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Agricultural Kosovo Strategy Report

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					Final Deliverable




Kosovo Agricultural Opportunities Strategy

                                                                    Pristina, Kosovo
                                                                  February 10, 2010

                                                                                 DISCLAIMER
                     The author’s views expressed in this publication do not necessarily reflect
                    the views of the United States Agency for International Development or the
                                                                    United States Government




                                                                                                   0
Table of Contents

 Overview of Deliverable…........................................................................................2

 Baseline Analysis of Agriculture Sector……………………………..…………………..7
    – Quantitative Baseline of Kosovo’s Agriculture Sector……...……………………8
    – Overview of Constraints and Opportunities……..………………………………40
    – International Best Practices Assessment………..…………………………….102

 Recommendations to Improve Kosovo’s Agriculture Sector…......………………...142
    – Overview…………………………………………......……………………………143
    – Recommended Diversified Crop Mix for Kosovo…......………………………144
    – Initiatives & Action Plan for Implementation………….....…………………….210
    – Reaching Kosovo’s Overall Potential………………………….……………….268


                                                                                                                     1
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector

 Recommendations to Improve Kosovo’s Agriculture Sector




                                                          2
The objective of this document is to present details of the
Agricultural Opportunities Strategy, including findings from the
analysis and recommendations for Kosovo’s agriculture sector
                                              Document Objectives

  Over the course of nine weeks, the Booz Allen team, including an agronomist, analyzed in detail Kosovo’s
  agriculture sector. The team developed findings along three main areas, including a quantitative baseline of
  Kosovo’s agriculture sector, current constraints facing the sector and an assessment of best practices in
  agriculture around the world

  Based on the analysis, the team developed recommendations in three main areas including: 1) a crop
  diversification initiative, including strategic crops of focus for Kosovo; 2) initiatives to address constraints in
  Kosovo’s agriculture sector; and 3) impact analysis showing the impact of the program on agricultural
  production and employment

  The team has briefed the US Ambassador to Kosovo, members of the USAID Mission, “EU Plus” donor
  group and representatives of the Government of Kosovo on the findings of the analysis




                                                                                                                        3
The Agricultural Opportunities Strategy (AgStrat) comprised five
steps that spanned a total of nine weeks
                                             Kosovo AgStrat Project Approach
                                                    Overall Project Duration: 9 weeks

                                    2
                                             Complete
                                             Complete
                                           Quantitative
                                            Quantitative
                                           Baseline and
                                           Baseline and
                                        Constraints Analysis
                                        Constraints Analysis
                                         Examine Kosovo’s export
   1                                     performance according to            4                                  5
                                         supply and demand                                                          Develop Action Plan
                                                                                                                    Develop Action Plan
       Gauge Stakeholder
       Gauge Stakeholder                 Study local and global trends           Recommend Crop
                                                                                 Recommend Crop                           & Prioritize
                                                                                                                          & Prioritize
         Aspirations &
         Aspirations &                   Examine current constraints             Diversification for
                                                                                 Diversification for                    Initiatives for
                                                                                                                         Initiatives for
       Confirm Objectives
       Confirm Objectives                and opportunities                            Kosovo
                                                                                      Kosovo                          Implementation
                                                                                                                       Implementation
       Aggregate and review all                                                  Complete a study of the             Recommend the actions
       GoK and USAID Kosovo         3                                            natural environment in              and initiatives that will be
       reports, studies,                                                         Kosovo to determine what            required to help Kosovo
       documentation                           Conduct
                                               Conduct                           can be grown in the                 reach its agricultural
       Reconfirm stakeholder             International Best
                                          International Best                     country                             potential
       objectives, guiding              Practice Assessment
                                        Practice Assessment                      Prioritize crops that can be        Prioritize actions based on
       principles and priorities                                                 grown based on economic             their impact in terms of
       Test initial hypotheses           Examine successful                      attractiveness, economic            value of production and
       concerning agricultural           initiatives of other countries to       feasibility and production          employment
       strategy                          improve agricultural                    and marketing chain                 Recommend timeframes,
       Synthesize implications on        performance                             considerations                      sequencing and key
       objectives and guiding            Undertake analysis of the               Recommend a short list of           counterpart participation
       principles                        competition landscape                   high-value crops that
                                                                                 should be introduced
              1 week                           3 weeks                                  2.5 weeks                         2.5 weeks
Source : BAH Analysis
                                                                                                                                                    4
We interviewed a number stakeholders, reviewed studies,
documents and reports…
                                               List of Interviewees & Documents Reviewed
                              Interviewees
                               Interviewees                                                         Reports Examined
                                                                                                    Reports Examined
     HE Idriz Vehapi, Ministry of Agriculture, Minister of Agriculture
      HE Idriz Vehapi, Ministry of Agriculture, Minister of Agriculture         Agriculture Household Survey, 2007, Statistics Office of Kosovo
                                                                                 Agriculture Household Survey, 2007, Statistics Office of Kosovo
     Rifat Blaku, Ministry of Public Administration, Vice Minister
      Rifat Blaku, Ministry of Public Administration, Vice Minister             Agriculture Land Utilization Project Report, 2008, GFA Consulting Group
                                                                                 Agriculture Land Utilization Project Report, 2008, GFA Consulting Group
     Hakile Xhaferi, Mediha Halimi, Fetie Muriqi, Xhevat Lushi: Ministry of
      Hakile Xhaferi, Mediha Halimi, Fetie Muriqi, Xhevat Lushi: Ministry of    GmbH // BVVG // DFFE // European Union
                                                                                 GmbH BVVG DFFE European Union
     Agriculture, Forestry and Rural Development
      Agriculture, Forestry and Rural Development                               The Kosovo Greenbook – A Strategy for Sustainable Agricultural and
                                                                                 The Kosovo Greenbook – A Strategy for Sustainable Agricultural and
     Isuf Cikaqi, Ministry of Agriculture, Director of Plant Protection
      Isuf Cikaqi, Ministry of Agriculture, Director of Plant Protection        Rural Development in Kosovo, 2003
     Department                                                                  Rural Development in Kosovo, 2003
      Department                                                                Study on the State of Agriculture in Kosovo, 2006, ARCOTRASS
     Syle Tahirsylaj, Ministry of Environment and Spatial Planning, Director
      Syle Tahirsylaj, Ministry of Environment and Spatial Planning, Director    Study on the State of Agriculture in Kosovo, 2006, ARCOTRASS
     Dr. Shukri Fetahu, University of Pristina, Faculty                         Consortium/European Commission
                                                                                 Consortium/European Commission
      Dr. Shukri Fetahu, University of Pristina, Faculty
     Dr. Skender Muji, University of Pristina, Dean
      Dr. Skender Muji, University of Pristina, Dean                            Kosovo Poverty Assessment, 2007, World Bank
                                                                                 Kosovo Poverty Assessment, 2007, World Bank
     Flamur Kadriu, Food and Veterinary Agency, Chief of Veterinary Public
      Flamur Kadriu, Food and Veterinary Agency, Chief of Veterinary Public     Report on Potential of Greenhouse Industry in Kosovo, 2008,
                                                                                 Report on Potential of Greenhouse Industry in Kosovo, 2008,
     Health Sector
      Health Sector                                                             Intercooperation
                                                                                 Intercooperation
     Bujar Haxhidauti, Customs, Manager of Performance and Planning
      Bujar Haxhidauti, Customs, Manager of Performance and Planning            Horticulture Strategy of Kosovo, 2009-2013
                                                                                 Horticulture Strategy of Kosovo, 2009-2013
     Department
      Department                                                                Output Price Index and Prices in Agriculture, 2008, Statistics Office of
                                                                                 Output Price Index and Prices in Agriculture, 2008, Statistics Office of
     Haki Kurti, Statistical Office of Kosovo, Chief of Agricultural and
      Haki Kurti, Statistical Office of Kosovo, Chief of Agricultural and       Kosovo
                                                                                 Kosovo
     Environmental Division
      Environmental Division                                                    The Rapid Rise of Supermarkets in Central and Eastern Europe:
                                                                                 The Rapid Rise of Supermarkets in Central and Eastern Europe:
     Ismet Kastrati, Peja Institute, Director of Agriculture
      Ismet Kastrati, Peja Institute, Director of Agriculture                   Implications for the Agrifood Sector and Rural Development, 2004
                                                                                 Implications for the Agrifood Sector and Rural Development, 2004
     Bardh Begolli, Peja Institute, Head of Laboratory
      Bardh Begolli, Peja Institute, Head of Laboratory
     Agran Halimi, AGROVET Laboratory, Master of Soil Science                   Audit of the Kosovo Fruit & Vegetable Sector (KPEP), 2009
                                                                                 Audit of the Kosovo Fruit & Vegetable Sector (KPEP), 2009
      Agran Halimi, AGROVET Laboratory, Master of Soil Science
     Deme Abazi, Iber-Lepenc, Director
      Deme Abazi, Iber-Lepenc, Director                                         Horticultural strategy of Kosovo 2009 – 2013
                                                                                 Horticultural strategy of Kosovo 2009 – 2013
     Arberor Prekazi, Iber-Lepenc, Director
      Arberor Prekazi, Iber-Lepenc, Director                                    Horticultural Promotion in Kosovo, 2008
                                                                                 Horticultural Promotion in Kosovo, 2008
     Avni Kastrati, Statistical Sector of Kosovo, Director
      Avni Kastrati, Statistical Sector of Kosovo, Director                     Profile of the Macedonian Fresh Vegetable Value Chain, 2008
                                                                                 Profile of the Macedonian Fresh Vegetable Value Chain, 2008
     Maliq Gjyshinca, Intereuropa
      Maliq Gjyshinca, Intereuropa                                              Profile of the Macedonian Table Grapes Industry, 2008
                                                                                 Profile of the Macedonian Table Grapes Industry, 2008
     Shefqet Kelmendi, Kelmendi Company
      Shefqet Kelmendi, Kelmendi Company                                        Vegetable Value Chain Assessment, 2008
     Artan Osmani, EU Commission                                                 Vegetable Value Chain Assessment, 2008
      Artan Osmani, EU Commission                                               Training Interns in Milk Quality Field Work (KPEP), 2009
     Anton Selitaj, UNDP, Associate
      Anton Selitaj, UNDP, Associate                                             Training Interns in Milk Quality Field Work (KPEP), 2009
     Luan Hoti, Intercooperation, Marketing Officer                             Audit of the Kosovo Fruit & Vegetable Sector, 2008
                                                                                 Audit of the Kosovo Fruit & Vegetable Sector, 2008
      Luan Hoti, Intercooperation, Marketing Officer
     Betim Emra -- Manager of Cargo Departament, Pristina Airport
      Betim Emra Manager of Cargo Departament, Pristina Airport                 Business Consulting in A Growing Kosovo Workshop Materials, 2009
                                                                                 Business Consulting in A Growing Kosovo Workshop Materials, 2009
     Arlinda Arenliu, Pestova
      Arlinda Arenliu, Pestova                                                  Responding to Subsidized Dairy Imports Into Kosovo (KPEP), 2009
                                                                                 Responding to Subsidized Dairy Imports Into Kosovo (KPEP), 2009
     Habil Zeqiui, Ministry of Agriculture
      Habil Zeqiui, Ministry of Agriculture                                     Standards of Identity for Milk and Milk Products, 2009
                                                                                 Standards of Identity for Milk and Milk Products, 2009
     Taulant Koshi, Eurofood
      Taulant Koshi, Eurofood                                                   Vegco Business Model: A Vegetable Packing, Cooling & Sales
                                                                                 Vegco Business Model: A Vegetable Packing, Cooling & Sales
     Feim, Rexhepi, Perdrini
      Feim, Rexhepi, Perdrini                                                   Enterprise, 2009
                                                                                 Enterprise, 2009
     Selmon Shala, Agroqyshku
      Selmon Shala, Agroqyshku
Source : BAH Analysis
                                                                                                                                                            5
… and compiled a comprehensive agriculture data repository
based on cross-reference from multiple sources to ensure data
consistency
                                           Data Sources and Guiding Principles
    Data Source
    Data Source                          Information Extracted
                                          Information Extracted
                        Production, Yield, Area Harvested
                        Production, Yield, Area Harvested
      FAOSTAT
      FAOSTAT           Export // Import Values and Volumes
                        Export Import Values and Volumes
                        Consumption, Feed, Seed and Other uses
                        Consumption, Feed, Seed and Other uses                             Core Guiding Principles
                                                                                           Core Guiding Principles
UN Comtrade // ITC
UN Comtrade ITC         Breakdown of Exported/ Imported Value by Destination/
                        Breakdown of Exported/ Imported Value by Destination/
                        Origin                                                           Rely as much as possible on one
                                                                                         Rely as much as possible on one
                        Origin
                                                                                         data source to provide
                                                                                         data source to provide
          WDI
          WDI           Population Data
                        Population Data                                                  consistent and comparable
                                                                                         consistent and comparable
   Int’l Fertilizer
    Int’l Fertilizer    Fertilizer Consumption
                        Fertilizer Consumption                                           export figures
                                                                                         export figures
   Industry Assoc.
    Industry Assoc.
 Statistics Office of
 Statistics Office of   Production, Yield, Area Harvested, Fertilizer Use, Irrigation,
                        Production, Yield, Area Harvested, Fertilizer Use, Irrigation,   Cross-check trade, price, and
                                                                                         Cross-check trade, price, and
       Kosovo
       Kosovo           Local Market Prices
                        Local Market Prices                                              production data with alternative
                                                                                         production data with alternative
                                                                                         data sources
                                                                                         data sources
     Ministry of
      Ministry of       Production, Yield, Exports/Imports
                        Production, Yield, Exports/Imports
     Agriculture,
     Agriculture,       GIS Irrigation Maps                                              Prefer mirrored data sets over
                        GIS Irrigation Maps                                              Prefer mirrored data sets over
   Forestry, Rural
   Forestry, Rural                                                                       single-source
                                                                                         single-source
    Development
    Development
 Customs Office of
 Customs Office of      Imported and Exported Volumes and Values overall as well
                         Imported and Exported Volumes and Values overall as well        Complement missing information
                                                                                          Complement missing information
     Kosovo
      Kosovo            as for select HS codes
                         as for select HS codes                                          with expert opinion and
                                                                                          with expert opinion and
                                                                                         interpolation
                                                                                          interpolation
    Peja Institute
    Peja Institute      Soil types and Analysis
                        Soil types and Analysis

     Ministry of        Temperature Data and Rainfall Data for 7 Meteorological
                        Temperature Data and Rainfall Data for 7 Meteorological
      Ministry of
    Environment &       Stations
                        Stations
     Environment &
    Spatial Planning
    Spatial Planning

Source : BAH Analysis
                                                                                                                            6
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector
   – Quantitative Baseline of Kosovo’s Agriculture Sector
   – Overview of Constraints and Opportunities
   – International Best Practices Assessment

 Recommendations to Improve Kosovo’s Agriculture Sector




                                                            7
Quantitative Baseline of Kosovo’s Agriculture Sector

 Market Definition and Methodology

 Kosovo Agricultural Commodities Performance

 Crop-specific Performance and Market Assessment




                                                       8
                                                                                                                                Market Definition and Methodology



We started our analysis by looking at the “universe” of agricultural
commodities, which fall into twenty-four product chapters
                                                            Overview of Agricultural Commodities

    HS Chapter                 Name                                                                HS Chapter     Name
              01               Live Animals                                                                  13   Lac, Gums, Resins, Etc.

              02               Meat & Edible Meat Offal                                                      14   Vegetable Plaiting Materials

              03               Fish & Crustaceans                                                            15   Animal or Vegetable Fats, Oils & Waxes

              04               Dairy, Eggs, Honey, & Ed. Products                                            16   Ed. Prep. Of Meat, Fish, Crustaceans,
                                                                                                                  Etc.
              05               Products of Animal Origin
                                                                                                             17   Sugars & Sugar Confectionery
              06               Live Trees & Other Plants
                                                                                                             18   Cocoa & Cocoa Preparations
              07               Edible Vegetables
                                                                                                             19   Preps. Of Cereals, Flour, Starch, Milk
              08               Ed. Fruits & Nuts, Peel of Citrus/Melons                                      20   Preps of Vegs, Fruits, Nuts, Etc.
              09               Coffee, Tea, Mate & Spices                                                    21   Misc. Edible Preparations
              10               Cereals                                                                       22   Beverages, Spirits & Vinegar
              11               Milling Industry Products                                                     23   Residues from Food Industries, Animal
                                                                                                                  Feed
              12               Oil Seeds/Misc. Grains/Med.
                               Plants/Straw                                                                  24   Tobacco & Manuf. Tobacco Substitutes




Note : HS stands for the Harmonized System developed by the World Customs Organization for traded products
                                                                                                                                                                    9
                                                                                                                                                     Market Definition and Methodology

Over 61% of the total value for agriculture commodities exported
by Kosovo in 2008 came from primary crops and related processed
products
                        Composition of Primary Crops and Processed Products in Total Export Basket

             Total Agricultural Export Value                                                                Primary Crops and Related Processed Product
             Total Agricultural Export Value                                                                Export Value
                                                                                                        Primary Crops and Related Processed Product Export Value
             (2008)
                         (2008)                                                                             (2008)               (2008)
                                                                                                                                                                   Prep of
                                                                                                                                                                   Cereal,
               Other                                                                                                                                            Starch, Flour
                3%                                                                                                                                                   1%
                                                                          Oil crops
                                      Horticulture                           2%
                                         27%                                                                                       Milling                 Prep of
                                                                                                     Cereals
                                                                       Coffee, Tea,                                               Products               vegetable,
                                                                                                       1%
                                                                         Spices                                                     24%                  fruit, nuts
                                                                           1%                                                                               26%
                  Beverages
                                                                           Cereal                    Coffee, Tea,
                    29%
                                                                            1%                          Spices
                                                  Processed                                               2%
                                                   Veg/Fruit                                        Oil Seeds,                                       Vegetables,
                                                     16%                                           Misc. Grains             Fruits, Nuts             Other plants
                                    Processed                                                           3%                      11%                     32%
                                     Cereals,
   Animals and                        Grain
     Animal                            15%
    Products
       6%




Note: Other includes the following HS chapters: 23,21,17,15,3,18,24
Note: Other includes the following are: Vegetables and Other Plants (HS
Note: HS codes for the following crops HS chapters: 23,21,17,15,3,18,24 6,7); Fruits, Nuts (HS 8); Oil Seeds, Misc. Grains (HS 12); Coffee, Tea, Spices (HS 9); Cereals(HS 10); Milling Products
Note: HS codes for the following crops are: Vegetables and Other Plants (HS
(HS 11); Prep of Cereal, Starch, Flour (HS 19); Prep of vegetable, fruit, nuts (HS 20) 6,7); Fruits, Nuts (HS 8); Oil Seeds, Misc. Grains (HS 12); Coffee, Tea, Spices (HS 9); Cereals
              (HS 10); of Kosovo; BAH Analysis
Source: Customs Office Milling Products (HS 11); Prep of Cereal, Starch, Flour (HS 19); Prep of vegetable, fruit, nuts (HS 20)
                                                                                                                                                                                                   10
                                                                                                       Market Definition and Methodology

We will focus our baseline analysis on these primary crops
including horticulture, cereals, oil crops, and spices/stimulants as
well as processed fruits, vegetables, and cereals
                              Primary Agricultural Commodities and Related Processed Products
      1    Horticulture
                                        Strawberries, oranges,
                                         Strawberries, oranges,                               Onions, garlic, lettuce, cauliflowers,
                                                                                               Onions, garlic, lettuce, cauliflowers,
             Fruits
             Fruits                     tangerines, citrus fruit, bananas,
                                         tangerines, citrus fruit, bananas,    Vegetables
                                                                               Vegetables     tomatoes, cabbages, cucumbers,
                                                                                               tomatoes, cabbages, cucumbers,
            (HS 08)
            (HS 08)                     dates, guavas, mangoes,
                                         dates, guavas, mangoes,                (HS 07)
                                                                                 (HS 07)      artichokes, spinach, green pepper
                                                                                               artichokes, spinach, green pepper
                                        avocados, kiwis, grapes, etc.
                                         avocados, kiwis, grapes, etc.                        etc.
                                                                                               etc.

                                        Beans, cassava, chick peas,
                                         Beans, cassava, chick peas,             Roots &      Potatoes, sweet potatoes, cassava,
                                                                                              Potatoes, sweet potatoes, cassava,
                                        lentils, broad beans, lupins,             Roots &     yams, etc.
            Pulses
             Pulses                      lentils, broad beans, lupins,            Tubers      yams, etc.
                                        vetches                                   Tubers
            (HS 07)
            (HS 07)                      vetches
                                                                                 (HS 06*)
                                                                                 (HS 06*)

      2                                                                       5 Processed
                                        Rice, barley, oats, rye, millet and
                                        Rice, barley, oats, rye, millet and     Processed     Jams, juice, frozen products
                                                                                              Jams, juice, frozen products
           Cereals
           Cereals                      sorghum, maize and wheat
                                        sorghum, maize and wheat                 Fruits &
                                                                                 Fruits &
           (HS 10)
           (HS 10)                                                              Vegetables
                                                                                Vegetables
                                                                                 (HS 20)
                                                                                  (HS 20)
      3                                                                       6 Processed
                                        Cottonseed, groundnuts,
                                        Cottonseed, groundnuts,                  Processed    Cereal flour and other milling
                                                                                              Cereal flour and other milling
          Oil Crops
          Oil Crops                     sunflower, sunflower seed,
                                        sunflower, sunflower seed,               Cereals &
                                                                                 Cereals &    products, bread, pasta
                                                                                              products, bread, pasta
           (HS 12)
           (HS 12)                      sesame seed, almonds, etc.
                                        sesame seed, almonds, etc.                Grains
                                                                                   Grains
                                                                                (HS 11, 19)
                                                                                (HS 11, 19)
      4                                 Anise, saffron, basil, coriander,
                                         Anise, saffron, basil, coriander,
           Spices,
            Spices,                     fennel, cinnamon, pepper, cut
                                         fennel, cinnamon, pepper, cut
          Stimulants
          Stimulants                    flowers and bulbs, coffee, tea,
                                         flowers and bulbs, coffee, tea,
            (HS 09)
            (HS 09)                     etc.
                                         etc.

Note: (*)HS Code 6 also includes cut flowers
Source: FAOSTAT; UN Comtrade; BAH Analysis
                                                                                                                                        11
                                                                                                          Market Definition and Methodology

The baseline will analyze different aspects of production,
consumption, imports, and exports to better understand Kosovo’s
current agriculture performance
                                           Kosovo Baseline Analysis Components


                    Exports
                    Exports         =           Production
                                                Production            -         Consumption
                                                                                Consumption           +            Imports
                                                                                                                    Imports



     – Kosovo export value by           – Production volume from          – Consumption volume from       – Import volume from
       crop category from 2004-           2005-2008                         2005-2008                       2005 – 2008
       2008                             – Analyze production of top       – Analyze consumption of        – Analyze imports of top 5
     – Kosovo exports to                  5 crops                           top 5 crops                     crops
       destination markets                    – Production                      – Main products                  – Main imports
     – Export market analysis for               concentration                     consumed                       – Import growth
       top crops                              – Production growth               – Consumption
     – Kosovo export                    – Production Value = Total                growth
       performance compared to            Agriculture Land * %
       benchmark countries                Cultivated * Average Crop
              – % exports to              Yield * Unit Value
                production
              – Exports to area
                harvested




Source : BAH Analysis
                                                                                                                                          12
Quantitative Baseline of Kosovo’s Agriculture Sector

 Market Definition and Methodology

 Kosovo Agricultural Commodities Performance

 Crop-specific Performance and Market Assessment




                                                       13
                                                                                                            Kosovo Agricultural Commodities Performance



       Kosovo’s exports have grown from 2.5M to over 11M Euros over
       the past five years with horticulture making up the largest share
                          Breakdown of Kosovo Agricultural Commodities Exports Value by Commodity Type
                                                  (2004–2008, in Million Euros)
                                                                                                                                              CAGR
                                                                                                                                            (2004-2008)
                                                                                 11.9M
                                                                                         11.2M    Total
                                                                     0.5M                             Oil Crops                               97.5%
                                                                                                 3%
                                                                                                 2%   Spices and Stimulants                   -1.0%

                                                                                  4.0M   2.9M    26% Cereals (includes processed cereals) 200.2%


                                                           6.6M
                                                                                         2.9M
                                                          0.7M                    3.1M
                                                                                                 26% Processed Fruits and Vegetables          68.2%


                                   4.0M                   2.2M
          2.5M
                                  1.2M                                                   4.9M
0.4M                                                                              4.3M
                                                          3.1 M                                   43% Horticulture                            26.9%
          1.9M                    2.1M


          2004                    2005                    2006                    2007   2008




       Note: The HS chapters used to determine commodity exports include 6-12, 19, 20
       Source: Customs Office of Kosovo; BAH Analysis
                                                                                                                                                      14
                                                                                                                                         Kosovo Agricultural Commodities Performance

 Kosovo has experienced a 45.5% growth in agriculture exports,
 which is higher than its competitors because of its entry into new
 markets
       Growth rate is higher because
      Kosovo is entering new markets                         Agriculture Commodities Export Growth
     while other countries have already                            (2004-2008, in Million Euros)
        established export markets

  Kosovo                         Macedonia                                Serbia                              Croatia                                Italy                  Spain

          11.2M                             142M                               622.9M                              205.1M                              12,221.7M                   12,170M




                                                                                                                                            8,773.9M
                                                                     388.8M


                                  65.9M                                                                    93.5M
                                                                                                                                                                         10,803M


 2.5M




 2004      2008                   2004      2008                       2005      2008                      2004      2008                       2004      2008             2004     2008

CAGR 45.5%                             21.2%                               17%*                               21.7%                                  8.6%                     3%

 Note: CAGR stands for compound annual growth rate calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period
 Note: (*) Serbia’s CAGR is from 2005-2008
 Note: The HS codes used to determine commodities exports include 6-12, 19,20
 Source: Customs Office of Kosovo, TradeMap; BAH Analysis                                                                                                                                    15
                                                                                                                                       Kosovo Agricultural Commodities Performance

Albania and Macedonia account for over 50% of Kosovo’s
agriculture commodities destination markets, with the EU also
representing a large portion of exports
                  Relative Share of Destination Markets* for Kosovo Agricultural Commodities Exports
                                               (2004-2008, in Million Euros)
                                                                                                                                                    CAGR Exports      Main
                                                                                  11.7M
                                                                                                                              Total                  (2004-2008) Trade Commodity
                                                                                                            11.2M           3% Other***                    88.4%
                                                                                   0.8M
                                                                                   0.5M                                     6% Montenegro                 145.5%                  Horticulture
                                                                                                             0.7M
                                                                                   0.8M
                                                                                                             1.2M           11% Bosnia and                220.6%
                                                                                                                                Herzegovina                                       Horticulture
                                                                                   1.4M
                                                                                                             1.4M           13% EU**                       12.9%                  Horticulture

                                                                                   2.4M                                                                                   Processed Fruits and
                                                          6.4M                                               1.5M           13% Serbia                     38.7%         Vegetables, Horticulture
                                                          0.4M
                                                          1.1M                                                                                                               Processed Fruits
                                                                                   2.3M                      2.4M           21% Macedonia                 113.8%
                                                                                                                                                                             and Vegetables
                                3.6M                      1.9M

                                1.4M                                                                         3.6M
                                                          0.6M                                                              32% Albania                   107.8%                Horticulture
       1.3M                                                                        3.5M
                                0.5M                      2.1M
       0.9M
                                0.8M

      2004                      2005                     2006                     2007                      2008


Note: * In 2004, Serbia and Montenegro were recorded as one country, whereas for the other years, the are recorded separately; **EU includes: Austria, Bulgaria, Germany, Italy, Sweden,
Switzerland, UK; ***“Other” includes: Australia, Algeria, Jamaica, Turkey, Croatia, Slovenia, Romania
Note: CAGR for Serbia and Montenegro is calculated from 2005-2008
Note: The HS chapters used to determine commodity exports include 6-12, 19, 20
Source: Customs Office of Kosovo; BAH Analysis
                                                                                                                                                                                                 16
                                                                                                                                     Kosovo Agricultural Commodities Performance



  Export of Kosovo’s five major agricultural commodities are
  predominantly concentrated in a small number of countries
                                   Market Distribution of Selected Agricultural Commodities in Kosovo
                                                                   (2008)

 HS070960 - Peppers                       HS071420/HS070190                              HS081040 -                         HS080240 - Chestnuts                         HS070959-
                                               - Potatoes                                Blueberries                                                                     Mushrooms

                                                                Other                                                                           Montenegro                           Other
                                         2.7%         2.9%                                                                    0.1%         0.8%                                 3.0%
                                                                                    3.7%        3.8% Other
  15.6%     9.7% Other                                                                                                       10.2%         9.3% Italy                   7.6%    6.0% Slovenia
                                         15.8%       14.3% Macedonia               13.0%
                                                                                                17.0% Montenegro

  15.5%     27.7% Montenegro                                                                                                                                                    27.3% Italy
                                         10.9%
                                                     20.7% Montenegro                                                        40.5%                                     43.4%
                                                                                                                                          52.1% Macedonia



                                                                                   83.3%        79.2%
  69.0%     62.6%                        70.5%                                                                                                                    47            63.7% Serbia
                     Serbia                          62.1% Albania
                                                                                                        Serbia
                                                                                                                             49.3%                                     45.8%
                           27                                                                                                             37.8% Serbia
                                                                                                                                                                  46
                                                                                           31

% Share % Volume                       % Share % Volume                         % Share % Volume                           % Share % Volume                            % Share % Volume

  Note: (*)Exported value for primary crops is determined by looking at HS chapters 6-10,12
  Note: Combined HS071420 (sweet potatoes) and HS 070190 (other potatoes) since assumed potatoes identified as sweet potatoes were misclassified given the significant volume
  Note: Numbers may not add to 100% due to rounding
  Source: Customs Office of Kosovo
                                                                                                                                                                                          17
                                                                                                            Kosovo Agricultural Commodities Performance



The top five primary crops represented a larger share of exported
value compared to benchmarks
                                               Top 5 Exports Compared to Total Agriculture Exports
                                                             (2008, in Million Euros)

   5.5M                  8.6M               420.2M               6055.0M             9,661.4M    105.3M    Country        Top 5 Crop Categories

                                                                                                           Kosovo         Peppers, potatoes, blueberries,
                                                                                                                          chestnuts, mushrooms
                                                                                                           Macedonia      Fresh mushrooms, dried
                                                                                                                          mushrooms/truffles, cherries,
                                                                                                                          poppy seeds, asparagus
                                                                                                           Serbia         Raspberries/mulberries/
                                                                                                                          blackberries/loganberries,
                        94.9%                                                                                             maize, maize seed, fruits/nuts

   72.1%                                                                                                   Italy          Coffee, grapes, apples, rice, live
                                             65.1%                                                                        plants
                                                                                                 60.5%
     66.5%                     94.9%                      65.1%                      42.3%        40.5%    Spain          Mandarins / clementines,
                                                               42.3%                  40.5%                               tomatoes, oranges, peppers,
                                                                                                            60.5%
                                                                                                                          peaches
                                                                                                           Croatia        Maize, mandarins/ clementines,
                                                                                                                          sunflower seeds, maize seed,
                                                                                                                          rape/colza seeds
  Kosovo              Macedonia               Serbia                Italy                Spain   Croatia

                  Top 5 Exported Commodities                    Remaining Exported Commodities




Note: Exported value for primary crops is determined by looking at HS chapters 6-10,12
Source: Customs Office of Kosovo, TradeMap
                                                                                                                                                               18
                                                                                                           Kosovo Agricultural Commodities Performance

  Kosovo’s imports have grown from 48M to over 155M Euros over
  the past five years with processed cereals making up the largest
  share
                       Breakdown of Kosovo Agricultural Commodities Import Value by Commodity Type
                                              (2004–2008, in Millions, Euro)
                                                                                                                                    CAGR
                                                                                                      Total                       (2004-2008)
                                                                                          155.8M
                                                                                           5.2M     3.3% Oil Crops                  59.7%
                                                                                           13.3M    8.5% Spices & Stimulants        34.9%
                                                                                 129.3M                    Processed Fruits &
                                                                                           16.6M   10.6%                            28.4%
                                                                                                           Vegetables
                                                                                  9.8M
                                                          110.0M
                                                                                 15.8M             22.2% Horticulture
                                                            8.6M                           34.6M                                    30.2%
                                 91.1M
                                                          11.9M
                                   7.7M                                          28.7M
                                 11.5M                    27.4M
                                                                                           35.6M   22.9% Cereals                    54.9%
                                 26.2M                                           26.0M
        48.6M
                                                          22.7M
         6.1M                     9.8M
        12.1M
         6.2M                                                                              50.6M   32.5% Processed Cereals          26.9%
                                                                                 45.2M
                                 33.2M                    36.9 M
        19.5M


        2004                      2005                     2006                  2007      2008


Note: The HS chapters used to determine commodity exports include 6-12, 19, 20
Source: Customs Office of Kosovo
                                                                                                                                                     19
                                                                                                                                         Kosovo Agricultural Commodities Performance



   The agriculture commodities imported from the top ten importing
   countries account for over 73% of Kosovo’s total imported value
                                    Relative Share of Importers of Agricultural Commodities into Kosovo
                                                        (2004-2008, in Millions, Euro)         Total                                                                     CAGR
                                                                                                                        472.6M                                        (2004-2008)


                                                                                                                        125.8M              26.6% Other                   13.4%
                                                                                            384.1M


                                                                 319.2M                                                  17.4M             3.7%       Germany            36.7%
                                                                                            100.3M                       18.8M             4.0%       Austria            20.4%
                                     285.5M                                                                              19.3M             4.1%       Slovenia           28.3%
                                                                 81.0M                      14.0M                        21.2M             4.5%       Croatia            40.0%
                                                                                            16.1M                        22.4M             4.7%       Bulgaria           47.2%
                                                                 10.4M                      17.9M
                                     112.7M                                                 17.5M
                                                                                                                         27.8M              5.9%      Hungary             43.2%
                                                                 14.1M
                                                                 14.5M                      17.1M                        31.0M              6.6%      Turkey              29.5%
                                                                 11.8M
                                                                 13.4M                      26.2M
         157.4M                                                  12.6M                                                  42.4M               9.0%      Brazil              33.1%
                                                                 25.4M                       29.4M
                                                                 18.0M
         76.2M                                                                               45.0M                                          12.1% Macedonia               32.1%
                                                                                                                         57.0M
                                     25.0M                       40.8M
                                     16.0M
                                     35.9M                                                   89.9M                      89.3M               18.9% Serbia                 46.9%
                                                                 77.4M
         13.5M
         18.7M                        28.2M


          2004                       2005                        2006                        2007                       2008

Note: 101 countries imported agriculture commodities into Kosovo in 2008; CAGR for Serbia is calculated from 2005-2008; The HS chapters used to determine commodity exports include 6-12,
19, 20; Total numbers may not add to sum of country totals due to rounding
Source: Customs Office of Kosovo                                                                                                                                                            20
                                                                                                                                         Kosovo Agricultural Commodities Performance



For a representative basket of crops*, the rise in export value from
475K to 3,154K Euros was primarily driven by growth in price…
                                  Component Marginal Analysis of Kosovo Agricultural Exports Value
                                                 (2005- 2008, in Thousand Euros)
                                                                                                                                                            3,154.9K

               The large increase in price is most
              likely driven by the increase in price
                 of a few commodities, including
                       wheat, rye and barley                                                                                          +336%

                                                                                                                                                                                     Cumulative
                                                                                                                                                                                       Effect
                                                                                                                                                                                       563 %


                                                                    +16.3K                 +227%


                       475.7K




             Exported Value 2005                    Increase in Exported Volume                          Increase in Price                        Exported Value 2008


Note: To determine respective impact of each component, the following mathematical approximation was used:          EV / EV = V/V + Price/ Price; Since farm gate prices were
not available, we calculated price from the change in export value and volume
Note: Price increase was impacted by price spikes over 2006-2008 for products like: wheat (+125%),rye (+98%), and barley (64%) (TradeMap World Export Prices)
Note: (*)A representative basket of products with production, import, and export volume were included for this calculation: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants,
pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries
Source: Customs Office of Kosovo
                                                                                                                                                                                                        21
                                                                                                                                           Kosovo Agricultural Commodities Performance



…while increased export volumes were largely the result of an
increase in production, coupled with a decrease in consumption
                                                     Kosovo Agricultural Commodities Trade Balance
                                                            (2005–2008, in Thousand Tons)

                                                                                                                           147.5
                                                                                                                                                                             7.2
                                                                           826.8

Year                       686.5

2005
                      Production                      -        Consumption, Feed,                     +                  Imports                       =                  Exports
                                                               Seed, Other Use

                      +41.3 (6%)                                       -39.2 (-5%)                                     -64.2 (-44%)                                   +16.3 (227%)



                                                                                                                           83.3                                             23.5

                                                                           787.6
                           727.8
2008


                      Production                      -        Consumption, Feed,                     +                  Imports                       =                  Exports
                                                               Seed, Other Use
 Note: A representative basket of products were included for this calculation: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom,
 cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries
 Note: Consumption volume data not available. Consumption, feed, seed, and other use numbers were calculated by Production + Imports – Exports = Consumption
 Source: Customs Office of Kosovo, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study )
                                                                                                                                                                                             22
                                                                                                                                      Kosovo Agricultural Commodities Performance



