Voluntary Report - public distribution

**Date:** 6/23/2004

**GAIN Report Number:** BK4017

BK4017

**Bosnia-Hercegovina**

**Poultry and Products**

**Market Update**

**2004**

**Approved by:**

![](media/image1.wmf)Sarah Hanson

U.S. Embassy

**Prepared by:**

Sanela Stanojcic

**Report Highlights:**

Bosnian poultry consumption has been increasing for several years with
domestic production growing as well. At present, there is a shortage of
poultry meat for processing, and Bosnian processors find imported
poultry meat cheaper than locally produced product. However, market
opportunities for U.S. poultry products are still somewhat limited
because of relatively high protective tariffs and competition by
neighboring suppliers who enjoy free trade agreement provisions.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Vienna \[AU1\]

\[BK\]

**Market Overview**

Bosnia and Herzegovina's (BiH) population of 3.8 million consumes about
15 kg of chicken meat and 150 eggs per capita per year. Total
consumption for poultry meat is estimated at 50,000 MT and 570 million
for eggs. Domestic production meets approximately two-thirds of the
demand for chicken meat and shell eggs. Production of broilers is
approximately 20 million birds. The stock of layers is about 2 million
birds with total production of around 400 million eggs.

A few years ago the market for processed poultry meat was rather poor
and only fresh/frozen whole chickens, leg quarters, and, at times,
chicken lunchmeat, could be found for sale. There are now a variety of
processed meat products on the market such as breast filet, chicken
kabobs with peppers, marinated chicken legs and mixed cuts that have
been prepared for barbecuing. These products are very popular among
people with higher incomes. Chicken is the most popular form of poultry.
Turkey is rarely produced in BiH, and consumers are generally not
familiar with it in processed products.

Domestic production is expected to grow further because local demand is
high, and there is some excess production capacity. Given that
purchasing power in BiH is quite low by European standards, poultry meat
and products are a good source of protein relative to other meats. In
addition, steady outbreaks of cattle, sheep and pig diseases in the
country (e.g., q-fever, brucellosis, blue tongue, and classical swine
fever) have left consumers wary of other meat products.

Locally produced chicken used to cost more to produce than foreign
products because of the poorer stock of broiler genetics in the country,
less experienced management, and a lack of a domestically produced feed
supply. In 1999 the Government decided to protect poultry producers by
introducing an import duty of 10% ad valorem plus 2 KM (\$1.25) per
kilogram of chicken meat. Shortly after, BiH signed free trade
agreements (FTA) with major suppliers Slovenia (not valid since May 2004
as they entered the European Union) and Croatia. These FTAs are one of
many reasons for local producers to protest and require more support in
terms of production subsidies. Farmers think that veterinary taxes are
also high and an additional burden to producers. Access to loans is
generally limited and interest rates are high. Also, capacities for
production of mechanically de-boned meat (MDM) are undeveloped,
partially because processing industries find locally produced MDM too
expensive, and they prefer imported frozen meat and lower quality cuts
for processing. At the moment, producers are keeping stocks of 3,000
tons of frozen chicken meat because of its high price.

The situation is getting better for local producers in terms of genetics
and management. Current obstacles to industry expansion include the poor
quality of slaughter facilities and the lack of refrigerated storage in
some parts of the country. However, there are some new/renewed
facilities in the pipeline. Market opportunities for American products
are at the moment limited because of relatively high protection tariffs
and free trade agreements signed with neighboring countries.

# Policy Issues

In 1999, the government introduced protective tariffs on poultry
imports, and that was the main reason for the growth in domestic
production. Recently an amendment to the Customs Tariff Law was proposed
but not passed by the BiH Parliament to introduce duty free import quota
of 2,268 t for HS 0207141000 (poultry meat, cuts, frozen, boneless). The
quantity was based on the estimated processing industry needs for three
months with the possibility of renewal each three months. This duty free
import would have been allowed only to processors that purchased locally
produced chicken meat, e.g. for 1 kg of locally purchased meat, 3 kg
would be imported duty free. The Government proposed this to allow a
supply of cheaper raw meat for the meat industry and also to stimulate
domestic production of raw meat. Farmers protested against it because
the last time a duty free quota was introduced in December 2003, the
processors didn't keep their promises to buy locally produced chicken
meat first.

