Voluntary Report - public distribution

**Date:** 2/9/2005

**GAIN Report Number:** BK5002

BK5002

**Bosnia-Hercegovina**

**Livestock and Products**

**Market Update**

**2005**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Sanela Stanojcic

**Report Highlights:**

Bosnia and Herzegovina (BiH) suffers a deficit of raw meat for
processing and relies on imports for an estimated 80 percent of its
production. The BiH Government recently applied duty free import quotas
on beef, pork, and chicken for processing to allow the meat industry to
have access to cheaper supplies of unprocessed meat. BiH also imports an
estimated 30 to 40 percent of its processed meat consumption. While
official statistics are unreliable, total annual imports of meat and
meat products are estimated at around US\$ 135 million. The total annual
consumption of meat and meat products is estimated at around 135,000 MT.
BiH is unable to export most animal products because of inadequate
veterinary and certification systems.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Vienna \[AU1\]

\[BK\]

**Overview**

# Cattle

#  

Bosnia and Herzegovina[^1] suffers a deficit in beef and veal
production. It is estimated that only 38% of local market demand for
meat products is satisfied by domestic production. Total pre-war
consumption of various meats and meat products was 42 kg per capita, and
it is estimated that total per capita consumption is currently at around
35 kg, of which 14 kg is beef. Total per capita consumption of meat is
expected to grow to 40 kg (16 kg of beef) by 2006. Current total
consumption of meat and products is around 135,000 MT, and total
consumption of beef is estimated at around 55,000 MT. Estimated total
number of cattle is around 450,000 head, representing about 50% of the
pre-war production (note: there are no reliable official statistics for
the number of animals or meat production, the above are estimates).

According to slaughterhouses, butchers, and processors in the USAID LAMP
Study in September 2004, the beef and veal production deficit is due to
several factors, including: the meat processing industry's inability to
improve their raw material base, the lack of proper incentives for
efficient cattle fattening, and the lack of a genetic improvement
program that would improve the overall quality of cattle population.
Also lacking are the necessary veterinarian care and genetic
improvements while endemic animal diseases and continued preference for
traditional breeds (that have weaker genetic characteristics) are
resulting in constricted production. Subsidized and illegal beef imports
have worsened the situation as well. Slaughterhouses, processors, and
producers report that their most serious problem is the price volatility
of meat. This volatility disrupts cash flow and makes it very difficult
to forecast or set prices. Smuggling, unpredictable enforcement of laws,
and fluctuating policy all contribute to this volatility.

Domestic production costs in bull fattening amount to 3.5 KM/kg (BiH
currency is the Convertible Mark, KM; US\$1 = KM 1.4974 on 2/3/05) live
weight compared with an import price of 2.0 KM/kg plus duty (2.7--2.8
KM/kg). However, BiH has signed free trade agreements with most
countries in Central and Eastern Europe, and for these countries
(Croatia, Serbia and Montenegro, Macedonia, Moldova, Bulgaria, Turkey
and Romania) the duties are almost abolished. Also, in July 2004, BiH
Government applied duty free import quotas for beef, pork, and chicken
for processing to allow the meat industry to have access to cheaper
supplies of unprocessed meat, as well as to stimulate domestic
production of meat. The duty free quotas only apply if meat processors
have previously purchased locally produced meat.

## Swine

The number of pigs has declined by about 50 percent from pre-war levels
to an estimated 330,000 count. The non-Muslim populations of BiH mostly
consume pork (Catholics and Orthodox represented 51.4% of the total
population in 2000). Before the war, per capita pork consumption was 7.5
kg with total consumption at 26,000 MT (the last official survey was
from 1990). Demand for pork products has remained relatively constant.
However, only half of the demand is met by domestic production with
imports filling the gap. The sector is faced with problems of inadequate
facilities for swine production, lack of sufficient operating funds for
producers, poor access to farm credit, resistance to new pig breeds and
methods of production, lack of proper training, and lack of high quality
swine semen, veterinarian support, and methods for artificial
insemination. Owing to poor nutrition, the domestic swine population is
insufficient to supply local slaughtering facilities. Today, there are
about 30 medium to large slaughterhouses, plus a large number of smaller
enterprises. Some of these slaughterhouses operate according to
high-quality standards but not at full capacity--- most probably because
some of the smaller slaughterhouses are not as tightly supervised, which
enables them to sell at lower costs and often lower quality. Occurrences
of trichinosis are regular, as well as the classical swine fever
occurrence.