Production increase was primarily driven by growth in wheat,
potato and watermelon crops
                                         Change in Agriculture Production Volumes for the Top Five
                                                    Producer Crops (2005-2008, in Tons)

350,000

300,000                                                                                                                                                      % of Total
                                                                                                                                                             Production
                                                                                                                                                                                   CAGR
                                                                                                                                                              Volume
250,000                                                                                                                                                                          (2005-08)
                                                                                                                                                               (2008)

                                                                                                                                         Wheat                   40.3%              2.3%
200,000
                                                                                                                                         Potato                  14.3%               6%
150,000
                                                                                                                                         Maize                   17.4%             -3.7%
100,000
                                                                                                                                         Pepper                    7%              -2.3%

 50,000                                                                                                                                  Watermelon              3.4%              22.5%

        0
        2005                              2006                             2007                             2008

                             Wheat              Potato              Maize             Pepper              Watermelon


Note: The top 5 crops of the representative basket of products were those with the largest production in tons in 2008; They represented over 82% of the total production volume in tons
Note: The representative basket of products included: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach,
leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries
Source: Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study )
                                                                                                                                                                                                    23
                                                                                                                                      Kosovo Agricultural Commodities Performance



Across the board, volumes for the most imported crops (tomatoes,
apples, maize, melon and peppers) have decreased
                                    Change in Agriculture Import Volumes for the Top Five Imported
                                                       Crops (2005-2008, in Tons)

35,000

30,000                                                                                                                                                        % of Total
                                                                                                                                                               Import
                                                                                                                                                                                   CAGR
                                                                                                                                                               Volume
25,000                                                                                                                                                                           (2005-08)
                                                                                                                                                                (2008)

                                                                                                                                         Tomato                  14.4%             -8.6%
20,000
                                                                                                                                         Apple                   11.9%             -5.5%
15,000
                                                                                                                                         Maize                   11.6%            -24.9%
10,000
                                                                                                                                         Melon                   22.2%             -7.1%

 5,000                                                                                                                                   Pepper                  8.2%              -2.5%

      0
      2005                               2006                              2007                              2008

                               Tomato              Apples              Maize              Melons              Pepper


Note: The top 5 imported crops of the representative basket were those with the largest imported volume in tons in 2008; They represented 68.4% of the total tons imported in 2008
Note: The representative basket of products included: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach,
leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries
Source: Statistics Office of Kosovo, Customs Office of Kosovo
                                                                                                                                                                                                    24
                                                                                                                                        Kosovo Agricultural Commodities Performance

Export volume increased for all top five exported crops, resulting
in a decrease in the quantity of domestic consumption, feed, and
seed crops
                                      Change in Agriculture Export Volumes for the Top Five Exporter
                                                         Crops (2005-2008, in Tons)

 2,500
18,000

                                                                                                                                                                 % of Total
 2,000                                                                                                                                                            Export
                                                                                                                                                                                     CAGR
                                                                                                                                                                  Volume
12,000                                                                                                                                                             (2008)
                                                                                                                                                                                   (2005-08)


1,500                                                                                                                                      Potato                  80.1%              47.0%

6,000                                                                                                                                      Pepper                   8.8%             185.3%

1,000
                                                                                                                                           Onion/Shallot            3.1%              28.4%

                                                                                                                                           Tomato                   2.1%             267.2%
  500
                                                                                                                                           Chestnut                 2.0%             187.5%

      0
      2005                               2006                               2007                              2008

                         Potato            Pepper              Onions/Shallots               Tomatoes              Chestnuts
 Note: The top 5 exported crops of the representative basket were those with the largest exported volume in tons in 2008 for the smaller representative basket of crops; They represented 96% of the total
 tons exported in 2008 for the smaller basket of crops
 Note: The representative basket of products included: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach,
 leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries
 Note: Consumption volume data is not available for this basket of crops; Potato (HS070190,071420) uses the 6000-18000 scale. All other crops use the 0-1000 scale
 Source: Statistics Office of Kosovo, Customs Office of Kosovo
                                                                                                                                                                                                       25
                                                                                                                                              Kosovo Agricultural Commodities Performance



   Kosovo’s export performance remains well below its potential
   compared to benchmarks
     1
     1      Agricultural Commodities Export Value per Ton Produced*                                             2
                                                                                                                2      Agriculture Commodities Export Share of GDP
                                     (2007)                                                                                             (2007)
               Spain                                                                        169
                                                                                                               Macedonia                                                                    2.6%
                  Italy                                                                   163
                                                                                                                    Serbia                                                         2.2%

         Macedonia                                   70                                                              Spain                                             1.7%

              Serbia                         44                                                                        Italy                         0.9%

              Croatia                       41                                                                      Croatia                   0.6%

             Kosovo              15                                                                                 Kosovo             0.4%



    3
    3   Agricultural Commodities Export Value per Area                                                          4
                                                                                                                4        Agricultural Commodities Export per Capita
  Harvested of Agricultural Land (2007, Euro per Area Harvested)                                                                   (2007, Euro per Capita)

                   Italy                                                                        1199                    Spain                                 272

                Spain                                                        737                                          Italy                      184
          Macedonia                               348
                                                                                                                  Macedonia             67
               Croatia                 183
                                                                                                                       Serbia           66
                Serbia                148
                                                                                                                      Croatia          49
              Kosovo        25
                                                                                                                      Kosovo      6

Note: The HS chapters used to determine commodities exports include 6-12, 19, 20
Note: (*) The following categories in FAOSTAT were used to estimate total production per country: cereals, coarse grain, vegetables and melons, fruit excluding melons, roots and tubers, pulses, and oil
    crops
Source: WDI; FAOSTAT; Population Reference Bureau; TradeMap
                                                                                                                                                                                                            26
                                                                               Kosovo Agricultural Commodities Performance



Agricultural production value is driven by total arable land, the
portion of arable land cultivated, crop yield and value
                              Agriculture Commodities Production Drivers


                            Total Arable
                            Total Arable           Available land for agricultural use (excludes urban and
                               Land
                                Land               rural areas, desert, natural parks, etc.)


                                                   Portion of arable land cultivated
                            Percent of
                            Percent of
                          Cultivated Land
                          Cultivated Land
      Production
      Production
        Value
         Value                                     Overall agriculture commodities harvested in ton per
                           Average Crop
                           Average Crop            hectare cultivated
                               Yield
                               Yield               Short-growing seasons allow use of same physical
                                                   areas for multiple crop rotation

                                                   Price per ton (Euros/ton)
                             Unit Value
                             Unit Value



 Production Value   =   Agricultural Land   X   Land Cultivated   X   Average Crop Yield         X   Unit Value
      (Euro)                (Hectare)                (%)                (Ton/Hectare)                (Euro/Ton)


Source: FAOSTAT
                                                                                                                         27
                                                                                                                  Kosovo Agricultural Commodities Performance (Total Arable Land)



     Approximately 76% of total land in Kosovo is arable, of that only
     85% is cultivated
                                                        Proportion of Arable Land and Cultivation in Kosovo
                                                                               (2008)
       Proportion of Arable Land in Kosovo by Hectares                                                                       Total Arable Land Cultivated in Kosovo
                            (2008)                                                                                                           (2008)
                                                                                                                                                                          Vineyard
                                                                                                                                            Orchards                         0%
                                                                                                                                              2%
                                                                                                                                                                        Greenhouse
                                                                                                                        Meadow                                              0%
                                                                                                                         37%




                                                  Arable Land
                                                     76%
                                                                                                                                                                  Arable Land
                                                                                                                                                                  and Kitchen
                       Non Arable                                                                                                                                  Gardens
                         Land                                                                                                                                        53%
                         24%



                                                                                                Total Cultivated Land      Pasture     Left Fallow
                                                                                                                             1%            7%
                                                                                                Total Uncultivated Land




Note: Assume all crops in 2008 are grown in orchards, vineyards, greenhouses, and arable land and kitchen categories with the following exceptions: assume 100% of hay volume (tons) is grown in meadow,
50% of mixed grass (tons) is grown in meadow, and 75% of trefoil (tons) is grown in meadow; Thus 83% of meadows is being cultivated for hay, mixed grass, and trefoil and 6.5% (37.2%-(37%*83%)) of
meadows is considered fallow
Non Arable Land includes forestry (20%) and houseyard (4%)
Source: Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study)                                                                                 28
                                                                                                       Kosovo Agricultural Commodities Performance (Percent of Cultivated Land)

    The primary use of cultivated land is to grow cereals, vegetables,
    fodder crops, and fruits; non-use of land is attributed to low
    profitability and lack of equipment
                                                           Crop Cultivation and Reasons for Fallow Land
                                                                              (2008)
                    Crop Cultivation Breakdown by Volume                                                                           Reasons for Leaving Land Fallow
                                     (2008)                                                                                                     (2006)

                                         Fruits                                                                 Low Economic
                                                                                                                  Profitability                                       30.5%
                                          4%
                                                                                                                      Lack of
                                                                                                                                                                  25.3%
                                                                                                                     Equipment
                                                                                                                       Lack of
                                                                                                                                                          14.7%
                              Fodder                                                                                  Manpower
                                                               Cereals
                               crops
                                                                40%
                                31%                                                                           Lack of Security                        12.1%

                                                                                                                            Other                  8.4%

                                                                                                                 Lack of Inputs               5.1%
                                     Vegetables
                                        25%
                                                                                                                 Crop Rotation              2.6%

                                                                                                                            Mines          1.1%




Source: “Determinants of the Fallowing Decision in Kosovo”, Johannes Sauer, Sophia Davidova, Laure Latruffe; Statistics Office of Kosovo
                                                                                                                                                                              29
                                                                                                                 Kosovo Agricultural Commodities Performance (Average Crop Yield)



   Compared to similar benchmarks, Kosovo ranks low in agricultural
   productivity although higher than some regional countries

                                                                                Agricultural Productivity
                                                                                    (2007, Tons/Ha)
                                                                                                                                                                45.1    46.4

                                                                                                                                                 40.5
                                                                                                                            36.1       36.7
                                                                                                               33.4
                                                                                            30.6     31.3

                                                                             25.6
                                                                  21.9
                                             19        20
                               16.6
                   14.6




                                                                                                                                                                Italy
                                                                                          Republic




                                                                                                                            Slovenia




                                                                                                                                                 South Africa
                                                                                                     Kenya


                                                                                                                Albania
                                           Slovakia
                               Bulgaria




                                                                              Macedonia
                                                       Kosovo




                                                                                                                                                                        Spain
                    Serbia




                                                                  Croatia




                                                                                                                                       Morocco
                                                                                           Czech




Note: In order to compare productivity across countries, measured overall productivity in cereals, fruit and vegetables commodities
Source: FAOSTAT, Statistics Office of Kosovo
                                                                                                                                                                                30
                                                                                                                Kosovo Agricultural Commodities Performance (Average Crop Yield)



Agriculture yields for select crops have increased since 2005, but
still rank lower than international benchmarks
          Kosovo Yield (Ton per Hectare)                                                                   Potato Yield                                     Berries Yield*
                                                                                                      (2007, Ton per Hectare)                           (2007, Ton per Hectare)
                               CAGR
                               4.7%                                                                   Spain                          28.2
                                                                                                                                                     Italy            9.6
                       23.3                                  23.1         Average
                                          17.4                                                          Italy                       25.5
    19.2                                                                   Yield                                                                  Kosovo              9.2
                                                                                                   Kosovo                     19.2
    2005               2006               2007               2008
                                                                                                                                                    Spain       5.0
                                                                                                    Croatia                  17.0
     23                  23                                    21                              Macedonia                                           Serbia       4.3
                                          19.2                            Potato                                           13.1

    2005               2006               2007               2008                                    Serbia            9.1                        Croatia     2.0


                       20.2                                 26.7                                        Cabbage Yield                                            Pepper Yield**
    8.4                                   9.2                             Berries                   (2007, Ton per Hectare)                                  (2007, Ton per Hectare)
   2005               2006               2007               2008
                                                                                                      Spain                              32.7       Spain                          48.3

    24.4               27.1                24.9                                                Macedonia                            26.6             Italy
                                                              22.8                                                                                                          18.9
                                                                          Cabbage
                                                                                                    Kosovo                        24.9          Macedonia                 16.8
    2005               2006               2007               2008
                                                                                                        Italy                 19.4                Kosovo                  16.1
     21                 23                16.1               21.7                                   Croatia                  18.3
                                                                          Peppers                                                                 Croatia            10.6
                                                                                                     Serbia                13.2                    Serbia           7.8
    2005               2006               2007               2008
Note: (*) Berries yield not available for Macedonia for 2007; berries include blackberries, strawberries and raspberries
(**)Peppers and chilies are grouped together for Croatia, Italy, Serbia, Spain and Macedonia, but not for Kosovo
Source: FAOSTAT, Statistics Office of Kosovo
                                                                                                                                                                                       31
                                                                                                              Kosovo Agricultural Commodities Performance (Average Crop Yield)



Kosovo has potential to improve yields by increasing cropping
intensity and fertilizer consumption
                                                Cropping Intensity (Area Harvested by Agricultural Land)*
                                                                         (2005)
                                                                                                               1.2                           1.2                           1.2
                                                                                 1.1
                                                   0.9

                     0.6




                 Macedonia                       Kosovo                        Croatia                    Serbia and                         Italy                        Spain
                                                                                                          Macedonia
                                                                                                                                                                          1809
                                                                             Fertilizer Consumption**
                                                                                    (2006, Kg/Ha)                                           1380




                                                 151                             176                           254
                     32

                Macedonia                       Kosovo                         Serbia                       Croatia                          Italy                       Spain
Note: (*) Area harvested refers to the area a crop is gathered, the area is counted as many times as the area is harvested; Agricultural lands (in hectares) refers to arable lands (under temporary crops,
meadows), under permanent crops (such as cocoa, coffee planted for several years) and lands under permanent pastures (mainly forage planted for 5 years). Data from 2007 was used to calculate area
harvested; however, the most recent data for agricultural land was only available from 2005. Agricultural land data combined Serbia and Montenegro whereas as area harvested data is only for Serbia.
(**)Fertilizers products cover nitrogenous, potash and phosphate (NPK) fertilizers; the metric measures the quantity of plants nutrients used per unit of agricultural land
Source: FAOSTAT for area harvested, WDI for agricultural land and International Fertilizer Industry Association data for fertilizer consumption
                                                                                                                                                                                                          32
                                                                                           Kosovo Agricultural Commodities Performance (Total Agriculture Commodity Value)



 Kosovo’s local prices for agricultural commodities are relatively
 low when compared against EU FOB origin prices
                                                     Kosovo Market Price Compared to FOB Origin Prices
                                                                      (2008, Euro/Kg*)
       2.50
                     +1.66                  Indicates differential in Kosovo’s price and highest price shown                                        Because of the price differential,
       2.25                                                                                                                                          opportunities exist to capture
                                                                                                                                                     market share from competitors
       2.00
                                +1.12
       1.75
                                                                             +0.40
       1.50
                                                                +0.54                                                                                              +0.07
       1.25
                                                                                                         +0.29
       1.00
                                                                                              +0.33
                                                  +0.57
       0.75
                                                                                                                                                    +0.15
                                                                                                                                      +0.15
       0.50
                                                                                                                         +0.16                                                    +0.06
       0.25

       0.00




                                                                                                            oma o s




                                                                                                                                           et
                                   S ia h




                                                                                               c es
                                                     bae



                                                                Pe r




                                                                                                                           Wa emeon




                                                                                                                                                       Onon
                     p r




                                                                                                                                                                       ae



                                                                                                                                                                                    Poa o
                                                                                 e t us



                                                                                             Cu umb r



                                                                                                            T te




                                                                                                                                         Wh a
                    Pe pe



                                    pn c



                                                   Ca b g



                                                                 a



                                                                               Ch s n t




                                                                                                                                                                                      tt
                                                                                                                                                                      Grp
                                                                                                                             tr l




                                                                                                                                                         i
                Kosovo Market Price                             United Kingdom FOB Origin Price                       France FOB Origin Price
                                                                                                                                                              Belgium FOB Origin Price
                Germany FOB Origin Price                        Netherlands FOB Origin Price                          Italy FOB Origin Price

Note: (*) Differential was calculated between Kosovo and the country with the largest Euro/Kg gap from Kosovo
Note: Kosovo prices were collected in all seven regions (Peja, Pristina, Prizren, Ferizaj, Gjilan, Gjakova, Mitrovica ) on the 15th of each month and reflect prices farmers receive for the production
that are sold outside the sector. The price collection was carried out at markets, farms and other places where prices on agriculture products are available.
Note: Pepper (HS070960): Germany FOB Origin for Turkey, UK FOB Origin for Italy; Spinach (HS070970): UK and Netherlands FOB Origin for Italy; Cabbage (HS070490): Germany and UK FOB
Origin for Italy; Pear (HS080820): Germany FOB Origin for Turkey, UK FOB Origin for Italy; Chestnuts (HS080240): France and Italy FOB Origin for Turkey; Cucumber (HS070700): Germany FOB
Origin for Turkey, UK FOB Origin for Spain; Tomatoes (HS070200): Germany and UK FOB Origin for Turkey; Watermelon (HS080711): Germany and France FOB Origin for Italy; Wheat
(HS100190): Italy FOB Origin for Greece, Germany FOB Origin for Italy; Onion (HS070310): UK FOB Origin for Italy, Germany FOB Origin for Turkey; Grape (HS080610): UK FOB Origin for Turkey,
Netherlands FOB Origin for Spain; Potato (HS070190): Belgium and Netherlands FOB Origin for Italy; Statistics for Spain’s exports are 2007
Source: “Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008”, Statistics Office of Kosovo; TradeMap; UN Comtrade                                                    33
Quantitative Baseline of Kosovo’s Agriculture Sector

 Market Definition and Methodology

 Kosovo Agricultural Commodities Performance

 Crop-specific Performance and Market Assessment




                                                       34
                                                                                                                         Crop-specific Performance and Market Assessment (Potatoes)

  Kosovo’s potato sector has competitive yields compared to
  benchmarks, with small differences in FOB origin prices
  compared to Belgium and Netherlands
        Agricultural Commodity Production and Export Volume
        Agricultural Commodity Production and Export Volume                                                                              Agricultural Yield Comparison
                                                                                                                                         Agricultural Yield Comparison
                                                                                                            Ton/Ha
      K Ton                                                                                              30
100
                                                   11%                                  Produced         25
                                                                                        Volume
 75                                                                                                      20
                                                                                                         15
 50                                                                                                      10
                                                                                                           5
 25                                                                                     Exported           0
                                                   59%




                                                                                                                                                            Kosovo



                                                                                                                                                                         Italy
                                                                                                                    Serbia



                                                                                                                                 Macedonia



                                                                                                                                               Croatia




                                                                                                                                                                                       Spain
                                                                                        Volume
  0
            2004




                            2005




                                            2006




                                                                2007




                     Agricultural Commodity Price Comparison
                     Agricultural Commodity Price Comparison                   2008
                                                                                         CAGR
                                                                                                                                 Agricultural Commodity Comments
                                                                                                                                 Agricultural Commodity Comments
      Euro per Kg                                                                     (2004-2008)
                                                                                Netherlands                      Potatoes are grown in all municipalities* across Kosovo
                                                                                                                  Potatoes are grown in all municipalities* across Kosovo
                                                                                FOB Origin 7.6%
                                                                                                                 In 2008, over 100K tons of potatoes were produced while over
                                                                                                                  In 2008, over 100K tons of potatoes were produced while over
 0.40
                                                                                Belgium -0.1%                    18K tons were exported to Albania (62.1%), Montenegro (20.7%),
                                                                                                                  18K tons were exported to Albania (62.1%), Montenegro (20.7%),
                                                                                FOB Origin                       Macedonia (14.3%), Serbia (2.5%)
                                                                                                                  Macedonia (14.3%), Serbia (2.5%)
                                                                                Kosovo
                                                                                         -0.8%                   Kosovo’s yield is higher than regional competitors, but lower than
                                                                                                                  Kosovo’s yield is higher than regional competitors, but lower than
                                                                                Price                            best practice producers like Italy and Spain
                                                                                                                  best practice producers like Italy and Spain
 0.15                                                                                                            Kosovo’s local market price has been similar to the Netherlands
                                                                                                                  Kosovo’s local market price has been similar to the Netherlands
                                                                                                                 and Belgium FOB origin prices for the past 5 years, indicating that
                                                                                                                  and Belgium FOB origin prices for the past 5 years, indicating that
              2004




                            2005




                                          2006




                                                         2007




                                                                        2008




                                                                                                                 there may be little opportunity to capture market share in these
                                                                                                                  there may be little opportunity to capture market share in these
 Difference +0.02        +0.06          +0.11         +0.14            +0.02          Belgium                    countries
                                                                                                                  countries
                                                                                      vs. Kosovo
Note: Potato export data is for HS070190,071420; HS070190 used for price comparison; (*) Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; Netherlands FOB Origin from
Italy; Belgium FOB Origin from Italy
Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study); Customs Office of Kosovo;
                                                                                                                                                                                                         35
Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap; BAH Analysis
                                                                                                                               Crop-specific Performance and Market Assessment (Peppers)

 Kosovo has higher pepper yields compared to benchmarks;
 FOB origin prices are lower than those of the United
 Kingdom and Germany
        Agricultural Commodity Production and Export Volume
        Agricultural Commodity Production and Export Volume                                                                                Agricultural Yield Comparison*
                                                                                                                                           Agricultural Yield Comparison*
                                                                                                              Ton/Ha
      K Ton                                                                                                50
60
                                                    -2%                                  Produced
                                                                                                           40
                                                                                         Volume
40                                                                                                         30
                                                                                                           20
                                                                                                           10
20
                                                                                         Exported            0




                                                                                                                                                  Kosovo




                                                                                                                                                                             Italy
                                                                                                                      Serbia



                                                                                                                                      Croatia




                                                                                                                                                                Macedonia




                                                                                                                                                                                           Spain
                                                    116%                                 Volume
0
            2004




                           2005




                                            2006




                                                             2007




                     Agricultural Commodity Price Comparison
                     Agricultural Commodity Price Comparison                    2008
                                                                                          CAGR
                                                                                                                                      Agricultural Commodity Comments
                                                                                                                                      Agricultural Commodity Comments
     Euro per Kg                                                                       (2004-2008)
     2.50                                                                                                          Peppers are cultivated in 26 of the 30 municipalities** listed in the
                                                                                 United                             Peppers are cultivated in 26 of the 30 municipalities** listed in the
     2.00                                                                                   18%                    2007 Household Survey
                                                                                 Kingdom                            2007 Household Survey
     1.50
                                                                                 FOB Origin                        In 2008, over 51K tons of peppers were cultivated while only 2K
                                                                                                                    In 2008, over 51K tons of peppers were cultivated while only 2K
                                                                                 Germany                           tons were exported primarily to Serbia (62.6%) and Montenegro
                                                                                                                    tons were exported primarily to Serbia (62.6%) and Montenegro
     1.00                                                                                  3.7%
                                                                                                                   (27.7%) with the remaining volume sent to Albania (5%),
                                                                                 FOB Origin                         (27.7%) with the remaining volume sent to Albania (5%),
     0.50                                                                        Kosovo                            Germany (2%), Macedonia (1.2%), Sweden (0.9%), Romania
                                                                                                                    Germany (2%), Macedonia (1.2%), Sweden (0.9%), Romania
                                                                                             8.3%                  (0.6%), and Italy (0.005%)
     0.00                                                                        Price                              (0.6%), and Italy (0.005%)
                                                                                                                   Kosovo’s yield is competitive with Italy
                                                                                                                    Kosovo’s yield is competitive with Italy
                   2004




                              2005




                                             2006




                                                            2007




                                                                         2008




                                                                                                                   UK’s FOB origin price is significantly higher than Kosovo’s local
                                                                                                                    UK’s FOB origin price is significantly higher than Kosovo’s local
Difference +0.71           +1.28          +0.93            +1.35      +1.66            UK vs.                      market price
                                                                                                                    market price
                                                                                       Kosovo
Note: (*)Peppers and chilies are grouped together for Croatia, Italy, Serbia, Spain and Macedonia, but not for Kosovo; (**) Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey;
United Kingdom FOB Origin from Turkey; Germany FOB Origin from Turkey
Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo; HS070960 used for peppers
Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap; BAH Analysis                                                                                             36
                                                                                                                        Crop-specific Performance and Market Assessment (Tomatoes)

 While tomato yields have been comparatively low, Kosovo’s
 FOB origin price is much lower than Germany’s, and
 marginally less than the United Kingdom
          Agricultural Commodity Production and Export Volume
          Agricultural Commodity Production and Export Volume                                                                            Agricultural Yield Comparison
                                                                                                                                         Agricultural Yield Comparison
                                                                                                               Ton/Ha
       K Ton                                                                                                70
25
                                                                                           Produced         60
20                                                     11%                                 Volume           50
                                                                                                            40
15                                                                                                          30
                                                                                                            20
10
                                                                                                            10
5                                                                                          Exported          0




                                                                                                                                    Kosovo




                                                                                                                                                                          Italy
                                                                                                                      Serbia




                                                                                                                                                 Macedonia




                                                                                                                                                                Croatia




                                                                                                                                                                                  Spain
                                                      267%                                 Volume
0
             2004




                             2005




                                              2006




                                                              2007




                     Agricultural Commodity Price Comparison
                     Agricultural Commodity Price Comparison                      2008
                                                                                            CAGR                                    Agricultural Commodity Comments
      Euro per Kg                                                                                                                   Agricultural Commodity Comments
                                                                                         (2005-2008)
      1.20
                                                                                                                    Tomatoes are cultivated in 27 of the 30 municipalities*
                                                                                                                     Tomatoes are cultivated in 27 of the 30 municipalities*
                                                                                   Germany 0.0%
                                                                                   FOB Origin                       In 2008, over 20K tons of tomatoes were cultivated while 500 tons
                                                                                                                     In 2008, over 20K tons of tomatoes were cultivated while 500 tons
      0.90                                                                                                          were exported to Montenegro (62.5%), Bulgaria (14.8%), Albania
                                                                                                                     were exported to Montenegro (62.5%), Bulgaria (14.8%), Albania
                                                                                   UK FOB -14.2%                    (12.1%), Italy (4.4%), Macedonia (4%), Romania (1.8%), Serbia
                                                                                   Origin
                                                                                                                     (12.1%), Italy (4.4%), Macedonia (4%), Romania (1.8%), Serbia
      0.60                                                                                                          (0.4%), and Germany (0.01%)
                                                                                                                     (0.4%), and Germany (0.01%)
                                                                                   Kosovo      1.8%                 Kosovo has a lower yield in comparison with other regional and
                                                                                                                     Kosovo has a lower yield in comparison with other regional and
                                                                                   Price
      0.30                                                                                                          best practice countries
                                                                                                                     best practice countries
                                                                                                                    Given Germany’s higher FOB origin price, Kosovo could be
                    2004




                                    2005




                                               2006




                                                             2007




                                                                           2008




                                                                                                                     Given Germany’s higher FOB origin price, Kosovo could be
                                                                                                                    competitive in select EU markets
                                                                                                                     competitive in select EU markets
Difference                     +0.32          +0.12          +0.47        +0.29          Germany
                                                                                         vs. Kosovo
     Note: CAGR is calculated from 2005-2008; (*)Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; HS 070200 is used for
     tomato data; Germany FOB Origin from Turkey; United Kingdom FOB Origin from Turkey
     Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of
     Kosovo, Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap; BAH Analysis                                                             37
                                                                                                                          Crop-specific Performance and Market Assessment (Onions)

 Kosovo’s onion sector has experienced lower yields
 compared to benchmarks and maintains a higher FOB origin
 price than Germany
       Agricultural Commodity Production and Export Volume
       Agricultural Commodity Production and Export Volume                                                                           Agricultural Yield Comparison
                                                                                                                                     Agricultural Yield Comparison
                                                                                                         Ton/Ha
     K Ton                                                                                             60
16                                                     4%
                                                                                  Produced
                                                                                                       48
                                                                                  Volume
12
                                                                                                       36
                                                                                                       24
8
                                                                                                       12
4                                                                                 Exported              0
                                                 153%




                                                                                                                                Kosovo




                                                                                                                                                                      Italy
                                                                                                                 Serbia




                                                                                                                                           Macedonia




                                                                                                                                                         Croatia




                                                                                                                                                                                   Spain
                                                                                  Volume
0
         2004




                         2005




                                         2006




                                                             2007




                Agricultural Commodity Price Comparison
                Agricultural Commodity Price Comparison                  2008

                                                                                   CAGR                                         Agricultural Commodity Comments
                                                                                                                                Agricultural Commodity Comments
     Euro per Kg
      0.75                                                                      (2004-2008)
                                                                                                              Onions are grown in all municipalities* across Kosovo
                                                                                                               Onions are grown in all municipalities* across Kosovo
                                                                               UK FOB 1.5%
                                                                                                              In 2008, almost 16K tons of onions were cultivated while 740 tons
                                                                                                               In 2008, almost 16K tons of onions were cultivated while 740 tons
                                                                               Origin
      0.50                                                                                                    were exported to Montenegro (67.4%), Albania (31%), and
                                                                                                               were exported to Montenegro (67.4%), Albania (31%), and
                                                                               Kosovo     -5%                 Romania (1.5%)
                                                                                                               Romania (1.5%)
                                                                               Price
      0.25                                                                                                    Kosovo has a lower yield in comparison with other regional and
                                                                                                               Kosovo has a lower yield in comparison with other regional and
                                                                               Germany -12%                   best practice countries
                                                                                                               best practice countries
                                                                               FOB Origin
      0.00                                                                                                    Kosovo’s market price is similar to or higher than UK and
                                                                                                               Kosovo’s market price is similar to or higher than UK and
                                                                                                              Germany FOB origin prices, making Kosovo uncompetitive;
                 2004




                                2005




                                                2006




                                                              2007




                                                                        2008




                                                                                                               Germany FOB origin prices, making Kosovo uncompetitive;
                                                                                                              Export growth has been focused primarily on local regional
                                                                                                               Export growth has been focused primarily on local regional
Difference +0.01            +0.23         +0.14             +0.28    +0.15       UK vs.                       markets
                                                                                                               markets
                                                                                 Kosovo

 Note: (*)Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; HS 070310 used for onion data; United Kingdom FOB Origin from Italy; Germany FOB Origin from Turkey
 Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo,
 Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap                                                                                                  38
                                                                                                                  Crop-specific Performance and Market Assessment (Watermelons)

 While watermelon producers have lower yields in Kosovo,
 FOB origin price is significantly less than Germany and
 France
          Agricultural Commodity Production and Export Volume
          Agricultural Commodity Production and Export Volume                                                                          Agricultural Yield Comparison
                                                                                                                                       Agricultural Yield Comparison
                                                                                                             Ton/Ha
       K Ton                                                                                               45
25
                                                                                        Produced
                                                                                                           36
20                                                  18%                                 Volume
                                                                                                           27
15
                                                                                                           18
10                                                                                                          9

5                                                                                       Exported            0




                                                                                                                                  Kosovo




                                                                                                                                                                          Italy
                                                                                                                     Serbia




                                                                                                                                               Macedonia




                                                                                                                                                             Croatia




                                                                                                                                                                                       Spain
                                                                                        Volume
0                                                   44%
             2004




                                2005




                                             2006




                                                             2007




                           Agricultural Commodity Price Comparison
                           Agricultural Commodity Price Comparison             2008
                                                                                         CAGR                                     Agricultural Commodity Comments
      Euro per Kg                                                                                                                 Agricultural Commodity Comments
                                                                                      (2005-2008)
 0.40                                                                                                             Watermelons are cultivated in 25 of the 30 municipalities*
                                                                                 Germany 11.0%                     Watermelons are cultivated in 25 of the 30 municipalities*
                                                                                 FOB Origin                       In 2008, almost 25K tons of watermelons were cultivated while
                                                                                 France     9.2%
                                                                                                                   In 2008, almost 25K tons of watermelons were cultivated while
 0.30                                                                                                             just under 45 tons of watermelons were exported to Montenegro
                                                                                                                   just under 45 tons of watermelons were exported to Montenegro
                                                                                 FOB Origin
                                                                                                                  (84.2%), Albania (15.7%), and Germany (0.1%)
                                                                                                                   (84.2%), Albania (15.7%), and Germany (0.1%)
 0.20                                                                           Kosovo      -3.5%
                                                                                                                  Kosovo has a lower yield in comparison with other regional and
                                                                                                                   Kosovo has a lower yield in comparison with other regional and
                                                                                Price
                                                                                                                  best practice countries
                                                                                                                   best practice countries
 0.10                                                                                                             German and France FOB origin prices have consistently been
                                                                                                                   German and France FOB origin prices have consistently been
                                                                                                                  higher than Kosovo’s local price
                    2004




                                  2005




                                            2006




                                                          2007




                                                                        2008




                                                                                                                   higher than Kosovo’s local price

Difference                      +0.05      +0.12        +0.10         -+0.16          Germany
                                                                                      vs. Kosovo
     Note: CAGR for price is calculated from 2005-2008; (*)Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; HS080711 is used for watermelon data; Germany FOB Origin
     From Italy; France FOB Origin from Italy
     Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo,                                       39
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector
   – Quantitative Baseline of Kosovo’s Agriculture Sector
   – Overview of Constraints and Opportunities
   – International Best Practices Assessment

 Recommendations to Improve Kosovo’s Agriculture Sector




                                                            40
                                                                                                                    Constraints Methodology



Kosovo has a number of advantages that can be tapped to
increase the total agricultural production in the country
                                         Kosovo’s Agricultural Competitive Advantages

            Proximity to EU and Regional Markets                                Opportunities to Improve Productivity
            Kosovo is within 1-2 days delivery time of all major                Kosovo lags behind European benchmark countries
            fresh wholesale markets in Europe.                                  in cropping intensity (0.9), yield per hectare (20),
                                                                                export value per harvested hectare (€25) and
            Agricultural production volumes and exports have
                                                                                percentage of arable land in production (66%),
            been growing, at 2.4% and 48.3% compound
                                                                                offering significant opportunities to improve
            annual growth rates, respectively.
                                                                                agricultural production and employment.
            The number of trading partners is expanding with
                                                                                There is sufficient workforce for expanded
            exports to 10 new countries since 2004 including
                                                                                agricultural production (only 15% of farmers cite
            Austria, Denmark, UAE and the United States.
                                                                                workforce as an issue).
                                                                 Agricultural
                                                                 Agricultural
                                                                 Competitive
                                                                 Competitive
                                                                 Advantages
                                                                 Advantages
                        Significant Donor Support                          Natural Environment Supports Diversification
          Government and donors are providing €15-18                            Kosovo’s natural environment supports all crops that
          million per year in support to the agricultural                       can be grown in temperate climates.
          sector including programs in over 20 crops in
          every area of the country.                                            Growing seasons support harvest 30 days earlier
                                                                                than in northern Europe allowing some seasonality
          With effective coordination, this funding can                         advantages.
          become a major source for improvements in ag-
          related infrastructure, input quality, productivity,                  Water and other resources are relatively plentiful
          crop diversity, quality and export promotion.                         and there are opportunities to expand both small-
                                                                                scale and formal irrigation systems.

