President of SAAE prof. Ph.D. Tatjana Brankov on food prices in Serbia

Association of Agricultural Economists of Serbia (SAAE), in cooperation with the Leibniz Institute for Agricultural Development in Transition Countries from Halle, Germany, and leading researcher Ph.D. IVAN ĐURIĆ, research on food prices in Serbia began.

Based on the available data on the average prices of producers of agricultural products and retail prices for the period from January 2019 to August 2023, several key trends and analyzes can be noted:

• Price fluctuations: By analyzing the data, price fluctuations are observed both at the producer level and on the retail market. Analyzing the volatility of prices in the dairy sector, we notice that producer prices of milk show the greatest fluctuations, while processing prices are the most stable. These results indicate the uncertainty and risk that milk producers bear, while the retail sector and the milk processing sector are in a relatively more favorable position.

1. Rise or fall of prices: By comparing prices during the analyzed period, it is possible to see whether prices tended to rise or fall over time. Investigating food price fluctuations, we note that both producer and retail prices tend to rise more than fall.
2. Differences between producer prices and retail prices: In addition to analyzing the prices themselves, it is important to look at the differences between prices at the producer level and retail prices. These differences may indicate the level of margins that retailers make or other factors that influence price formation at different levels of the supply chain. The pronounced positive asymmetry in milk prices suggests that retail prices tend to maintain or even increase margins compared to producer prices. This indicates that store prices usually respond more quickly to increases in (raw) milk prices than to decreases. In the chicken meat sector, we observe a moderate positive asymmetry between the retail price of a whole chicken and the price of chicken meat producers, less pronounced than in the dairy sector. The asymmetry between the retail price of chicken salami and the producer price of chicken meat is mild, suggesting a relatively balanced response of retail salami prices to changes in producer prices. Price asymmetry was noticed in the pig and cattle sectors as well. The unusual increase in the price of rozbratna (beef) since December 2022 indicates a disturbance in the market structure. Such a sudden increase in prices was not recorded for other products.
3. Food price elasticity: Analysis of food price elasticity shows a range from 0.17 to 1.53 (absolute values). Cheese, milk, beans and cured bacon are among the most sensitive products to price changes. For example, an increase in the price of homemade cheese by 10% results in a decrease in consumption by about 15%, while an increase in the price of cured bacon by 10% reduces consumption by 8%.
4. Determining the influence of factors: By analyzing data, it is possible to partially identify factors that had a significant impact on price movements during the analyzed period. The increased volatility of milk prices and margins, which began in 2022, can be directly linked to the start of the war in Ukraine. A significant jump in chicken, pork and beef prices occurred in June 2021 and can be linked to feed prices. High food prices in Serbia are the result not only of the war in Ukraine and the rise in animal feed prices, but also the rise in electricity and fuel prices.
5. The action "Bolja cena": The action "Bolja cena" had a positive impact on the drop in food prices, but it is necessary to expand the range of products and include products of higher quality. The "Stop Inflation" program implemented by the Government of Montenegro, which included some of the highest quality cheeses (such as cheese, whose price was around 6 euros per kilogram) and cured meat products (such as Montenegrin prosciutto, which cost less than 10 euros per kilogram).

These findings can serve as a basis for further analysis and decision-making regarding prices of agricultural products and policies in agriculture.

The retail sector is likely to hold prices higher due to risk and not reduce them in line with falling producer prices, thus passing the risk on to consumers. This situation highlights the need for government measures aimed at the economy to mitigate risks for consumers:

1. adequate activation of commodity reserves that should contribute to price stabilization;
2. increasing support for the domestic economy, especially the food industry, by reducing taxes and providing favorable loans for the construction of production facilities;
3. the formation of the Food Price Transparency Committee (as in Albania) and ultimately the establishment of the institution of the food ombudsman who would advocate for fair relations between producers, processors and traders.