), with Hungary are consented the highest wheat and maize
quotas, and with Slovenia quotas for wheat flour. Free Trade Agreement with Bosna and
Herzegovina related on all products is signed.
Table 3: Tariff rate for cereals and some cereal products imported to Croatia
Tariff note Tariff rate (%)
10019099
1020000
1040000
1059000
1030090
11010015
11021000
11022010
11029010
11029030
8,5+3,5€/100kg
max. 52,5
20
15
13
10+3€/100kg
max. 31
10+10,4€/100kg
max 45,5
20
10+6,4€/100kg
max 30,5
40
20
EU
EFTA
BH
Bulg.
Czech
MFN MFN
App.1a 20
13,5
15
11,7
13
sl.
sl.
sl.
sl.
30
15
15
13
30
15
15
13
MFN
sl.
18
18
18
App.1a MFN
20
20
sl.
sl.
30
15
30
15
sl.
sl.
sl.
15
15
15
15
15
15
MFN
MFN
40
20
MFN
40
20
Hung.
Mak. Poland Slovakia
App. 7 MFN MFN
15
20
20
15
15
15
App. 7 13
13
Sloven.
30
15
15
13
MFN
20
15
13
MFN MFN
18
MFN
30
15
MFN MFN
20
20
30
15
App. 11
20
15
15
15
MFN MFN
40
40
20
20
15
15
15
MFN
40
20
Source: http://www.mingo.hr/hrvatski/FRcarina.htm
10019099
- wheat - remainding
1020000
- rye
1040000
- oat
1059000
- maize - remainding
1030090
- barley - remainding
11010015
- wheat flour
11021000
- rye flour
11022010
- maize flour (fat content include to 1,5 mass %)
11029010
- barley flour
11029030
- oat flour
Table 4: Quotas and quotas tariffs for products from table 3.
In quotas
Tariff note
Quotas
(prerogative) tariffs
1020000
500
0
11010015
900
90% MFN
7
10019099
15000
15
10059000
30000
9
11
11010015
500
1
Source: http://www.mingo.hr/shared/download/CT_prilozi .pdf
Appendix
1a
Tariffs out of quotas
MFN
MFN
MFN
MFN
MFN
CONCLUSION
Croatian agricultural production is traditional strong connected to, so called, capital-intensive
crop production, such as cereals, what results with dominate wheat and maize share (66%) in
sown structure. Actual cereal unorganized market situation includes rensom price problem,
high input prices in agricultural production and factors which limit productivity (land-owner
structure, old agricultural machinery etc.). Farmers decreas quantity and quality of neccesary
input components and this is reason for lower average yields.
Signing of Stabilization and Accesion Agreement and some bilateral agreemenst with EFTA's
countries and most important middle-european partners obligated Croatia to respecting certain
rules in foreign trade exchange.
First result of engaging Croatia to the world integration events is domestic market opening for
world and european products. Reinforcement of foreign trade deficit of cereals from the
middle-european countries is provided by import which is charged by ad valorem tariffs and
in some cases with prerogative, in quotas, tariff rates. Unreciprocal terms of foreign trade
charging, defined by SAA with EU, which implicates better terms of exchange to Croatian
products in relate to EU, insures expedient protection of domestic products.
Second european and world market engaging result is easier entry of our products. Price
uncompetitiveness of cereals and cereal producced products relating to trade partners, limits
higher participation of these products in foreign trade exchange (10% of total exported
agricultural products). Further, Croatia has low differentiation of quality cereal products in
export program. Products sold by theirs quality and image in reach consumer group can
provide better export chances on saturated west market. We are remained to create domestic
products image by changing products structure which includes noted mark and quality and to
provide certain share in foreign market to our producers.
LITERATURE
1. Boban, Ž. 1997. Svjetska trgovinska organizacija. Slobodno poduzetništvo. 11-12: 237.241.
2. Žimbrek, T. i sur. 2002. Nacionalni program za poljoprivredu i seoska područja – nacrt.
Agronomski fakultet Sveučilišta u Zagrebu. Zagreb.
3. ***. 1999. FAO Yearbook, Trade 1998. FAO. Rome.
4. ***. 2002. Statistical Yearbook. Croatian Statistical Department. Zagreb.
5. http.//www.hgca.comc.stats/data/eu.xls
6. http://www.mingo.hr/shared/download/CT_prilozi .pdf
7. http://www.mingo.hr/croatian/FRcustoms.htm
8. http://WTO.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm
SAŽETAK
Od svog osamostaljenja Republika Hrvatska se deklarirala za model otvorenog tržišnog
gospodarstva i uključenja u europski integracijski proces tranzicije. S obzirom na malo
unutarnje tržište i gubitak tradicionalnih tržišta, gospodarski razvoj Republike Hrvatske se
ogleda u izvoznoj orijentaciji u kojoj poljoprivreda ima značajnu ulogu. Cilj ovog rada bio je
analizirati značaj žitarica te dati prijedloge mjera u svrhu bolje prilagodbe tržišta žitarica
novim i budućim uvjetima.
U radu su, između ostalog, korišteni podaci Državnog zavoda za statistiku, FAO publikacija i
Ministarstva gospodarstva o carinskoj tarifi za analizu uvjeta vanjsko-trgovinske razmjene
između Hrvatske i osnovnih trgovinskih partnera na temelju važećih multilateralnih i
bilateralnih ugovora.
Žitarice kod nas participiraju s više od dvije trećine svih zasijanih površina. U 2001. godini
najzastupljeniji su bili kukuruz (56%) i pšenica (33%) s zamjetnom dominacijom privatnog
sektora u ukupnoj proizvodnji. Koeficijent robnosti je izuzetno nizak (oko 20%) što ukazuje
na lošu tržišnu organizaciju, uske distribucijske kanale, ali i visok stupanj autokonzuma.
Relativni udio žitarica u poljoprivrednom uvozu i izvozu iznosi oko 10%. Sa zemljama EU,
CEFTA-e i EFTA-e Hrvatska se izborila za povoljnije uvjete razmjene koji se zasnivaju na
slobodnoj trgovini, carinama na MFN osnovi, a za neke su proizvode uvrštene kvote s
propisanim preferencionalnim carinama.