Source : BAH Analysis
                                                                                                                                          41
                                                                                                                                     Constraints Methodology

      To effectively understand the challenges facing Kosovo’s
      agriculture sector, a constraints analysis has been completed
      along six dimensions
                                                         Overview of Constraints
  1
  1
          Untapped         Coordination among Small Farmers: Proportion of active associations and activity levels
          Untapped         Extension Services: Assessment of current extension services and potential to focus on high value crops
      Potential of Small
      Potential of Small   Lack of Financing for Small Farmers: Financial products currently available to small farmers in Kosovo
          Farmers
           Farmers         Mechanization: Mechanization rates by equipment, type and size of farms; degree of small farmer mechanization

  2
  2                        Donor Coordination: Level of donor coordination among donors supporting Kosovo’s agriculture sector
                           Market Intelligence: Types of market intelligence on end customer characteristics and requirements.
      Lack of Demand-
      Lack of Demand-      Distribution: Collection centers and packhouses in Kosovo enabling reliability and flexibility of distribution
       Driven Focus
        Driven Focus       Promotion & Branding: Participation rate in trade shows; effectiveness of branding and promotion campaigns
                           Pricing: Storage capacity in Kosovo allowing farmers to take advantage of seasonally high prices

  3
  3                        Development of Irrigation Networks: Coverage of irrigation networks; working capacity levels of irrigated systems; pricing of
        Infrastructure
         Infrastructure    irrigation systems.
       Capacity Issues
       Capacity Issues     Building greenhouse capacity: Size of greenhouse market in Kosovo; types and construction of greenhouses; return on
                           investment of greenhouses in Kosovo

  4
  4                        Land & Land-Sea Delivery: Land-sea routes and road networks in Kosovo and within the region; accompanying costs and travel
        Transportation     time for deliveries
        Transportation
                           Air Transport and Shipping: Level of dedicated air cargo freighters for perishables and experience of agriculture exporters with
        Disadvantages
        Disadvantages      air delivery
                           Export and Cold Chain: Types of cold chain for fresh, chilled and frozen products
  5
  5
          Inadequate
           Inadequate      Food Safety & Quality: Current organizational responsibility for food safety; effectiveness of private labs for food quality testing
          Agriculture
           Agriculture     Regulation of Inputs: Types of regulation for seed, fertilizer and pesticide quality and usage.
          Regulations      Environment: Current issues facing arable land and quality and availability of natural resources
          Regulations

  6
  6                        Enforcement of Trade Agreements: Types of implementation issues for Kosovo’s trade agreement; level of trade facilitation
         Trade Access
         Trade Access      capacity within the Kosovo government
            Issues         Responses to Subsidies: Current treaties enabling government supports; overview of current supports in other countries
             Issues        Recognition of Sovereignty: Overview of countries recognizing Kosovo’s sovereignty; recognition-related risks from other
                           countries.
Source : BAH Analysis
                                                                                                                                                                  42
                                                                                                                    Untapped Potential of Small Farmers



In Kosovo, small farms account for 98% of all agricultural land with
the smallest farms, under 1.5 ha, accounting for 38%

                                                        Arable Land by Farm Size and Type
                                                                   % of Area (2006)

                                                                                                          1%
                   1%                  1%              5%         1%             2%         1%                                   Large & Specialized
                                                                                                                                     Farms (2%)
                                                                        20%           22%
                                                            28%                                  30%
                          34%                                                                                     33%         3+ ha.
     42%                                        36%

                                                                        25%
                                                                                      29%
                                                            30%                                  30%                                        Small
                          31%                                                                                     28%         1.5-3 ha.
                                                27%                                                                                         Farms
     27%
                                                                                                                                            (98%)


                                                                        53%           48%
                                                            40%                                  39%              38%         0-1.5 ha.
     31%                  34%                   32%



   Prishtina           Mitrovica                Peja    Gjakova        Prizren    Ferizaj        Gjilan        Kosovo Total




Sources : Statistical Agency of Kosovo (2006)
                                                                                                                                                      43
                                                                                                                                                                                                                                                                                     Untapped Potential of Small Farmers

At 1.4 hectares, Kosovo’s average farm size is among the smallest
in Europe although several other countries in SEE also have small
farm size
                                                                                                                                          Average Farm Size By Country
                                                           Hectares (2003 for Croatia, 2005 for EU, 2006 for Kosovo, 2007 for Serbia, Macedonia and Albania)
  84.2




                                                                                                                                                                                                                                    Kosovo’s average farm size is
                                                                                                                                                                                                                                    Kosovo’s average farm size is
                                                                                                                                                                                                                                smaller than the European average
                                                                                                                                                                                                                                smaller than the European average
                                                                                                                                                                                                                                and than for large Balkan countries
                                                                                                                                                                                                                                and than for large Balkan countries
                   55.6
                                    52.7 52.4                                                                                                                                                                                      such as Bulgaria, Romania and
                                                                                                                                                                                                                                   such as Bulgaria, Romania and
                                                           48.6                                                                                                                                                                 Serbia but in line with the farm size
                                                                                                                                                                                                                                Serbia but in line with the farm size
                                                                    43.7 42.1                                                                                                                                                   in Albania, Croatia and Macedonia
                                                                                                                                                                                                                                 in Albania, Croatia and Macedonia

                                                                                       32.1 31.8
                                                                                                           29.9
                                                                                                                     27.4 26.9
                                                                                                                                          23.9 23.0
                                                                                                                                                                21.4
                                                                                                                                                                       19.1
                                                                                                                                                                                 13.2 1 .9
                                                                                                                                                                                       1 1 .4 1 .0
                                                                                                                                                                                           1   1
                                                                                                                                                                                                                        7.4      6.3        6.0       6.0      5.5      5.5    5.1 4.8
                                                                                                                                                                                                                                                                                                   3.4      3.3 2.0              1.9       1.7        1.4      0.9




                                                                                                                                                                                                                                                                                                                                Croatia
                                                                                                                                                                                                                                                                                                                                          Macedonia
                                                                                                                                                                                                                                                               Serbia
                                                 Denmark
                   United Kingdom




                                                                                                                                                                EU15




                                                                                                                                                                                          EU27




                                                                                                                                                                                                                                                                        EU12




                                                                                                                                                                                                                                                                                                            Romania
                                                                                                                                                                                                                                                                                                                      Albania
  Czech Republic




                                                                    Germany




                                                                                                                                                                                                 Portugal
                                    Luxembourg




                                                                                       Finland




                                                                                                                                Belgium
                                                           France




                                                                                                 Ireland
                                                                                                           Estonia
                                                                                                                     Slovakia




                                                                                                                                                                                                                                                                                          Greece




                                                                                                                                                                                                                                                                                                                                                               Malta
                                                                                                                                                                                                                                                      Poland
                                                                                                                                          Netherlands




                                                                                                                                                                                                                        Italy


                                                                                                                                                                                                                                            Hungary




                                                                                                                                                                                                                                                                                                   Cyprus
                                                                                                                                                        Spain




                                                                                                                                                                                                            Lithuania


                                                                                                                                                                                                                                 Slovenia
                                                                                                                                                                                 Latvia




                                                                                                                                                                                                                                                                               Bulgaria




                                                                                                                                                                                                                                                                                                                                                      Kosovo
                                                                                                                                                                       Austria
                                                                              Sweden




Sources : Eurostat, Statistical Agency of Kosovo (2006), Ministry of Agriculture Albania, Central Bureau of Statistics Croatia, Ministry of Agriculture Serbia, Statistical Office of Macedonia, BAH Analysis
                                                                                                                                                                                                                                                                                                                                                                       44
                                                                                                               Untapped Potential of Small Farmers

  Although there is some indication that large and specialized farms
  make better use of the land, leaving only 1.7% fallow compared to
  9.5% for all farms …
                                                  Cultivated Over Total Agricultural Land by Farm Size
                                                                                % Based on Area (2006)



                0 - 1,5 ha                                                             92.7%                    7.3%



                1,5 - 3 ha                                                           88.8%                     11.2%



                     3 + ha                                                          88.9%                     11.1%              Large and
                                                                                                                                 Specialized
                                                                                                                                Farms Leave
Large and Specialized                                                                                                           Only 1.7% of
                                                                                           98.3%                   1.7%
       Farms                                                                                                                    Land Fallow
                                                                                                                                Compared to
                                                                                                                                 9.5% for All
                All Farms                                                             90.5%                     9.5%                Farms



                                                                                       Cultivated
                                                                                       Left Fallow

   Sources : Statistical Agency of Kosovo (2006)
   Note : Cultivated area includes arable, meadows, orchards and greenhouses. Left fallow includes pastures.
                                                                                                                                                 45
                                                                                                   Untapped Potential of Small Farmers



… there are several factors that would limit the feasibility and
attractiveness of land consolidation
                             Obstacles to Consolidation of Agricultural Land

                      Land is traditionally willed to all surviving children. This has led to the division of land into progressively
                      Land is traditionally willed to all surviving children. This has led to the division of land into progressively
 Subdivision of
 Subdivision of
                      smaller plots, often with one farmer owning several non-contiguous plots. This fact complicates and adds
                      smaller plots, often with one farmer owning several non-contiguous plots. This fact complicates and adds
 Land Between
 Land Between
                      costs to efforts to consolidate land.
                      costs to efforts to consolidate land.
Family Members
Family Members



                      A significant amount of arable land belongs to socially- or publicly-owned enterprises that have not been
                       A significant amount of arable land belongs to socially- or publicly-owned enterprises that have not been
Privatization of      definitively privatized. Much of this land is subject to claims by previous owners. In addition, much of the
                       definitively privatized. Much of this land is subject to claims by previous owners. In addition, much of the
 Privatization of
SOEs and POEs         land is being farmed by smallholders without formal or indisputable title. Because of this status, sale or
                       land is being farmed by smallholders without formal or indisputable title. Because of this status, sale or
SOEs and POEs
                      consolidation of land on socially-owned enterprises (SOEs) will be complex and time-consuming.
                       consolidation of land on socially-owned enterprises (SOEs) will be complex and time-consuming.



                      Title to agricultural land held by IDPs creates significant complications to change of ownership, sale of
                       Title to agricultural land held by IDPs creates significant complications to change of ownership, sale of
  Title Issues
  Title Issues        land and consolidation. There is a significant amount of arable land that is not held under clear title
                       land and consolidation. There is a significant amount of arable land that is not held under clear title
Associated with
Associated with       because of disputes dating to 1999 and from the Yugoslav period. This includes claims by the Orthodox
                       because of disputes dating to 1999 and from the Yugoslav period. This includes claims by the Orthodox
      IDPs
       IDPs           Church in Peja and Decani.
                       Church in Peja and Decani.



                      While larger farm size unequivocally correlates with higher yields and productivity, sources including
                       While larger farm size unequivocally correlates with higher yields and productivity, sources including
Employment and
Employment and        EuroStat indicate that smaller farms may actually produce more employment per hectare. This indicates
                       EuroStat indicate that smaller farms may actually produce more employment per hectare. This indicates
     Rural
     Rural            that consolidation could exacerbate rural unemployment. In addition, a sense of food insecurity persists
                       that consolidation could exacerbate rural unemployment. In addition, a sense of food insecurity persists
  Livelihoods
  Livelihoods         which lead families to value smallholder farms as an important safety net in case of instability.
                       which lead families to value smallholder farms as an important safety net in case of instability.


Sources: Interviews
                                                                                                                                        46
                                                                                                               Untapped Potential of Small Farmers



Therefore, it is important for Kosovo’s agricultural development to
address obstacles in leveraging smallholder farmers
                        Challenges in Leveraging Kosovo’s Small Growers Potential for Export
A
A
                                While cooperatives and associations exist in a number of crops and areas of the country, there are less than 15
                                While cooperatives and associations exist in a number of crops and areas of the country, there are less than 15
 Lack of Coordination
 Lack of Coordination           associations in operation and these represent only a small percentage of farmers.
                                associations in operation and these represent only a small percentage of farmers.
    among Small
     among Small                The capacity of existing cooperatives is weak and few focus on the full value chain of activities (i.e. bargaining &
                                The capacity of existing cooperatives is weak and few focus on the full value chain of activities (i.e. bargaining &
       Farmers
       Farmers                  services, asset sharing, labor sharing, knowledge for value-added crops). Services are limited.
                                services, asset sharing, labor sharing, knowledge for value-added crops). Services are limited.

B
B                               No effective extension service exists to assist small farmers in developing new crops and improving yields of
                                 No effective extension service exists to assist small farmers in developing new crops and improving yields of
                                existing ones. Food processors such as Pestova provide extension-like services but are impeded by lack of
                                 existing ones. Food processors such as Pestova provide extension-like services but are impeded by lack of
    Lack of Education
    Lack of Education           enforceable contracts with farmers that would create an incentive to invest.
                                 enforceable contracts with farmers that would create an incentive to invest.
      and Training
       and Training             The educational institutes that do exist focus on a small number of traditional crops (peppers, winter wheat,
                                 The educational institutes that do exist focus on a small number of traditional crops (peppers, winter wheat,
                                tomatoes, potatoes).
                                 tomatoes, potatoes).


C                               While the banking system is robust and access to hypothecated lines of credit does exist, farmers with minimal
                                 While the banking system is robust and access to hypothecated lines of credit does exist, farmers with minimal
C
                                collateral do not have sufficient access to investment capital.
                                 collateral do not have sufficient access to investment capital.
     Poor Access To
     Poor Access To             Alternative financial products such as crop insurance, warehouse receipts and community-based microfinance
                                 Alternative financial products such as crop insurance, warehouse receipts and community-based microfinance
        Finance
        Finance                 are not readily available.
                                 are not readily available.
                                Food processors do provide some access to credit for their supplying farmers but investment is limited by the
                                 Food processors do provide some access to credit for their supplying farmers but investment is limited by the
                                lack of borrowing capacity of the processors and lack of enforceable contracts.
                                 lack of borrowing capacity of the processors and lack of enforceable contracts.
D
D                               Although the rate of tractor use is quite high, there is a low level of mechanization for harvesting, grading and
                                Although the rate of tractor use is quite high, there is a low level of mechanization for harvesting, grading and
                                packing and other stages in the production value chain.
                                packing and other stages in the production value chain.
    Use of Technology
    Use of Technology           The lack of cooperatives to pool equipment purchases and the lack of certified repair technicians in country is a
                                The lack of cooperatives to pool equipment purchases and the lack of certified repair technicians in country is a
                                major obstacle to adoption
                                major obstacle to adoption




 Sources: Interviews
                                                                                                                                                       47
                                                                     Untapped Potential of Small Farmers (Lack of Coordination among Small Farmers)



Approximately 9.6% of all associations and cooperatives in Kosovo
are considered active…
                              Summary of Major Agricultural Cooperatives and Associations in Kosovo


        Proportion of Active Associations /
        Cooperatives Operative in Kosovo
                                                                                                               Comments
                                                                                                               Comments
                                                                                           Only 9.6% of associations and cooperatives in
                                                                                           Only 9.6% of associations and cooperatives in
                                                                                           Kosovo are considered active
                                                                                           Kosovo are considered active
                                                                                            – Active associations and cooperatives are
                                                                                             – Active associations and cooperatives are
                                                             13 Active                          defined as entities that have shown a
                                                                                                 defined as entities that have shown a
                                                           Associations /                       commitment to their members in marketing
                                                                                                 commitment to their members in marketing
          Non-active Associations /                        Cooperatives                         and that operate as businesses
                                                                                                 and that operate as businesses
           Cooperatives, 90.4%
                                                            Mamushe                        Historically, associations and cooperatives have not
                                                                                           Historically, associations and cooperatives have not
                                   Active Associations /    Perdrini                       been popular for three main reasons
                                                                                           been popular for three main reasons
                                    Cooperatives, 9.6%                                      – Dependence on the extended family for
                                                            Anadrini                         – Dependence on the extended family for
                                                            Agroqyshu                           production relationships and support
                                                                                                 production relationships and support
                                                            Krusha Madhe                    – Lack of trust in developing business ventures
                                                                                             – Lack of trust in developing business ventures
                                                            Tina Association                    with other association and cooperative
                                                                                                 with other association and cooperative
                                                            KOVRGA                              members
                                                                                                 members
                                                            FRUTI                           – Producers have not placed as much emphasis
                                                                                             – Producers have not placed as much emphasis
                                                            Women for                           on relationships with buyers; if the business
                                                            Women (5)
                                                                                                 on relationships with buyers; if the business
                                                                                                model is driven more by attracting buyer
                                                                                                 model is driven more by attracting buyer
                                                                                                attention, then there is greater ability to foster
                                                                                                 attention, then there is greater ability to foster
                   Total: 135 Associations
                   Total: 135 Associations                                                      trust among members
                                                                                                 trust among members




Source : BAH Analysis; KPEP
                                                                                                                                                      48
                                                                                           Untapped Potential of Small Farmers (Lack of Coordination among Small Farmers)



   … the active associations / cooperatives have varying levels of
   membership and do not complete many critical activities
                                                  Cooperatives in Kosovo By Function, Location and Crop

            Number of Members in Active Associations /                                                                Types of Activities Completed by Active
                   Cooperatives (1) in Kosovo                                                                         Associations / Cooperatives in Kosovo
                                                                                  175
                                                                                                                                                                   Crop
                                                                                                                Bargaining     Labor        Asset     Expertise/
                                                                                                                                                                 Collection/
                                                                                                                for Inputs    Sharing      Sharing    Extension
                                                                                                                                                                 Marketing

                                                                                                  Mamushe                                                ✓
                                                                                                  Perdrini                                    ✓          ✓           ✓

                                                          100           100                       Anadrini                                               ✓           ✓
                                                                                                  Agroqyshu                                              ✓

                                                                                                                                              ✓          ✓
                                                                                                  Krusha
                                             60                                                   Madhe
                               50
                                                                                                                                                         ✓           ✓
                                                                                                  Tina
                                                                                                  Association

                  25                                                                              KOVRGA                                                             ✓
     8                                                                                            FRUTI                                                              ✓

                                                                                                                                ✓             ✓          ✓           ✓
Agroqyshu      Women          Tina         Krusha       Perdrini      Anadrini   Mamushe          Women for
                for                        Madhe                                                  Women
              Women (2)
                                                                                                                                  Gap in Activities
   Note (1) : Does not include membership figures for all active associations
   Note (2) : Average number of members per cooperative
   Source : BAH Analysis; KPEP                                                                                                                                            49
                                                                     Untapped Potential of Small Farmers (Lack of Education and Training)



While a number of organizations are providing training and
extension services in Kosovo, capacity is weak
                                    Extension and Training Organizations in Kosovo

                 Public Sector
                 Public Sector                   Public-Private Partnership
                                                 Public-Private Partnership                             Private Sector
                                                                                                        Private Sector


 Structure: The Ministry of Agriculture      Structure: There are no true public-             Structure: Food processors and
 operates Extension Departments in           private partnerships involving the GoK           associations offer extension-like
 each of the 33 municipalities, but          and private parties for extension                services to their supplying farmers.
 capacity is limited and activities are      services. However, many of the donor             For example, Pestova provides advice
 focused primarily on data collection for    projects function essentially in this            to farmers on quality, varieties and
 statistical purposes. The Peja Institute    way. As an example, Intercooperation             ways to maximize yields in potatoes,
 manages test plots and conducts             has trained and certified 25 private             Bylmeti works with dairy farmers to
 testing and limited production of seed      agronomists and is subsidizing their             improve raw milk quality and animal
 for winter wheat, potatoes, peppers         cost to farmers. KPEP is supporting              nutrition.
 and maize. However, there is no             associations such as Perdrini which
 effective publicly-funded extension.        provide extension services.
                                                                                              Funding: Processing companies
 Funding: The Ministry of Agriculture        Funding: Intercooperation is cost-
                                                                                              typically provide extension services
 has access to a programmable budget         sharing payments to agronomists at a
                                                                                              and inputs free of charge in exchange
 of €5-6M per year, which is primarily       rate of 75% in 2009 and 50% in 2010.
                                                                                              for commitments of product.
 used for grants and price supports. In      The cost is €50 per day. Clients
                                                                                              Investment in these services is limited
 2009, funds were allocated to               include large farmers, associations
                                                                                              by the informal nature of the
 purchases of apple rootstock, wheat         and informal community organizations.
                                                                                              relationships. Associations provide
 seed and rehabilitation of irrigation
                                                                                              services for a nominal membership fee
 systems and to support a subsidy of
                                                                                              (€10 per year) and for fees for
 €50 per cow for farmers who own at
                                                                                              marketing and sale of crops.
 least five cows.

Source: Interviews; BAH Analysis
                                                                                                                                        50
                                                                                                            Untapped Potential of Small Farmers (Lack of Education and Training)

Without effective extension, a large area is dedicated to crops that
are unprofitable, produced through poor methods or sold through
poor channels
                                            The Role of Extension in Helping Small Farmers Improve Choices and Techniques

                                                 Crop Profitability By Total Production

                                      Attractive Crops Grown Very Little     Attractive Crops Grown A lot


                                                                              Beans (bush)                                                        Comments
                                                                                                                                                  Comments
                     High (≥ €1000)




                                                                                (2106 ha)
                                                                                                                             Kosovo farmers grow large quantities of low-
                                                                                                                             Kosovo farmers grow large quantities of low-
    Farmer’s Profit Per Hectare




                                               Peppers Sold to Processor                                                     profit crops (maize), make poor production
                                                                                                                             profit crops (maize), make poor production
                                                       (504 ha)                       Potato                                 choices (maize without irrigation, white beans
                                                                                                                             choices (maize without irrigation, white beans
                                                                                    (3746 ha)
                                                                       Beans (Pillar)                                        on pillar) and choose less-profitable market
                                                                                                                             on pillar) and choose less-profitable market
                                                                         (2106 ha)                                           channels (i.e. selling peppers in the green
                                                                                                                             channels (i.e. selling peppers in the green
                                                                                                                             market rather than for processing)
                                                                                                                             market rather than for processing)
                                                                           Unattractive Crops Grown A lot
                                                                                                                             Extension services can help farmers select
                                                                                                                              Extension services can help farmers select
                                                        Tomatoes                                                             better crops, adopt better production
                                                                                                                              better crops, adopt better production
                                                         (903 ha)
                                                                                                                             techniques and sell through more profitable
                                                                                                                              techniques and sell through more profitable
                 Low (≤ €1000)




                                                                  Peppers Sold to Green Market                               channels
                                                                                                                              channels
                                                                           (2018 ha)

                                                                                     Maize (Irrigated)
                                                                                        (21671 ha)
                                                                             Maize (Unirrigated)
                                                                                 (14447 ha)
                                                 Low (≤2000 ha)                   High (≥ 2000 ha)
                                              Total Hectares of Kosovo Production in 2008

Source : KPEP, Predrini, Agroqyushu, Mamusha Association; Statistics Office of Kosovo (Note: 2008 data from SoK is preliminary and was being finalized at the time of the study)
Notes : % of production include horticulture and cereals only; Maize includes maize and mixed maize and beans includes beans and mixed beans
Assume: 60% of maize is irrigated while 40% is not irrigated; 80% of peppers are sold to green market while 20% is sold to processors 50% of beans are bush while 50% are pillar
                                                                                                                                                                                   51
                                                                                                                   Untapped Potential of Small Farmers (Poor Access To Finance)



There are a number of organizations providing finance to farmers
and food processors, but the types of instruments are limited
                                                           Financial Products Available to Farmers
                                                                                           Suitability
      Agency                    Product                            Term                                                                    Comments
                                                                                             to Ag
                            Line of credit or           Term loans up to 5 years                               Products offered are acceptable for processor and farm working capital
                            term loan                   Lines of Credit up to 12                               needs. However, the revolving nature of loans requires clients to
                            12-14% with                 months revolving.                                      mortgage long-term assets for short-term financing.
 Commercial                 preferential rates          Collateral requirements at                             Because agriculture is not a target sector for the banks, loan officers do
 Banks                      as low as 9%                1.5 to 3+x loan value.                                 not focus on nor understand clients in the sector.
                            (including to some                                                                 The $10M GDA was considered successful although only one bank
                            ag processors)                                                                     (Raiffeisen) participated; although all the loans have been made under
                                                                                                               GDA, Raiffeisen will continue to lend without GDA guarantee
                             Generally priced            With a few exceptions,                                Competition is high in urban and peri-urban areas, less so in villages,
                             on a monthly                under 12 months with                                  with Kosinvest more focused on rural clients than others.
                             declining basis             some enterprise loans up                              Beginning in 2010, MFIs will be allowed to take deposits, possibly
 Microfinance                with annual rates           to 60 months.                                         lowering cost of capital and interest rates.
                             at 24%+                     Collateral requirements
                                                         vary - lending on
                                                         references is common.
                             Purchase order              Less than a year. POF is                              Although not a good instrument for smallholders, it is well-suited for
 Purchase Order              financing                   a working capital                                     processors and exporters.
 Financing                   On par with bank            instrument                                            Initial CFF capital was only $1.5M and is fully committed. New loans
                             interest rates.                                                                   are based now on reflows. Lendable market estimated at $20M+.
                             Variable rates and          Around current lending                                Two companies are registered for leasing - Raiffeisen Leasing and CFF
                             terms. Nascent              rates                                High             - but neither are active yet except in vehicle leasing.
 Leasing
                                                                                            Potential          There would appear to be a significant market in agriculture for leasing
                                                                                                               of tractors and motocultivators (close to 80k units).

                                                                             Conclusions
       The financial sector must serve both the smallholder farmer directly as well as the processor or distributor to which he / she sells
       The current mix of financial products does not serve either segment well because of lack of focus on the sector, relatively short-terms and high collateral
       requirements. There is an opportunity for alternative products

Sources: Interviews with Raiffeisen, Crimson Capital, Kosinvest, ProCredt, FINCA, Bankers’ Association, AFK, others.
                                                                                                                                                                                         52
                                                                                                                          Untapped Potential of Small Farmers (Use of Technology)



The overall amount of mechanization is high although small
farmers primarily use machinery for soil preparation
                                     Mechanization by Type of Equipment and Size and Type of Farm
                                                                                         % – 2006
                                   Soil Preparation


                               32%


                                         24%                                            Other Operations in the Production Chain

                                     20%                      20%       19%       19%
                                                 17%
                                               15%                                          16%       16%        16%
                                                                                                                           14%       14%
                                                          13%
                           11%
                                                                                                                                                9%         9%
                                                                                                   7%
                                                                     4%                                                                                              4%
                                                                               2%        1%                   1%        2%        2%        1%         1%
                                                                                                                                                                 0%
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                                                                      Small Farms                 Large & Specialized Farms
Sources: Statistical Agency of Kosovo (2006)
Note: Data was provided in total numbers. We have estimated a total of 257k small farmers and 276 large and specialized farms based on other land use data in order to calculate
           percentages. Motocultivators include motocultivators and all categories of “related equipment. Large tractor is defined as over 40hp.
                                                                                                                                                                                   53
                                                                                              Untapped Potential of Small Farmers (Use of Technology)

Although many of the production steps will not benefit from
mechanization because of the low cost of labor, improvements in
several area are critical
                          Degree of Small Farmer Mechanization Across the Production Chain


                      Infrastructure         Soil                                                 Post-Harvest
                                                             Planting         Harvesting                              Packaging          Storage
                      Development         Preparation                                              Handling


  Degree of
Mechanization

                      Additional         High            Planting of         Harvesting is      Although there      For several      There is a lack
                      greenhouse         mechanization   cereals is highly   primarily          is some need        processors       of cold storage
                      investment         for cereals.    mechanized,         manual and,        for additional      bottling,        capacity and
                      would allow        Low in          but horticulture    because of         conveyers and       packaging        many farmers
                      smallholders       vegetable       is primarily        the low cost       equipment for       and steriliza-   store
                      to produce         crops.          manual. Some        of labor, will     sorting (e.g. for   tion is a        vegetable in
Needed                crops earlier in                   mechanization       continue as        apples),            production       barns.
Investments           the season                         exists for          such.              mechanization       bottleneck       Investment in
for                   when high                          planting of         Increased          is not a            which effects    cold storage is
Smallholders          prices can be                      peppers (Las        mechaniza-         bottleneck.         the volume       necessary.
                      obtained.                          Palmas). As         tion is not        Manual sorting      they are able
                      Small-scale                        long a labor        economical.        on tables is        to buy from
                      “blast                             costs are low,                         sufficient.         smallholders
                      irrigation”                        this is not a
                      systems are                        bottleneck
                      also needed.



                                                                        Most Critical Areas

Sources: Interviews
                                                                                                                                                       54
                                                                                                   Lack of Demand Driven Focus

There are a number of obstacles to developing a demand-driven
focus in agriculture that will maximize the value of production,
employment and benefits to farmers
                                 Demand-Driven Strategy Obstacles

                            Poor Donor
                            Poor Donor          There is a significant amount of donor funding for agriculture focused on
                                                 There is a significant amount of donor funding for agriculture focused on
                          Coordination To
                          Coordination To       factors that will influence the value chain -- infrastructure, production,
                                                 factors that will influence the value chain infrastructure, production,
                           Meet Market
                            Meet Market         extension, marketing. However, there is poor coordination between the
                                                 extension, marketing. However, there is poor coordination between the
                             Demands
                             Demands            GoK and donors to focus on constraints, crops and areas of the value chain
                                                 GoK and donors to focus on constraints, crops and areas of the value chain


                                                Producers have limited understanding of customer requirements for variety,
                                                 Producers have limited understanding of customer requirements for variety,
                          Limited Ability to
                          Limited Ability to    shape, grade, size and packaging of products.
                                                 shape, grade, size and packaging of products.
                           Meet Customer
                           Meet Customer        In some cases, associations or food processors are playing the role of
                                                 In some cases, associations or food processors are playing the role of
                           Requirements
                            Requirements        educating producers on product requirements. However, there has been
                                                 educating producers on product requirements. However, there has been
                                                limited success.
                                                 limited success.
 Lack of Demand-
 Lack of Demand-
  Driven Focus
   Driven Focus                                 Well-developed distribution and marketing chains can provide product to
                                                 Well-developed distribution and marketing chains can provide product to
                        Limited Development
                        Limited Development     target markets in a flexible and reliable way based on the specialized roles
                                                 target markets in a flexible and reliable way based on the specialized roles
                         of Distribution and
                          of Distribution and   of actors in the distribution and marketing chain.
                                                 of actors in the distribution and marketing chain.
                           Marketing Chain
                           Marketing Chain      In Kosovo, there is little specialization and key roles in the distribution chain
                                                 In Kosovo, there is little specialization and key roles in the distribution chain
                                                are not being filled.
                                                 are not being filled.


                                                Although Kosovo producers are participating in a large number of
                                                Although Kosovo producers are participating in a large number of
                                                promotional events in target markets, Kosovo is not recognized as a
                                                promotional events in target markets, Kosovo is not recognized as a
                         Limited Promotion
                         Limited Promotion      producer of high quality “branded” agricultural products. It is a commodity
                                                producer of high quality “branded” agricultural products. It is a commodity
                            Capabilities
                            Capabilities        supplier.
                                                supplier.
                                                Little focus has been placed on promotional events besides trade fairs.
                                                Little focus has been placed on promotional events besides trade fairs.




Source : BAH Analysis
                                                                                                                                     55
                                                                                     Lack of Demand Driven Focus (Donor Coordination To Meet Market Demands)



Donor support for agriculture is €15-18M per year although
coordination between donors and with the GoK is weak
                              Selected Data on Donor Programs- Estimated Funding in € (Annualized - 2009)
      Donor                Funding for Agriculture                         Current Focus Areas                         Planned Future Focus Areas
                                                                   Institutional Support for MAFRD (Austria,    Establishing farm register value (€1M)
                        €65M from 1999-2009 or c.                  Slovenia, Hungary)                           Land Use €1.5M
                        €7M per year                               Meeting EU standards on Food Safety          Forestry Value TBD
 European
                                                                   and Veterinary Services (Germany and         Support for Disease Control €1.5M
 Commission
                                                                   Lithuania)                                   Animal Registration €1.5 Million;
                                                                                                                Rural Grants in support of Dairy and Fruit &
                                                                                                                Vegetable Processing €5M
                          Annual support estimated at               Support for dairy, non-wood forest          Development of strategy in progress
                          c. €2-3M per year including               products and fruit & vegetables through
 USAID                    KPEP (€2.9M Euros per year                KPEP
                          total value), DCA and other               Develop Credit Authority (DCA)
                                                                    supporting access to finance (1)
                          Annual support estimated at               Cadastre Development Program                Country Economic Memorandum (CEM) in
                          €4-5M per year (loans and                 ($12M/4-year)                               development. Will allocate $10-15M from July
                          TA) including the Cadastre                Support for the MAFRD Grants Program        2010-July 2013. Areas of focus
 World Bank               program and the WB-funded                 - $10M total; €3M dispensed in 2009 for       – Improving Public Sector Extension
                          MAFRD grants program                      producer supports, purchase of apple          – Improving MAFRD Finance & Budgeting
                                                                    root stock, irrigation
                                                                                                                  – Supporting Alignment with EU Standards
                                                                                                                IBRD support for irrigation possible
                          Annual support estimated at               Intercooperation (€1M p.a.) focused on      Not known
                          €2-3M                                     fruit, veg, MAP
                                                                    GTZ (€300K) focused on medicinal and
 European
                                                                    aromatic plants
 Bilaterals
                                                                    Several Italian funded ag programs
                                                                    Turkish funding for cold storage capacity
                                                                    in Mamushe
Note (1) : DCA program is fully subscribed and no longer lending
Sources: Interviews                                                                                                                                            56
                                                                     Lack of Demand Driven Focus (Limited Ability to Meet Customer Requirements)



In a well-developed agricultural system, both large and small
producers fit within a marketing chain that brings goods to market
                                               Well-Development Marketing Chain
                                                       Sorting,                                   Export Logistics       Distribution in
       Production and
                                  Collection           Grading               Transportation        and Customs               Export
         Harvesting
                                                       Packing                                      Procedures              Markets

                                Collection
                                Collection                                                                             Wholesalers and
                                                                                                                       Wholesalers and
       Small Farmers
       Small Farmers                             Small Marketers
                                                 Small Marketers                  Transportation agents
                                                                                  Transportation agents
                                 Centers
                                 Centers                                                                                  retailers
                                                                                                                          retailers
                                                                           Land transport
                                                                           Land transport       Customs, Taxes
                                                                                                Customs, Taxes            Distribution
                                                                                                                          Distribution
                Vertically integrated producers // marketers
                Vertically integrated producers marketers                   companies
                                                                             companies          and Quarantine
                                                                                                and Quarantine              Agents
                                                                                                                            Agents

                 Farming cooperatives, farmers associations
                 Farming cooperatives, farmers associations



                             Large Marketers
                             Large Marketers                                                    Small Marketers
                                                                                                Small Marketers
         Large marketers are normally vertically integrated along
          Large marketers are normally vertically integrated along          Small marketers mainly focus on selling crops produced
                                                                             Small marketers mainly focus on selling crops produced
         the whole supply chain, and have their own production
          the whole supply chain, and have their own production             by the multitude of small producers operating in the
                                                                             by the multitude of small producers operating in the
         lands, packing houses and end-customer contracts
          lands, packing houses and end-customer contracts                  sector. Cooperatives can also play this role.
                                                                             sector. Cooperatives can also play this role.
         The rationale behind their business model is to:
          The rationale behind their business model is to:                  Small marketers depend on dealers and packing houses
                                                                             Small marketers depend on dealers and packing houses
              – Reduce supply risk and dependency on the large
               – Reduce supply risk and dependency on the large             to supply them with their needs of export volumes
                                                                             to supply them with their needs of export volumes
                number of small size farmers
                 number of small size farmers                               The level of profitability for small exporters is much lower
                                                                             The level of profitability for small exporters is much lower
              – Better control cost and quality of crops produced
               – Better control cost and quality of crops produced          than large ones since they pay for the mark-ups of all
                                                                             than large ones since they pay for the mark-ups of all
         Large marketers base their business on supplying major
          Large marketers base their business on supplying major            player upstream of the supply chain (farmers and
                                                                             player upstream of the supply chain (farmers and
         international retail chains
          international retail chains                                       packers)
                                                                             packers)



Source: Interviews
                                                                                                                                               57
                                                                    Lack of Demand Driven Focus (Limited Ability to Meet Customer Requirements)



The distribution system in Kosovo lacks specialized intermediaries
in the value chain and non-Kosovo customers perform key roles
                                                     Marketing Chain in Kosovo

                                                           Sorting,                               Export Logistics       Distribution in
        Production and
                                  Collection              Processing         Transportation        and Customs               Export
          Harvesting
                                                           Packing                                  Procedures              Markets


        Small Farmers
        Small Farmers              Perdrini Association
                                   Perdrini Association                      Pepper Processing Customers in Macedonia
                                                                             Pepper Processing Customers in Macedonia

                                                                                                                           Foreign
                                                                                                                            Foreign
        Small Farmers
        Small Farmers                                          Pestova (Processor)
                                                               Pestova (Processor)                                        Distributors
                                                                                                                          Distributors

           Collectors
           Collectors                  Hit Flores
                                       Hit Flores                                      Slovenian Processors
                                                                                       Slovenian Processors


        Small Farmers
        Small Farmers                          Etlinger
                                               Etlinger                                        Austrian Customer
                                                                                               Austrian Customer


                                                           Comments
                                                           Comments
           For the majority of export products, the exporter works directly with small producers and do not benefit
            For the majority of export products, the exporter works directly with small producers and do not benefit
           from vertically integrated production or from a cooperative or intermediary who can perform intermediary
            from vertically integrated production or from a cooperative or intermediary who can perform intermediary           Roles performed
           steps in the marketing chain.
            steps in the marketing chain.                                                                                      by foreign
                                                                                                                               customer
           In addition, most exporters rely on foreign customers for critical steps in the marketing chain including
            In addition, most exporters rely on foreign customers for critical steps in the marketing chain including
           final packaging, processing, transportation and sale to distributors and retailers. This both reduces the
            final packaging, processing, transportation and sale to distributors and retailers. This both reduces the
           margins of exporters and makes them dependant on customers with knowledge of the end market.
            margins of exporters and makes them dependant on customers with knowledge of the end market.