## Sheep

The number of sheep in BiH in 1991 was estimated to be 1,317,000
animals, of which 971,000 were breeding ewes. This number decreased
during the 1992-1995 war by more than 50%. However, the sector is slowly
recovering, and in 2002 total sheep numbered at 820,712 head (614,608
breeding ewes) according to the USAID LAMP study September 2004. The
dominant sheep breed is the local Pramenka breed used for production of
meat, milk and wool, with modest production characteristics, but very
suitable for local breeding conditions. Resistance to new types and
methods of rearing, poor animal nutrition especially in winter, low
genetic potential of domestic sheep, and endemic animal diseases
characterizes the sector. There are regular outbreaks of Q-fever and
Brucellosis because of insufficient prevention and control measures
carried out by the veterinary services. Nomadic systems of breeding make
easier for diseases to spread from animals to animals and to humans as
well. Although the sector has significantly recovered after the war
losses, it is expected that sheep production in BiH will be stagnate or
even decline because of constant decrease in the rural population that
traditionally bread sheep in hilly and mountainous areas. Also, declines
will occur due to low levels of animal performance and low
profitability, and constant outbreaks of diseases that cause significant
economic losses for farmers.

On the marketing side, there is constant demand for lamb and cheese
throughout the year and sales increase during Muslim religious holidays
(Kurban Bajram). Young lambs that weight 20 kg are slaughtered and
roasted whole on a spit. It's a local specialty and consumers prefer the
young meat. Current consumption of mutton and lamb is estimated at 2
kg/per capita. The annual production of meat is reported to be around
7,200 MT (milk production around 7,000 MT). Significant quantities of
meat are being consumed on farm without reaching the market. Annual
exports are usually minor, 50 -- 150 MT and imports between 150 -- 300
MT.

## Processed Meats

Processed meat, particularly dried and smoked meat, has a very long
tradition in BiH. The range of products produced and marketed in BiH
includes dried and smoked sausages, salami, poultry products, and meat
spreads. Most sausage products contain a mix of beef and poultry. The
Muslim population in the country prefers pork-free products. There are
now three major meat processing facilities in BiH: Lijanovici in Siroki
Brijeg, Akova Impex in Sarajevo, and Stanic in Kresevo, each with a
daily capacity of about 40 MT, but actually producing at around 80 MT of
products monthly because of cheaper imported processed meat products and
the inability to export abroad. There are also several smaller
packing/processing plants such as Brajlovic in Blazuj and Menprom in
Tuzla. A number of small-scale, "backyard" operations also exist,
producing dried and smoked meats especially. It is estimated that
30--40% of processed meat in BiH is imported. Official statistics on
processed meat products are unavailable.

Estimates show that the processing industry in BiH can be broken down as
follows: 50% poultry (95% chicken), 35--40% beef and 10--15% pork. Meat
processors and producers are facing many constraints at the moment, such
as inability to export to most destinations because they lack a
functioning state-level veterinary certification system (a number of
endemic animal disease issues in BiH that have not been dealt with
effectively). Furthermore, the Government-mandated standards for product
purity do not exist, affecting the market for processed meat in
particular. For instance, reputable sausage processors must compete with
processors that adulterate their pork with other, lower quality meats.
The trend is for reputable companies to concentrate on the market for
fresh beef and veal products. In addition, the meat processors in BiH
import approximately 80% of their raw materials (frozen, de-boned beef,
swine, and poultry). This situation pits producers against processors:
producers maintain that domestic production is sufficient for the
processing industry's needs, while processors contend that domestic
producers are not willing to provide the older, less expensive meat they
require. Given producers' strong preference for slaughtering their
cattle young as premium-priced "veal," it is understandable that
processors look elsewhere for their raw material^s^. Another constraint
is that import tariffs are imposed on these raw materials. Also, BiH has
signed free trade agreements (FTAs) with Croatia and Serbia--Montenegro
that subsidize their meat producers and processors, but export mostly
processed products to BiH.

### Market Profiles 

Before the war, there were about 200 slaughterhouses in BiH: 120 (60%)
were privately owned and 10 (5%) were quite large and government owned.
Most processing facilities were destroyed or severely damaged during the
war, consequently limiting processing capacity. Today there are about 30
medium- to large-sized slaughterhouses plus a great number of smaller
enterprises.

