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Where did the sharp decline in livestock come from? Why investments without direction risk turning into a bubble

2023-07-24 09:53:25Biznes SHKRUAR NGA REDAKSIA VOX
Where did the sharp decline in livestock come from? Why investments without
stall

Albanian agriculture suffers from a lack of organization, planning and orientation. Farmers concentrate their investments in animal and plant farms, starting from market prices than from the food needs of the country that in developed countries, but also in the region, are supported and subsidized by governments.

The orientation of the crop market leads to fluctuations in profits, causing farmers to often shift investments within the agricultural sector to lines that bring more income. Experience has shown that massive shifts in crops or animals that bring profits in one year lead to overproduction and create bubbles and then bankruptcies in subsequent years.

The livestock sector is currently being hit by this scheme. The extraordinary increase in costs in animal farms in recent years and, on the other hand, the reduction of the rural population has shifted part of the investments from animal husbandry to the cultivation of vegetables in greenhouses in areas with intensive agriculture in Lushnja, Fier and Berat.

In the North of the country, families are selling livestock and taking up beehives, as honey costs more and there is less effort and cost. The livestock sector is the second main branch of agriculture that is experiencing a deep decline from year to year, both in the number of heads and in the production of meat and milk by-products.

Last year, the number of heads in all categories of dairy cattle decreased. In the number of heads, cattle decreased by almost 12% compared to 2021; sheep, with 2.7% and goats, with 6%.

The strongest contraction of heads in stables last year is in Fier with 34%. The county with the largest number of cattle, with about 12% of the total, also suffered the strongest contraction.

INSTAT reported that in Fier there were about 39 thousand head last year from over 58 thousand head in 2021.

In 2022, there were 20 thousand fewer heads. The second district with the largest decrease in the number of heads was Tirana, with an annual decrease of 27% in 2022.

Ervin Resuli, an expert in the livestock sector, who breeds a medium-sized cattle farm in Fier County, says that many livestock farmers sold and slaughtered their animals in recent years and invested in greenhouses.

While Kujtim Buçpapaj, a well-known economist in Tropoja and beekeeper, says that many farmers who used to breed animals are now dealing with beekeeping. The high price of honey is attracting many farmers who were previously engaged in other activities.

The chairman of the Albanian Agribusiness Council, Agim Rrapaj, says that the increase in dairy prices in the markets will increase investments in livestock farms.

He emphasized that production in the livestock sector, both in meat and dairy, will be improved by the concentration of investments in large multi-head stables.

The livestock sector currently suffers from many complex factors that are leading to its massive abandonment. First is the reduction of the population in the rural areas of the country which automatically leads to the decline of the heads.

Second, high costs from the nearly 80% increase in animal feed prices after the war in Ukraine are leading to the abandonment of animal breeding. Meanwhile, other branches of agriculture, such as greenhouses and beehives, are attracting investment from livestock.

Stables are abandoned, livestock farmers diversify into greenhouses and beehives

The administrative units of Suk, Strum, Samatica, Goriçani used to breed almost 40% of cattle in the District of Berat and Fier. Therefore, the largest milk processing factories in the country "Lufra" and "Erzeni" were built in these areas.

Currently, the areas in question own no more than 1% of the number of heads in the respective counties, because many livestock farmers abandoned the stables and led the investments to the greenhouses.

For 1 hectare of greenhouse, the income reaches an average of 40 thousand euros per year, while for a cow, 1 hectare is needed and 1000 euros are earned per year, analyzes Mr. The messenger. He said that the farmers have understood that the greenhouse gives 2-3 plantings per year, that even if it loses in one cultivar, it gains in another.

This is the reason that in areas where greenhouses have a massive spread, the number of cattle has dropped drastically. Improving export chains for greenhouse products has made sales more secure, as livestock products are entirely dependent on the domestic market, as exports are not allowed to EU markets.

INSTAT data show that, during the year 2022, the biggest annual decline in cattle, which are also the main producers of milk and dairy, was highest in Belsh with 56%, Mallakastër 55%, Vorë 52%, Lushnjë 46%, Shijak 45%. There was a 20-30% decrease in cattle heads in one year in the municipalities of Roskovec, Divjaka, Fier, Cërrik, Rrogozhina, Kamza, Kavaja, Tirana, Kukës, etc.

Last year, the greenhouse area expanded by about 6%, but the effects of the shift to greenhouses will be felt in 2023, as the increase in vegetable prices on international markets after the war in Ukraine boosted greenhouse plantings.

Agim Rrapaj, from the Agribusiness Council, claimed that the decrease in the number of heads last year was driven by the increase in costs created by the war in Ukraine, and livestock farmers destroyed the number of heads to cope with the crisis, but this was the most wrong decision they made, he said.

In the North, ranchers are selling cows and buying hives. For example, in the Tropoja area, the number of cattle has decreased by 35% in the last five years, but the number of beehives is increasing rapidly.