Source: Interviews
                                                                                                                                                 58
                                                           Lack of Demand Driven Focus (Limited Ability to Meet Customer Requirements)



Improvements in demand chains have floundered on lack of trust,
a “transactional mentality” and a lack of incentives
                                An Example of Compliance with Customer Requirements

      Sale of Peppers to Macedonian Processors
      Sale of Peppers to Macedonian Processors                                        General Issues
                                                                                      General Issues

                                                                    1 Lack of trust. Because farmers do not value
                                                                    1
        Customer Requirements: Macedonian
                                                                      the relationship with the customer, they are
        processors in Bitola have been purchasing
                                                                      prepared to game the system to increase
        peppers from Kosovo since 2008. There are
                                                                      volume in the short-term at the expense of the
        specific requirements for variety, size (over
                                                                      long-term relationship.
        30cm), shape (straight) and color (red).
                                                                    2 Lack of knowledge of customer
                                                                    2
        Intermediaries: Perdrini has participated as an               requirements. Unless an intermediary (such
        intermediary working with farmers to collect                  as Perdrini) educates farmers on requirements,
        produce that meets the customer specifics.                    there is limited knowledge and ability to meet
        Perdrini has also helped farmers grow the                     these requirements.
        correct varieties.                                           3 Lack of enforceable contracts. In most
                                                                     3
                                                                       cases, there is no contract between the
        Problems: Farmers intentionally try to “game”                  intermediary (or buyer) and the farmer such
        the system by packing peppers that do not                      that investments in inputs and training cannot
        comply with requirements on the bottoms of                     always be recouped. This limits the willingness
        boxes. Perdrini does not receive a fee for                     of intermediaries and buyers to invest in
        services to incent continued investment and                    helping smallholders understand and meet
        there is no contractual relationship between the               requirements.
        farmer and Perdrini or Perdrini and the
                                                                     4 Lack of incentives. In Kosovo, virtually all
                                                                     4
        processor. However, as the third year of the
                                                                       intermediaries are associations rather than
        relationship begins, farmer responsiveness to
                                                                       cooperatives. Associations are not able to buy
        customer requirements is improving.
                                                                       and sell products and, therefore, have no
                                                                       material incentive in expending volumes.
Source: Interviews
                                                                                                                                     59
                                                                              Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)



There are a limited number of packhouses and storage businesses
in Kosovo although more are in the planning stage
                    Selected Packhouses and Cold Storage Facilities in Operating and in Planning


                                                           Leshak                            Podjeve
                                                             Dren
      Istog                                                   Albanik
                                                                                          In operation.
  In operation.                                                Socanice                100m2 cooling for
100m2 cooling for                                                                       cabbage, carrots
     apples                                       Banjske                                                                               Comments
                                                                           Podjeve                                                      Comments
                                       Zubin Potok Zvecan Mitrovice
                                                                     Llapshtice Gllamik                                    Collection and packing operations
                                                                                                                            Collection and packing operations
                                                                             Batllave    Orllan
                                            Rakosh Runik                                                                   highlighted on the map are ones that are
                                                                                                                            highlighted on the map are ones that are
                              VrelleIstog
                                                                      Vushttri
                                         Kilodernice       Skenderaj                                                       integral to the production value chain,
                                                                                                                            integral to the production value chain,
                   Fshat I Ri           Gjurakc Liaushe                           Prapashtice
                   Vitomirice Dobrushe                    Polac Cirez
                                                                                  Prishtina Marec
                                                                                                                           i.e. facilitating the movement of
                                                                                                                            i.e. facilitating the movement of
                                                                 Kastriot
                     Peje                       Siceve Dobroshevc
                                                                              Fushe Kosove             Hogosht             agriculture goods from producers to the
                                                                                                                            agriculture goods from producers to the
                   Raushiq      Baran                    Drenas     Bardh I Madh
                   Strellc
                                             Kline
                                                                  Komoran
                                                                                           Artane                          markets
                                                                                                                            markets
                                      Jabllanice Drenoc                            Janjeve           Dardane
                    Decan                                  Liapushnik
    Mamushe                    Irznic                                          Lipjan     Bresalc                          Approximately 50 storage units exist
                                        Kralan             Krojmir Krajishte
                                                                                                     Miresh                Approximately 50 storage units exist
   In planning         Junik                       Malisheve                                                               around Pristina; however, the facilities
100m2 cooling for                      Ratkoc Rahovec                                         Gjilan                       around Pristina; however, the facilities
                                                                      Shtime Ferizaj
    tomatoes               Gjakove                      Therande                      Pozharan Zheger                      are used for wholesalers and traders to
                                                                                                                           are used for wholesalers and traders to
                                              Xerxe                 Pleshine
                                     Rogove       Krushe e MMushtisht            Greme        Gjylekare                    store goods that have already been
                                                                                                                           store goods that have already been
                                                                                 Gacke Viti
              Krusha
                                      Damjan Pirane          VerbeshticeBrod
                                                                                   Kacanik                                 purchased. They are not part of the
                                                                                                                           purchased. They are not part of the
                                                         Korishe
           In planning,                        Prizren
                                                     Hoce e Qytetit
                                                                    Sherpce                                                production value chain
                                                                                                                           production value chain
                                            Zhur                                Ham Elezit         Vushttri
        180m2 cooling for                          Mushnikove
              tomato,                                                                       In operation.
                                                  Brodosafc
             cucumber,                                                                    150m2 cooling for
                                                 Dragash                                      potatoes
          cabbage, pepper,                       Brod
               melon
                                                  Restelica




Source : BAH Analysis
                                                                                                                                                                      60
                                                                                    Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)



Despite this, packhouses can be profitable and should be attractive
for private investment
                Data from the Business Plan for a Proposed Packhouse Business in Peja Called “Vegco"
               Annual Purchases by Commodity
                                       Metric Ton
                                                                                                                                   Cash Flow Per Year
                                                                                                                                      Thousands of €            Cumulative
                                                                                                                                                                Cash Flow
  Melon - 410 MT
                                                                                                                                                       € 423       € 465
                                                                                                                                     € 350    € 385
                                                   Cucumber -                                                             € 330
                                                     980 MT



                  Peppers -                                                                                  Investment   Year 1     Year 2   Year 3   Year 4      Year 5
                  1880 MT
                                                         Cabbage -                                                                              3-Year Return of
                                                          1900 MT                                                                                  Investment


                                Tomato -
                                 980 MT                                                                                                Based on business plan
                                                                                                                                     assumptions, Vegco has an
                                                                                                              -€ 1,143                IRR of over 35% making it
                                                                              Total = 6150 MT
                                                                              Total = 6150 MT                                        potentially a very attractive
                                                                            Processed Annually
                                                                            Processed Annually                                               investment

Sources : KPEP, BAH Analysis
Notes : IRR = Internal Rate of Return, which is a calculation of the overall return of the investment.
                                                                                                                                                                            61
                                                         Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)



Improvements in this area will be necessary to satisfy customer
demands for quality and predictable, flexible and reliable delivery
                        Product and Service Requirements of Agriculture Commodities Importers



                             Retailers are increasingly requiring high quality products by imposing certain certification standards
                             Retailers are increasingly requiring high quality products by imposing certain certification standards
                             (e.g., GlobalGAP, BRC, HAACP, IFS standards)
                             (e.g., GlobalGAP, BRC, HAACP, IFS standards)
   High Quality
   High Quality              Kosovo is handicapped by the lack of standards compliance of producers and private labs and by
                              Kosovo is handicapped by the lack of standards compliance of producers and private labs and by
   Product
   Product                   lack of compliance of GoK institutions with EU standards.
                              lack of compliance of GoK institutions with EU standards.




                             Predictability: Whereas the demand is variable, irregular, and changes from one day to another,
                             Predictability: Whereas the demand is variable, irregular, and changes from one day to another,
                             retailers expect that their changing requirements would be predicted by their suppliers
                             retailers expect that their changing requirements would be predicted by their suppliers
   Predictable,
   Predictable,
                             Flexibility: The retailers prefer not to commit to purchase specific quantities. Retailers such as
                             Flexibility: The retailers prefer not to commit to purchase specific quantities. Retailers such as
   Flexible and
   Flexible and              Carrefour try to order the agriculture crops that they need few days in advance
                             Carrefour try to order the agriculture crops that they need few days in advance
   Reliable
   Reliable
   Service                   Reliability: On-shelf availability is one of the top priority fore retailers. Retailers are very sensitive
                             Reliability: On-shelf availability is one of the top priority fore retailers. Retailers are very sensitive
   Service                   about time. They want to track the status of their crop order, and to make sure that delivery would be
                             about time. They want to track the status of their crop order, and to make sure that delivery would be
   Delivery
   Delivery                  on-time
                             on-time




Source : BAH Analysis
                                                                                                                                             62
                                                                              Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)

                     As an example, food produce retailers in the UK are reducing their
                     inventory stock levels and as such require more flexible and
                     frequent deliveries from their suppliers
                                                                           Retail Logistics Trends
                                LE
                                                                                    (2006)
                                 LE
                              MP
                              MP
                           XA
                          EXA
                          E               Average Retailer Stock Level                                     Average Delivery Frequency from Distribution Center
                       UK
                       UK
                                                   (in Day)                                                              per Category per Week
                     30
                                                                                                              Non Foods                  3.6

                                                                                                           Slower Moving
                     25                                                                                                                        4.6
                                                                                                              Grocery
                                                                               CAGR
                                                                            (1996-2005)
Stock Level (Days)




                                                                                                                  Frozen                        5.1
                     20




                                                                                                Category
                                                                           BWS     -0.7%                    Beers, Wines
                                                                                                                                                5.1
                                                                                                             and Spirits

                     15                                                                                    Chilled / Fresh
                                                                           Non                                                                            7.5
                                                                           Foods   -6.3%                        Meats

                                                                           SMG     -1.8%                     Fast Moving
                                                                                                                                                                9
                     10                                                    FMG    -1.2%                        Grocery
                                                                           Frozen -3.4%
                                                                                                                 Produce                                            9.8

                       5
                       1996 1997 1998 1999 2000 2001 2002 2003 2004 2005                                                     0   2       4           6    8         10    12

                                                       Year                                                                          Delivery Frequency



                     Sources: IGD Research, Retail Logistics 2006
                                                                                                                                                                               63
                                                                                                   Lack of Demand Driven Focus (Limited Promotion Capabilities)



In 2009, Kosovo producers were represented at approximately
eight trade events, primarily as visitors
                                         Kosovo’s Trade Show Participation Around the World (2009)

                                           BioFach, Nuremberg, Germany,
                                           February, 6 visitors
                                           Fruit Logistica, Berlin, Germany,                    GroTech, Antalya,
                                           February, 1 exhibitor, 6 visitors                    Turkey, December, 4
                                                                                                visitors

                                                 Albania Agricultural      Germany Turkey              Novi Sad Agricultural
                                                 Trade Show, October,
                                                                                                       Fair, Serbia, May, ~
                             USA                 2 exhibitors, ~ 5        Albania      Serbia          30-40 visitors
                                                 visitors
                                                                          Macedonia Bulgaria
                                                         International Trade Fair of        FoodTech, Plovdiv,
                     New York Fancy                      Consumer Goods, Macedonia,         Bulgaria, May, 8
                     Food Show,                          October, 2 exhibitors,             visitors
                     June, 4 visitors                    Approximately 25-30 visitors




                                                                               Conclusion
    Kosovo producers participated in approximately eight trade shows around the world in 2009. Participants attended the fairs either as visitors to learn
    about the market, competition and commodities, and / or as producers to display their goods
    The major constraint in the attendance rate is that food processors need to be HACCP certified as a minimum to do business in countries abroad

Source : BAH Analysis; KPEP Interviews
                                                                                                                                                              64
                                                                        Lack of Demand Driven Focus (Limited Promotion Capabilities)

With few exceptions, Kosovo producers have not managed to
promote their products, which are perceived as commodities with
poor quality
                      Promotion Issues Impacting Kosovo Agriculture Production


                      Kosovo agriculture exporters are positioning their products on the lowest rung of the supply chain and are
                      Kosovo agriculture exporters are positioning their products on the lowest rung of the supply chain and are
                      used primarily to fill seasonal demand in neighboring markets when domestic products are unavailable.
                      used primarily to fill seasonal demand in neighboring markets when domestic products are unavailable.
                      With the exception of Pestova and a few other processors, no exporters have recognized brands and, in
                       With the exception of Pestova and a few other processors, no exporters have recognized brands and, in
                      fact, products are often relabeled or re-packaged before being shipped to the retailer.
                       fact, products are often relabeled or re-packaged before being shipped to the retailer.
        Weak
         Weak         Agriculture producers do not brand fresh or processed products as “Made in Kosovo” even in markets
                      Agriculture producers do not brand fresh or processed products as “Made in Kosovo” even in markets
       Branding
       Branding       (e.g.. US, UK, Albania, Germany) where such branding would be well-received.
                      (e.g.. US, UK, Albania, Germany) where such branding would be well-received.
                      Agriculture producers are not leveraging Fair Trade trends. They are not associating their products to the
                       Agriculture producers are not leveraging Fair Trade trends. They are not associating their products to the
                      natural heritage of specific regions, and not emphasizing the role of small farmers in producing the crop.
                       natural heritage of specific regions, and not emphasizing the role of small farmers in producing the crop.
                      In addition, few producers are taking advantage of organic, halal or other value-added branding.
                       In addition, few producers are taking advantage of organic, halal or other value-added branding.




                      There are a relatively large number of export promotion events organized annually to promote exports of
                       There are a relatively large number of export promotion events organized annually to promote exports of
                      field and horticultural crops, mainly handled by donor agencies. However, these events are not executed
                       field and horticultural crops, mainly handled by donor agencies. However, these events are not executed
       Limited
        Limited       as part of a clear multi-year campaign to develop specific markets for specific Kosovo products and
                       as part of a clear multi-year campaign to develop specific markets for specific Kosovo products and
      Promotion       overall measurement of results from trade programs is weak.
                       overall measurement of results from trade programs is weak.
      Promotion
      Campaigns
      Campaigns       There is very little focus on other types of marketing programs that can be both low-cost and highly
                      There is very little focus on other types of marketing programs that can be both low-cost and highly
                      effective such as “earned media”, advertising and direct marketing to retailers and buyers in target
                      effective such as “earned media”, advertising and direct marketing to retailers and buyers in target
                      markets.
                      markets.




Sources: Interviews
                                                                                                                                    65
                                                                                                                                                  Infrastructure Capacity Issues



Overall 17.4% of agricultural land is irrigated with significant
differences by municipality
                                                          Percent of Irrigated Land by Region
                                                                          (% of Arable Land - 2007)



                                                                              Leposaviqi



                                                                             Zvecani       Mitrovica
                                                                 Zubin Potoku
                                                                                                        Podujeva                                    Comments
                                                                                                                                                    Comments
                                                                                       Vushtrria
                                                            Istogu        Skenderaj                                                           Municipalities like Shtërpca
                                                                                                                                               Municipalities like Shtërpca
                                                Peja
                                                                                            F. Kosova        Prishtina                        and Zveçani show a high
                                                                                                                                               and Zveçani show a high
                                                                                                                                   Kamenica   percentage of irrigation
                                                                                                                                               percentage of irrigation
                                                                  Klina          Drenas       Obiliqi
                                                                                                                    Novoberda                 because of the relatively
                                                                                                                                               because of the relatively
                                              Decani                                                                                          small amount of arable land
                                                                                                                                               small amount of arable land
                                                                          Malisheva                Lipjani
                                                                                                                         Gjilani
                                                                                                                                              (1168 and 801 ha
                                                                                                                                               (1168 and 801 ha
                                                       Gjakova
                                                                                            Shtimja                                           respectively) and the use of
                                                                                                                                               respectively) and the use of
                                                                 Rahoveci
                                                                                                       Ferizaji                               informal pump-based
                                                                                                                                               informal pump-based
                                                                                Suhareka                              Vitia                   systems.
                                                                                                                                               systems.
                                                                                                                                              Gjilani, Ferizai and Vitia are
                                                                                                                                               Gjilani, Ferizai and Vitia are
                                                                     Prizreni              Shterpca
                                                                                                           Kacaniku                           also served primarily by
                                                                                                                                               also served primarily by
                                                                                                                                              informal systems
                                                                                                                                               informal systems
                                                                       Dragashi




Source : Statistics Office of Kosovo (2007)
                                                                                                                                                                                66
                                                                                                                                    Infrastructure Capacity Issues



Three formal irrigation systems cover most of Dukagjini and
northern Kosovo-Plains but leave the southeast uncovered
                                                      Areas Covered by Formal Irrigation Systems
                                                                                          (2009)


                                                                                                                           Comments
                                                                                                                           Comments
                                                                Ibër-Lepenc                             Ibër-Lepenc is a sprinkler system supplied by the
                                                                                                         Ibër-Lepenc is a sprinkler system supplied by the
 Drini i Bardhë                                                                                         Gazivode reservoir (Iber River) via the 54 km
                                                                                                         Gazivode reservoir (Iber River) via the 54 km
                                                                                                        Pridvorica-Obiliq canal. Although it had an original
                                                                                                         Pridvorica-Obiliq canal. Although it had an original
                                                                                                        designed capacity of 30,000ha, less than 1200ha are
                                                                                                         designed capacity of 30,000ha, less than 1200ha are
                                                                                                        currently irrigated. At the time of its design, a phase
                                                                                                         currently irrigated. At the time of its design, a phase
                                                                                                        two covering 43,000 ha in southern Kosovo Plains and
                                                                                                         two covering 43,000 ha in southern Kosovo Plains and
                                                                                                        the Vitina Plain was planned but not completed.
                                                                                                         the Vitina Plain was planned but not completed.
                                                                                                        Radoniqi-Dukadjini consists of two systems. The
                                                                                                         Radoniqi-Dukadjini consists of two systems. The
                                                                                                        Radoniqi system (Gjakova) is a sprinkler system built
                                                                                                         Radoniqi system (Gjakova) is a sprinkler system built
                                                                                                        in 1986 with a designed capacity of 10,250 ha and a
                                                                                                         in 1986 with a designed capacity of 10,250 ha and a
                                                                                                        current irrigated area of 5000 ha. The Dukadjini
                                                                                                         current irrigated area of 5000 ha. The Dukadjini
                                                                                                        system (Prizren) is an open channel system built in
                                                                                                         system (Prizren) is an open channel system built in
                                                                                                        1963. Although 3500ha was originally covered by
                                                                                                         1963. Although 3500ha was originally covered by
                                                                                                        sprinklers, almost 75% has been lost to creeping
                                                                                                         sprinklers, almost 75% has been lost to creeping
                                                                                                        urbanization.
                                                                                                         urbanization.
                                                                                                        Drini ii Bardhë was formed from the 2003
                                                                                                         Drini Bardhë was formed from the 2003
    Radoniqi-                                                                                           consolidation of the three irrigation companies of Peja,
                                                                                                         consolidation of the three irrigation companies of Peja,
    Dukadjini                                                                            Area           Deçani and Istog municipalities. It is an open channel
                                                                                                         Deçani and Istog municipalities. It is an open channel
                                                                                                        system built in the 1950s. It is considered inefficient
                                                                                                         system built in the 1950s. It is considered inefficient
                                                                                    Uncovered by
                                                                                                        and poorly maintained and suffers shortages in July
                                                                                                         and poorly maintained and suffers shortages in July
                                                                                        Formal          and August.
                                                                                                         and August.
                                                                                      Irrigation
                                                                                       System

Source : MESP Irrigation Strategy (2009), Kosovo Trust Agency website, World Bank (2009), Interviews.
                                                                                                                                                                    67
                                                                                                                                                                   Infrastructure Capacity Issues



All of the formal systems are operating below installed capacity
due to deferred maintenance and lack of demand
                                                                Capacity of Formal Irrigation Systems
                                                                              (2009 with some 2004 data)


                 37,190                                                                                                                                    Design Capacity
                                                                                                                                                           Equipped Area

                                                                   30,000                                                                                  Present Irrigable Area
                                                                                                                                                           Area Actually Irrigated

                            23,500


                                                                              18,000
                                                                                         14,500                      15,250
                                                                                                                                13,600


                                        7,500                                                                                              7,500
                                                   4,000
                                                                                                     1,200                                            2,100


                           Drini i Bardhë                                      Ibër-Lepenc                                Radoniqi-Dukadjini




Sources: MESP Irrigation Strategy (2009), World Bank, Interviews
Notes : Ibër-Lepenc Irrigable area requires rehabilitation of the pump network. Area actually irrigated is 2004 for Drini i Bardhë and Radoniqi-Dukadjini and 2009 for
            Ibër-Lepenc.
                                                                                                                                                                                                68
                                                                                                                                                       Infrastructure Capacity Issues



In 2006, none of the systems were operating on a financially
sustainable basis
                                                    Financial Results for Public Irrigation Systems
                                                                             Thousands of € – 2006


                   Ibër-Lepenc
                    Ibër-Lepenc                                                 Radoniqi-Dukadjini
                                                                                Radoniqi-Dukadjini                                                  Drini ii Bardhë
                                                                                                                                                    Drini Bardhë

            Loss = €5,073                                                  Loss = €1,895                                                     Loss = €496
                                                                     KTA (€44)                                                                                  Donors (€269)
  In-kind                                                                                                                          Reduction
                                                                   KCB (€80)
   Grant                                                           Previous                                                        in Equity
                                          €353 (Other)                                                      €212 (Other)                                                  €30 (Other)
   (€63)                                                         Grants (€133)                                                      (€189)
                                                                                                  €193
                               €1,650 Staff Cost                        Reduction                                                     KCB(€40)
                                                                                                            Reserves
                                                                        in Equity                            for Bad                                            €442 Depreciation
Reduction
                                                                         (€1,638)                             Debt
in Equity
 (€5010)

                              €6,090 Depreciation                                                 €1,045 Staff Cost
                                                                                                                                                                €118 Staff Cost

         Sales    €3,020
                                                                                      €101        €583 Depreciation
                                                                       Other Inc                                                     Other Inc        €29
                                                                    Irrigation Inc    €455         €418 Supplies                   Irrigation Inc     €65

                 Operating    Operating                                              Operating Operating                                            Op Income Operating
                  Income      Expense                                                 Income Expense                                                          Expense




Sources: Audited Financial Statements from KTA website.
Notes : P&Ls show grants as a source of income. For purposes of this analysis, grants have been removed from Income. 2006 is the
          last year for which financial statements are available.
                                                                                                                                                                                        69
                                                                                                        Infrastructure Capacity Issues



Fees are charged on a flat per hectare basis and the price is
significantly less than the true cost of irrigation
                               End-user Irrigation Tariff (Price) and Shadow Price (Cost)
                                                  € per Ha per Year (2009)



                                          The Ibër Lepenc system
                                         loses approximately €280
                                             for every hectare
                                                  irrigated
                                 € 120                                                        Comments
                                                                                              Comments
         Iber Lepenc                                                         Ibër-Lepenc charges a flat fee of €120 per hectare
                                                                              Ibër-Lepenc charges a flat fee of €120 per hectare
                                                            € 400            per year and loses approximately €280 per
                                                                              per year and loses approximately €280 per
                                                                             irrigated hectare. It compensates for these losses
                                                                              irrigated hectare. It compensates for these losses
                                                                             in part through sale of technical water to the
                                                                              in part through sale of technical water to the
                                                                             Kosovo e Res power station, sale of electricity
                                                                              Kosovo e Res power station, sale of electricity
                                                                             from the Zuben Potok hydro station and provision
                                                                              from the Zuben Potok hydro station and provision
                                                                             of municipal drinking water.
                                                                              of municipal drinking water.
                               € 100
                                                                             The other systems charge €100 per hectare per
                                                                              The other systems charge €100 per hectare per
    Other Systems                                                            year. Although costs are less, because the
                                                                              year. Although costs are less, because the
                                                                             systems require less pumping than for Ibër
                                                                              systems require less pumping than for Ibër
                                                                             Lepenc, the shadow price is likely significantly
                                                                              Lepenc, the shadow price is likely significantly
                       Shadow Price Not Known                                higher than the cost.
                                                                              higher than the cost.




Sources: Interviews
                                                                                                                                     70
                                                                                                                                     Infrastructure Capacity Issues



Continued investment in the formal systems should be carefully
examined for engineering and economic feasibility
                                     Summary of Estimated Investments in Formal Irrigation Systems

                                Estimated
     Irrigation
                               Investment                                                                   Description of Issues
      Provider
                               (2007-2013)
                                                           Ibër-Lepenc is suffering from low market demand and is currently irrigating only 3% of its installed
                                                           capacity. Reconstruction of pump stations is being considered. However, improvements must be
Ibër-Lepenc I                       €6.4M                  made in the context of bringing the system back up to a break-even level of demand and considering
                                                           non-irrigation demands on the reservoir.
                                                           The Lepenc system (Ibër Lepenc II) was originally designed in the 1960s to irrigate land in Southern
                              €298.5-677.6M                Kosovo-Plains and in Macedonia. It was intended to transfer water from the Lepenc catchment and
Ibër-Lepenc II                (Pending New                 from two smaller catchments on the Drenica and Gracanka rivers. Although a system in southeast
                                 Study)                    Kosovo is required, plans for the Lepenc system must be thoroughly updated to account for political,
                                                           economic and technical changes over the past 40 years.
                                                           Dukadjini has lost almost 75% of the area in its original planned capacity due to unregulated
                                                           urbanization in Prizren municipality. Of the remaining area, 1500 hectares consists of open
Dukadjini                             NA                   channels which are now in poor condition and used in part for urban waste. Continued investment in
                                                           the system needs to be based on a new plan reflecting current conditions.

                                                           Planned investment for the Radoniqi system including rehabilitation of two pumping stations to
Radoniqi                            €9.6M                  increase the irrigable area by 3,600 hectares. Of all the systems, Radoniqi is considered the best
                                                           candidate for expansion based on demand and the current maintenance state of the system.
                                                           Drini I Bardhë is an open channel system that has been poorly maintained and suffers from low
                                                           water efficiency. True water use is hard to gauge because of the large number of private channels
Drini i Bardhë                      €9.6M
                                                           drawing water directly from the rivers. Careful analysis is needed before additional investment can
                                                           be made with the most likely candidate for investment on the Peja system.

Sources: MESP Irrigation Strategy (2009), World Bank
Notes : Estimated investment (2007-2013) is drawn directly from the Irrigation Strategy. Investment estimates for Iber-Lepenc
                                                                                                                                                                  71
                                                                                        Infrastructure Capacity Issues



Overall the are a number of inter-related problems that must be
addressed to put the formal irrigation system on a stable basis
    Problems Identified in Formal Irrigation           Principles of a Strategy to Improve Formal
                                                                        Irrigation
                Water Permit Issues Processes
                Water Permit Issues Processes
                                                         Cost Effectiveness. The cost effectiveness of any
                    Low Water Use Efficiency
                                                         investments in irrigation must be assessed. Cost-
                    Low Water Use Efficiency
                                                         effectiveness depends greatly on the value and types
              Low Collection Rate for Water Use          of crops that are and will be cultivated in the irrigated
              Low Collection Rate for Water Use
                          Payments
                          Payments                       area. For this reason, investment in the IPs must be
                                                         considered together with development of the sector as
               Significant Deferred Maintenance
               Significant Deferred Maintenance          a whole.
                                                         Demand. All of the systems, and especially Ibër-
             Lack of Inter-basin Transfer System         Lepenc, irrigate such a small portion of the irrigable
             Lack of Inter-basin Transfer System
                                                         area that almost no cost structure could achieve
                                                         financial sustainability. The key to survival and
                    Unregulated Urbanization
                    Unregulated Urbanization             development of these systems is to improve marketing
                                                         and pricing and re-build demand to break-even levels.
                 Insufficiently Qualified IP Staff
                  Insufficiently Qualified IP Staff      Integrated View of Water Needs. Most of the IPs
                                                         serve other water needs besides irrigation – technical
               Inability to Attract Staff on Public
                Inability to Attract Staff on Public     water for industry, potable water, power generation,
                         Service Salaries
                          Service Salaries               etc. The evolution of the irrigation system must
                                                         happen within the context of an integrated water
                  Low Level of Market Demand
                  Low Level of Market Demand             management strategy for Kosovo that considers all
                                                         uses of the resource.
                 Lack of Volume-based Pricing
                 Lack of Volume-based Pricing



Sources: MESP Irrigation Strategy (2009), World Bank
                                                                                                                     72
                                                                                            Infrastructure Capacity Issues



Starting from a low base, total area under greenhouse almost
doubled from 2004-2008
                    Growth in Greenhouse Area
                                  Ha - 2004-2008



                                                        154

                                          +28%
                                                 133

                                                                         Comments
                                                                         Comments

                                                               Greenhouses are used primarily
                                                                Greenhouses are used primarily
                                   93
                                                               production of tomatoes and a small
                                                                production of tomatoes and a small
                                                               amount of cucumbers. Some
                                                                amount of cucumbers. Some
               73                                              lettuce is produced as a second
                                                                lettuce is produced as a second
                                                               crop in winter. Most other major
                                                                crop in winter. Most other major
                                                               crops including peppers, white
                                                                crops including peppers, white
                                                               beans, aubergine and melons and
                                                                beans, aubergine and melons and
                                                               produced in open field.
                                                                produced in open field.




            2005                2006             2007   2008


Sources: Intercooperation Report (2008)
                                                                                                                         73
                                                                                                  Infrastructure Capacity Issues



However, the area will need to double again even to meet import
substitution goals and by much more to support export crops
New Greenhouse Area Required for Import Substitution
                                          Ha - 2008


                                           130               284
      Tomatoes                                                                           Comments
                                                                                         Comments
      Peppers                               60
      Cucumbers                                                           Analysis concludes that 130 hectares of
                                                                          Analysis concludes that 130 hectares of
                                                                          greenhouse are needed to substitute imports
                                                                          greenhouse are needed to substitute imports
                                                                          of only three crops -- tomatoes, peppers and
                                                                          of only three crops tomatoes, peppers and
                                            50                            cucumbers -- during the late Spring and
                                                                          cucumbers during the late Spring and
                                                                          Summer which is the peak time for imports.
                                                                          Summer which is the peak time for imports.
             154                            20                            By improving the quality of greenhouses,
                                                                           By improving the quality of greenhouses,
                                                                          tomato harvests could be moved from the last
                                                                           tomato harvests could be moved from the last
                                                                          decade of June to the beginning of June and
                                                                           decade of June to the beginning of June and
                                                                          imports could be substituted from June to
                                                                           imports could be substituted from June to
                                                                          November. Pepper harvests could be moved
                                                                           November. Pepper harvests could be moved
                                                                          from late July (open field) to the second half
                                                                           from late July (open field) to the second half
                                                                          of May, etc.
                                                                           of May, etc.
                                                                          Greenhouses could also significantly improve
                                                                           Greenhouses could also significantly improve
                                                                          the price and volume of export crops destined
                                                                           the price and volume of export crops destined
                                                                          for Europe and the region.
                                                                           for Europe and the region.


        2008 Area                 Additional Area     Total Area Needed
                                 Needed For Import        For Import
                                    Substitution         Substitution

Sources: Intercooperation Report (2008)
                                                                                                                               74
                                                                                                                    Infrastructure Capacity Issues



 Almost all greenhouse area is in Dukagjini and 87% is of the simple
 tunnel variety, which is cheap to build but has relatively low yields
                                                      Location and Types of Greenhouses
                                                                     Ha - 2008

                                                                                                             Block Type
                                                           154                          Medium Technology
                                                            3  Block Type                                         2%
                                                            16 Medium Technology
                                                                                                          11%




  93
  4 2


                                                           134 Simple Tunnels
                                                                                                                       87%
  87
                                                   29
                                                   2 1
             11         11                                                                                                    Simple Tunnel
                    1                6      4       26
             10           7                    1
                        4           4 1    2 1                                                           Conclusion
                                                                           Tunnel greenhouses are much cheaper to build at €2-4 per square meter
MamushaSuhareka Rahovec Prizren Gjakova            Other   Total
                                                                           as opposed to €15-20 for more advanced technology.
                                                                           However, tunnels cannot vent heat in Summer allowing only one
                                                                           planting; they have lower yields and do not allow vine plants like
                                                                           tomatoes to grow to heights required for retail quality.
 Sources: Intercooperation Report (2008)
                                                                                                                                                   75
                                                                                                                           Infrastructure Capacity Issues



Greenhouse cultivation improves yields and incomes, but the
payback is long
                                            Return on Investment for Greenhouse Grown Crops
                                                             € per 1000 square meters planted

                                                                            6-Year Return of                                             Cumulative
                                                                               Investment                                                Cash Flow

                                                 €709     €709     €709     €705      €709     €705     €705      €709        €709    €705
                                   Investment
                                                 Year 1   Year 2   Year 3   Year 4   Year 5    Year 6   Year 7   Year 8       Year 9 Year 10
 Tomato Produced in
 Tunnel Greenhouse
 (Single Planting)                                                                                         9-Year Return of
                                     (€4,000)
                                                                                                              Investment
                                                                                                                                          Cumulative
                                                 €1817    €1819    €1817    €1011    €1817     €1811    €1017    €1817         €1817 €1811 Cash Flow
                                   Investment

                                                 Year 1   Year 2   Year 3   Year 4   Year 5    Year 6   Year 7   Year 8       Year 9 Year 10
 Tomato + Cucumber
 Produced in Block
 Greenhouse (Two
 Plantings)
                                   (€ 15,000)                                                               9-Year Return of
                                                                                                               Investment                 Cumulative
                                                 €1795    €1795    €1795    €989     €1795     €1795    €1789     €995         €1795 €1789 Cash Flow
                                    Investment

                                                 Year 1   Year 2   Year 3   Year 4   Year 5    Year 6   Year 7   Year 8       Year 9 Year 10
 Peppers + Lettuce
 Produced in Block
 Greenhouse (Two
 Plantings)
                                   (€ 15,000)
Sources: Intercooperation Report (2008)
                                                                                                                                                        76
                                                                                                                                  Infrastructure Capacity Issues



Greenhousing enables farmers to take advantage of seasonality to
achieve higher prices
                                                    Monthly Price of the Example Ag Commodities
                                                                           EU Import Prices
                                                                 (2008-2009) (in €; Series Beginning = 1)



                   1.6
                                                 Kosovo Open                                                Kosovo Open     Tomato
                   1.4                           Field Harvest                                              Field Harvest
                   1.2

                      1

                   0.8
                                                                                                                                        Cucumber
                   0.6

                   0.4                                                                                                                   Peppers
                                                                                                                  Kosovo Open
                                                            Kosovo Open
                   0.2                                                                                            Field Harvest
                                                            Field Harvest
                      0
                  D 08
                    Ju 8




                    Ju 9
                  Ap 8




                  A u 08




                  Ap 9




                  A u 09
                  N 8




                            9
                  S e 08




                  S e 09
                           08




                  F e 09
                   Ju 8




                   Ju 9
                  M 8




                  M 9
                  M 08




                  M 09
                   O 8




                  Ja 8




                   O 9
                           0




                           0
                         -0




                         -0
                         -0




                         -0
                         -0




                         -0
                          0




                          0
                          0




                        -0




                          0
                      n-




                      n-
                         -
                      n-




                      n-
                        l-




                        l-
                      b-




                      g-




                      b-




                      g-
                       r-




                       r-
                      p-




                      p-
                     ov
                     ar




                     ar
                     ct
                    ay




                     ct
                    ay
                    ec
                Ja
                      Fe




Sources: ITC Comtrade, Terminal Market Data; Intercooperation for Some Harvest Dates; Interviews
                                                                                                                                                               77
                                                                                                                                         Infrastructure Capacity Issues

           However, there are a number of technical and economic
           constraints that must be overcome to significantly expand
           greenhousing, with access to finance the most critical issue
                                                               Constraints to Expansion of Greenhousing
           1
           1
                   Quality of
                   Quality of                        The tunnel style greenhouses currently in use do not vent Summer heat well leading to early senescence
                                                     The tunnel style greenhouses currently in use do not vent Summer heat well leading to early senescence
                  Greenhouse
                  Greenhouse                         of crops and reduced yields. There are currently a few small companies in Kosovo building better quality
                                                     of crops and reduced yields. There are currently a few small companies in Kosovo building better quality
                  Construction
                  Construction                       greenhouses that enable better micro-climate control.
                                                     greenhouses that enable better micro-climate control.

           2
           2                                         The value of climate controlled production is the ability to take advantage of seasonality and to improve
                                                      The value of climate controlled production is the ability to take advantage of seasonality and to improve
                 Post-harvest
                 Post-harvest                        the quality of the produce. In order to take advantage of this, the marketing chain must be improved
                                                      the quality of the produce. In order to take advantage of this, the marketing chain must be improved
                Processing and
                Processing and                       including better market intelligence, investment in packing and sorting houses, and cold storage and
                                                      including better market intelligence, investment in packing and sorting houses, and cold storage and
                   Marketing
                   Marketing                         transport.
                                                      transport.
           3
           3
                                                     Only tomatoes and a small amount of cucumbers are currently grown in greenhouses in Kosovo. Crops
                                                     Only tomatoes and a small amount of cucumbers are currently grown in greenhouses in Kosovo. Crops
                 Improved Crop
                  Improved Crop
                                                     such as peppers, aubergine, melon and white beans are good candidates for diversification. Farmers’
                                                     such as peppers, aubergine, melon and white beans are good candidates for diversification. Farmers’
                    Diversity
                    Diversity
                                                     decisions on choice of crop and variety are not based on qualified advice or appropriate farm trials.
                                                     decisions on choice of crop and variety are not based on qualified advice or appropriate farm trials.
           4
           4
                  Planting and                       Most farmers plant only once per year or use lettuce as a second crop during the winter, primarily
                                                     Most farmers plant only once per year or use lettuce as a second crop during the winter, primarily
                  Planting and
                   Harvesting                        because poor aeration does not allow a second crop during the Summer. Improved greenhouse
                                                     because poor aeration does not allow a second crop during the Summer. Improved greenhouse
                   Harvesting
                   Schedule                          aeration, improved knowledge of planting and harvesting schedules, and better availability of seedlings
                                                     aeration, improved knowledge of planting and harvesting schedules, and better availability of seedlings
                    Schedule
                                                     will improve the growing season and return on investment from greenhouses.
                                                     will improve the growing season and return on investment from greenhouses.
           5
           5
               Crop Management                       Although drip irrigation and mulching are in use, farmers require technical assistance on growing
                                                     Although drip irrigation and mulching are in use, farmers require technical assistance on growing
               Crop Management
                  Techniques                         practices (plant density, plant spacing, fruit setting, use of fertilizer, etc.). In addition, farmers tend to
                                                     practices (plant density, plant spacing, fruit setting, use of fertilizer, etc.). In addition, farmers tend to
                  Techniques
                                                     over-use chemical fertilizers, which reduces yields and can impact the quality and safety of the crop.
                                                     over-use chemical fertilizers, which reduces yields and can impact the quality and safety of the crop.
           6
           6
                                                     Even with proper crop management and planting schedules, the payback period for greenhouses can be
                                                      Even with proper crop management and planting schedules, the payback period for greenhouses can be
Critical
 Most




               Access To Finance
               Access To Finance                     relatively long. Programs are necessary to ensure that smallholder farmers have the necessary access
                                                      relatively long. Programs are necessary to ensure that smallholder farmers have the necessary access
                                                     to finance to invest in this area.
                                                      to finance to invest in this area.