There are also about 20 meat-processing companies in BiH. Several of
these have significant capacity, possess modern equipment, and are
operating efficiently and profitably. Raw materials are imported because
BiH producers do not produce the desired products at the required
prices. Domestic raw materials, primarily poultry and swine, are mainly
sourced from producers near the processors' facilities. Packaging for
processed meat products in BiH is competitive with imports and similar
products in Europe. All packaging film is imported (Slovenia, Croatia,
Serbia--Montenegro, Hungary), whereas cardboard boxes are sourced
domestically.

Several processing companies operate excellent processing facilities and
produce to EU standards. These companies are competing effectively with
imports and possess the capacity to export when certification is
available to them. For most products, the production cycle ranges from
one to seven days. Quality management is based on traditional product
quality control. Emphasis is given to processing equipment quality, raw
material input quality, experienced staff, and obligatory daily
inspections by the veterinary inspectors. Large producers are adopting
Good Manufacturing Practice (GMP) and HACCP practices.

After manufacturing, processors are finding a market for final meat
products through their own retail stores, via truck delivery to small
and large grocery stores, and/or through direct sale to large trading
centers and wholesale distributors of processed meat products within the
country. Truck delivery is organized on a daily basis for fresh meat
products; preserved products are delivered as needed. Companies such as
Lijanovici, Ovako, Brajlovic, and MIS Stanic have successfully invested
in brand building and marketing campaigns in a variety of media: radio,
television, billboards, and print advertising. There is little evidence
of segmentation and target marketing, however, and distribution appears
to be limited mostly to the large retail. Some processors have provided
branded refrigerated display units in supermarkets.

#### Consumer Preferences

#### Meat and processed meat products are preferred foods in BiH. However, BiH consumers are highly price sensitive because of the country's continuing poor economic situation. Therefore, the structure of meat consumption has changed, resulting in less demand for expensive beef/veal and lamb, while the consumption of relatively cheap poultry has increased significantly. Consumption of pork is stable, and much higher in the non-Muslim areas of the country (Republika Srpska). Mutton and lamb are consumed by the Muslim and non-Muslim populations of BiH. 

As in most parts of Europe, BiH consumers now prefer leaner meat with
most of the fat removed. However, this is a recent trend, and the older
population continues to prefer meat with higher fat quantities.
Consumers buy their meat in butcher shops and green markets more often
than in hypermarkets or supermarkets. Meat cuts are typically wrapped in
plastic wrap, so that consumers can view the meat's quality. In butcher
shops customers can watch the meat being cut before their eyes.

Product quality of the major processors is competitive with imported
products. Very popular and produced throughout the country are dried and
smoked beef and smoked ham ("Prsut"). These products are produced by a
number of small family-owned companies as well as big industries.

**Trade**

Annual imports of live animals, meat and meat products to BiH are
estimated at around 200 million KM (US\$ 135 million). Officially
reported imports by BiH Foreign Trade Chamber, BiH and RS Statistics
Institutes in 2003 were KM 195 million or US\$ 130 million. In contrast,
it is almost impossible for BiH to export animal products (especially
beef) to most markets because of inefficient veterinary and veterinary
inspection systems\--meaning poor animal health conditions and lack of
an accepted certification system within BiH. Countries that export meat
and products to BiH are mainly Slovenia, Croatia, Austria, Italy, Poland
and Hungary.

Tariffs for live animals are the following:

*Table 1:-- Import Tariffs for Live Animals, Bosnia and Herzegovina*

  ----------------------------------------- -----------------------------
  **Commodity**                             **Import Tariff**

  **Live Cattle**                           ** **

  *0102.10 - Breeding animals*              

  0102.10.10 - breeding heifers             5%

  0102.10.30 - breeding cows                10%

  0102.10.30 - other                        10%

  *0102.90 Other Live Cattle*               

  0102.90.05 - less than 80kg               5%

  0102.90.21 - for slaughter, 80 -- 160 kg  5% + 0.50 KM/kg

  0102.90.29 -- other, 80 -- 160 kg         10% + 0.50 KM/kg

  0102.90.41 -- for slaughter, 160 -- 300   5% + 0.50 KM/kg
  kg                                        

  0102.90.49 - for slaughter, 160 -- 300 kg 10% + 0.50 KM/kg

  0102.90.51 -- heifers, for slaughter,     5% + 0.50 KM/kg
  more than 300 kg                          

  0102.90.59 -- other, for slaughter, more  10% + 0.50 KM/kg
  than 300 kg                               

  All other cattle for slaughter less than  10% + 0.50 KM/kg
  450 kg                                    

  Breeding sows                             0%

  All other live pigs                       10% + 0.50 KM/kg

  Breeding sheep                            0%

  All other live sheep                      10% + 0.50 KM/kg

  Breeding goats                            0%

  All other live goats                      10%
  ----------------------------------------- -----------------------------

For meat, fresh, chilled and frozen, tariffs are 10% + 1.20 KM -- 2.50
KM, depending on origin and cuts. For finished meat products, tariffs
are 10% + 3.00 KM -- 3.50 KM.