Production subsidies are different in the two Entities[^1] and paid
separately by the Entity Governments of Federation and the Republika
Srpska. The Federation of Bosnia and Herzegovina supports production of
broilers with 0.30 KM (\$0.18) per bird and layers with 1 KM/bird
(\$0.62). The Republika Srpska supports production of parent flocks with
2.00 -- 2.50 KM (\$1.25 - \$1.56) per bird and layers with 0.50 KM
(\$0.31) per bird. However, amount of subsidies and actual payments
heavily depend on the Entities' annual budgets for agriculture and the
general availability of funds.

**Advantages & Challenges**

Advantages:

\- Demand for poultry meat is increasing; demand is expected to continue
to grow (poultry meat is considered healthier than red meats);

\- Competitively low price for certain U.S. products (e.g. leg quarters)

\- Shortage of mechanically de-boned meat for the processing industry

Challenges:

\- Reservations towards GMO and "hormone treated" products associated
with U.S. agriculture and

\- Protection tariffs/levies raise the final price of imported products

\- Free trade agreements signed with big suppliers (e.g. Croatia)

**Trade**

In 2003 and 2002, 75% - 80% of all poultry imports originated from
Holland, Slovenia, Croatia and Austria. Croatia was the largest exporter
to BiH in 2003 with more than 20% of market share. Holland was the
largest exporter in 2002 with 30% of total market share and in 2001 with
20% of total market share. Official statistics indicate that BiH
imported around 13,000 tons of poultry meat, eggs and processed products
in 2003, 15,000 tons in 2002 and 11,000 tons in 2001. Post considers the
official trade statistics as inaccurate, because the Republika Srpska
reported only 1,240 ton of total poultry imports in 2003 and 613 ton in
2002 while the Federation imported more than 10,000 tons in both years.
Exports are usually stable around 500 tons.

####### Table 2: Structure of imports in 2002

  ----------------- ---------------- ------------------- -----------------
  ***Product***     ***Quantity      ***Value of imports ***% of market
                    (t)***           (million \$)***     share ( based on
                                                         value)***

  Live poultry      51               1.03                5.96

  Eggs              152              0.51                2.95

  Poultry Meat      9,188            8.73                50.52

  Processed         1,628            7.01                40.57
  products                                               

  Total:            11,019           17.28               100
  ----------------- ---------------- ------------------- -----------------

Source: FBiH and RS Institutes for Statistic

######## 

######## *There are several big companies that serve as reproduction and production centers (e.g. Posavina Koka Orasje, Kokodzada Gracanica, MI Ovako Sarajevo, Agrovet Gradacac, etc.) and hundreds of small and medium sized poultry farms. A general weakness is absence of good slaughtering and cold storage capacities, but new facilities are likely to start operating in near future (e.g. Zivinoprodukt, Srbac with capacity of 18,000 birds per shift).*

With regard to the processing industry, there are few big producers of
poultry products (e.g. meat industries Lijanovici, "Ovako" and "Stanic")
and a shortage of raw materials (de-boned chicken meat).

###### Tariff Rates

Currently, there are no quantitative restrictions for imports of poultry
meat and products to country. For chicken meat (HS 0207 11 -- HS 0207
24) tariffs are 10% + 2.00 KM/kg (\$1.25) and for other chicken meat and
turkey meat tariff is 10% + 1.50 KM (\$0.94). For eggs tariff is zero.
For processed chicken and turkey products tariff is 10% + 3.50 KM
(\$2.18).

The import duty for Croatia and Serbia & Montenegro is zero and
Macedonia pays 40% of total duty due to free trade agreements signed
between the countries. There is 1% customs registration fee paid for all
customs items.

## Retail Prices

Locally produced chilled whole chicken costs from KM 3.50 (\$2.19) and
more, while imported Croatian and Slovenian (Cekin and Perutnina) whole
chicken costs from KM 4.50 (\$ 2.81) and more. Chicken filet, locally
produced costs around KM 10.00 (\$6.25), while filet imported from
Croatia (Cekin) for example costs KM 12.20 (\$7.62).