           Sources: Intercooperation Report (2008), BAH Analysis
                                                                                                                                                                      78
                                                                                                                                    Transportation Disadvantages



85% of Kosovo’s agricultural exports travel over land to their final
destination through four primary land border crossings
                                      Primary Exit Points for Kosovo’s Agricultural Exports (2008)


 Kulla (To Montenegro, West
 Kulla (To Montenegro, West                                                                                                   0.07%                0.01% Air
  Europe and Port of Bar)
   Europe and Port of Bar)
 Ag Exports = €2.7M // 9.7MT
 Ag Exports = €2.7M 9.7MT                                                             Merdare (To Serbia, E-80 and
                                                                                      Merdare (To Serbia, E-80 and
                                                                                           Northern Europe)
                                                                                           Northern Europe)             14.7%               17.6%        Land-Sea
                                                                                      Ag Exports = €4.9M // 10.8MT
                                                                                      Ag Exports = €4.9M 10.8MT
                                                           Mitrovice




                                                                          Prishtina
                            Peje



                                                                                                 Pristina Airport
                                                                                                 Pristina Airport                                        Land
                                                                                              Ag Exports = €13k/8kT     85.2%               82.4%
                                                                                              Ag Exports = €13k/8kT


                                               Prizren




                                                                      Hani ii Elezit (To Macedonia,
                                                                      Hani Elezit (To Macedonia,
Vermica (To Albania, West/South
Vermica (To Albania, West/South                                      Southern Europe and Port of
                                                                      Southern Europe and Port of
  Europe and Port of Durres)
   Europe and Port of Durres)                                      Thessaloniki; E-75 through Serbia)                 Valuey 1(€)
                                                                                                                         Categor            Categor
                                                                                                                                         Weighty 2 (T)
                                                                   Thessaloniki; E-75 through Serbia)
  Ag Exports = €5.1M // 23.6MT
  Ag Exports = €5.1M 23.6MT                                           Ag Exports = €4.3M // 14.2MT
                                                                      Ag Exports = €4.3M 14.2MT



Sources: Kosovo Customs, Interviews with Transport Companies
Note: The five border crossings pictured represented 94.25% of agricultural exports in 2008
                                                                                                                                                                    79
                                                                                                                 Transportation Disadvantages



  The unavailability of transiting Serbia makes road transportation 9-
  17% more costly and disadvantages Kosovo within the region
               Comparison of Transport Costs for Shipping a 23 Ton Load by Road to Hamburg, Germany
                                             (in € per Truckload) (2009)

   Distance
                                                                                                        This route is the most
                                                                                                         This route is the most
    in KM
                                                                                                         direct but is currently
                                                                                                         direct but is currently
                                                                                                        unavailable because it
                                                                                                        unavailable because it
     1552                      Belgrade                                     1,397
                                                                                                           requires transit of
                                                                                                           requires transit of
                                                                                                                 Serbia.
                                                                                                                 Serbia.
     1896          Pristina (Merdare)                                                 1,706


     1956                    Podgorica                                                  1,760


     1980                        Skopje                                                 1,782
                                                                                                                  These routes are
                                                                                                                   These routes are
                                                                                                              currently most used and
                                                                                                              currently most used and
     2065               Pristina (Hani)                                                    1,859               are 9% and 17% more
                                                                                                                are 9% and 17% more
                                                                                                              costly than the Merdare
                                                                                                               costly than the Merdare
     2135                         Tirana                                                      1,922                     route.
                                                                                                                        route.


     2217               Pristina (Kulla)                                                        1,995



Because imports greatly exceed exports, deadhead rates for exports from Pristina are discounted by 12% when a round-trip is provided.

   Sources: Interviews with Transport Companies
                                                                                                                                            80
                                                                                                                                                              Transportation Disadvantages




High value perishables and processed goods can overcome the cost
of shipping while commodities cannot
                                     Commodity Values and Transport Costs as a Percentage of Value
                                                                 (€ per 23 Ton Truckload to Hamburg - 2009)

     7%                          Transport Cost as % of
                                       Goods Value


                        9%
                                         10%
                                                           11%

                                                                                                               Transport Costs Exceed 20% of Value of Goods
  26,251                                                                      15%
                                                                                                18%
                    20,000             18,783                                                                      20%                21%
                                                          16,000
                                                                                                                                                      28%           30%
                                                                            11,092
                                                                                                8,907             7,969              7,590                                       53%
                                                                                                                                                      5,146         4,600
                                                                                                                                                                                 1,778
Berries (fresh) Dried Herbs            Fresh              Pickled            Potato              Apple            Tomato             Carrots          Cabbage     White Bean    Courgette
                (Hit Flores)        Peppers (1st          Peppers
                                       Sort)             (Etlinger)1




 Sources: Kosovo Customs, Interviews with Transport Companies
 Note: 1) Etlinger price assumes highest value products in retail packaging. Product in wholesale packaging (2kg) is valued at €8000 per truckload.
                                                                                                                                                                                            81
                                                                                                 Transportation Disadvantages



Land-sea routes use three ports – Thessaloniki in Greece, Bar in
Montenegro and Durres in Albania

                                             Primary Handling Ports for Goods from Kosovo


                                        SLOVENIA
                                                   CROATIA

                                                                                                  Bar, Montenegro
                                                                                                  Bar, Montenegro
                                                        BOSNIA         SERBIA
                                                                                            5M tons/year per year cargo
                                                                                             5M tons/year per year cargo
                                                                                            worked
                                                                                             worked
                                     ITALY                                 KOSOVO           120k m2 covered storage
                                                                                             120k m2 covered storage
                                                       MONTENEGRO                           Bar is not used as frequently in
                                                                                             Bar is not used as frequently in
                                                                                            recent years by Kosovo
                                                                                             recent years by Kosovo
                                                                 ALBANIA   MACEDONIA
                                                                                            companies
                                                                                             companies


                                                                                               Thessaloniki, Greece
                                                                                               Thessaloniki, Greece
                Durres, Albania
                Durres, Albania                                              GREECE         15.95M tons/year (366k TEUs)
                                                                                             15.95M tons/year (366k TEUs)
       2.28M tons/year cargo worked
       2.28M tons/year cargo worked                                                         85k m2 covered storage
                                                                                             85k m2 covered storage
       23.5k m2 covered storage
       23.5k m2 covered storage                                                             Used by Kosovo companies for
                                                                                             Used by Kosovo companies for
       Primarily used by Kosovo
       Primarily used by Kosovo                                                             trial exports to the UAE and
                                                                                             trial exports to the UAE and
       companies for imports of grain
       companies for imports of grain                                                       Saudi Arabia (Abi Foods)
                                                                                             Saudi Arabia (Abi Foods)
       and perishables from Italy (Port
       and perishables from Italy (Port
       of Bari)
       of Bari)




Source: Lloyd’s (2007); Interviews
                                                                                                                                82
                                                                                                                                  Transportation Disadvantages



After completion of the Tirana Highway, the land route will remain
the most economical compared to other routes
                   Comparison of Transport Costs for Shipping a 23 Ton Truckload to Rotterdam (2009)

                                  Most Economical Route
                                                                                                                                €2300 / ~35 hours
                                   Pristina         (through Kulla)    Podgorica(through BiH/Croatia Highway)
                                                                                                            Rotterdam
       Current
       Current
      Situation
      Situation                   Most Economical Land-Sea Route
                                                                                                                                €2900 / ~55 hours
                                   Pristina               Durres                 Ancona              Rotterdam
                                          €850 / ~ 12 hours      €785 / ~ 12 hours    €1265 / ~ 26 hours
                                       (through Skopje-Ohrid)     (Ro-Ro on ferry)      (Ro-Ro on ferry)


       Upon
        Upon                      Most Economical Land-Sea Route
  Completion of
  Completion of
  Pristina-Tirana                                                                                                               €2600 / ~45 hours
  Pristina-Tirana                  Pristina               Durres                 Ancona              Rotterdam
     Highway
     Highway                               €550 / ~ 5 hours      €785 / ~ 12 hours    €1265 / ~ 26 hours
                                          (through Vermica)       (Ro-Ro on ferry)      (Ro-Ro on ferry)


    IF Transit of
     IF Transit of
        Serbia                    Most Economical Route
        Serbia
      Becomes
       Becomes                                                                                                                  €1900 / ~25 hours
                                   Pristina                                E-80
     Normalized
      Normalized                                  (through Merdare)               (Croatia, Slovenia, Austria) Rotterdam

                                                                            Conclusion
   Upon completion of the Tirana Road, some traffic will shift to the Port of Durres or to land routes through Albania to compensate for bad weather
   conditions, to take advantage of warehousing capacity there, or for goods originating in the Prizren area
   However, the land route through Kulla will remain the most economical overall. If relations are normalized with Serbia, the Merdare route will have
   significant advantages over all other routes to destinations throughout Europe.
Sources: Interviews with Transport Companies and Ports; BAH Analysis
                                                                                                                                                             83
                                                                                                                 Transportation Disadvantages



There is currently no dedicated air cargo services to Pristina
airport with all cargo travelling on scheduled passenger rates
                                              Air Cargo Operators at Pristina Airport
                                      (in € per kg of effective weight assuming 100kg shipment - 2009)

                                                                                         Approximate Price per Kg to
                                                                                         Approximate Price per Kg to
                      Air Carrier
                      Air Carrier                       Description
                                                        Description                           Frankfurt (FRA)
                                                                                              Frankfurt (FRA)
                 Adria Airlines
                 Adria Airlines              Operates belly cargo on daily flights
                                              Operates belly cargo on daily flights     €2.58 per kg effective weight
                                                                                        €2.58 per kg effective weight
                 (Intereuropa)
                 (Intereuropa)               from Pristina to Ljubljana
                                              from Pristina to Ljubljana
                                             Maximum shipment size of 2 tons
                                              Maximum shipment size of 2 tons
                                             Currently handles c. 500 kg/day
                                              Currently handles c. 500 kg/day

                 Austrian Airlines
                 Austrian Airlines           Operates belly cargo 6 days/wk from
                                             Operates belly cargo 6 days/wk from        €1.40 per kg effective weight
                                                                                        €1.40 per kg effective weight
                 (MCM)
                 (MCM)                       Pristina to Vienna
                                             Pristina to Vienna
                                             No dedicated cargo flights or
                                             No dedicated cargo flights or
                                             charters. Maximum weight of
                                             charters. Maximum weight of
                                             shipment 100 kg
                                             shipment 100 kg
                 Turkish Airlines
                 Turkish Airlines            Operates belly cargo on passenger
                                              Operates belly cargo on passenger         €1.70 per kg effective weight
                                                                                        €1.70 per kg effective weight
                                             planes 5 times per week
                                              planes 5 times per week
                                             A freighter operates 1 time per week
                                              A freighter operates 1 time per week
                                             IST-PRN- MXP(Milano)-IST but is
                                              IST-PRN- MXP(Milano)-IST but is
                                             only used for inbound cargo to PRN
                                              only used for inbound cargo to PRN



              Use of the Turkish freighter to carry outbound cargo from Pristina to Milan (MXP) is an opportunity for Kosovo
                 exporters. Re-routed freighter rates are typically 30-50% of full rates. Turkish Airlines requires a license
                                                        from ICAO to offer this service.

Sources: Interviews
                                                                                                                                            84
                                                                                                                                Inadequate Agricultural Regulation

  The structure for food safety regulation in Kosovo is disjointed
  with several different organizations responsible for parts of the
  issue…
                                                   Agencies with Responsibility for Food Safety
  Ministry of Agriculture, Forestry and
  Ministry of Agriculture, Forestry and                             Office of Prime Minister
                                                                    Office of Prime Minister                                     Ministry of Health
                                                                                                                                 Ministry of Health
     Rural Development (MAFRD)
      Rural Development (MAFRD)

                                                                                                                                        Ministry of
                                                                                                                                        Ministry of
                        MAFRD
                        MAFRD                                                     OPM
                                                                                  OPM                                                     Health
                                                                                                                                          Health


  Department of
  Department of
      Plant
      Plant                       Peja Institute
                                  Peja Institute                                                                                           Sanitary
                                                                                                                                           Sanitary
   Protection
    Protection                                                                    KFVA
                                                                                  KFVA                                                  Inspectorate
                                                                                                                                         Inspectorate


Department of Plant Protection:                          Kosovo Food & Veterinary Agency                            Sanitary Inspectorate
   Issues export certificates for all fresh and             Issues Export Certificates for all animal                  Inspects and certifies processing facilities
   processed foods based on lab tests for                   products
   processed and visual inspection for fresh                Issues import certificates for veterinary drugs,
   Issues import certificates for seeds                     semen, live animals, etc.
                                                            Responsible for all phyto-sanitary inspectors
Peja Institute                                              at border posts
    Acts as the only government lab for safety
    testing of plant products
    Issues export certificates for wine and grapes

                                                                               Conclusions
        According to Food Law of April 9, 2009, similar functions from the Peja Institute and the Plant Protection Department will be consolidated into KFVA.
        However, at present, this has not occurred and there is duplication of effort between the various organizations.
        KFVA has a plan in place to achieve EU compliance in animal products with a target date of 2011. It is currently in the process of answering the
        questionnaire and has invited the EU to set up the Food & Veterinary Office (FVO) in Kosovo. Plans at MAFRD are less advanced.
        The labs at Peja Institute and KFVA do not have any international certification (e.g. ISO, EurepGAP) which has caused recognition issues.

   Source: Interviews
                                                                                                                                                                      85
                                                                                                           Inadequate Agricultural Regulation



… there are also two private labs, whose scope are limited by lack
of certification
                                     Private Food Safety and Quality Labs in Kosovo
                              1
                              1                                                      2
                                                                                     2
                                            Sara & Meti
                                            Sara & Meti                                              Agrovet
                                                                                                     Agrovet



Year Opened
Year Opened                                    2008                                                       2005


  Location
  Location                                   Pristina                                    Fushe Kosovo (suburb of Pristina)


                        Chemical and microbiological analysis in plants,           Soil analysis but also capable of heavy metal
Area of Focus
Area of Focus           food, fertilizers                                          detection in food products


      Size                           2009 turnover €80,000                                     2009 turnover €100,000
      Size




                                                                 Conclusions
                      The Peja Institute is the primary body for testing agricultural goods. However, the Institute will use
                      the private labs to complete secondary testing when exporters or producers contest findings that
                      goods have not passed certification standards
                      Neither of the private labs are internationally recognized or have bilateral agreements with
                      governments in other countries

Sources: Interviews
                                                                                                                                                86
                                                                                                   Inadequate Agricultural Regulation



The regulation and use of inputs is perceived to be ineffective for a
number of reasons
                                    Issues Related to Regulation of Inputs

                       Farmers are not trained in the use of fertilizers and pesticides and tend to over-apply relative to the
                       amounts needed for specific crops
 Over-Application
 Over-Application      Over-use is exacerbated by the common availability of poor quality inputs which require application
 of Fertilizers and
 of Fertilizers and    at a rate above what is indicated by the instructions
    Pesticides
     Pesticides        Over-use has been found on a number of occasions to effect the safety of horticultural products,
                       and consignments have been denied export certificates because of contamination by pesticides
                       and fertilizers


                       There is a significant amount of seed and other inputs that are imported and sold illegally and are
                       of poor quality, effecting yields and crop quality. The main entry points are believe to be the open
                       gates in the north.
  Poor Quality of
  Poor Quality of      The Peja Institute tests and registers seed varieties, but testing is limited to only four crops
  Seed and Other
  Seed and Other       (peppers, tomatoes, potatoes, winter wheat) and much seed is sold that has not been registered.
      Inputs
       Inputs
                       No input retailer has developed branding that justifies higher input prices based on input quality.
                       Despite this, several of the larger processors have begun to import higher quality seed and other
                       imports directly.


                       Input distributors report very infrequent inspections of their products and complain that lack of
    Insufficient
     Insufficient      enforcement makes it difficult to compete with illegal or counterfeit imports.
Inspection of Input
 Inspection of Input
                       MAFRD admits that their inspection force is insufficient to properly regulate the sale of agricultural
    Distributors
    Distributors
                       inputs at retail and wholesale distribution points.



Sources: Interviews
                                                                                                                                        87
                                                                                                                                                      Inadequate Agricultural Regulation

Pilot studies have shown farmer over reliance on pesticides, which
could create serious environmental consequences given the
increase use of counterfeit pesticides in the region
                                              Pesticide Consumption & Use of Counterfeit Pesticides

                  Pesticide Consumption (Kg/Ha, 2001) (1)                                                                                    Comments
                                                                                                                                             Comments
                                                                                                                  Pesticide consumption per hectare is higher in countries
                                                                                                                   Pesticide consumption per hectare is higher in countries
                                                                          23.7                                    with more developed agriculture sectors
                                                                                                                   with more developed agriculture sectors
                                                           20.9                                                      – With Balkan countries entering more export markets,
                                                                                                                     – With Balkan countries entering more export markets,
                                                                                                                         pesticide consumption has increased
                                                                                                                         pesticide consumption has increased
                                                                                                                  According to a recent World Bank report, pesticide use has
                                                                                                                   According to a recent World Bank report, pesticide use has
                                                                                                                  not been monitored in Kosovo. Imported fertilizers and
                                                                                                                   not been monitored in Kosovo. Imported fertilizers and
                                           6.2                                                                    pesticides started being controlled and licensed in 2007, but
                                                                                                                   pesticides started being controlled and licensed in 2007, but
                            5.1
                                                                                                                  there are no data on the intensity and extent of pollution
                                                                                                                   there are no data on the intensity and extent of pollution
            1.3
                                                                                                                  An Intercooperation pilot study in Dugagjjini showed that
                                                                                                                   An Intercooperation pilot study in Dugagjjini showed that
                                                                                                                  surveyed farmers are heavily dependant on pesticides.
                                                                                                                   surveyed farmers are heavily dependant on pesticides.
          Kenya          Czech          Slovakia        Slovenia          Italy
                                                                                                                  Farmers are not aware that large use is not always
                                                                                                                   Farmers are not aware that large use is not always
                        Republic
                                                                                                                  necessary, and can lead to environmental problems
                                                                                                                   necessary, and can lead to environmental problems


                                                                                                                                             Comments
                                                                                                                                             Comments
 Portion of Counterfeit Pesticides in Total Market (%, 2007) (2)
                                                                                                                  Studies have shown a rapid growth in counterfeit pesticide
                                                                                                                  Studies have shown a rapid growth in counterfeit pesticide
                                                                                                                  use in Eastern Europe. Many of these pesticides come from
                                                                                                                  use in Eastern Europe. Many of these pesticides come from
                                                                          10%                                     Asia, especially China
                                                                                                                  Asia, especially China
                                                          8.5%                                                    Types of counterfeit and illegal pesticides include fakes,
                                                                                                                  Types of counterfeit and illegal pesticides include fakes,
                                                                                                                  counterfeits and illegal parallel imports
                                                                                                                  counterfeits and illegal parallel imports
                                          4.5%                                                                    The effects of counterfeit pesticide use include:
                                                                                                                  The effects of counterfeit pesticide use include:
                                                                                                                    – Harm to the environment, which could be detrimental
                                                                                                                    – Harm to the environment, which could be detrimental
            2%              2%                                                                                          to subsequent crops
                                                                                                                         to subsequent crops
                                                                                                                    – Farmers’ economic and reputation damage
                                                                                                                    – Farmers’ economic and reputation damage
          Czech          Hungary           Italy        Bulgaria        Slovenia                                    – Economic and reputation damage for the food value
                                                                                                                    – Economic and reputation damage for the food value
         Republic                                                                                                       chain
                                                                                                                         chain


(1) Commodities include cereals, fruits and vegetables; (2) Averages taken for Bulgaria & Italy; Source: FAOSTAT; World Bank; EU- Counterfeit Pesticides
Across Europe; Intercooperation- Integrated Pest Management Intervention; BAH Analysis
                                                                                                                                                                                           88
                                                                                                           Trade Access Issues



Trade access issues effect Kosovo’s agricultural exports in three
fundamental ways
                                             Trade Access Issues


                                                 Kosovo enjoys membership in CEFTA and benefits from Generalized
                                                 Kosovo enjoys membership in CEFTA and benefits from Generalized
                                                 System of Preferences (GSP) status with both the European Union and
                                                 System of Preferences (GSP) status with both the European Union and
                           Incomplete
                            Incomplete           United States. These regimes confer advantages on Kosovo for some
                                                 United States. These regimes confer advantages on Kosovo for some
                         Enforcement of
                          Enforcement of         agricultural products vis a vis regional competitors.
                                                 agricultural products vis a vis regional competitors.
                        Trade Agreements
                        Trade Agreements         However, there have been implementation issues with each of these
                                                 However, there have been implementation issues with each of these
                                                 agreements that have hindered growth in trade.
                                                 agreements that have hindered growth in trade.


                                                 A number of Kosovo’s trading partners subsidize agricultural production,
                                                 A number of Kosovo’s trading partners subsidize agricultural production,
                                                 especially in animal products and cereals. These subsidies in some cases
                                                 especially in animal products and cereals. These subsidies in some cases
Trade Access
Trade Access               Insufficient
                            Insufficient         disadvantage Kosovo producers both in the domestic market and in exports.
                                                 disadvantage Kosovo producers both in the domestic market and in exports.
   Issues
    Issues              Response to Trade
                        Response to Trade        However, subsidy levels on horticulture and processed food are fairly low.
                                                 However, subsidy levels on horticulture and processed food are fairly low.
                        Partner Subsidies
                         Partner Subsidies       Kosovo has lacked the ability to respond to subsidies on a comprehensive,
                                                 Kosovo has lacked the ability to respond to subsidies on a comprehensive,
                                                 economy-wide level that complies with trade agreements.
                                                 economy-wide level that complies with trade agreements.


                                                 Kosovo’s sovereignty has been recognized by 36 countries including many
                                                  Kosovo’s sovereignty has been recognized by 36 countries including many
                                                 of the world’s largest food importers.
                                                  of the world’s largest food importers.
                         Recognition of
                         Recognition of          Specific sovereignty-related trade issues have been experienced only with
                                                  Specific sovereignty-related trade issues have been experienced only with
                          Sovereignty
                          Sovereignty            two countries -- Serbia and BiH. However, although not tested, there are 12
                                                  two countries Serbia and BiH. However, although not tested, there are 12
                                                 other countries (including Russia and Romania) where there is risk that
                                                  other countries (including Russia and Romania) where there is risk that
                                                 recognition issues may impede trade.
                                                  recognition issues may impede trade.



Source : BAH Analysis
                                                                                                                               89
                                                                                                                 Trade Access Issues (Incomplete Enforcement of Trade Agreements)



 Despite preferential trade regimes, Kosovo’s trade deficit with
 CEFTA, EU and the US has widened over the past five years

                                                                               Trade Deficit Over Time
                                                          Agricultural Products Only (Chapters 1-24), 2004-2009, €



                                                                                                                                                                 2005   2009 (E) CAGR*
€ 500,000,000
€ 450,000,000                                                                                                                              Total - All Countries €278M €393M    12.3%

€ 400,000,000
€ 350,000,000                                                                                                                                  Other Countries   €53M   €108M   24.5%
€ 300,000,000
€ 250,000,000                                                                                                                                    United States   €12M   €17M    11%

€ 200,000,000
€ 150,000,000
                                                                                                                                                     CEFTA       €111M €151M    11%

€ 100,000,000
 € 50,000,000                                                                                                                                  European Union    €99M   €116M   5.7%

               €0
                2004 (6                   2005                   2006                    2007                   2008                  2009
                months)                                                                                                          (extrapolated
                                                                                                                                     from 9
                                                                                                                                    months)


 Sources: Kosovo Customs
 Notes: Trade deficit is represented as a positive number for illustrative purposes. 2009 total is extrapolated on a straight line basis from data
           through September. CAGR = Compounded Annual Growth Rate
                                                                                                                                                                                        90
                                                                                                                 Trade Access Issues (Incomplete Enforcement of Trade Agreements)



The preferential trade regimes do confer some benefits on Kosovo
for major agricultural products
                                        Kosovo’s Relative Advantages on Selected Ag Products (2009)

 When              Kosovo has a           For the                                                                                                                            Comments
                                                                                                                                                                             Comments
 exporting         benefit over:          Following
 to:                                      Products:         Tomatoes          Cucumbers            Peppers          Mushrooms           Strawberries
                                                                                                                                                                       Kosovo’s preferential trade
                                                                                                                                                                        Kosovo’s preferential trade
 Albania           Other CEFTA                              10%               0%                   10%    (2)       10%                 10%                            regimes give it some
                                                                                                                                                                        regimes give it some
                   Members                                                                                                                                             advantages in exports.
                                                                                                                                                                        advantages in exports.
                   EU Members                               0%                0%                   6%               0%                  10%                            The biggest advantages
                                                                                                                                                                        The biggest advantages
                                                                                                                                                                       are with Croatia and
                                                                                                                                                                        are with Croatia and
                   MFNs (1)                                 10%               0%                   10%              10%                 10%                            Albania which have high
                                                                                                                                                                        Albania which have high
                                                                                                                                                                       tariffs even on other
                                                                                                                                                                        tariffs even on other
 Croatia           Other CEFTA                              38.5%             35.27% (3)           20% (4)          15% (4)             28.05%
                   Members                                                                                                                                             CEFTA members and
                                                                                                                                                                        CEFTA members and
                                                                                                                                                                       generally give Kosovo duty
                                                                                                                                                                        generally give Kosovo duty
                   EU Members                               0%                35.27%               20%              15%                 20%                            free access.
                                                                                                                                                                        free access.
                   MFNs (1)                                 15%               35.27%               20%              15%                 28.05%
                                                                                                                                                                       Kosovo also has some
                                                                                                                                                                        Kosovo also has some
                                                                                                                                                                       advantages in the EU vis a
                                                                                                                                                                        advantages in the EU vis a
 European          Other CEFTA                              0%                0%                   0%               0%                  0%                             vis MFN exporters.
                                                                                                                                                                        vis MFN exporters.
 Union             Members                                                                                                                                             However, the EU’s trade
                                                                                                                                                                        However, the EU’s trade
                   EU Members                               0%                0%                   0%               0%                  0%                             policy of non-discrimination
                                                                                                                                                                        policy of non-discrimination
                                                                                                                                                                       in the Balkans means that
                                                                                                                                                                        in the Balkans means that
                   MFNs (1)                                 15% (5)           16%                  16%     (5)      12.8%               7.2%                           most countries in the region
                                                                                                                                                                        most countries in the region
                                                                                                                                                                       are on a level playing field.
                                                                                                                                                                        are on a level playing field.
 United            Other CEFTA                              0%                0%                   0%               0%                  0%
 States            Members                                                                                                                                             Kosovo qualifies for
                                                                                                                                                                        Kosovo qualifies for
                                                                                                                                                                       privileges under US GSP.
                                                                                                                                                                        privileges under US GSP.
                   EU Members                               2.58%             0%                   1.96%            0%                  0.22%                          However, little benefits can
                                                                                                                                                                        However, little benefits can
                   MFNs (1)                                 2.58%             - 3.85% (6)          1.96%            0%                  0.22%                          be reaped as the US has
                                                                                                                                                                        be reaped as the US has
                                                                                                                                                                       such low tariffs
                                                                                                                                                                        such low tariffs

Sources: ITC Comtrade
Notes: (1) Most favored nation, one which has no special trade regime. (2) The full rate is applied only to Serbia. Macedonia has a rate of 6%. (3) Full rate applied only       Kosovo has a tariff-
           to Serbia. Macedonia has a rate of 15.87%. (4) Applies only to Serbia. Several countries have preferential rates. (5) The largest exporters, Morocco and              related advantage
           Turkey, have free trade agreements with the EU and lower rates. (6) The largest exports have duty free access putting Kosovo at a disadvantage.
                                                                                                                                                                                                        91
                                                                                       Trade Access Issues (Incomplete Enforcement of Trade Agreements)



However, implementation issues have arisen which have made it
difficult to take advantage of these trade regimes
                                      Implementation Issues with FTAs and Preferential Trade Regimes

    Agreement                    Country                                             Description of Issues
                                                Serbia and BiH do not recognize Kosovo and do not allow entry or transit of Kosovo registered goods
                                                or vehicles
                              Serbia and           – Serbia. Despite the restrictions, significant trade volume exists and a significant amount of trade
                              BiH                    travels to and from Kosovo via Merdare aboard Serbian registered vehicles.
Central                                            – BiH. Restrictions on transiting BiH are significant primarily because it is required to reach the
European Free                                        Croatian coastal highway from Albanian or Montenegro
Trade                                           All other countries in the Western Balkans provide Kosovo duty-free access under CEFTA. However,
Agreement                                       trade disputes have arisen over several issues including:
(CEFTA)                                            – Phyto-sanitary Inspection. Montenegro does not recognize Kosovo food safety certifications and
                              Other
                                                      often require additional testing and certification. Macedonia at times requires HACCP
                              Countries               certification for entry of agriculture products into the country.
                                                   – Assessment. Albanian Customs has at times assessed the value of goods as higher than the
                                                      declared value increasing VAT liability.
                                                Exports to the EU require that the exporting country be listed on the “Third Country Eligibility List”.
EU Generalized                                  Although Kosovo is not on the list, and exports could technically be rejected, exports of fresh and
System of                                       processes products are entering the EU.
Preferences                                     Food shipments have been turned back for quality and safety related reasons. A shipment of wine to
(GSP)                                           Austria was turned back because lab test results were not accepted. A shipment of low alcohol beer to
                                                Italy was turned back because the alcohol content was found to be too high.
                                                Exports to the US have been minimal and, for this reason, few exporters are knowledgeable of US
US GSP                                         requirements or able to meet standards. The most important standards are FDA labeling requirements
                                               and USDA Prior Inspection of Facility requirements


Sources: Interviews
Note : FTA is free trade agreement.
                                                                                                                                                           92
                                                                                              Trade Access Issues (Incomplete Enforcement of Trade Agreements)



Many of the implementation issues result from a lack of capacity in
trade facilitation
                                     Selected Agencies with Responsibility for Trade Facilitation

   Agency              Staff                            Role                                                                  Issues
                                Responsible for development and implementation of              MTI’s lack of capacity is crippling. Few of the staff adequately
                                trade policy.                                                  understand CEFTA and general trade best practices. The lack of
Department of
                       5-10     Chairs CEFTA Committees on Agriculture, Customs and            capacity typically translates into poorly chosen and ineffective
Trade, MTI
                                Rules of Origin, and Tariff and Non-Tariff Barriers.           safeguard measures. Little donor assistance has been provided.
                                Represents Kosovo to CEFTA Secretariat
                                Enforces CEFTA provisions at the border.                       The Customs Authority has taken its role seriously, and fields specific
Kosovo                          Provides advisory opinions on CEFTA rules.                     requests for information from the Private Sector, but does not deeply
                       600
Customs                                                                                        understand CEFTA rules and lacks resources necessary to broadly
                                                                                               provide information.
                                Responsible for negotiating bilateral commercial and           Adequate understanding of its role, but emphasizes political benefits
Dept of Bilateral
                  1-5           trade agreements.                                              of agreements far more than economic benefits.
Affairs, MFA
                                                                                               Virtually no coordination with other GoK entities or Civil Society.
                               Constitutional responsibility for leading foreign policy and   Has taken little initiative in articulating trade policy as a component of
Office of the                  signing international agreements.                              foreign policy.
                       1-5
President

                               Responsible for conducting safety testing and issuing          Although consolidation is planned, KFVA handles only animal products.
                               export certificates for animal products. Conducts testing      Export certificates for plant and processed products are issued by other
Kosovo Food &                  and provides import certificates for agriculture imports       agencies.
Veterinary             5-10    (drugs, semen, etc.).                                          KFVA is just starting the process of EU compliance. It is hoped that an
Agency (KFVA)                  According to Food Law of April 9, 2009, similar functions      EU Food & Veterinary Office (FVO) can be established in 2010 and
                               from the Institute of Agriculture and the Plant Protection     compliance obtained in 2011.
                               Department will be consolidated in KFVA.

                                                                      Conclusions
     An overall weakness of the system is that there is no apex organization or inter-ministerial body to coordinate trade facilitation and examine
     trade issues on an economy-wide (rather than sector specific) basis. Trade actions often favor one sector at the expense of another. In
     addition, no organization has the skills or resources to negotiate effectively with trade partners.

 Sources: Interviews
                                                                                                                                                                           93
                                                                               Trade Access Issues (Insufficient Response to Trade Partner Subsidies)



Agricultural supports are bound by CEFTA and, for Kosovo’s
trading partners, also by the WTO Agreement on Agriculture
                                                        Treaties Governing Agricultural Supports

             Central Europe Free Trade Agreement
             Central Europe Free Trade Agreement                                             WTO Agreement on Agriculture
                                                                                             WTO Agreement on Agriculture
      CEFTA generally provides that trade relations among
       CEFTA generally provides that trade relations among                        Financial assistance to farmers through direct (price
                                                                                  Financial assistance to farmers through direct (price
      parties be developed in accordance with WTO rules
       parties be developed in accordance with WTO rules                          support) or indirect means are classified in 3 categories
                                                                                  support) or indirect means are classified in 3 categories
      However, it does not fully follow the WTO agreement                         or “boxes”:
                                                                                  or “boxes”:
       However, it does not fully follow the WTO agreement
      on agriculture and is generally more permissive in                              −Green Box: permitted as minimally trade-
                                                                                       −Green Box: permitted as minimally trade-
       on agriculture and is generally more permissive in
      terms of agriculture subsidies permitted.                                       distorting. They include direct income support to
                                                                                       distorting. They include direct income support to
       terms of agriculture subsidies permitted.
                                                                                      farmers, rural development and environment
                                                                                       farmers, rural development and environment
          – Members are required to follow the WTO
           – Members are required to follow the WTO                                   programs and should be “decoupled” from
                                                                                       programs and should be “decoupled” from
          agreements on Sanitary & Phyto-sanitary
           agreements on Sanitary & Phyto-sanitary
          Measures (SPS), Technical Barriers to Trade                                 production level and should not be targeted to
                                                                                       production level and should not be targeted to
           Measures (SPS), Technical Barriers to Trade
          (TBT) and Valuation.
           (TBT) and Valuation.                                                       specific products
                                                                                       specific products
                                                                                      −Amber Box: discouraged as trade distorting (e.g.,
                                                                                       −Amber Box: discouraged as trade distorting (e.g.,
          – Members are not allowed to use export subsidies
           – Members are not allowed to use export subsidies
          for agriculture, defined as subsidies that create                           measures to support prices, subsidies directly
                                                                                       measures to support prices, subsidies directly
           for agriculture, defined as subsidies that create
          more output than can be absorbed in the local
           more output than can be absorbed in the local                              related to production quantities or targeted at
                                                                                       related to production quantities or targeted at
          market.
           market.                                                                    specific crops). Levels must be reduced to 15% for
                                                                                       specific crops). Levels must be reduced to 15% for
                                                                                      developed and 10% for developing countries.
                                                                                       developed and 10% for developing countries.
      Other subsidies are generally permitted.
       Other subsidies are generally permitted.                                       −Blue Box: permitted “with conditions”. Refers to
                                                                                       −Blue Box: permitted “with conditions”. Refers to
                                                                                      any “amber box” program implemented with
                                                                                       any “amber box” program implemented with
                                                                                      measures to reduce production. No limits.
                                                                                       measures to reduce production. No limits.

                                                       Implications for Kosovo
    All of Kosovo’s neighbors are CEFTA members and all except Serbia are WTO members. Kosovo is required to comply with
    CEFTA regulations on agricultural subsidies and has expressed an intention to comply with WTO requirements.
    Kosovo’s trade policy calls for development of “green box” policies focused on support to poor farmers in remote areas and on
    the provision of health, water and educational facilities as a way of improving the quality of rural life.

Source: WTO, CEFTA, Trade Policy of Kosovo/MTI (2009)
                                                                                                                                                    94
                                                                                                                Trade Access Issues (Insufficient Response to Trade Partner Subsidies)



Agricultural supports vary significantly by commodity type with
grains and animal products receiving the most
                                                     Production Support Estimate (PSE) by Commodity                                                         PSE is the total of all
                                                                            OECD Countries, % (1986-2003)                                                  supports to agricultural
81%                                                                                                                                                          producers over the
                                                                                                         78%                                                farm gate value of all
                                                                                                                                                                 production.


