The Serbian dairy market is experiencing a significant surplus of milk this year, positioning all stakeholders in a challenging environment, including producers, dairies, and the government, which is seeking solutions to a persistent cycle that diminishes the overall agricultural sector.

This cycle, characterized by complex factors leading to regular crises, includes fluctuations in retail prices, decreases in purchase prices, and other elements disrupting various stages of production and consumption.

Key negative factors contributing to this cycle involve declining production alongside low consumption rates, which remain below European standards and continue to fall.

Serbia's milk consumption is reported to be between 180 and 200 liters per capita annually.

This figure significantly trails behind countries in the top ten for global consumption, such as Montenegro, where per capita consumption reaches 390 liters.

In addition, challenges with milk imports and exports persist, particularly due to strict aflatoxin limits imposed by the European Union.

Currently, the most pressing issue is the market's surplus of milk.

According to data from the Statistical Office of the Republic of Serbia, annual milk production in Serbia is slightly under 1.4 billion liters, while the consumption of milk and dairy products is pegged at 1.3 billion liters.

The aflatoxin limit in Serbian milk has historically been much higher than that of the EU, which complicates export prospects.

The limit was increased in 2013 to 0.5 micrograms (whereas the EU permits 0.05), subsequently reduced to 0.25 micrograms, with plans to align with EU standards in the autumn.

However, even this elevated threshold presents challenges for exporting milk and dairy products from Serbia.

According to Nenad Budimović, Secretary of the Livestock Association at the Chamber of Commerce of Serbia, production levels have increased seasonally since calving season has concluded, and new green forage has become available.

In late April, Serbia’s Ministry of Agriculture, Forestry, and Water Management halted the issuance of import permits for milk, dairy products, and palm oil, the latter often used as a milk substitute, in response to the surplus situation.

Producers have reported that dairy processors are reducing purchase prices by as much as 16 dinars per liter, warning that if this trend continues, smaller and medium-sized farms engaged in cattle breeding may face collapse.

Producers attribute the decline in prices to excessive milk imports that remain in stock.

Conversely, the company Imlek announced its intent to maintain its purchase price for raw milk for May and June despite the market's significant surplus and record levels of finished dairy product inventories.

Imlek reaffirmed its commitment to supporting domestic agriculture and ensuring stability for producers amidst challenging operating conditions.

Due to quality issues, specifically regarding fat content, dairies often resort to imports.

In 2022, Serbia recorded the highest milk imports in recent years, totaling 48,000 tons, alongside 9,600 tons of milk powder.

The overall import volume for milk and dairy products reached 89,000 tons that year.

Imported milk generally costs less than that produced by Serbian farmers, as many European countries provide significantly higher subsidies to their agricultural sectors, rendering imports more competitively priced than domestic products.

Experts have highlighted that the primary cause of the surplus is the elevated aflatoxin levels in domestically produced milk compared to the EU standards.

Following a meeting at the end of April between Agriculture Minister Dragan Glamočić and representatives from major dairies, it was acknowledged that issues surrounding milk quality and surplus are contributing factors affecting export capabilities.

Measures to enhance quality control are anticipated, including the timely intervention in crop treatments, with the potential incorporation of drones for fungicide application in corn production.

The ministry has committed to providing incentives and loans for drone procurement.

Minister Glamočić has requested dairies to report current milk inventory levels to collaboratively define measures for reducing excess stocks without disrupting market stability.

He emphasized the need for stronger partnerships between producers and processors as a means of systemic improvement and resilience against domestic and international challenges.

Facing dissatisfaction with purchase prices, producers plan protests outside the Ministry of Agriculture in Belgrade, citing the government’s inadequate response to their concerns.

Members of the 'Naše mleko' association and the Association for the Preservation and Survival of Livestock in Western Serbia previously appealed for a meeting with Minister Glamočić before May 30, which did not materialize.

The Ministry asserts its readiness for dialogue with agricultural associations, provided those organizations demonstrate clear representation and legitimacy toward their members' interests.

Representatives of dairy and livestock organizations are pressing for discussions with Minister Glamočić while resisting demands for legitimization, viewing it as unnecessary bureaucracy.

They argue that past affiliations with ministry personnel negate the need for formal verification of their status.

Vice President of the 'Naše mleko' association, Slobodan Brkić, mentioned that during their assembly, members will decide whether to proceed with protests against low purchase prices and excessive importation of milk.

He highlighted significant declines in purchase prices, ranging from 11 to 16 dinars per liter compared to the previous year, with a reduction of three to five dinars per liter since June 1. He contends that insufficient purchase prices threaten farmers' livelihoods and advocates for immediate state intervention.

Concerns have also been raised regarding the import of vegetable cheese, misrepresented as dairy cheese, creating surplus issues that hinder market viability for locally produced dairy products.

Agroeconomist Milan Prostran emphasized that the government should increase premiums for milk producers to ensure sustainable business operations and adequate quality milk supply, directly influencing purchase prices.

He suggested that a national reference laboratory should be established to assess milk quality, benefiting farmers by certifying their product quality for enhanced pricing negotiations with dairies.