##### *General Import and Inspection Procedures*

The State Veterinary Office (SVO) issues "prior import approvals" for
import and transit of live animals, animal products, veterinary
medicines, and animal feed and waste (forms available from
<http://www.vet.gov.ba/>). The SVO also sets health requirements for all
animal origin products, which are generally in line with those of the
Office of International Epizooties (OIE). The requirements can be
obtained directly from the SVO or from the FAS Sarajevo office (see
contact information below). The cost of SVO approval is 350 KM (approx.
\$219). The maximum time for processing is 30 days from date of
submission. Approvals are valid for 60 days.

Imported animals/products must be accompanied with standard documents
that follow each shipment and by veterinary health certificates issued
by relevant authorities of exporting countries and are subject to
veterinary inspections at border crossings and sanitary and market
inspections at customs points.

The Ministry of Foreign Trade and Economic Relations (MFTER) issues
final import permits for animals for reproduction and semen, based on
SVO prior approvals (for more information see report #BK 3001 that can
be downloaded from [Attache
Reports](http://www.fas.usda.gov/scriptsw/attacherep/default.asp)).

Six border crossings have been designated for the import and transit of
live animals and animal products. They include: Orasje, Gradiska,
Izacic, Doljani (on the border with Croatia), Raca (on the border with
Serbia) and the Sarajevo Airport.

All foreign exporting facilities of animals and animal products have to
register with the BiH State Veterinary Office on a first time basis (see
report #BK 4006 that can be downloaded from [Attache
Reports](http://www.fas.usda.gov/scriptsw/attacherep/default.asp))

#### Laws and regulations

The *quality* of poultry meat and products is regulated by ordinances
inherited from former Yugoslavia (Official Gazette No. 1/81, 51/88,
55/91). In addition, the SVO issues specific requirements - those
requirements are in accordance with the [Office International des
Epizooties]{.underline} (OIE) requirements (e.g., no imports from areas
with Newcastle disease outbreaks within past 60 days may occur etc.).

Food products must be tested for microbes. The ordinance on
"Microbiological Wholesomeness of Food" (former Yugoslavia Official
Gazette, No. 43/83 and No. 43/89) provides maximum content of different
microorganisms in food products.

*Labeling*: - the Law on Sanitary Correctness of Food and Goods of
General Use (old Yugoslavia Official Gazette 53/91) regulates labeling
requirements for food. According to the Law, a label must be present in
both retail and bulk packaged foods and must indicate the following:
expiry date, type and content of food additives, type and content of
added vitamins, minerals, and other ingredients added to enrich the
product's nutritional value. The Law on Quality Control of Imported and
Exported says that a label must clearly indicate the name of the
product, manufacturer's 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 is obliged
to prepare translated stick-on labels and deliver them together with
imported products. It is the importer's obligation is to stick those
translated labels on products prior to retail distribution. There are no
specific *packaging* requirements.

*Additives and pesticides & other contaminants:-* food additives are
regulated by the ordinance on "Quality of Foods Additives" (former
Yugoslavia Official Gazette 39/89).

The ordinance on "Pesticides and other Contaminants in Food" says that
hormones and antibiotics are generally not allowed in food products
(former Yugoslavia Official Gazette, No. 59/83, 79/87).

Related reports: BK 2011

Exchange Rate on June 14, 2004 \$1.00 = 1.62 KM (Convertible Mark)

####### **Key Contact Information**

BiH State Veterinary Office

Radiceva 12

71000 Sarajevo

Bosnia and Herzegovina

Tel/fax: +387 33 211 495, 265 620

E-mail: svabih@bih.net.ba

**Post Contact Information**

U.S. Embassy Sarajevo - Office of Agricultural Affairs

FAS/USDA

71000 Sarajevo

Bosnia and Herzegovina

Tel.: +387 33 445 700, x2099

Fax +387 33 212 692

Contact person: Sanela Stanojcic

E-mail: Sanela.Stanojcic-Eminagic@usda.gov

[http://www.usembassy.ba/]{.underline}

[http://www.usembassy-vienna.at/usda/]{.underline}

[^1]: Under the 1995 Dayton Peace Agreement, Bosnia and Herzegovina
    (BiH) is divided into two Entities: the Federation of Bosnia and
    Herzegovina (F BiH) and Republika Srpska (RS). There is also the
    Brcko District with a special administrative status. Each Entity and
    District has its Ministry of Agriculture and there is no state-level
    ministry of agriculture.