                                                 Average for all
             59%
                          55%
                                                 Commodities                                                                                             Average for all
      54%
                   52%                                                                                           51%                                     Commodities
                                 47%                                                                                   48%

                                                            40%                                                              41%
                                               37%                                                                                 38% 37%
                                        32%                                                                                                  33%
                                                                                                                                                   31%
                                                     29%
                                                                   27%                                                                                   26%
                                                                                                                                                               24% 24%
                                                                                 20%                                                                                     21%
                                                                          18%          17%                                                                                     17%


                                                                                               7%                                                                                    8%
                                                                                                                                                                                          5%



                                          1986-1988                                                                                           2001-2003
                        Rice                              Sugar                             Milk                             Other grains                Lamb
                        Wheat                             Beef and Veal                     All Commodities                  Other Commodities           Maize
                        Oilseeds                          Pork                              Poultry                          Eggs                        Wool


Source: OECD (2003)
Note : PSE is the total of all supports to agricultural producers over the farm gate value of all production.
                                                                                                                                                                                               95
                                                                                Trade Access Issues (Insufficient Response to Trade Partner Subsidies)

Overall, OECD countries spent over €229 billion in agricultural
supports in 2003 with milk receiving more support than any other
commodity
                                                Total Production Supports by Commodity
                                                       OECD Countries, € Billion (1986-2003)


                                                                                                €257 €264 €255
     €241                                                     €236                                                 €244
                                                       €232                              €235                             €229
                                         €228
            €215                                €214                 €214
                                €209                                        €208 €211                                                   Other Commodities
                      €202 €203
                                                                                                                                        Eggs and Wool
                                                                                                                                     Poultry
                                                                                                                                      Sugar
                                                                                                                                    Oilseeds
                                                                                                                                  Other Grains
                                                                                                                                 Maize
                                                                                                                                 Pork
                                                                                                                                 Wheat
                                                                                                                                 Rice

                                                                                                                                 Beef & Veal

                                                                                                                                 Milk




                                                                                                                          p
 86

        87

                88

                         89

                               90

                                     91

                                            92

                                                   93

                                                          94

                                                                 95

                                                                        96

                                                                               97

                                                                                     98

                                                                                            99

                                                                                                   00

                                                                                                         01

                                                                                                                02

                                                                                                                      03
19

      19

             19

                       19

                              19

                                    19

                                          19

                                                 19

                                                        19

                                                               19

                                                                      19

                                                                             19

                                                                                    19

                                                                                          19

                                                                                                 20

                                                                                                        20

                                                                                                              20

                                                                                                                    20
Source: OECD (2003)
                                                                                                                                                        96
                                                                                                            Trade Access Issues (Insufficient Response to Trade Partner Subsidies)




The level of support varies significantly by country …
                                                          Production Support Estimate (PSE) by Country
                                                                                     % - 2008 or Latest Data
      61.9%
                 58.1%

                                    51.0% 51.7%
                                                       47.8%




                                                                27.8% 26.6%
                                                                                      24.9% 24.5%
                                                                                                           20.9%

                                                                                                                        13.1% 13.0%
                                                                                                                                              8.7%
                                                                                                                                                       6.9%            6.3%       5.9%
                                                                                                                                                                                              0.8%




                                                                                                                         Mexico
                                                                                                             Slovakia




                                                                                                                                                                                              New Zealand
        Norway




                                                                           Hungary




                                                                                                  Turkey
                                     Iceland




                                                        Japan




                                                                                       EU-27




                                                                                                                                                                                  Australia
                                                                                                                                                       United States
                                                                 Romania
                                               Korea




                                                                                                                                   Canada


                                                                                                                                              Poland




                                                                                                                                                                       Bulgaria
                   Czech Republic




Source: OECD (2009)
Note : PSE is the total of all supports to agricultural producers over the farm gate value of all production. All countries are 2008 except
          Hungary, Slovakia and Poland (2003) and Romania and Bulgaria (2006). Thereafter, these countries are included in the EU
          average.
                                                                                                                                                                                                            97
                                                                                                          Trade Access Issues (Insufficient Response to Trade Partner Subsidies)

  …and, across the OECD, market price supports, considered a
  minimally-distorting “green box” measure, were the most
  commonly used
                                                        Production Support Estimate (PSE) by Country
                                                                                  % - 2008 or Latest Data
                                                                                                                                   Misc                 Based on farm income
                                                                                                                                                        Based on input constraints
                                                                                                                                                        Based on input use
                                                                                                                                                        Based on historical
                                                                                                                                                        entitlements
                                                                                                                                                        Based on area planted
                                                                                                                                                        Based on output




                                                                                                                                                        Market Price Supports
                                                                                    d




                                                                                                                                               e
                                                                  o




                                                                                                                              es
                l ia




                   d




                                                                                                                                               e
                   a




                 ry




                                                                                   ia
                                                                                 nd
                                                                                  ay




                                                                                 nd
                                               n

                                                         a




                                                                                                                              ey
                 ic




                                                                                an




                                                                                                                                             ag
                                                                ic
              an




                                                                                                                                            ag
              ad




                                             pa


                                                      re
               bl




                                                                               ak
             ga
             ra




                                                                                                                            at
                                                                               w




                                                                                                                           rk
                                                                               la




                                                                              la
                                                              ex
                                                    Ko




                                                                             al




                                                                                                                                          er
           pu




                                           Ja
            el
           an




                                                                                                                                         er
                                                                            or




                                                                           ov
           st




                                                                                                                         St
                                                                          Po




                                                                            er
          un




                                                                                                                        Tu
                                                             M

                                                                         Ze
         Ic




                                                                                                                                       Av

                                                                                                                                       Av
        Au




                                                                          N
        Re
         C




                                                                        itz
                                                                        Sl
        H




                                                                                                                       d
                                                                                                                     te
                                                                 ew




                                                                     Sw




                                                                                                                                   EU


                                                                                                                                     D
     ch




                                                                                                                   ni




                                                                                                                                          EC
                                                                N




                                                                                                                      U
  ze




                                                                                                                                        O
C




   Source: OECD (2004).
   Note : EU is EU-12 for 1986-94, EU-15 from 1995. Market Price support is net of producer levies and excess feed costs.
                                                                                                                                                                                 98
                                                                           Trade Access Issues (Insufficient Response to Trade Partner Subsidies)



Although there is little data, all of Kosovo’s neighbors are
employing some kinds of supports for the agriculture sector
                                        Summary of Subsidies in Neighboring Countries

                                 Anecdotal evidence exists of subsidies amounting to approximately € 270 per 0.1 Ha and up to 50% of the
                                 Anecdotal evidence exists of subsidies amounting to approximately € 270 per 0.1 Ha and up to 50% of the
      Albania
      Albania                    cost of irrigation systems and cold storage units. Additional per head subsidies may exist for sheep and
                                 cost of irrigation systems and cold storage units. Additional per head subsidies may exist for sheep and
                                 cattle
                                 cattle


                                 Anecdotal evidence of questionable reliability of subsidies of €.04 per kilogram of vegetables produced and
                                 Anecdotal evidence of questionable reliability of subsidies of €.04 per kilogram of vegetables produced and
   Macedonia
   Macedonia                     of €30 per head of sheep owned. The subsidy on sheep is part of a program to rebuild the size of
                                 of €30 per head of sheep owned. The subsidy on sheep is part of a program to rebuild the size of
                                 Macedonia’s herd
                                 Macedonia’s herd


                                 Serbia subsidizes mechanization and marketing of agricultural products directly with a budget of
                                 Serbia subsidizes mechanization and marketing of agricultural products directly with a budget of
       Serbia
       Serbia                    approximately €20M per year
                                 approximately €20M per year



  Montenegro                     Montenegro is openly providing export subsidies on processed foods that are likely in violation of CEFTA
                                 Montenegro is openly providing export subsidies on processed foods that are likely in violation of CEFTA
  Montenegro
                                 requirements
                                 requirements

                                                             Conclusions
    Most of Kosovo’s neighbors and partners in CEFTA provide some subsidies on agriculture including some that are likely in
    violation of CEFTA requirements and subject to de minimis regulation under WTO rules (amber box). Several industries - notably
    the milk industry - have made claims that these subsidies damage their competitiveness on the domestic market.
    At present, though, all evidence is anecdotal. In order for Kosovo to in a position to take action under CEFTA more detailed
    information must be requested from the parties or otherwise obtained.

Source: HPK Study, Interviews.
                                                                                                                                                99
                                                                                                                                 Trade Access Issues (Recognition of Sovereignty)



There are currently 63 countries that recognize Kosovo including
22 out of the 27 EU member countries
                                             Countries that Recognize Kosovo’s Independent Status


                                                                                                   Finland
                                                                          Iceland          Sweden
                                                                           Netherlands   Norway        Estonia
                              Canada
                                                                      United Kingdom      Denmark      Latvia
                                                                                                     Lithuania
                                                                            Ireland    Germany Poland
                                                                             Belgium                          Slovakia
                                                                                          Austria
                                                                                                              Hungary
                                                                                  France Croatia Romania
                                                                                           Italy       Bulgaria
                          USA                                                 Spain
                                                                        Portugal       Albania     Greece Turkey                                               Japan
                                                                                      Macedonia            Cyprus       Afghanistan                  South Korea
                                                                                                 Malta     Jordan
                                                                                                                      Bahrain
                                                                                                          Saudi Arabia UAE
                           Belize       Dominican Republic
                                                                     Senegal
                                                                    Gambia      Burkino Faso
                        Costa Rica
                                      Panama                       Sierra Leone
                                                                        Liberia                                                               Malaysia
                                     Colombia
                                                                                                                               Maldives


                                      Peru
                                                                                                                  Comoros                                                 Marshall Islands
                                                                                                                                                                            Palau
                                                                                                                                                                             Micronesia
                                                                                                                                                              Australia         Naura
Countries Recognizing                                                                                                                                                        Samoa

Countries Not Recognizing                                                                                                                                                  New Zealand
EU Members Not Recognizing




Sources: Ministry of Foreign Affairs, News Sources.
Note : Several countries have not been labeled on the map because of space. They are Czech Republic, Lichtenstein, Luxembourg, Monaco,
           Montenegro, San Marino, Slovenia, Switzerland.
                                                                                                                                                                                      100
                                                                                              Trade Access Issues (Recognition of Sovereignty)



Only two countries actively block trade with Kosovo although there
is a risk that others might also
                                          Countries That Block Trade with Kosovo


                                                                                                     Russia
                                                              Belarus
                                                            Bosnia       Romania
                                                    Spain
                                                                        Serbia
                                                                                 Azerbaijan               China
                                                                          Cyprus



                                                                                                                       Vietnam

            Venezuela
                                                                                                                 Comments
                                                                                                                 Comments
                                                                            Burundi
                                                                                                   Only Serbia and BiH actively block the transit
                                                                                                    Only Serbia and BiH actively block the transit
                                                                                                   of goods, vehicles and people from Kosovo
                                                                                                    of goods, vehicles and people from Kosovo
                                     Bolivia                                                       across their territories.
                                                                                                    across their territories.
                                                                                                   There are 12 other countries which do not
                                                                                                    There are 12 other countries which do not
                                                                                                   recognize Kosovo and have taken an active
                                                                                                    recognize Kosovo and have taken an active
                                                                                                   position against recognition at the ICoJ.
                                                                                                    position against recognition at the ICoJ.
                                        Argentina                                                  Although trade with these countries has not
                                                                                                    Although trade with these countries has not
                                                                                                   been tested, it is felt that there could be a risk
                                                                                                    been tested, it is felt that there could be a risk
                                                                                                   of trade disruption. These countries are
                                                                                                    of trade disruption. These countries are
                                                                                                   Argentina, Azerbaijan, Belarus, Bolivia,
                                                                                                    Argentina, Azerbaijan, Belarus, Bolivia,
                                                                                                   Burundi, China, Cyprus, Spain, Russia,
                                                                                                    Burundi, China, Cyprus, Spain, Russia,
                                                                                                   Romania, Venezuela and Vietnam.
                                                                                                    Romania, Venezuela and Vietnam.

Source: Lloyd’s (2007); Interviews
                                                                                                                                                         101
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector
   – Quantitative Baseline of Kosovo’s Agriculture Sector
   – Overview of Constraints and Opportunities
   – International Best Practices Assessment

 Recommendations to Improve Kosovo’s Agriculture Sector




                                                            102
International Best Practice Assessment

 Benchmarking Methodology

 Benchmarking Analysis




                                         103
                                                                                                                                                                                                       Benchmarking Methodology



A combination of quantitative and qualitative criteria were selected
to identify relevant countries for benchmarking
                                                                                                                   Country Selection Framework
                                                                    Quantitative
                                                                    Quantitative                                                                                                      Qualitative
                                                                                                                                                                                      Qualitative

                          Agricultural Productivity (Tons/Ha, 2007) (1)                                                                                       Seasonality and Target Markets
                                                                                                                                            45.1 46.4             Mix of On, Off and           On
                                                                                                                             40.5
                                                                                                        36.1 36.7                                                 Niche agricultural         Season
                                                                               33.4
                                                                     30.6 31.3                                                                                    exporters                   Niche
                                                        25.6                                                                                                                                 Season
                                              21.9                                                                                                                Target market overlap
                          19         20
              16.6                                                                                                                                                for agricultural exports     Off
  14.6
                                                                                                                                                                                             Season



                                                                                                                                                              Best-In-Class Countries
                                                                     Czech Republic




                                                                                                                                            Italy
                          Slovakia




                                                        Macedonia




                                                                                      Kenya

                                                                                              Albania

                                                                                                        Slovenia

                                                                                                                   Morocco

                                                                                                                             South Africa
    Serbia




                                     Kosovo
               Bulgaria




                                              Croatia




                                                                                                                                                     Spain
                                                                                                                                                                  Best in class examples of countries that excel at
                                                                                                                                                                  dealing with challenges relevant to Kosovo
                                                                                                                                                                  Best in class competitors that produce and export
             Agricultural Export Value Growth (%, 2004-2008) (1) (2)                                                                                              agriculture commodities similar to those in Kosovo

         62%

                     38% 35%
                             33% 31%
                                     28% 28%
                                                                                                                                                              Geographic Characteristics
                                                                                         18%
                                                                                                   12% 10% 10%                                                    Size of the country
                                                                                                                                       8%       7%
                                                                                                                                                         2%
                                                                                                                                                                  Location of the country (landlocked vs. coastal)
                                                                                                                                                                  Climate, soil, water, etc.
                                                                                                                        ly

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(1) Commodities include cereals, fruits and vegetables; (2) Figures for Morocco & Macedonia are 2003-2007; Kosovo (2005-2008); Source: FAOSTAT; Trademap; BAH Analysis
                                                                                                                                                                                                                              104
                                                                                                                    Benchmarking Methodology

As a result, eight countries were selected as primary benchmarking
targets – however, when applicable, best practices from other
countries were also analyzed
                        Overview of Benchmark Countries Examined According to Six Dimensions
                                          Leveraging Small                   Infrastructure                    Government
                                                            Demand-Driven
                          Countries           Farmers                           Capacity      Transportation   Agriculture   Trade Access
                                                           Export Strategies
                                              Potential                         Building                       Regulations
                           Macedonia             ✓                                 ✓                                              ✓
                             Serbia              ✓                ✓                ✓               ✓               ✓
                            Morocco                               ✓                                                ✓              ✓
    Primary                   Italy              ✓                ✓                ✓
  Benchmarks                 Spain               ✓                ✓                                                ✓
                             Kenya                                ✓                                ✓               ✓
                            Slovakia                              ✓                                                ✓              ✓
                             Israel                               ✓                ✓               ✓
                          South Africa                            ✓                                                ✓
                         United States           ✓                ✓
                            Croatia                                                                                ✓
                            Albania                                                ✓
   Secondary
  Benchmarks             Czech Republic                                                                            ✓
                             Brazil                                                                ✓
                          Mozambique                                                               ✓
                            Slovenia                                                                                              ✓
                             Chile                                ✓
Source : BAH Analysis                                                                                                                       105
                                                                                                                      Benchmarking Methodology

The benchmarking analysis focused on six key dimensions that are
designed to address constraints facing Kosovo’s agricultural
sector
                                     Overview of Benchmarking Dimensions
          Dimensions                                              Description
 1
 1                       Coordination among Small Farmers: Models of farmer cooperatives; coordination among associations
                         Extension Services: Models for providing extension services; types of training administered
     Leveraging Small
     Leveraging Small    Lack of Financing for Small Farmers: Access to credit for small-scale farmers; use of crop insurance, purchase order
     Farmers Potential
     Farmers Potential   financing, microfinance and other financial products
                         Land Consolidation: Steps to comprehensive land consolidation; models for land consolidation
 2
 2                       Donor Coordination: Export promotion strategies for agricultural commodities enhanced by effective donor coordination
                         Product Characteristics: Development of new products based on understanding of consumer tastes and preferences
      Demand-Driven
      Demand-Driven      Reliability & Flexibility of Distribution: Improved distribution channels for small volumes; collection centers
     Export Strategies
     Export Strategies   Promotion & Branding: Cost effective export promotion strategy; promotion of new products in strategic markets
                         Pricing: Optimal pricing; methods for addressing seasonality issues for farmers to receive best prices

 3
 3                       Development of Irrigation Networks: Development of innovative irrigation systems with restricted water access; models of
      Infrastructure
       Infrastructure    irrigation charging systems
     Capacity Building
     Capacity Building   Building greenhouse capacity: Methods to support development of greenhouses; types of extension programs for
                         developing greenhouse capacity

 4
 4
                         Costs of Road Delivery: Methods to decrease cost of transportation; prioritization of road investments
                         Facilitated Border Crossing: Development of additional transportation channels to reach destination markets
       Transportation
       Transportation    Air Transport and Shipping: Use of air cargo forwarders and commercial airlines to transport goods to strategic markets
                         Cold Chain: Improved cold chain systems for small-scale farmers

 5
 5                       Food Safety & Quality: Regulatory models for overseeing food safety and quality; private quality labs
         Government
         Government      Compliance with Regulations: Comparative costs for farmers to comply with international food safety standards
         Agriculture
          Agriculture    Regulation of Inputs: Regulations surrounding seed and fertilizer use
         Regulations
         Regulations     Environment : Methods to enforce and implement pesticide regulation to protect the environment

 6
 6                       Trade Facilitation Capacity: Development of trade facilitation capacity measures; donor-funded methods for advancing trade
                         facilitation capacity development
        Trade Access
        Trade Access     Responses to Subsidies : Interim solutions to subsidies; advanced solutions for subsidies, including export risk guarantee
                         Recognition of Sovereignty: Methods to increase trade recognition
Source : BAH Analysis                                                                                                                               106
International Best Practice Assessment

 Benchmarking Methodology

 Benchmarking Analysis




                                         107
                                                                                                                                                                                                                              Leveraging Small Farmers Potential

Cooperatives of smallholder famers have become a common model
in Italy to increase their ability to compete on the market and create
economies of scale
                                                                                                             Overview of Italian Cooperatives by Crop
                                     Average Revenue per Coop Type ($mil)                                                                                                               Average Workforce per Coop Type (N)
                                                                                                                                                 59.43                                                                                                                          202
                                                                                                                                                                                                                                                                       114
                                                                                                                                      38.39                                                                                                                 29
                                                                                                                                                                                                                                                   22
                                                                                                                           6.04                                                                                                      16
                                                                                   4.81        4.93           4.98
                                                        3.72        3.79                                                                                                                                               9      11
                                            2.06                                                                                                                                        5         7         8
                           0.70                                                                                                                                           4
0.20         0.51                                                                                                                                              3




                                                                                                                                                                                                                      Dairy
                                                                                                 Dairy




                                                                                                                                                                                                           Forestry
                                                                                                                                                  Poultry




                                                                                                                                                               Supply




                                                                                                                                                                                                                              Wine




                                                                                                                                                                                                                                                                                Poultry
                                                                                     Wine




                                                                                                                            Tobacco




                                                                                                                                                                 Farm
  Forestry




                                                                                                                                                                                                                                                     Veg


                                                                                                                                                                                                                                                            Tobacco
                                                                                                                                                            Services &
                                                                                                                                         Rice
                                                        Grain




                                                                                                                                                                         Olive Oil


                                                                                                                                                                                        Grain

                                                                                                                                                                                                   Joint
                                                                                                                                                                                                Farming




                                                                                                                                                                                                                                                                         Rice
                                                                                                                                                                                                                                                 Fruits &
                                                                                                                                                                                                                                     Livestock
                                              Supply




                                                                                                                  Veg




                                                                                                                                      Sugar &




                                                                                                                                                                                                                                                                      Sugar &
                Joint




                                                Farm
             Farming




                                                                                                              Fruits &
                                           Services &




                                                                      Livestock
                               Olive Oil




                         Average Revenue per Member in Coop Type ($mil)
                                                                                                                                                                                                         Comments
                                                                                                                                                                                                          Comments
                                                                                                                                                 3.92
                                                                                                                                      0.14                                           The membership of many Italian cooperatives is
                                                                                                                                                                                     The membership of many Italian cooperatives is
                                                                                                              0.07
                                                                                                                           0.09                                                      comprised primarily of small producers
                                                                                                                                                                                     comprised primarily of small producers
                                                                                               0.06
                                                        0.03        0.03           0.04                                                                                                – The goal of the cooperative model is to support
0.00         0.01          0.02             0.02                                                                                                                                       – The goal of the cooperative model is to support
                                                                                                                                                                                         small farm operations
                                                                                                                                                                                          small farm operations
                                                                                                                                       Dairy
                                                                                     Supply




                                                                                                                                                  Poultry
                                                                                       Farm
              Forestry




                                                                                                   Veg
                                                                                  Services &




                                                                                                                            Tobacco
                                                                                                               Livestock
                                                        Grain



                                                                       Rice




                                                                                               Fruits &
                              Joint
                           Farming


                                             Wine




                                                                    Sugar &
Olive Oil




                                                                                                                                                                                       – Cooperatives aggregate efforts of farmers who
                                                                                                                                                                                       – Cooperatives aggregate efforts of farmers who
                                                                                                                                                                                         would not otherwise be able to compete
                                                                                                                                                                                          would not otherwise be able to compete
                                                                                                                                                                                         effectively on the market
                                                                                                                                                                                          effectively on the market
                          Average Number of Members per Coop Type (N)                                                                                                                  – In the absence of economies of scale,
                                                                                                                                                                                       – In the absence of economies of scale,
                                                                                                                                      693
                                                                                                                                                 1039                                    cooperatives enable small farmers to avoid
                                                                                                                                                                                          cooperatives enable small farmers to avoid
                                                                                                                           436                                                           significant economic losses that could force
                                                                                                                                                                                          significant economic losses that could force
                                                                                                              350
                                                                                               317                                                                                       them to sell their farms
                                                                                                                                                                                          them to sell their farms
                                                                                    177
                                                                     123
               31            52              57         58
   22
                             Forestry
  Poultry




                                             Dairy
                Joint




                                                                                                 Olive Oil




                                                                                                                                                    Rice
             Farming




                                                                                        Veg




                                                                                                                Grain


                                                                                                                            Wine


                                                                                                                                       Tobacco
                                                        Livestock




                                                                                    Fruits &




                                                                                                                                                 Sugar &




Source: Alternative Italian Agricultural Cooperative Systems in the Changing EU Food System; BAH Analysis
                                                                                                                                                                                                                                                                                          108
                                                                                                                                                        Leveraging Small Farmers Potential



Public cooperatives- those managed by an outside manager- tend
to use internal sources of equity extensively
                                        Overview of Italian Cooperatives by Equity Management Type
              Equity / Asset Ratio (EAR) by Coop Cluster Type                                                             Overview of Cooperatives by Function
                                                                                                                          Overview of Cooperatives by Function
                   0.48                      0.40                                                                 Cooperatives can be classified according to function:
                                                                                                                  Cooperatives can be classified according to function:
                                0.30
                                                                       0.25                                        – Bargaining & Service: provide members with
                                                                                                                   – Bargaining & Service: provide members with
                                                          0.22
       0.22                                                                                                           “intangibles” services
                                                                                                                       “intangibles” services
                                                                                    0.04                           – Hollow: more extreme form of bargaining coop
                                                                                                                   – Hollow: more extreme form of bargaining coop
                                                                                                                   – Labor: operate mostly in labor-intensive businesses
                                                                                                                   – Labor: operate mostly in labor-intensive businesses
  Bargaining &    “Hollow”      Labor      Durable-      “Public” Industrialized   Value-
    Service        Coop         Coop       Sharing        Coop        Coop         Added                           – Durable-sharing: allow small farmers to utilize costly
                                                                                                                   – Durable-sharing: allow small farmers to utilize costly
     Coop                                   Coop                                   Coop                               fixed assets at a fair price
                                                                                                                       fixed assets at a fair price
                                                                                                                   – Public: achieve large average scale of operations
                                                                                                                   – Public: achieve large average scale of operations
            Internal Sources Ratio (ISR) by Coop Cluster Type                                                         using products of a large number of small patrons
                                                                                                                       using products of a large number of small patrons
                                                          0.10                                                     – Industrialized: membership comprised of large,
                                                                                                                   – Industrialized: membership comprised of large,
                  0.00                                                 0.04         0.01
                                                                                                                      professional farmers
                                                                                                                       professional farmers
                               -0.10
                                                                                                                   – Value-added: focus on developing high value
                                                                                                                   – Value-added: focus on developing high value
    -0.31                                                                                                             processed products
                                                                                                                       processed products

                                            -0.87                                                                                Management of Public Coops
                                                                                                                                 Management of Public Coops
  Bargaining &   “Hollow”      Labor       Durable-      “Public” Industrialized   Value-
    Service       Coop         Coop        Sharing        Coop        Coop         Added                          Public coops are largely supervised by third-party
                                                                                                                   Public coops are largely supervised by third-party
     Coop                                   Coop                                   Coop                           managers hired by the cooperative. The managers instruct
                                                                                                                   managers hired by the cooperative. The managers instruct
                                                                                                                  farmers on the types and amounts of crops to grow, and
                                                                                                                   farmers on the types and amounts of crops to grow, and
            Allocated Equity Ratio (AER) by Coop Cluster Type                                                     manage the capital structure of the coop
                                                                                                                   manage the capital structure of the coop
       0.89        0.83                                                                                           On average, public coops tend to be leveraged because of
                                                                                                                   On average, public coops tend to be leveraged because of
                                0.57                                   0.50                                       the low contribution of farmers’ assets
                                                                                                                   the low contribution of farmers’ assets
                                             0.46                                   0.46
                                                          0.35                                                       – The coop is the only one that is using the internal
                                                                                                                     – The coop is the only one that is using the internal
                                                                                                                         sources of equity extensively
                                                                                                                          sources of equity extensively
                                                                                                                     – On average, 10% of revenues are retained as
                                                                                                                     – On average, 10% of revenues are retained as
  Bargaining &    “Hollow”      Labor      Durable-      “Public” Industrialized   Value-
    Service        Coop         Coop       Sharing        Coop        Coop         Added                                 financial resources, which represents a sizable share
                                                                                                                          financial resources, which represents a sizable share
     Coop                                   Coop                                   Coop

Note: EAR = percent share of total assets financed through equity; ISR = capacity of the cooperative to accumulate equity from business operations; AER = percentage of allocated equity on total equity
Source: Equity Management Practices in Italian Agricultural Cooperatives: a Cluster Analysis Approach; BAH Analysis
                                                                                                                                                                                                      109
                                                                                                                      Leveraging Small Farmers Potential

 In Macedonia, a number of small agriculture cooperatives have
 come together under an umbrella association, AKOM, which
 provides advocacy support
                                           Overview of Alliances of Cooperatives in Macedonia (AKOM)
                                            Support to Farmer's
                                            Support to Farmer's
                                              Associations in
                                              Associations in
                                             Macedonia Project
                                             Macedonia Project
                                      Provides support                                                              Comments
                                                                                                                    Comments
                             Partnership         Alliances of
                                                 Alliances of                                 Function: Founded in June 2007, AKOM is a non-
                                                                                               Function: Founded in June 2007, AKOM is a non-
Federation of Farmers
Federation of Farmers                          Cooperatives in
                                               Cooperatives in                                governmental organization created to unite, represent
                                                                                               governmental organization created to unite, represent
in Macedonia (FFRM)
 in Macedonia (FFRM)                          Macedonia (AKOM)
                                              Macedonia (AKOM)                                and serve cooperatives in Macedonia vis-à-vis
                                                                                               and serve cooperatives in Macedonia vis-à-vis
                                                         Provide representation               governmental and non-governmental institutions
                                                                                               governmental and non-governmental institutions
                           Prva lozarska                         Ovcarska kooperativa
                                                                                              concerning cooperative issues (policy, economy,
                                                                                               concerning cooperative issues (policy, economy,
                            Prva lozarska                        Ovcarska kooperativa
                            kooperativa
                             kooperativa                                Izgrev
                                                                         Izgrev               finance, legal etc.)
                                                                                               finance, legal etc.)
                          (Wine and fruit)
                           (Wine and fruit)                   (Sheep breeding & cheese)
                                                               (Sheep breeding & cheese)
                                                                                              Objectives:
                                                                                              Objectives:
                          Nektar Koop
                           Nektar Koop                             Agrokultura koop
                                                                                               – Promote the development of coops
                                                                                               – Promote the development of coops
                         (Beekeeping &                             Agrokultura koop
                          (Beekeeping &
                     accompanying products)
                     accompanying products)
                                                                (Procurement of Inputs)
                                                                 (Procurement of Inputs)       – Advance information exchange among coops
                                                                                               – Advance information exchange among coops
                                                                                               – Represent and provide advocacy for coops with
                                                                                               – Represent and provide advocacy for coops with
                            Farmer
                             Farmer                                     Demetra
                                                                         Demetra                 NGOs and the government
                                                                                                 NGOs and the government
                   (Sheep breeding & cheese)                   (Marketing for ag products)
                    (Sheep breeding & cheese)                   (Marketing for ag products)    – Support promotion and marketing efforts
                                                                                               – Support promotion and marketing efforts
                                                                                               – Provide services and expertise to coops
                                                                                               – Provide services and expertise to coops
                        Eko – kooperativa
                        Eko – kooperativa                               Koperant
                                                                        Koperant
                     (Processed forest fruits)                 (Marketing for ag products)     – Research and provide findings to coops
                                                                                               – Research and provide findings to coops
                      (Processed forest fruits)                 (Marketing for ag products)
                                                                                              Sample Activities :: Developed workshops, study
                                                                                               Sample Activities Developed workshops, study
                                                                                              trips and consulting services for cooperatives
                                                                                               trips and consulting services for cooperatives
                                Pigi
                                Pigi                                 Novaci koop
                                                                      Novaci koop
                          (Pig products)
                           (Pig products)                      (Marketing for ag products)
                                                                (Marketing for ag products)


                        Vedro kooperativa
                        Vedro kooperativa                                 Lejla
                                                                           Lejla
                     (Milk and accompanying
                      (Milk and accompanying                              (Milk)
                                                                           (Milk)
                             products)
                              products)

  Source: Alliances of Cooperatives in Macedonia website; BAH Analysis
                                                                                                                                                       110
                                                                                                                                                Leveraging Small Farmers Potential



Extension models around the world fall into four main categories:
public sector, partnerships, cost-recovery and privatized
                                                               Overview of Extension Model Types
                                                                                                 1
                                                                                                 1
                                                                                                                                      Systems that provide public sector
                        Extension Model Types by Delivery & Funding
                                                                                                                                      funding and delivery of extension
                                                                                                       Public Sector
                                                                                                       Public Sector                  services, either partially or entirely. Some
                                                                                                                                      countries have slowly started introducing
                                                                                                                                      charges for previously free services, such
                                                         Cost Recovery                                                                as the United States
           Public




                     Public Sector Extension
                                                      (fee-based) Systems                        2
                                                                                                 2
                             Services                                                                                                 Involves contracting out the delivery of
                                                                                                                                      extension field services to non-
                        (Canada, Israel, USA)
                                                            (OECD countries,                            Pluralism,
                                                                                                        Pluralism,                    governmental organizations, such as non-
                                                          previously in Mexico)                       Partnerships,
                                                                                                       Partnerships,                  profit NGOs, or to for-profit companies,
                                                                                                      Power Sharing
                                                                                                      Power Sharing                   including consultancy firms and farmers’
Delivery




                                                                                                                                      cooperatives

                                                                                                 3
                                                                                                 3                                    Some agricultural advisory services have
                                                                                                      Cost Recovery                   redesigned their fiscal arrangements,
                     Pluralism, Partnerships,             Privatization,                              Cost Recovery
           Private




                                                                                                                                      initiating cost recovery or fee-based
                         Power Sharing                  Commercialization                              (fee-based)
                                                                                                       (fee-based)                    services to farmers. Became prevalent in
                                                                                                         Systems
                                                                                                         Systems                      the European OECD member countries,
                       (Chile, Estonia, Hungary,        (The Netherlands, New                                                         largely because of national deficits
                     Venezuela, S. Korea, Taiwan)     Zealand, England & Wales)
                                                                                                 4
                                                                                                 4
                                                                                                                                      Both the funding and the delivery of
                                Public                           Private                             Privatization,
                                                                                                     Privatization,                   extension services are shifted entirely, or
                                                                                                   Commercialization
                                                                                                   Commercialization                  largely, to the private sector
                                                Funding




Source: FAO- Agricultural and Rural Extension Worldwide: Options for Institutional Reform in the Developing Countries; BAH Analysis
                                                                                                                                                                                     111
                                                                                                               Leveraging Small Farmers Potential

The US has established a public land-grant model for funding
extension services; the government funds extension at
universities, which in-turn provide services to farmers
                                Example of United States Model: Public Sector Extension Services
   1
   1
                Public Sector Extension Services- United States
                Public Sector Extension Services- United States                                                Comments
                                                                                                               Comments
                                                                                          Background: The Cooperative Extension System in
                                                                                           Background: The Cooperative Extension System in
                                         US Department of                                 the United States is a non-formal educational
                                                                                           the United States is a non-formal educational
                                          US Department of
                                         Agriculture (USDA)
                                         Agriculture (USDA)                               program designed to "reach out," with teaching and
                                                                                           program designed to "reach out," with teaching and
                                                                                          research. Land-grant institutions "extend" their
                                                                                           research. Land-grant institutions "extend" their
                                          Oversees
                                                                                          resources, solving public needs with college or
                                                                                           resources, solving public needs with college or
                        Approves
                         budget      National Institute of Food                           university resources through non-credit programs in
                                                                                           university resources through non-credit programs in
       Congress                      National Institute of Food
       Congress                        & Agriculture (NIFA)
                                       & Agriculture (NIFA)                               agriculture
                                                                                           agriculture
                                   Funds & supports                                       Structure: The USDA oversees the work of NIFA,
                                                                                           Structure: The USDA oversees the work of NIFA,
                                                                                          which funds and supports extension programs at
                                                                                           which funds and supports extension programs at
                      Land-grant             Washington State
                                             Washington State
                                                                                          land-grant universities. Programs are largely
                                                                                           land-grant universities. Programs are largely
                      universities          University Extension
                                            University Extension                          administered through thousands of county and
                                                                                           administered through thousands of county and
                                                 Program
                                                  Program                                 regional extension offices, which bring land-grant
                                                                                           regional extension offices, which bring land-grant
                                                                                          expertise to local levels
                                                                                           expertise to local levels
                   Oversees extension programs and
                          offices in over 39 counties                                     Funding: NIFA distributes annual Congressionally
                                                                                          Funding: NIFA distributes annual Congressionally
                                                                                          appropriated formula grants to supplement state and
                                                                                          appropriated formula grants to supplement state and
                                                                                          county funds to designated land-grant universities
                                                                                          county funds to designated land-grant universities
                                                                                           – The amount of funds provided to each institution
                                                                                           – The amount of funds provided to each institution
                                                                                             is determined by formulae, often statutorily
                                                                                              is determined by formulae, often statutorily
                                                                                             defined, that may include variables such as the
                                                                                              defined, that may include variables such as the
                                                                                             rural population or farm population
                                                                                              rural population or farm population
                                                                                           – Local or regional university leaders decide
                                                                                           – Local or regional university leaders decide
                                                                                             which specific projects will be supported by an
                                                                                              which specific projects will be supported by an
                                                                                             institution’s formula grant allotment
                                                                                              institution’s formula grant allotment




Source: USDA- NIFA website; Washington State University Extension Program; BAH Analysis
                                                                                                                                                 112
                                                                                                                                                      Leveraging Small Farmers Potential

  Kenya uses partnership arrangements for training, while Germany
  has developed a cost-recovery model; the Netherlands has
  privatized the provision of extension services
                                           Example of Partnership, Cost-Recovery and Privatized Models
2
2                                         3
                                          3                                                                                        4
                                                                                                                                   4
 Pluralism, Partnerships, Power Sharing-
  Pluralism, Partnerships, Power Sharing-   Cost Recovery (fee-based) System-
                                            Cost Recovery (fee-based) System-                                                             Privatization, Commercialization-
                                                                                                                                          Privatization, Commercialization-
                  Kenya
                   Kenya                               Germany
                                                        Germany                                                                                      Netherlands
                                                                                                                                                      Netherlands

                                                                                                                                                                Dutch
                                                                                                                                                                 Dutch
                                                                             State of
                                                                             State of
                   Gov’t of Kenya
                   Gov’t of Kenya                                                                                                                             Government
                                                                                                                                                              Government
                                                                            Thuringia
                                                                            Thuringia
                                                                                                                                              Assigns responsibility
                  Supports                                         Outsources &
  Buyer                                         NGO                  subsidizes
  Buyer         Sponsors &      Funds &         NGO                                                                                                                 DLV
                                                                                                                                                                    DLV
                    Funds         Trains                                                       Trains
                                                                              Private
                                                                              Private                          Farmer
                                                                                                                Farmer
                                                                            companies
                                                                            companies                        Organization
                                                                                                             Organization                       Provides training         Pays for services
                      Farmer
                       Farmer                                                                   Funds
                    Organization
                    Organization                                                               training
                                                                                                                                                                Farmers
                                                                                                                                                                Farmers