The Bosnia and Herzegovina Government has passed an amendment to the
Customs Tariff Law that applies duty free import quotas for beef, pork,
and chicken for processing on a quarterly basis (BiH Official Gazette
#32 dated July 15 2004). The reason for this was to allow the meat
industry to have access to cheaper supplies of unprocessed meat, as well
as to stimulate domestic production of meat. The quotas only apply if
meat processors have previously purchased locally produced meat. The
ratio is determined as follows:

\- *Pork*: 1 kg of duty free imported pork meat will be allowed for 2 kg
of locally purchased meat

\- *Beef and chicken meat:* 3 kg of duty free imported meat will be
allowed 1 kg of locally purchased meat. Bosnia and Herzegovina imports
most meat for processing from Slovenia, Austria, Poland, the
Netherlands, Hungary, and Italy.

*Table 2. Duty Free Import Tariff Quotas for beef, pork and chicken meat
(on quarterly basis)*

+----------+-------------------------------------+------+-------------+
| HS \#    |                                     | Duty | Regular     |
|          |                                     | Free | Import Duty |
|          |                                     | Ta   |             |
|          |                                     | riff |             |
|          |                                     |      |             |
|          |                                     | Q    |             |
|          |                                     | uota |             |
|          |                                     | (to  |             |
|          |                                     | nes) |             |
+----------+-------------------------------------+------+-------------+
| 0202 30  | Beef, frozen, boneless, other       | 1    | 10% + 1.50  |
| 90 00    |                                     | .273 | KM/kg       |
+----------+-------------------------------------+------+-------------+
| 0203 19  | Pork, fresh, chilled and frozen,    | 652  | 10% + 1.50  |
| 15 00    | breasts with bacon and cuts         |      | KM/kg       |
+----------+-------------------------------------+------+-------------+
| 0203 22  | Pork, fresh, chilled and frozen,    | 450  | 10% + 1.20  |
| 19 00    | shoulders and cuts                  |      | KM/kg       |
+----------+-------------------------------------+------+-------------+
| 0207 14  | Poultry meat, cuts, frozen,         | 2    | 10% + 2.00  |
| 10 00    | boneless                            | .268 | KM/kg       |
+----------+-------------------------------------+------+-------------+
| 0210 11  | Meat and edible meat offal, salted, | 80   | 10% + 2.50  |
| 31 00    | in brine, dried or smoked; edible   |      | KM/kg       |
|          | flours and meals of meat, ham and   |      |             |
|          | cuts.                               |      |             |
+----------+-------------------------------------+------+-------------+
| 0210 19  | Meat and edible offal, salted, in   | 120  | 10% + 2.50  |
| 81 00    | brine, dried or smoked; edible      |      | KM/kg       |
|          | flours and meals of meat or offal   |      |             |
|          | meal, boneless                      |      |             |
+----------+-------------------------------------+------+-------------+

**Import Procedures**

The State Veterinary Office (SVO) has responsibility over "prior import
approvals" for live animal, fresh, chilled and frozen meat, veterinary
medicines, eggs for reproduction, semen and inseminated egg cell (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 at end of this report).

Other products, such as preserved meat and milk products, milk powder,
ice-cream, cheese, butter, skin, wool, pet food, feed etc. require no
import approval or import license if the shipment is accompanied by an
international veterinary certificate.

Contact information:

[State Veterinary Office]{.underline}

Radiceva 8/II

7100 Sarajevo

Contact person: Darko Cobanov

Bosnia and Herzegovina

Tel. +387 33 258 840

Fax +387 33 265 620

E-mail: info@vet.gov.ba

<http://www.vet.gov.ba/>

[Post Contact:]{.underline}

FAS/USDA

US Embassy to BiH

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

[^1]: Under the 1995 Dayton Peace Agreement, Bosnia Herzegovina (BiH) is
    divided into two Entities: the Federation of Bosnia and Herzegovina
    (F BiH) and Republika Srpska (RS). Each Entity has its own Ministry
    of Agriculture. Understanding this dual governmental structure is
    important to doing business in the country. However, foreign trade
    is responsibility of the state level Ministry of Foreign Trade and
    Economic Relations.