Last year, 19,569 beehives were counted in Tropoja Municipality, increasing by 22% from 2021 and 166% from 2018. Beekeeping is being encouraged by the high price of chestnut honey, characteristic of the area.

A kilogram of chestnut honey costs 2,250 Lek and according to livestock farmers, it is much more profitable for live cattle, even though beekeeping is a risky job and requires in-depth knowledge. Gëzim Kapiti, who has a farm with over 120 beehives, says that the annual income is satisfactory and much higher than that of cattle.

Bees, according to him, require dedication and attention, but not physical fatigue, as contracts for the sale of honey are secured in advance. Despite the fact that the production of honey fluctuates with the seasons, the demand for Tropoja's products is high and the price has also marked a rapid increase from year to year.

In some municipalities, the number of hives has tripled within a year. INSTAT reported that in Delvina, the number of beehives marked an annual increase of 366% in 2022, in Vlora by 293%, Konispol 205%, Saranda 181%, Selenica 179%, Himarë 174%, Fier 96%. In almost half of the municipalities, the number of beehives grew at double-digit rates in 2022.

Bees do not require much physical fatigue, except when moving to pastures, but they require more knowledge about how to treat diseases, etc. Kujtimi, a beekeeper in Tropoja, says that in most cases this work is also done by retirees and above all, it gives both satisfaction and profits.

The rise in dairy prices risks leading to over-investment in livestock

The increase in dairy prices from 50-100% in some items in the last year has made investments in farms attractive. Cattle farmers are currently selling a liter of sheep's milk for 160 Lek, up from 70 Lek in 2021, while cow's milk is selling for 90-100 Lek, almost double as of 2021.

Experts in the sector claim that the increase in the prices of livestock products is encouraging investments in livestock. Data from the Ministry of Agriculture show that applications for IPARD funds have increased significantly, as there are no more dairy animals for sale in the markets.

With the increase in the price of milk, all the farmers who slaughtered their animals are now looking to replace them. Official data from Customs shows that in January-May 2023, imports of live animals increased by 6%.

Expert Resuli says that in the area of ​​Fier, everyone is looking to invest in stables, but there are no dairy animals on the market.

Even European markets are struggling for dairy cattle, as all countries reduced the number of animals, following the war in Ukraine due to high food prices. However, the rush to stables without guidance can increase production as well as prices and create a similar situation as in 2014.

Livestock farms, since the crisis of 2008, were seen as a good solution for diversifying investments for some businesses, which were traditionally related to construction and trade activity, turned out to be a disappointment.

Large farms that were created by businesses that had no organic connection to agriculture and livestock went bankrupt, due to high costs from the lack of economies of scale.

Of the 16 large cattle farms that were established in 2014, only 4 of them are with the same owners in 2018, while the others were sold or went bankrupt. The chain, which could ensure success in animal husbandry, is missing the main link, the raw material which, in this case, is feed for livestock.

Land fragmentation is not allowing pastoralists to own large areas, or to enter into contracts for insurance in place of the food base.

Consequently, farms with more than 60-70 heads of cows, or with more than 200 sheep, will have to import food. Data from the balance sheets of large farms show that 84% of income goes to the purchase of the food base.

Subsidy policy reduces small farms

Last year, funding from the national scheme was 1.5 billion ALL from about 1 billion ALL in 2021. About 6,211 livestock farmers benefited from the Support Scheme for 2022, compared to 4,316 livestock farmers who benefited in 2021.

The National Scheme, applied by AZHBR, supports farms with more than 100 sheep and/or goats, amounting to 1,200 ALL/head, but not more than 360,000 ALL per subject. As for farms with no less than 10 cows, the support is in the amount of 10,000 ALL/head, but not more than 500,000 ALL per subject.

While funds from IPARD schemes are being channeled to large farms with hundreds of heads. This policy in encouraging the livestock of large stables destroyed the foundation of Albanian agriculture, which is reorganized into small farms with 2-5 heads.

Luan Çela, who breeds a farm with 10 cows in Fier County, says that for years he has been working seasonally in Italy and Greece to cover the costs of animal feed. Luani does not receive support, as last year he reduced the number of cows due to high feed prices.

Ndoc Fasllia, a well-known agricultural expert, claimed that 70% of livestock is organized in small farms and is automatically excluded from subsidies. While funds for large farms are often won by people who do not have enough knowledge about animals.

The Ministry of Agriculture has an extensive development plan, which aims to promote infrastructure in the countryside, stimulating small farms from the profession of shepherd, veterinarian, construction of stables and small dairies. This type of development, which will be supported by internal funds, aims to support small farms with 10 cows, said official sources from the Department of Agriculture.

According to them, the livestock sector is consolidating, as small farms are shrinking and large animal farms with 50 to 300 heads are growing. For large farmers, the Ministry of Agriculture is supporting them with European Union funds from the IPARD scheme, which are intended to support large farmers in order to be a factor in the market.