   Background: Public-private partnerships                            Background: In Germany, all of the Federal                           Background: The Netherlands decided to
   among the government, buyers, farmer groups                        States are responsible for extension services.                       privatize its public extension agents, at first by
   and NGOs have become more common to                                At one point, 80% of farmers used extension                          transferring them with initial financial support
   support smallholders’ compliance of IFSS.                          services, creating a drain on the state budget                       to work with farmer associations
   Such partnerships focus on providing                               Structure: The government has outsourced                             Structure: More recently, the Dutch
   information, financial support, and capacity                       extension services to private companies since                        government has assigning responsibility for
   building                                                           1998                                                                 extension services to a private company, DLV,
   Structure: The group’s certification is                            Funding: Public funding for extension                                which provides training to farmers in exchange
   sponsored by the buyer, with the training                          services dropped over 50%. As a result, part                         for a fee
   provided by the NGO. The certification loses                       of the extension cost is paid by farmers while                       Funding: Farmers pay for extension services
   validity if the relationship between the buyer                     the other part is subsidized by the                                  which are provided by DLV
   and farmer group fail. The government                              government. With the introduction of the cost-
   supports the process and relationship                              recovery model, demand for extension fell,
   Funding: Mix of funding is provided by the                         with only 13% of farmers using the system.
   buyer and NGOs, who provide training                               Farmers pay for training that they need
  Source: Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; Contracting for Extension; FAO- Agricultural and Rural Extension Worldwide: Options for
         Institutional Reform in the Developing Countries; BAH Analysis
                                                                                                                                                                                              113
                                                                                                                 Leveraging Small Farmers Potential

In order to improve farmers’ access to credit, South Africa has
developed a model based on financial intermediation at the local
level through “Village Banks”
                                                     Overview of Village Banks in South Africa
                      South Africa Village Banks                                                  Village Bank Evolution

                      South Africa’s farmers had difficulty in
                      accessing credit through commercial banks               Savings                    Loans             Commercial
   Background
   Background




                         – Distance from branch networks                       Phase                     Phase               Phase
                         – Lack of collateral
                         – Moral hazard and adverse selection
                                                                             Rotating                 Loans to             Provision of
                      Government did not offer customized credit
                                                                             savings                  community            insurance and
                      lines for small farmers
                                                                             associations             authorities as       fund
                                                                             (savings of              well as for          transferring to
                      Village Banks project was funded by USAID,
                                                                             specified                individuals for      producers
                      with additional resources from World Bank
                                                                             amounts to give          entrepreneurial      At this stage,
                      “Savings-first” institutions – concession of
                                                                             lump payouts to          and targeted         link to the
   Overview
   Overview




                      credit only when volume of savings allowed it
                                                                             each member)             investment           formal financial
                      Institutions owned by member farmers –
                                                                             Deposit and              activities           sector is
                      controlled by local communities
                                                                             withdrawal               Only achieved        stressed –
                      Decentralized services at local level
                                                                             services for             after savings        eased
                      Typically negligible loss ratio
                                                                             local producers          assets are at        regulations to
                                                                             Self-regulated           the level of         become formal
                                                                             with no                  supporting loan      institutions (e.g.
                      Different products according to farmer
                                                                             government               portfolio            lower
   Service Offering
   Service Offering




                      segments (defined by gender and source of
                                                                             interference                                  capitalization
                      income) – e.g. women farm workers,
                                                                             Small size and                                requirements)
                      unemployed rural poor, small scale
                                                                             profits – staff is
                      employers, etc.
                                                                             motivated
                      Bank revenue is generated by interest on
                                                                             through variable
                      loans and depositing of resources in the
                                                                             earnings
                      nearest commercial bank branch (“link bank”)

Source: Lit Search; BAH Analysis
                                                                                                                                                 114
                                                                                                                                                      Leveraging Small Farmers Potential

There are also a wide range of products that comprise the
agricultural finance system, including purchase order financing,
crop insurance and microfinance payment systems
                     Overview of Financial Products to Increase Smallholder Farmers’ Access to Credit
             Purchase Order Financing (POF)
             Purchase Order Financing (POF)                                            Crop Insurance
                                                                                       Crop Insurance                                       Microfinance Payment Systems
                                                                                                                                            Microfinance Payment Systems

             Transaction-based form of working capital                     A mechanism that provides insurance for                          System that enables individuals to perform
             financing.                                                    a variety of crop types in the event of                          basic banking functions via mobile phone
                – When a business receives an order                        loss                                                             and SMS
                  from a buyer, a POF lender advances                         – Different crop insurance types                                – Enables users to check status of
                  a loan to the business to cover all the                       include single-risk, combined, yield,                            accounts, make payments of loans
Definition
Definition




                  steps necessary (production,                                  revenue, whole-farm yield, and                                   and/or transfer funds
                  purchasing, processing, packaging,                            indirect insurance                                            – Can lower the costs of providing
                  etc.) to ship the order                                     – Crop insurance can be voluntary or                               financial services in remote, sparsely
                – POF allows for a longer horizon that                          compulsory, depending on the                                     populated areas
                  includes production of the commodity                          country. However, possible risks of                           – Continued growth and improved
                  to be shipped                                                 crop insurance include moral                                     interoperability depend heavily on the
                                                                                hazard, where farmers may take                                   regulatory and enabling environment
                                                                                excessive risk or not take enough                                and their impact on product
                                                                                measures to mitigate risk                                        innovation
             The purchase order (the contract between                      Farmers in Central and Eastern Europe                            In 2000, Kenya’s Equity Building Society
             the seller and buyer) becomes the                             hold approximately 3% of the crop                                introduced mobile banking in about 20 of
             collateral for the loan                                       insurance in the world. Most insurance                           the country’s most isolated towns and
                – The accounts receivable is                               premiums are concentrated in the United                          villages
                  transferred to the lending institution                   States and Europe                                                    – The program offered a range of
Example
Example




                  and becomes the source of loan                           Donors can play a role in the introduction                             financial services, including
                  repayment                                                of crop insurance. For instance, the World                             agricultural loans, even in remote
                – The financial institution collects                       Bank provided research support before                                  rural areas, with full cost recovery. By
                  payment for the loan plus interest and                   the introduction of crop insurance in                                  early 2004, these mobile units were
                  fees from the buyer once the product                     Morocco to ensure success                                              serving 29 locations and about
                  has been delivered                                                                                                              12,000 clients

Source: System of Warehouse Receipts; Managing risks and designing products for agricultural microfinance; Warehouse Receipts: facilitating credit and commodity markets; Insurance of crops in
developing countries; BAH Analysis
                                                                                                                                                                                                  115
                                                                                                                              Leveraging Small Farmers Potential



According to the FAO, land consolidation is a best practice for
addressing rural poverty in Eastern Europe
                                           Overview of Best Practice Land Consolidation Techniques
              Steps to Comprehensive Land Consolidation
1
1                                                                                                                 Methods to Land Consolidation
       Initiate Land                   Includes analyzing the situation to identify needs,                        Methods to Land Consolidation
        Initiate Land
      Consolidation                    preparing a concept plan that outlines goals, costs
      Consolidation
                                       and sources of financing, receiving approval and                    Land consolidation can occur in several ways, for
           Project
           Project
                                       forming management team to oversee effort                           example:
                                                                                                           – As consolidated farm, where a farm comprises
2
2                                      Activities such as selecting consultants, defining the                 a number of parcels located some distance
      Design Project                   area and scope of the project, preparing the cost-                     from one another
      Design Project
                                       estimate and schedule of the project, and defining the              – As consolidated ownership, where a farmer’s
                                       performance monitoring system to measure success                       holding includes land owned by the farmer as
                                                                                                              well as land leased from others. The leased
3
3
                                       Includes identifying or adjudicating boundaries and                    land may be owned by a neighboring farmer or
    Inventory Existing
     Inventory Existing                                                                                       it may involve a case of “absentee ownership”
                                       legal status of parcels, delimiting important
         Situation
         Situation                                                                                            with the owner living in a distant city
                                       environmental areas, determining the value of parcels,
                                       and addressing objections to land ownership
4
4                                                                                                                             Advantages
                                                                                                                              Advantages
                                       Activities such as preparing a plan the details the new
    Define the Detailed
    Define the Detailed                parcel layout location of new roads, facilities, etc.,
    Consolidation Plan
    Consolidation Plan                                                                                     Land consolidation can offer benefits:
                                       socializing the plan with different scenarios and the
                                       impact of each, and approving and refining the plan                 – Facilitate the creation of competitive agricultural
                                                                                                              production arrangements by enabling farmers
5
5                                                                                                             to have farms with fewer parcels that are larger
    Implement Detailed
     Implement Detailed                Includes selecting the contractors to complete the
                                                                                                              and better shaped, and to expand the size of
    Consolidation Plan
     Consolidation Plan                work, constructing any new or reformed public works,
                                                                                                              their holdings
                                       and surveying new boundaries
                                                                                                           – Can offer opportunities for land owners to sell
6
6                                                                                                             their land to others willingly. The objective is not
        Conclude
        Conclude                       Activities include addressing any remaining                            to make people landless
      Consolidation
      Consolidation                    compensation or cost issues; updating the cadastral
        Process
         Process                       map, and issuing and registering new titles
Source: FAO- The design of land consolidation pilot projects in Central and Eastern Europe; BAH Analysis                                                             116
                                                                                                                                                   Demand-Driven Export Strategies

Three main methods were used to coordinate multiple donor
activities to support development of SIEPA in Serbia: line ministry
coordination, sub-group meetings and a donor coordination matrix
      T VE
                                    Donor Coordination Mechanisms to Support Development of SIEPA
       T   E
  NO STIIV
   NO S T      Donors                            Coordination Mechanisms                               Recipient
      U
      U
  HA A
EX H
EX
                EAR
                EAR                                                                                                                                  Comments
     Institutional strengthening                                                                                                                     Comments
      Institutional strengthening
            & cost sharing
             & cost sharing                                                                                                         Overview: Created in 2001 by the Government of
                                                                                                                                     Overview: Created in 2001 by the Government of
                                                                                                                                    Serbia, SIEPA oversees the promotion of Serbian
                                                                                                                                     Serbia, SIEPA oversees the promotion of Serbian
               USAID                                       Line Ministries
                                                           Line Ministries                                                          exports on the international market, and assists
                                                                                                                                     exports on the international market, and assists
               USAID
                                                        (Ministry of Economy,
                                                         (Ministry of Economy,                                                      foreign investors and buyers
        Cluster development
        Cluster development                      1
                                                 1                                                                                   foreign investors and buyers
              support                                     National SME Dev
                                                          National SME Dev
               support
                                                               Agency)                                                              Types of Coordination: Since its inception,
                                                                                                                                     Types of Coordination: Since its inception,
                                                                Agency)
                                                                                                                                    SIEPA has received assistance from a number of
                                                                                                                                     SIEPA has received assistance from a number of
               UNIDO
               UNIDO                                                                                                                donors. Three main methods have been used to
                                                                                                                                     donors. Three main methods have been used to
    Support for Natl Agency for
    Support for Natl Agency for                                                                                                     coordinate assistance efforts:
       SME Development
                                                                                                                                     coordinate assistance efforts:
        SME Development
                                                                                                                                       – Coordination through line ministries, such as
                                                                                                                                       – Coordination through line ministries, such as
                                                                                                                                           the Ministry of Economy, directly impacted
                                                                                                                                            the Ministry of Economy, directly impacted
     Japanese Government
     Japanese Government                                      Donor                                                                        by the assistance
                                                                                                                                            by the assistance
          Funding support                                     Donor                               Serbia Investment
                                                                                                   Serbia Investment
          Funding support
                                                         Coordination w/
                                                          Coordination w/                                                              – The UN Resident Director and the World
                                                                                                                                       – The UN Resident Director and the World
                                                 2
                                                 2                                                    and Export
                                                                                                      and Export
                                                         10 Sub-groups &
                                                         10 Sub-groups &                                                                   Bank initiated monthly donor coordinator
                                                                                                                                            Bank initiated monthly donor coordinator
                                                                                                  Promotion Agency
                                                                                                  Promotion Agency
                GTZ
                GTZ                                       SIPEA Support
                                                          SIPEA Support                                                                    meetings to review current, future and
                                                                                                                                            meetings to review current, future and
                                                                                                       (SIEPA)
                                                                                                        (SIEPA)
        Business advisory &
        Business advisory &                                                                                                                planned activities and provided joint policy
                                                                                                                                            planned activities and provided joint policy
         linkage services
          linkage services                                                                                                                 guidance to the government. SIEPA
                                                                                                                                            guidance to the government. SIEPA
                                                                                                                                           promoted and supported these meetings
                                                                                                                                            promoted and supported these meetings
         Swiss Dev Corp
         Swiss Dev Corp                                                                                                                    directly
                                                                                                                                            directly
       Funding for business
        Funding for business                                                                                                           – USAID developed a donor coordination
                                                                                                                                       – USAID developed a donor coordination
       development services
       development services                                                                                                                matrix to track all donor activities
                                                                                                                                            matrix to track all donor activities
                                                              Donor
                                                               Donor                                                                Results :: SIEPA has received a number of
                                                                                                                                     Results SIEPA has received a number of
       World Bank // MIGA
       World Bank MIGA                           3
                                                 3          Coordination
                                                            Coordination                                                            awards, including shortlist for WTPO Best Trade
         Capacity building &                                  Matrix                                                                 awards, including shortlist for WTPO Best Trade
         Capacity building &                                   Matrix                                                               Promotion Organization from a Developing
     institutional strengthening
      institutional strengthening
                                                                                                                                     Promotion Organization from a Developing
                                                                                                                                    Country in 2008 and special prize for the Best
                                                                                                                                     Country in 2008 and special prize for the Best
                                                                                                                                    Practices in Promotion from the La Baule 2007
                                                                                                                                     Practices in Promotion from the La Baule 2007
                SIDA
                SIDA                                                                                                                World Investment Conference
                                                                                                                                     World Investment Conference
        National FDI strategy
        National FDI strategy
            development
             development

  Source: Lit Search; EAR Action Programme 2006 for Serbia; SEDP Final Report, 2007; Comparative Overview of Local Government Ministries in the
  Region and Abroad; Transitional Support Strategy Update; SME Development
                                                                                                                                                                                      117
                                                                                                                                                       Demand-Driven Export Strategies

Kenyan green bean exporters have developed a strategic market in
the UK by tailoring production to buyer preferences, using contract
farming and developing additional safety codes of practices
                  Key Success Factors: Development of Kenyan Green Beans to Meet Consumer Needs
 II
                                    Studies show that buyers in developed countries may choose to buy agricultural commodities from developing markets
                                    for three main reasons: 1) the buyer may not find any existing suitable standard for regulating particular production
                                    processes 2) the buyer may not regard existing standard as sufficiently credible; or 3) the buyer may deliberately
                                    develop a standard that differentiates the in-house brand from that of competitors
         Tailoring
          Tailoring                 Kenya has developed a strategic market for exporting green beans to supermarkets in the United Kingdom
        Production
        Production                     – Semi-processed ‘high-care’ products such as mixed salads, assortments of cut vegetables for dips, vegetable
         to Buyer-
         to Buyer-                        kebabs, stir-fry and other mixes, are all produced under very stringent hygienic conditions
           Driven
           Driven                      – Kenyan producers have been able to add value, via consumer packing of cut, sliced and modified vegetables or
       Supply Chain
       Supply Chain                       vegetable combinations. The “high-care” market has been a key to profitability
                                    Exporters who supply the UK supermarket chains closely monitor and coordinate input supply, quality and usage as
                                    well as technical advice to the growers. EU importers do not directly monitor the green bean growers, but rather monitor
                                    the exporters and expect that the exporters will in turn monitor their growers. Leading export companies will regularly
                                    test workers for presence of pathogens, penalizing producers for any infractions

II                                  Contract farming has helped poor smallholders in Kenya by facilitating access to markets, such as the UK
 II
                                      – In particular, contract farming allows smallholders access to technical information regarding the pesticide usage,
  Using Contract
  Using Contract                         hygiene requirements and agronomic practices that facilitate compliance with IFSS
    Farming to
    Farming to                        – Contracted smallholders receive technical information in the form of handouts, training and field extension
  Meet Demand
   Meet Demand                           services
                                      – Contract production of green beans enables buyers to monitor and enforce IFSS compliance (at lower transaction
                                         costs) under a longer-term relationship
III
 III
                                    Kenya has also developed homegrown food safety standards (KenyaGAP, Horticultural Ethical Business Initiative) for
       Developing
       Developing                   horticulture crops destined for the export market
       Additional
        Additional                  Compliance with these codes are mandatory for growers and exporters
         Code of
         Code of                    Development of code of practices is a strategic method for exporters to signal their desire to meet high consumer
        Practices
        Practices                   standards
 Source: Strategic use of private standards to enhance international competitiveness: Vegetable exports from Kenya and elsewhere; Food Safety Requirements in African Green Bean
 Exports and Their Impact on Small Farmers; BAH Analysis
                                                                                                                                                                                    118
                                                                                                                                         Demand-Driven Export Strategies

The vast majority of Romanian dairy producers are family farms
that have less than two cows, with 21% of milk production going to
the milk collection system…
                                                           Overview of Romanian Dairy Producers

                 Size Structure of Livestock Farms (2001)                                                           Total Raw Milk Production (2001)
                                                                                                                     State Farms              Other Large Farms
      95%                                                                                                                                            1%
                                                                                                                         2%




              4.01%

                        0.36%      0.08%    0.04%     0.03%     0.02%     0.01%     0.01%                                          Family Farms
                                                                                                                                      97%
      1-2        3-5      6-10     11-15     16-20    21-30     31-50     51-100  more
     heads      heads    heads     heads     heads    heads     heads     heads than 100
                                                                                  heads




Size Distribution of Dairy Industry, Number of Employees (2004)                                                       Use of Milk Production (2001)
         93.2%


                                                                                                                           Milk Collection
                                                                                                                               System
                                                                                                                                21%

                                                                                                                                             Farm Usage &
                                                                                                                                              Direct Sales
                          2.90%             3.00%                                                                                                 79%

                                                              0.70%             0.20%

         0–49              50–99           100–249            250–499          Over 500

Source: The Dynamics of Vertical Coordination in Agrifood Chains in Eastern Europe and Central Asia; BAH Analysis
                                                                                                                                                                      119
                                                                                                                                           Demand-Driven Export Strategies

…however, a recent survey of dairies showed increased use of
collection arrangements, payment systems and support
mechanisms for smallholder farmers in Romania
                               Overview of Collection Centers, Payments and Assistance in Romania
                     Types of Collection Arrangements
                     Types of Collection Arrangements                                                         Overview of Farm Assistance by Dairies Surveyed
                                                                                                              Overview of Farm Assistance by Dairies Surveyed
  1
  1                                                                                                                            Danone    Friesland Promilch      Raraul
                                     Farmers deliver milk to
      Farmer to
      Farmer to                     collection points at firms
        Firm                                                         Collection Point //
                                                                     Collection Point                Extension services
         Firm
                                                                        Dairy Firm
                                                                         Dairy Firm
                                                                                                     Provide good quality
  2
  2                                                                                                  inputs financing
                                     Firms collect milk from
    Firm from                        farmers for delivery to
    Firm from                           collection points
                                                                                                     Support to purchases of
                                                                     Collection Point //
                                                                     Collection Point
     Farmer
      Farmer                                                                                         simple inputs
                                                                        Dairy Firm
                                                                         Dairy Firm
                                                                                                     Investment support by
  3
  3                                                                                                  small loans
                                 Collect                         Deliver
    3rd Party
    3rd Party                     milk      Collection
                                            Collection            milk                               Support in receiving
   Conveyors                                                                Dairy Firm
                                                                            Dairy Firm
   Conveyors                                  Point
                                              Point                                                  bank loans



                   Payment Systems to Ensure Quality
                   Payment Systems to Ensure Quality                                                                                 Comments
                                                                                                                                     Comments
                                                                                                          Examples of extension programs:
                                                                                                          Examples of extension programs:
  1 Payments Proportional to Quality: Farmers are paid at
  1
        collection centers according to the fat content and protein                                        – Friesland sends inspectors in the field, who visit farmers
                                                                                                            – Friesland sends inspectors in the field, who visit farmers
                                                                                                              and advise them on milk hygienic circumstances, cleaning
                                                                                                               and advise them on milk hygienic circumstances, cleaning
        content, density and germ counts in milk supplied
                                                                                                              practices, and fodder management
                                                                                                               practices, and fodder management
  2 Bonus System: Farmers are paid a relatively low base price, but
  2                                                                                                        – Promlich distributes leaflets with practical information on
                                                                                                            – Promlich distributes leaflets with practical information on
        bonuses are provided when farmers deliver above-average milk                                          cultivating feed, storing milk, cleaning practices, etc.
                                                                                                               cultivating feed, storing milk, cleaning practices, etc.
        quality, according to protein content, germ count and consistency                                 Examples of investment programs:
                                                                                                          Examples of investment programs:
        in delivery                                                                                        – Danone supports farmers who aim to improve their business
                                                                                                            – Danone supports farmers who aim to improve their business
                                                                                                              through small-scale investments. The farmer may apply for
                                                                                                               through small-scale investments. The farmer may apply for
  3 Penalization System: Firms measure milk according to a
  3                                                                                                           pre-financed inputs only after he has delivered good-quality
                                                                                                               pre-financed inputs only after he has delivered good-quality
        specified number of grades. Farmers delivering milk at the                                            milk to Danone for at least six months.
                                                                                                               milk to Danone for at least six months.
        lowest grades are penalized
Source: The Dynamics of Vertical Coordination in Agrifood Chains in Eastern Europe and Central Asia; BAH Analysis
                                                                                                                                                                          120
                                                                                                                                                       Demand-Driven Export Strategies

Effective promotion methods include targeted marketing based on
product type and pre-positioning of commodities at agriculture
food fairs
                                                        Innovative Promotion & Branding Methods
                            Targeted Promotion Based on Product Type
                            Targeted Promotion Based on Product Type                                                       Pre-Positioned Distribution at Fairs
                                                                                                                           Pre-Positioned Distribution at Fairs
                             ASOEX / ProChile co-funded an intensive marketing                                       Agricultural food fairs are important for promoting
                             campaign targeting the sale of blueberries in the UK                                    new products, learning about consumer tastes, and
                             “Eat the Blues – You Have to Eat Them to Beat                                           increasing innovation
                             Them” campaign included a number of efforts:                                            Smallholder farmers may be constrained if they
                               – An on-the-street sampling scheme in Yorkshire,                                      cannot ship and distribute their products readily at
                                 with handouts of fresh, free blueberries                                            international fairs
Overview
Overview                       – Free 3-week distribution to premium health spas                                       – The USAID South African Trade Hub addressed
                               – Aggressive sampling at radio stations and shows                                          this challenge by sponsoring six regional
                                                                                                                          companies to attend the 2006 Spring Fancy
                               – A national print and online PR campaign geared                                           Foods Show in Chicago
                                 to the over-50s with the potential to reach over                                      – The program helped pre-position distribution of
                                 3.5 million consumers                                                                    products so that small farmers could promote
                                                                                                                          and easily sell their products with minimal lag
                                                                                                                          time during and after the food fairs

                             Shipments have grown from 1,440 tons in 2005-2006                                       Participation helped raise the collective profile of
                             to 2,307 tons in 2006-2007, an increase of 60 percent                                   southern Africa as a supply source for specialty foods
  Impact
   Impact                    Due the success of the pilot program, the marketing                                     Three of the six companies sponsored by the USAID
                             campaign has become of yearly event, with possible                                      Trade Hub have since realized new exports to the
                             expansion into other countries                                                          U.S. specialty and gourmet food sector

                                                                                                                         Timeline for Success at Food Fairs


                                                                                                          Year 1                                Year 2                              Year 3
                                                                                                     Buyers examine                      Buyers take sample                    Buyers are ready to
                                                                                                       product and                        of product at food                    purchase larger
                                                                                                     express interest                     fair and tests with                   orders based on
                                                                                                                                             local market                      market assessment

Sources: “The Emergence of New Successful Export Activities in Latin America: The Case of Chile” (IADB); Lit Search, Interviews, USAID website; Fresh Plaza website; BAH Analysis
                                                                                                                                                                                               121
                                                                                                                                  Demand-Driven Export Strategies

    In order to optimize pricing for commodities, best practices point
    to three solutions: align with market prices, establish a niche
    product or develop a franchised quality product
                                              Methods to Optimize Pricing for Agricultural Commodities
1
1                                                                 2
                                                                  2                                                 3
                                                                                                                    3
            Align with Market Prices
            Align with Market Prices                                            Establish a Nice Product
                                                                                Establish a Nice Product                Buy Into A Franchised Product
                                                                                                                        Buy Into A Franchised Product




      The Foreign Agricultural Trade of the                             Kenyan green bean producers pinpointed          The Pink Lady® trade mark was originally
      United States (FATUS) service provides                            a market for “high-care” products to UK         established in Australia for use on apples
      historical prices for USA’s exports and                           supermarkets                                    that met specified quality standards
      imports, by crop and country of origin /                            – Customers differentiated value based           – In countries where the trade mark is
      destination                                                           on quality of the product rather than            registered, apples sold under the
         – User-friendly interface, with updated                            price                                            Pink Lady® brand must meet
           information                                                    – Exporters enforced and even                      rigorous and specific standards, and
         – Diverse breakdowns, allowing                                     developed stringent international                the trade mark can only be used
           producers to even assess impact of                               food safety standards to meet                    under license
           customs and duties on market prices                              consumer quality standards                     – License holders pay royalties, which
           for their crops                                                – Exporters have also developed                    cover management of the trade mark
      Service is on-line and free of charge                                 flexible distribution arrangements to          – Members span over four continents
      The tool allows producers to check trends                             supermarkets, at times decreasing or             in countries such as the United
      and recent development of crops in                                    increasing the size of order hours               States, South Africa, Chile, Japan,
      international markets                                                 before delivery. The variability is              Uruguay, etc.
         – Monitor competitors’ positions                                   offset by the continued relationship        Because of the high quality of the Pink
                                                                            with the buyer                              Lady brand, producers can expect to
         – Assess and act on seasonal trends
                                                                                                                        receive a premium on price
    Source: USAID; USDA; International Pink Lady Alliance Limited; Booz Allen Analysis
                                                                                                                                                                 122
                                                                                                                                                  Infrastructure Capacity Building

Despite the lack of water access, the Israeli government has
developed innovative irrigation methods to increase productivity
while decreasing water use
                                                   Overview of Israel’s Irrigation System and Impact
                     Types of Micro Irrigation Methods
                     Types of Micro Irrigation Methods                                                                          Implementation & Impact
                                                                                                                                 Implementation & Impact

                                   Drip irrigation can supply from one liter to 20                                  Water Use Per Hectare          Crop Productivity Per Unit
                                   liters per hour. With a peak water utilization                                          (m3/yr)                     of Water (kg/m3)
  Drip Irrigation
  Drip Irrigation                                                                                                    9000                                                2.5
                                   rate of 95%, this method is suitable for
                                   intensive cultivation                                                                             5700
                                                                                                                                                        1.2
                                   Sprinklers are designed for crops that require
  Mini-sprinkler                   irrigation of an entire area or field. The
  Mini-sprinkler
                                   sprinklers achieve a water utilization rate of
                                   70%-80%                                                                           1952            1995              1952             1995

                                   In an underground drip irrigation system, air                                                            Comments
                                                                                                                                            Comments
                                   valves open when the water is turned off and
   Underground
   Underground                     allow air into the pipe to prevent external dirt                                Despite the scarcity of water, the Israeli government has
                                                                                                                    Despite the scarcity of water, the Israeli government has
                                   from being sucked into the dripper                                              taken a number of steps to increase farmers’ access to
                                                                                                                    taken a number of steps to increase farmers’ access to
                                                                                                                   water
                                                                                                                    water
Portion of Israeli Land with                     Efficiency Rate According                                            – According to the Water Law, water is considered a public
                                                                                                                      – According to the Water Law, water is considered a public
Different Irrigation Types (%)                     to Irrigation Types (%)                                              good and managed by the Water Commissioner, who is
                                                                                                                         good and managed by the Water Commissioner, who is
                                                                                                                        responsible for determining the use and allocation of
                                                                                                                         responsible for determining the use and allocation of
                                                     95%                                                                water in all areas, including irrigation for agriculture
                                                                                                                         water in all areas, including irrigation for agriculture
     Sprinklers                                                                                                       – In 2006, the Israeli government developed the National
                                                                                                                      – In 2006, the Israeli government developed the National
                                                                          75%
       20%                                                                                                              Program for Promoting Water Technologies -- NEWTech.
                                                                                                                         Program for Promoting Water Technologies NEWTech.
                                                                                                                        The program invests in human capital, R&D funding and
                                                                                                                         The program invests in human capital, R&D funding and
         Micro-Irrigation
                                                                                                                        local market implementation for the development of
                                                                                                                         local market implementation for the development of
              80%
                                                                                                                        irrigation systems. The Israeli Ministry of Industry, Trade
                                                                                                                         irrigation systems. The Israeli Ministry of Industry, Trade
                                                                                                                        and Labor leads the Program with 10 other government
                                                                                                                         and Labor leads the Program with 10 other government
                                               Micro-irrigation         Sprinker                                        entities
                                                                                                                         entities
Source: Irrigation and Desertification: Ecological Consequences of Arid Land Reclamation in the Aral Sea Basin and Land
       Degradation Control; Management of Water Resources in Israel; Israel Agriculture; BAH Analysis
                                                                                                                                                                                  123
                                                                                                                                                                         Infrastructure Capacity Building

                          Four main types of irrigation charging systems exist around the
                          world: area-based, crop-based, volumetric and tradable water
                          rights
                                                                                        Types of Irrigation Charging Systems
                                         Area-based
                                         Area-based                                       Crop-based
                                                                                          Crop-based                                          Volumetric
                                                                                                                                              Volumetric                  Tradable Water Rights
                                                                                                                                                                          Tradable Water Rights

                                 A fixed rate per hectare of                      A variable rate per irrigated                   A fixed rate per unit water              Entitlements of users in an
                                 farm with a “two-part” tariff                    hectare of crop, i.e. different                 received, where the charge is            irrigation project, otherwise
Description
Description




                                 designed to cover the fixed                      charges for different crops                     proportional to the volume; or, a        known as rights holders,
                                 costs of the service, or a                       (not based on volume, but                       rising block tariff where the            are allowed to buy or sell
                                 fixed rate per hectare                           the type of crop and area                       charge is tied to quantity of            rights in accordance with
                                 irrigated                                        irrigated serve as proxies for                  water, but tiered unit costs can         specified rules designed
                                                                                  the volume of water                             be applied for different farms           primarily to protect third
                                                                                  received)                                                                                parties’ rights

                                 The marginal price of water                      The marginal price of water                     Provides an incentive to save            Brings supply and demand
 Incentives for Farmers
Incentives for Farmers




                                 is zero. Farmers take as                         is zero. Farmers take as                        water and has the potential to           into balance. Where water is
                                 much water as they would                         much water as they would                        reduce consumption                       scarce and rationed, farmers
                                 like to consume, but the cost                    like to consume, but the cost                   For block tariffs, low rates are for     will use water carefully even
                                 is unaffected by the amount                      is unaffected by the amount                     substantial, initial entitlements        though the marginal price to
                                 used                                             used                                            and high rates are for additional        them may be zero
                                                                                                                                  water beyond threshold. Results
                                                                                                                                  in a low total cost and a high
                                                                                                                                  marginal price

                                 In Spain, the most                               In Egypt, several charging                      In Israel, farmers receive a             Available in the United
 Country Example
 Country Example




                                 widespread charging                              mechanisms exist, including                     water allocation for which they          States, sales require
                                 mechanism is a fixed charge                      the crop based pricing for                      are charged on an increasing             authorization by a licensing
                                 per hectare. The variable                        irrigation                                      block tariff according to the            authority (most western
                                 element is the energy cost                                                                       percentage of the allocation             states) or may require court
                                 associated with pumping and                                                                      used                                     approval (e.g. Colorado)
                                 pressurizing water delivery
                                 systems

                          Source: Water Charging in Irrigated Agriculture; Cost Recovery for Agriculture: Egyptian Experience; BAH Analysis
                                                                                                                                                                                                           124
                                                                                                                                                  Infrastructure Capacity Building

A number of methods exist to support expansion of greenhouses,
including donor funding, tax credits, investment support, income
support and loan programs
                                        Overview of Methods to Support Greenhouse Development
             Methods to Support Greenhouse Development
             Methods to Support Greenhouse Development                                                          Examples of Donor Support Mechanisms
                                                                                                                Examples of Donor Support Mechanisms

                                 Funding can come in several forms, from investment                   1
                                                                                                      1 USAID / Croatia: Modernization of Greenhouse Facilities
                                 loans for building greenhouses (World Bank in
 Donor Funding
 Donor Funding                   Armenia) or providing monetary support to improve
                                 machinery (USAID in Croatia) to decrease costs and                       USAID // Croatia
                                                                                                          USAID Croatia             Help farmers reorganize and
                                 improve competitiveness                                                                              purchase equipment for
                                                                                                                                            greenhouses

                                 The Canadian government set up the Scientific                            Farmers had outdated equipment and the capacity of their seedling
                                 Research and Experimental Development Tax Credit                         production facilities was inadequate. Machinery was also expensive
    Tax Credits
    Tax Credits                  Program, an incentive program designed to                                for farmers
                                 encourage the development of new products and                            With USAID support, pepper production jumped by 50% over the
                                 processes, including greenhouses                                         previous year and costs fell by 15%
                                 The Government of Ontario, Canada, has set-up a                      2
                                                                                                      2        Donor Efforts in Armenia to Improve Infrastructure
                                 $12M investment fund to promote consumer
    Investment
     Investment                  awareness of locally produced goods, including
      Support
       Support                   agriculture grown using greenhouses. Programs
                                 include consumer promotion and setting-up a                          ACDI/VOCA
                                                                                                      ACDI/VOCA             USDA CARD
                                                                                                                            USDA CARD              DAI-ASME
                                                                                                                                                   DAI-ASME              IFAD
                                                                                                                                                                          IFAD
                                 distribution network for greenhouse goods
                                                                                                               Technical            Marketing               Market     Loans
                                 The Government of Canada has developed a Net                                  assistance           assistance              research

      Income                     Income Stabilization Account (NISA) program, which
       Income
                                 is meant to stabilize farm income. Farmers deposit a
      Support
      Support                    portion of their income, which is directly matched by
                                 the government. In years of low income, farmers can                                                     Greenhouses
                                                                                                                                         Greenhouses
                                 make withdrawals
                                 The Canadian government has a federal government
                                                                                                            The greenhouse industry received support from multiple donors to
                                 guaranteed loans program designed to increase the
 Loan Programs                                                                                              improve infrastructure. From 2003-2006, the acreage of
 Loan Programs                   availability of loans for greenhouse producers. Farm
                                                                                                            greenhouses in Armenia doubled. On average, 10 ha of
                                 Credit Canada (FCC) also provides flexible loan
                                                                                                            greenhouses were constructed annually
                                 options features, including multiple interest rate and
                                 payment options
Source: USAID Website; Government of Canada Website; Assessment of the Potential of the Armenian Greenhouse Cluster; BAH Analysis
                                                                                                                                                                                 125
                                                                                                                                  Infrastructure Capacity Building



Extension programs for irrigation can be provided through
universities, governments or public-private partnerships
                                              Delivery Types of Extension Programs for Irrigation
                                          In the United States, universities provide tailored extension services in greenhouse development
                                           In the United States, universities provide tailored extension services in greenhouse development
                                          – In Colorado, major crops grown in greenhouses are container-grown plants, including potted color,
                                           – In Colorado, major crops grown in greenhouses are container-grown plants, including potted color,
                                               bedding and foliage plants, cut flowers, and tomatoes
                                                bedding and foliage plants, cut flowers, and tomatoes
                                          – The Colorado State University Floriculture and Greenhouse Extension program offers a number of
                                           – The Colorado State University Floriculture and Greenhouse Extension program offers a number of
      University
      University                               tools for farmers, including 1) publications in areas such as disease management and water reuse; 2)
                                                tools for farmers, including 1) publications in areas such as disease management and water reuse; 2)
                                               presentations and workshops; 3) access to in-house professors who are experts in greenhouse; 4)
                                                presentations and workshops; 3) access to in-house professors who are experts in greenhouse; 4)
                                               access to an online Cooperative Extension Greenhouse Listserv that serves as a discussion list and
                                                access to an online Cooperative Extension Greenhouse Listserv that serves as a discussion list and
                                               a point of exchange for greenhouse farmers
                                                a point of exchange for greenhouse farmers


                                          In Alberta, Canada, the Ministry of Agriculture and Rural Development has developed a number of resources
                                           In Alberta, Canada, the Ministry of Agriculture and Rural Development has developed a number of resources
                                          to support and promote greenhouse vegetable production
                                           to support and promote greenhouse vegetable production
                                          – Online guides include information on industry statistics, regulatory requirements, market basics,
                                           – Online guides include information on industry statistics, regulatory requirements, market basics,
    Government                                 production knowledge, investment and capital requirements
                                               production knowledge, investment and capital requirements
    Government
                                          – Publications about starting and developing greenhouses in Alberta
                                           – Publications about starting and developing greenhouses in Alberta
                                          – Access to technical advisors in the Ministry who are greenhouse specialists, horticulture specialists
                                           – Access to technical advisors in the Ministry who are greenhouse specialists, horticulture specialists
                                               and economic analysts
                                               and economic analysts