With IPARD schemes, it is intended that large livestock farms reach EU standards in competitiveness. Permits for the construction of stables will no longer be issued by the local government, but by the Ministry of Agriculture, as there are many cases where the local government has prevented investments in animal stables.

The officials of the Ministry of Agriculture claimed that some of the livestock farmers who had a number of small animals, have abandoned the village.

Abandonment of the village, another reason

Land fragmentation, high food costs, but most importantly, the abandonment of the countryside are leading to a rapid decline in the number of cattle in our country.

In 2022, the number of live animals decreased by over 8%, while compared to 2004, their number was halved. The Ministry of Agriculture has analyzed that the contraction is happening in small family farms with 2-5 heads. Rural abandonment and an aging population are rapidly shrinking small farms.

Official sources of the Ministry of Agriculture claimed that the livestock sector is moving towards consolidation from small and medium farms to large ones. Experts in the regions of the country claim that the number of cattle has decreased more than in the official figures.

For example, in the area of ​​Maqellara, until five years ago, there were over 350 heads of cattle, now there are not even 50, says Lahim Kosiqi, who was previously involved with livestock policies in the district.

According to official data from the Ministry of Agriculture, the number of farms breeding more than 5 cows has been reduced from 4,250 (in 2015) to less than 2,800 in 2020, confirming farmers' difficulties with rising input and feed costs, high tillage costs and low milk prices.

In rural areas of the country, the population is aging rapidly and residents are selling their livestock, as they cannot take care of them.

On the other hand, the country is facing increasing demand for local products, such as meat and dairy products from positive developments in tourism. Farmers say the reduction in the number of heads has been high in 2022 as well, as high feed costs have accentuated the lack of ability to keep animals.

The decline of livestock makes basket products more expensive

Dairy products were the products with the highest price increase since the end of 2021. The decrease in milk production by 5-6% every year has led to a shortage of production in all by-products such as butter, cheese and yogurt.

For this reason, last year, Albania was ranked by Eurostat as one of the countries with the highest dairy prices in Europe. Dairy and egg prices in Albania were 111.7% of the average of the European Union countries, or to put it another way, if 1 kilogram of these products in the EU costs on average 100 Lek, in Albania it cost 111.7 Lek in 2022.

Albania was ranked among the 14 European countries with the highest dairy price last year.

In the last three years, in many countries of Europe, prices decreased compared to the EU average, but in Albania, there was an increase. In 2020, the price of dairy and eggs in our country was 105% of the EU average, but in the following two years, it increased by 6.8 percentage points.

Detailed data from Eurostat shows that in 2022, the cheapest prices for dairy and eggs relative to the EU average were in Poland at 75%. Second was North Macedonia with 82.2%, Bosnia, 90.1%, France with 90.3, Turkey with 94.7%.

Albania is the most agricultural country in Europe, due to the size of the sector in the economy (about 20% of GDP by 2021) and the contribution to employment, but on the other hand it has among the highest dairy prices in Europe.

As a result of high prices, the per capita expenditure of Albanians for the consumption of dairy and eggs increased significantly in 2022, reaching 324 euros per inhabitant per year.

From 2019 to 2022, Albanians' spending on milk and eggs increased by 30.6%, according to Eurostat data. Dairy and eggs are the main product of the basket of goods, of great importance in the nutrition process recommended for daily consumption in all age groups by the World Health Organization.

The high prices of these products, in addition to burdening the cost of living, seriously endanger the health of the population that cannot financially afford their daily purchase.

The domestic dairy processing industry is suffering from rising costs and declining herd numbers, driving up prices, making it uncompetitive and favoring imports.

The meat market is facing the same difficulty. The decline in livestock has led to shortages in the market's supply of country meat, as demand is increasing from tourists. Since last summer, the price of a kilogram of beef has increased by 20% in the country's minority markets.

Agritourism units claim that meat is a basic element of Albanian tradition. Meat is the basis of traditional Albanian cuisine, which tourists are interested in. The cost of this product has increased significantly, but in the meantime there are shortages in the market", says Altin Prenga, from "Mrizi i Zanave".

The import of meat and dairy products increases

Due to high prices and often questionable quality, dairy imports have increased significantly. In the last two years, imports of food products in quantity decreased in all products except dairy and meat.

INSTAT data showed that in January-May 2023, about 30 million euros of meat were imported, with a 19% increase compared to last year in the same period. The imports of this group also increased in quantity, by about 15%, in the same comparison period.

For the same reasons, dairy imports have also increased. During the first 5 months of 2023, the amount of dairy imports increased by about 20%. In total, 12 thousand tons of milk and eggs were imported from 10 thousand tons in 2022.

On the other hand, imports of cereals, sugars, oil continued to decline both in value and quantity, during the 5-month period. Sugars in quantity marked an annual decrease of 36% in January-May 2023, vegetable oils decreased by 28% and cereals by 11%.

Fragmentation of the land, high food costs, but most importantly, the abandonment of the village, are bringing, as a consequence, the rapid decline in the number of cattle in our country.

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