                                          In the United States, a regional public-private coalition was established to promote Integrated Pest
                                           In the United States, a regional public-private coalition was established to promote Integrated Pest
                                          Management (IPM) for the greenhouse industry in Northern New England
                                           Management (IPM) for the greenhouse industry in Northern New England
                                          – The coalition included growers, researchers, extension specialists and educators, socio-economists,
                                           – The coalition included growers, researchers, extension specialists and educators, socio-economists,
   Public Private
   Public Private                              bio-control and pesticide suppliers, state agricultural personnel and other key industry representatives
                                               bio-control and pesticide suppliers, state agricultural personnel and other key industry representatives
   Partnerships
    Partnerships                          – The main objectives of the program are to 1) develop workshops on IPM 2) develop an analysis of the
                                           – The main objectives of the program are to 1) develop workshops on IPM 2) develop an analysis of the
                                               needs of growers to improve productivity and reduce chemical pesticide inputs; 3) create a coalition
                                               needs of growers to improve productivity and reduce chemical pesticide inputs; 3) create a coalition
                                               of stakeholders in the greenhouse industry which will serve as the foundation for preparing
                                               of stakeholders in the greenhouse industry which will serve as the foundation for preparing
                                               collaborative research and extension activities
                                               collaborative research and extension activities


Source: A Public-Private Partnership to Promote IPM Implementation in Northern New England Greenhouse Ornamentals; BAH Analysis
                                                                                                                                                                126
                                                                                                                                                     Transportation

In Brazil, access to road infrastructure was a major challenge for
small farmers – one of the country’s largest states developed a
prioritization model to invest specific “logistical” funds
                                               Increasing Road Access for Small Farmers in Brazil
              Small Farmer Accessibility Studies
              Small Farmer Accessibility Studies                                                                 Description
                                                                                                                 Description

                                                                                    Small farmers’ accessibility to major logistics network in Brazil was
                                                                                    evaluated through studies funded by government
                                                                                    – Assessment of time and distance to main transportation backbones
                                                                                      helped determine which areas required investments
        Baselining
        Baselining




                                                                                    – Qualitative aspects, such as pavement conditions, were also
                                                                                      considered

                                                                                    Results of baselining stage were a set of logistics infrastructure
                                                                                    interventions required to enhance accessibility of small farmers to
                                                                                    transportation backbones, with cost estimates and eventually forecast of
                                                                                    return rates (based on production and trade flow estimates)


                                                                                    Portfolio was prioritized considering a “cost per capita” metric – projects
                                                                                    with lower cost per capita were the first to be completed
        Prioritization
        Prioritization




                                                                                    Indicators for completion of projects were incorporated to the state’s
                                                                                    overall performance metrics – accessibility of small farmers to logistics
                                                                                    network became part of the state’s strategy and has specific budget
                                                                                    allocation

                                                                                    A letter of commitment was signed by local representatives and state’s
                                                                                    authorities, so as to ensure continuity of projects past government
                                                                                    mandates (4 years)

Source: Booz Allen Project – “RumoS 2015” (Government of Rio Grande do Sul State – Brazil); BAH Analysis
                                                                                                                                                                  127
                                                                                                                                                           Transportation

Both the Serbian and Mozambique governments effectively used
donor support to find ways to decrease the costs of ground
transportation and facilitate road delivery for agricultural goods
                               Types of Donor Assistance to Decrease Ground Transportation Costs
                               Serbia- EBRD Roads Technical Assistance
                               Serbia- EBRD Roads Technical Assistance                                          Mozambique- MCC Road Sector Investments
                                                                                                                Mozambique- MCC Road Sector Investments
                                While the road network in Serbia provided adequate                                Almost two-thirds of the population in Mozambique
                                coverage and communication, routes needed to be                                   depends on agriculture for their livelihood
                                improved to meet increase in traffic volume                                         – Success of the agriculture sector is dependent
                                The responsible government agency, Serbian Roads                                      on the availability of reliable ground transport
    Overview
    Overview                    Directorate, needed assistance in developing a Road                                 – Studies showed that the Northern provinces
                                Recovery Plan to determine the investments                                            (Cabo Delgado, Niassa, Nampula, and Zambézia)
                                required to improve road conditions, which would                                      lacked the road density to sustain transport of
                                best improve economic conditions                                                      goods

                                The Serbian government used donor assistance in                                   MCC Mozambique worked with the National Road
                                two ways:                                                                         Administration and the Road Fund to:
                                  – US Trade and Development Agency (USTDA),                                       – Conduct an extensive study of the road network
     Types of
     Types of                       who funded and oversaw development of the                                        (5,231 km in the four provinces) to determine
      Donor
      Donor                         feasibility study for roads assistance                                           areas of improvement and the costs required
     Support
     Support                      – The World Bank, which developed the Highway                                    – Use the Road Economic Decision model to
                                    Development and Management Tool (HDM-4) to                                       simulate the economic effects of road
                                    analyze the current road system, create a cost /                                 interventions based on costs, resources, and
                                    benefit analysis of improvements to be                                           road conditions
                                    completed under the Road Recovery Plan
                                Based on the recommendations of the Road                                          MCC Mozambique made a final selection of road
                                Recovery Plan, the Serbian government                                             improvements that would facilitate delivery of
                                developed three types of budget scenarios                                         agriculture goods
     Results //
     Results                    (pessimistic, moderate, optimistic)                                                 – The study estimated that the net value of new
      Impact
       Impact                     – The government, along with USTDA, determined                                       production for both cash and food crops would
                                    the optimal amount of funding that would be                                        produce USD 37.7 million in value add
                                    required                                                                        – Smallholder farmers producing maize and cash
                                  – Amount of improved road conditions and                                             crops would benefit from better market access
                                    increased economic development were projected                                      and reduced import and transport costs
Source: EBRD Roads Technical Assistance Project in Serbia; MCC Mozambique: Proposal for Road Sector Investments in the North; BAH Analysis
                                                                                                                                                                         128
                                                                                                                                                                                 Transportation

Israel’s largest exporter of produce, Agrexco, found a cost
effective method to bypass borders by developing specialized
reefer vessels to directly transport goods to Europe
                                                   Agrexco’s Specialized Reefer Vessels – Key Facts

                      Agrexco has two specialized reefer vessels bearing its name, delivered in
                      2003 based on a 15-year usage contract with owner                                                            Agrexco’s Routes and Breakdown of Exports
                      The ships feature new technologies that allow flexibility in capacity usage –
Overview
Overview              cars can be loaded into the refrigerated area, providing an important asset for                                                                      LEGEND:
                      back-haulage                                                                                                                                               Air
                                                                                                                                                                                 Sea (Spec. Reefer)
                      During peak seasons, Agrexco charters two additional vessels, along with                                                        COLOGNE
                                                                                                                                                                                 Sea (Conv. Reefer)
                      support ventilated liners
                                                                                                                                          MARSEILLES
                                                                                                                                                               KOPER
                      Average speed is 22 knots – almost twice as fast as any other reefer vessel
Economics
Economics             Capacity of 880 TEU (~60,000T)
                      Return business consists of cars back to Israel (to Israeli and Asian markets)                                                                   PIRAEUS
                                                                                                                                                                                        ASHDOD
                      Agrexco products set sail from Haifa and Ashdod towards Europe (Marseilles
                      and Valencia)
                        – From Ashdod (loading port) to Marseilles, ships usually take 3 days
Routes and
Routes and              – 80% of the produce go to the company’s distribution center in Marseilles
 Markets
 Markets                   where Agrexco has a distribution center                                                                                      Conventional
  Served
  Served                – At Marseilles, new containers and cars are loaded into the vessel - two                                                         Reefer
                           day-shifts for cargo loading                                                                                                   Vessels
                                                                                                                                                           16%
                        – Ship heads to Valencia (additional cars are loaded) and after 14 days of
                           departure, arrives back at Ashdod                                                                                          Air
                                                                                                                                                    Cargo               Specialized
                                                                                                                                                     19%               Reefer Vessels
                      The 14-day timetable is composed so that there is time to make up if delays                                                                           65%
Time and
Time and              occur due to bad weather – ships can be loaded at night, for an extra cost that
Capacity
Capacity              rather than paying fuel and other additional costs
 Mgmt.
  Mgmt.               Agrexco also charters capacity to 3rd party companies (round-trip contracts)

 Source: Interviews; Logistics Study for Agricultural Flow – Egypt / Europe; FAO - Global Agricultural Marketing Management (1997); Lit Search; BAH Analysis
                                                                                                                                                                                                 129
                                                                                                                                                                 Transportation



Kenya has successfully developed a strategic export market for
green beans to the UK using air transport
                                   Kenya: Using Air Freight to Develop Strategic Green Bean Market
                                                                                                         Reasons Behind Success of Green Bean Market

                                                                                               1
                                                                                               1                       Producers and exporters of green beans chose to
           Kenyan Green Bean Exports Using Air                                                                         expand in markets that differentiated on quality, not
              Transport by Destination, 2004                                                                           price
                                                                                                                          – UK clients and consumers are prepared to pay
                        Other 6%                                                                 Product
                                                                                                 Product                    a premium for “high-care” and quality green
              Belgium 4%                                                                        Tailored to
                                                                                                Tailored to                 beans
                                                                                                  Market
                                                                                                  Market
   Netherlands 6%                                                                                                         – The increased demand for volume (four-fold
                                                                                                                            increase of green bean imports from 1990 to
                                                                                                                            2004) enabled exporters to offset costs of air
                                                                                                                            freights
                                                                                               2
                                                                                               2                       Most green bean farms are within a two-hour
                 France 15%                                                                                            proximity to the Nairobi airport
                                                                                                                       Airport proximity benefits green bean exporting due
                                             UK                                                   Producer
                                                                                                  Producer             to:
                                             70%                                                 Proximity                – Perishability of the product
                                                                                                  Proximity
                                                                                                to Airports
                                                                                                 to Airports              – Low value-volume ratio of the product, which is
                                                                                                                            due to high processing requirements and
                                                                                                                            makes long-distance transport costly
                                                                                                                          – Requirement of flexibility in orders
                                                                                               3
                                                                                               3
                                                   Total: 32,441 Tons
                                                   Total: 32,441 Tons                                                  Green beans are transported by one of two ways:
                                                                                                Availability
                                                                                                Availability            – Studies estimate that 60-70% of cargo is
                                                                                                  of Air
                                                                                                   of Air                 carried as belly freight on passenger planes,
                                                                                                 Freight
                                                                                                  Freight                 with British Airways offering daily flights to
                                                                                                 Options
                                                                                                 Options                  London, facilitating shipment of green beans
                                                                                                                        – Dedicated freight craft

Source: A life cycle analysis of UK supermarket imported green beans from Kenya; Strategic use of private standards to enhance international competitiveness:
        Vegetable exports from Kenya and elsewhere; Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; BAH Analysis
                                                                                                                                                                               130
                                                                                                                                       Transportation

A recent study in Serbia recommended the development of field
packing areas to enable vertically integrated cold-chain
distribution of berries for small-scale farmers
                           Overview of Recommended Field Packing System for Smallholder Farmers
                         Field Packing Process
                                                                                                                     Advantages
                                                                                                                     Advantages
1
1                                               Producers deliver shipments of fresh berries to
    Receive shipments from                      field packing centers, which could be private or
    Receive shipments from                                                                             Integrates purchasing locations into cold
            farmers                             municipal centers, and are in close proximity to
             farmers                                                                                   storage and processing facility systems by
                                                farms
                                                                                                       applying vertical integration
                                                Centers pay producers for berries according to
                                                going farmgate prices                                  Costs arising on the way from producers to
                                                                                                       cold stores are decreased
2
2                                                                                                      Products have extended shelf life
                                                Berries are sorted, cleaned and packed either
                                                                                                       capabilities, possibly double existing limits
      Sort, clean and pack
      Sort, clean and pack                      manually or using machines
       agricultural goods
       agricultural goods                       – Figures estimate that machine use is                 Consistent presentation and packaging for
                                                   equivalent to the work of 100 manual sorters        enhanced marketability



3
3                                               Utilizing field-level packing and cooling systems,
                                                                                                                   Disadvantages
                                                                                                                   Disadvantages
                                                chilled berries are prepared for local distribution
 Place goods in pre-cooling
 Place goods in pre-cooling                     with relative ease and limited cost
                                                Pre-cooling and packaging is important for
                                                product durability and differentiation                 Smallholder farmers may not have means to
                                                                                                       transport goods to field packing centers
                                                                                                       Producers are dependent on the center to
4
4                                               Using small refrigerated trucks, fresh chilled         give determine the cost for goods, which
     Transport refrigerated
     Transport refrigerated                     berries are transported in small quantities directly   may not be the best price they could receive
        goods to market
        goods to market                         to market to wholesalers, retail supermarket           on the market
                                                chains, hotels, restaurants (in compliance with        Field centers focus on domestic
                                                required standards)                                    consumption, which is small in comparison
                                                                                                       to export quantities

Source: Cold Chain Strategy for Serbia; The Market Chain of Fruit Production in Serbia; BAH Analysis
                                                                                                                                                       131
                                                                                                                     Government Agriculture Regulations

 While the PPECB operates as a quasi-private quality control body
 for South Africa, the EACCE is a government body in Morocco that
 ensures exports meet international food safety standards
                                                        Overview of Quality Control Agencies
                     Perishable Products Export Control Board (PPECB)                 L'Etablissement Autonome de Contrôle et de Coordination
                                                                                      L'Etablissement Autonome de Contrôle et de Coordination
                     Perishable Products Export Control Board (PPECB)                                des Exportations (EACCE)
                                                                                                      des Exportations (EACCE)
                 South Africa’s official export certification agency for perishable     Morocco’s official institution overseeing quality control and
                 products – mandated by the Government of South Africa –                coordination of exports, as mandated by the Government of
                 controls all agriculture and animal exports from the country
Description




                                                                                        Morocco
Description
  General
 General




                 –    Defines rules and impose penalties                                  – Ensures that all agriculture and food products exported
                 –    Negotiates with producers, shipping companies and other               out of the country meet international food safety and
                      stakeholders                                                          standard guidelines
                                                                                          – Coordinates food exports through development and
                 Independent service provider of quality certification and cold             execution of sector strategies and support of bilateral and
                 chain management services for producers and exporters                      multilateral export agreements
                                                                                        Financially and legally autonomous, the EACCE is overseen
                 Board comprised of representatives of main crop producers and
                                                                                        by a President, 10 members from the government, a member
  Organization
  Organization




                 largest exporter companies
                                                                                        from the Marketing and Exports Association, and eight
                 30 offices located in 11 production regions, reaching 1,500            members representing the exporters and producer
                 locations
                                                                                        21 regional offices located across the country
                 Matrix accreditation units – crop-specific and functional
                                                                                        Three types of labs are located in regional offices:
                 specialization
                                                                                        microbiological, phyto-sanitary and packaging

                 Two main service streams, reflected in the organizational              Services are provided in three main areas:
                 structure                                                               – An export development unit, which oversees marketing
                 – Statutory services (Inspection & Cold Chain): government-                efforts, data collection, and coordination of exports
   Services
   Services




                     mandated activities                                                 – A technical division that oversees quality control of
                 – Non-Statutory Services (Customized Services): independent                infrastructure, processed products and fresh foods
                     and profit-oriented service providing, with tailored solutions      – A laboratory division that oversees analysis of products
                 Funds are acquired through a legislated levy placed on all             Funds are acquired through a mix of government funding and
                 exporters (fixed cost per carton exported, migrating to a              a levy placed on imports
                 differentiated levy by product type)
  Source: PPECB, EACCE; BAH Analysis
                                                                                                                                                          132
                                                                                                                                                      Government Agriculture Regulations

The PPECB maintains a nationally and internationally recognized
lab which provides testing for government and private entities to
ensure safety and quality
                                                                 PPECB Quality Control Lab Interactions

                                                                                                                          Council for
                                                                                                                          Council for                                              SABS
                                                                                                                                                                                   SABS
   Department of
   Department of                                     Department of
                                                     Department of                       Department of
                                                                                         Department of                  Scientific and
                                                                                                                         Scientific and                         (National regulatory
                                                                                                                                                                 (National regulatory
      Health
      Health                                            Trade
                                                         Trade                            Agriculture
                                                                                          Agriculture                Industrial Research
                                                                                                                      Industrial Research                              body)
                                                                                                                                                                        body)

                                                                             Mandated to audit
                                                                           compliance & enforce
         Labs
         Labs                                                             Quality Standards and                                           Labs
                                                                                                                                          Labs                                         Labs
                                                                                                                                                                                       Labs
                                                                          Food Safety Standards




                                                                                                                          Conducts tests to monitor




                                                                                                                                                                   Conducts tests to monitor
             Conducts tests to monitor




                                                      SA National




                                                                                                                            food quality control




                                                                                                                                                                     food quality control
               food quality control




                                                      SA National
                                                     Accreditation
                                                     Accreditation                            PPECB
                                                                                              PPECB
                                                       Scheme
                                                        Scheme
                                           Accreditation of                       Oversees work
                                         laboratories to ISO /
                                              IEC 17025

                                                                                      Quality Control Lab
                                                                                      Quality Control Lab

                                                                     Completes testing & analysis

                                                                                     Exporters, Producers
                                                                                     Exporters, Producers

                                                                 Comments
                                                                  Comments
    The PPECB maintains a private lab that oversees testing for three areas: Mycotoxin Analytical Program, Fats Analytical Program, Labeling
    The PPECB maintains a private lab that oversees testing for three areas: Mycotoxin Analytical Program, Fats Analytical Program, Labeling
    Analytical Program
    Analytical Program
     – In addition to government labs under the Department of Health, CSIR and SABS, the PPECB lab completes third party analyses
      – In addition to government labs under the Department of Health, CSIR and SABS, the PPECB lab completes third party analyses
    PPECB has been accredited according to international standards, such as the ISO // IEC 17025, and has also developed a cross-accreditation
    PPECB has been accredited according to international standards, such as the ISO IEC 17025, and has also developed a cross-accreditation
    with the United Kingdom Accreditation Standards. As a result, South African and the UK recognize each other’s accreditation standards
    with the United Kingdom Accreditation Standards. As a result, South African and the UK recognize each other’s accreditation standards



Source: PPECB website; PPECB 2008-2009 Annual Report; Standards and global trade: a voice for Africa; BAH Analysis
                                                                                                                                                                                               133
                                                                                                                                                Government Agriculture Regulations

     Studies on Kenyan green bean producers show that costs for
     international food safety standard (IFSS) compliance are
     significantly lower for farmer groups versus small or large farmers
                                                        Overview of Farmer Costs for IFSS Compliance
                                                                                                                                Total Income by grower type, 2006
        Costs (in Kenya shillings) associated with IFSS compliance and
                                                                                                                                1,1120,000         1,248,000      336,000
                        certification by grower type, 2006 (*)
                   438,954
                                                                                                                                    96%               76%           27%
Needs assessment            6%
 Pesticide storage
               unit
                            6%
  Charcoal cooler           9%

          Analyses                                                                                                                                                  73%
                           10%                      311,340

     Grading shed                                      10%                                                       Remaining income
                           14%                                                 228,190
                                                       12%
                                                                                    9%                                                                24%
                                                       11%                          3%
                                                                                   2%                           Cost of Compliance
                                                                                   23%                             as % of income    4%
       Certification       24%                         14%                                                                       Farmer Group     Large Farmer   Small Farmer
                                                                                   8%
                                                       11%
                                                                                                                                                Comments
                                                                                                                                                Comments
                                                                                   38%                                         Cost per unit income is smaller for the farmer
                                                                                                                                Cost per unit income is smaller for the farmer
          Pre-audit        30%                         31%                                                                     group, with each farmer paying only 29,264
                                                                                                                                group, with each farmer paying only 29,264
                                                                                                                               shillings for compliance
                                                                                                                                shillings for compliance
                                                                                   23%                                         Income increases as more farmers work
                                                                                                                                Income increases as more farmers work
                                                       11%
                                                                                                                               together to increase productivity and
                                                                                                                                together to increase productivity and
                       Farmer Group              Large Farmer                Small Farmer                                      innovation
                                                                                                                                innovation

      Note (*): Does not include costs for toilet or disposal
      Source: Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; BAH Analysis
                                                                                                                                                                                 134
                                                                                                                                                     Government Agriculture Regulations

Spain’s seed import regulations work under “certified origin”
schemes – other countries also adopt solutions to regulate inputs
of seeds and fertilizers
                                              Overview of Input Regulations in Benchmark Countries
                                               Seed Import Regulations
                                               Seed Import Regulations                                                             Fertilizer Import Regulations
                                                                                                                                   Fertilizer Import Regulations

                              Spain works under a “certified-origin” scheme. For                                    For fertilizers, imports also work under
                              varieties registered in the EU, some countries have                                   “certified-origin” and positive list approval
                              (for specific types of seeds) same treatment as EU                                      – Fertilizers have to be previously
                              countries                                                                                   registered at the Ministry of Agriculture
                              Internal trade of imported varieties must be                                                to be allowed to enter Spain
                              communicated to the Ministry of Agriculture                                             – Only fertilizers from certified plants are
     Spain
     Spain                    (database of imported seed sellers, buyers and                                              accepted – for countries outside the EU,
                              transactions)                                                                               importers are required to send
                              Spain also adheres to OECD-sponsored seed                                                   Certification of Approval in country of
                              scheme that harmonize regulations in order to                                               origin and related legislation to be
                              facilitate the import and export of seed; typically                                         vetted by Spanish Authorities
                              through removal of technical trade barriers with
                              recognized labels (e.g., passports for trade)

                              Serbia: Ministry of Agriculture provides a pre-                                       Australia: fertilizer imports must also meet
                              approval process – new seeds are imported                                             strict Australian Quarantine regulations
                              within 7 days, and, unless stated otherwise, pre-                                     administered by the Australian Quarantine
                              approval is considered final after 6 months                                           Inspection Service (AQIS). Most fertilizer
   Other                      Croatia: The Institute for Seeds and Seedlings                                        products require an import permit and are
    Other
  Countries                   enforces seed laws set by the OECD, and conducts                                      required to conform to import conditions
  Countries
                              all DUS and VCU testing to determine domestic
                              movement and imports of seeds. The Institute follows
                              additional regulations set by the Ministry of Agriculture
                              Forestry and Water Management


Source: Interviews; Spain’s Ministry of Agriculture; DAI “Assessment of Egypt’s Agricultural Sector Competitiveness” (2002); Seed Production in Croatia; BAH Analysis
                                                                                                                                                                                      135
                                                                                                                                                  Government Agriculture Regulations

Protection of the environment against pesticide misuse is
supported by bans, as well as awareness and monitoring on use
and distribution of pesticides
                                Best Practices to Protect the Environment Against Pesticide Misuse

                                           Croatia uses a mix of bans and restrictions on pesticides
                                           Croatia uses a mix of bans and restrictions on pesticides
                                            – Certain pesticides (Alachlo) cannot be applied with sprayers
                                             – Certain pesticides (Alachlo) cannot be applied with sprayers
Prohibit use of
Prohibit use of
                                            – Pesticides, such as Atrazine, are limited to areas according to specific humidity levels (1.5 kg ai/ha in humid
                                             – Pesticides, such as Atrazine, are limited to areas according to specific humidity levels (1.5 kg ai/ha in humid
   specific
   specific                                   and 1 kg ai/ha in arid areas)
                                               and 1 kg ai/ha in arid areas)
  pesticides
  pesticides                                – Other pesticides are restricted according to the type of agriculture commodity (endosulfan banned for oil-
                                             – Other pesticides are restricted according to the type of agriculture commodity (endosulfan banned for oil-
                                              seed rape and forestry; trifIuralin use is not permitted in post-harvest sown soya bean and sunflower)
                                               seed rape and forestry; trifIuralin use is not permitted in post-harvest sown soya bean and sunflower)



                                           In Croatia, the Ministry of Agriculture, Forestry and Water Management has organized an extension service
                                            In Croatia, the Ministry of Agriculture, Forestry and Water Management has organized an extension service
  Encourage
  Encourage                                which provides non formal education, training and knowledge transfer to farmers on pesticide use. The costs of
                                            which provides non formal education, training and knowledge transfer to farmers on pesticide use. The costs of
 proper use of
 proper use of                             this service are covered by Ministry of Education. Short courses (one day or several hours) are provided by
                                            this service are covered by Ministry of Education. Short courses (one day or several hours) are provided by
  pesticides
   pesticides                              experts to farmers in villages or in smaller municipalities
                                            experts to farmers in villages or in smaller municipalities



                                          In the Czech Republic:
                                           In the Czech Republic:
                                          – All professional pesticide users have to keep spray records for 3 years
                                           – All professional pesticide users have to keep spray records for 3 years
                                          – Farms larger than 10 ha are required to submit pesticide use summaries to the Department of Information.
                                           – Farms larger than 10 ha are required to submit pesticide use summaries to the Department of Information.
  Monitor the
   Monitor the                                 Farmers report on amounts applied by formulated product, crop and geographical region
                                                Farmers report on amounts applied by formulated product, crop and geographical region
                                          – Pesticide sales data are also collected by the Czech Crop Protection Association
                                           – Pesticide sales data are also collected by the Czech Crop Protection Association
    use and
     use and                              In Slovakia:
                                           In Slovakia:
 distribution of
 distribution of                          – All traders are required to report sales data annually, including manufacturer, importer, distributors and
                                           – All traders are required to report sales data annually, including manufacturer, importer, distributors and
    pesticide
    pesticide                                  retailers. They are required to report the name and amount of formulated products for agricultural and non-
                                                retailers. They are required to report the name and amount of formulated products for agricultural and non-
                                               agricultural pesticides
                                                agricultural pesticides
                                          – All farmers have to keep detailed records of their pesticide use and are required to submit summaries to
                                           – All farmers have to keep detailed records of their pesticide use and are required to submit summaries to
                                               the Central Control and Testing Institute of Agriculture
                                                the Central Control and Testing Institute of Agriculture



Source: Inventory of Agricultural Pesticide Use in the Danube River Basin Countries; Education for Family Farms and Gender Aspects in Croatia; BAH Analysis
                                                                                                                                                                                   136
                                                                                                                                                                  Trade Access



The Macedonian government’s increased trade facilitation capacity
stemmed from four key success factors…
                                Success Factors for Trade Facilitation Capacity Building in Macedonia
                                   In an effort to accede to the WTO, the Macedonian government undertook
Multi-Pronged
Multi-Pronged                      trade facilitation capacity building simultaneously at multiple agencies:
  Capacity
   Capacity                        – Training for government officials at agencies such as the Ministry of
Building in the
Building in the                        Economy to develop WTO agreements for the accession process
 Government
 Government                        – Technical assistance provided to Customs Administration personnel to
                                       support compatibility of customs regime with international standards
                                                                                                                                                   Benefits for Macedonia
                                                                                                                                                   Benefits for Macedonia
                                   Capacity building has been targeted at the national and regional levels:
                                                                                                                                                    By taking steps to
                                                                                                                                                     By taking steps to
Interventions at
 Interventions at                  – National: Targeted technical assistance to Ministry of Economy, Customs
                                      Administration, and the Ministry of Finance                                                                   accede to the WTO, the
                                                                                                                                                     accede to the WTO, the
    National &
    National &
                                   – Regional: Participation in regional initiatives, such as the regional seminars                                 government was able to
                                                                                                                                                     government was able to
Regional Levels
Regional Levels
                                      on trade facilitation for the Southeast European countries                                                    strengthen trade
                                                                                                                                                     strengthen trade
                                                                                                                                                    facilitation capabilities
                                                                                                                                                     facilitation capabilities
                                                                                                                                                       – As a result, the
                                                                                                                                                       – As a result, the
                                   The Minister of Economy mobilized support for trade facilitation capacity                                             process of
                                                                                                                                                          process of
                                   building for WTO Accession and developed the required technical expertise                                             accession, as much
                                                                                                                                                          accession, as much
Political Will &
Political Will &                   through the accession process with the support of donors                                                              as accession itself,
                                                                                                                                                          as accession itself,
 Commitment
 Commitment                        – Since its accession in 2002, the government has continued capacity                                                  was beneficial to
                                                                                                                                                          was beneficial to
                                       building, through implementation of the New National Customs Declaration                                          improving capacity
                                                                                                                                                          improving capacity
                                       Processing System and improved management at border crossings                                                     in multiple
                                                                                                                                                          in multiple
                                                                                                                                                         government
                                                                                                                                                          government
                                   In laying the foundation for strengthened trade capacity, Macedonia has been                                          agencies
                                                                                                                                                          agencies
                                   able to take advantage of CEFTA
 Execution of
 Execution of
                                   – Macedonia has instituted a CEFTA office in the Ministry of Economy and
 Other Trade
  Other Trade                          has spent considerable effort in increasing capacity through training
 Agreements
 Agreements                            programs
                                   – The government has also taken advantage of UN / WTO technical
                                       assistance to promote capacity in trade best practices

Source: Trade Facilitation in the WTO Context; Non-Tariff Barriers and Trade Facilitation; Contribution of Customs for Enhanced Traffic of Goods
       Through National Border Crossings; BAH Analysis
                                                                                                                                                                                 137
                                                                                                                                                                   Trade Access




… as well as country-focused and regional donor-funded projects
                        Donor-Funded Methods for Trade Facilitation Capacity Building in Macedonia
         Method                                                   Description                                                                         Impact

                                   USAID provided expert technical assistance drafting                                          Accession process was completed in less
                                   documentation, identifying inconsistencies in the                                            than three years of negotiations and
                                   Macedonian trade regulations, training Macedonian                                            Macedonia became the 146th member of
                                   officials to extend their understanding of WTO                                               the WTO in 2003
                                   agreements and preparing them for negotiations
        Country-
        Country-
        Focused
        Focused
                                   The United Nations Economic Commission for                                                   Following the workshop, the Macedonian
                                   Europe provided workshops on trade data                                                      government started implementation of
                                   harmonization and the Single Window system                                                   Single Window for agencies, exporters,
                                                                                                                                importers, carriers, brokers and freight
                                                                                                                                forwarders

                                   Led by the World Bank and the United States, the Trade                                       Reduced nontariff costs to trade and
                                   and Transport Facilitation in Southeast Europe                                               transport, decreased smuggling and
                                   (TTFSE) program provided customs services procedures                                         corruption at border crossings, and improved
                                   reform, support to integrated customs information                                            customs administrations and other border-
                                   systems, and improvement of roads and border-crossing                                        control agencies
        Region-
         Region-                   facilities for eight countries, including Macedonia
        Focused
        Focused
                                   Through the Southeast Europe Regional Cross-Border                                           Simplified transit documentation
                                   Trade Facilitation, USTDA provided technical                                                 requirements to facilitate and increase trade
                                   assistance to develop a regional “single window”                                             among the three countries
                                   entry system for the Customs Administrations of
                                   Macedonia, Serbia and Bulgaria
Source: Trade Facilitation: Challenges and Opportunities in Eastern Europe and the Former Soviet Union; USTDA Trade Capacity Building Sector; USAID
        Trade Capacity Building Database; BAH Analysis
                                                                                                                                                                                138
                                                                                                                                                         Trade Access



A number of interim solutions exist for responding to competitor
subsidies…
                                          Interim Responses to Subsidies for Developing Countries
  Exercise Allowed
  Exercise Allowed                 CEFTA focuses on transparency in trade rather than free trade,
    Information
     Information                   and therefore contains information requirement provisions
    Gathering &
     Gathering &                     – For example, any subsidies that are executed by other                                 Donor Funding for Export Risk
                                                                                                                             Donor Funding for Export Risk
       Dispute
       Dispute                          countries should be made public (Art 44)                                                      Programs
                                                                                                                                      Programs
     Resolution
      Resolution                     – CEFTA allows arbitration if parties do not feel they have
  Provisions under
  Provisions under                      received satisfactory information or remedy (Art 43)                                Foreign governments and donors have
                                                                                                                            Foreign governments and donors have
       CEFTA
        CEFTA                                                                                                               helped countries in the region establish
                                                                                                                            helped countries in the region establish
                                                                                                                            export risk guarantee programs
                                                                                                                            export risk guarantee programs
                                   Legitimate methods exist to keep products that violate basic food                           – The Ministry of Economy in the
                                                                                                                               – The Ministry of Economy in the
                                   safety provisions from being imported into Kosovo                                             Netherlands developed a
                                                                                                                                  Netherlands developed a
      Develop
      Develop
                                      – Recently, a non-milk product was being imported as a milk                                governmental program that aims to
                                                                                                                                  governmental program that aims to
    Legitimate
     Legitimate
                                         product into the country. In response, Kosovo Customs added                             encourage Dutch investments in
                                                                                                                                  encourage Dutch investments in
 Barriers Based on
 Barriers Based on                       labeling requirements that required foreign companies to                                Serbia and assist SMEs that are
                                                                                                                                  Serbia and assist SMEs that are
     Quality &
      Quality &                          specify the ingredients of the import                                                   establishing cooperation with Dutch
                                                                                                                                  establishing cooperation with Dutch
    Packaging
     Packaging                        – All measures must be allowed under the WTO Technical                                     partners by co-financing risk
                                                                                                                                  partners by co-financing risk
                                         Barriers to Trade Agreement                                                             insurance and exports (up to 50%
                                                                                                                                  insurance and exports (up to 50%
                                                                                                                                 cost-share)
                                                                                                                                  cost-share)
      Execute                      Article 23 provides that where domestic producers of a product are                          – The Serbia and Montenegro Export
                                                                                                                               – The Serbia and Montenegro Export
       Execute
                                   suffering serious economic injury due to imports, the CEFTA                                   Credit Agency (SMECA) was
                                                                                                                                  Credit Agency (SMECA) was
  Legitimate Tariff
   Legitimate Tariff               member has the right to take safeguard measures, including                                    established in 2001 through a World
                                                                                                                                  established in 2001 through a World
  Provisions Under
  Provisions Under                 increased tariffs, so long as the measure meets CEFTA disclosure                              Bank loan of $11.5M. Products for
       CEFTA
       CEFTA                                                                                                                      Bank loan of $11.5M. Products for
                                   requirements                                                                                  national and foreign businesses
                                                                                                                                  national and foreign businesses
                                                                                                                                 include export credit insurance,
                                                                                                                                  include export credit insurance,
                                                                                                                                 exporter performance insurance and
                                                                                                                                  exporter performance insurance and
   Develop Export                  Countries can enter into agreements with foreign governments or                               import credit insurance
   Develop Export
                                   donors to provide support for export risk guarantee programs and
                                                                                                                                  import credit insurance
   Risk Programs
   Risk Programs                   finance programs through loans. Donor support aims at
     with Donor
     with Donor                    decreasing the perceived risk from foreign companies and
     Financing
      Financing                    governments
Source: USAID- Financial & Consultancy Support Available to Serbian SMEs; PPPs- EVD (International Business Cooperation);
       SMECA website; CEFTA; BAH Analysis
                                                                                                                                                                        139
                                                                                                                                                                 Trade Access

    …more advanced solutions include export risk insurance &
    guarantee programs, which can be provided through public,
    private or semi-private entities
                     Organizational Models for Advanced Export Risk Insurance and Guarantee Programs
                                            Germany                                             Switzerland                                          Turkey
                       (Private institution operating under government)               (Independent government agency)                          (State-owned bank)
                           Mandate: The Federal Government has                    Mandate: Established by the Swiss                 Mandate: Turk Eximbank offers specialized
                           entrusted the management of the Official               Government, Swiss Export Risk Insurance           financial services through a variety of short-,
                           Export Guarantee Scheme to a consortium                (SERV) offers an extended range of export         medium- and long-term credit, insurance
                           of two private companies, Euler Hermes and             credit insurance products                         and guarantee programs
                           PWC AG                                                 Structure: Governed by a management               Structure: Managed by a Board of
                           Structure: Governed by an inter-ministerial            board with members appointed by the               Directors, which provides supervision
                           Committee with representatives from                    Federal Council                                   principles for the General Directorate to
1
1                          several ministries                                                                                       follow
                                                                                  Resources: Capital is structured in three
    Organizational
                           Resources: Federal Government grants                   main areas: risk bearing capital, core            Resources: The sole shareholder, Turkish
      Overview
                           cover within an exposure limit on total                capital, and balance carried forward              Treasury, makes capital contributions to the
                           commitments fixed annually by Parliament               Relations with State: Established under the       Bank; receives domestic and foreign loans
                           Relations with State: Consortium acts only             supervision of the Federal Department of          Relations with State: As a state-owned
                           in the name and for the account of the state           Economic Affairs and governed by the              bank, maintains close co-operation with
                           and is governed by the Federal Budget Law              Federal Council                                   related government entities
                           Relations with Private Sector: Steps in                Relations with Private Sector:                    Relations with Private Sector: Almost 70%
                           when privately owned insurance industry                Complements, does not compete with                of the commercial risk is delegated to
                           does not provide sufficient cover                      private sector                                    reinsurance companies
                           Export guarantee schemes:                              Exporter insurance and guarantee schemes:         Exporter insurance and guarantee schemes:
                              – Wholeturnover Policy for safeguarding               – Supplier Credit Insurance covers                – Short-term export credit insurance
                                 trade receivables                                      political risk, transfer risk, commercial         provides companies with whole
                              – Manufacturing Risk Cover for                            risk                                              turnover insurance cover for one year
2    Examples of                 production costs of exports                        – Manufacturing Risk Cover for inability              for exports sold on short-term credit
2
      Services                – Supplier Credit Cover for amounts                       to continue production                        – Medium- and long-term export credit
      Provided                   receivables                                        – Confiscation Risk Cover for political               insurance is offered to protect against
                              – Revolving Specific Policy                               risk and force majeure                            commercial and/or political risks
                           Other                                                    – Contract guarantee insurance                  Export finance programs:
                              – Constructional Works Cover                                                                            – Short-term export credit
                              – Contract Bond insurance                                                                               – Medium- and long-term export credits


    Source: Export Credit Financing Systems in OECD Member Countries and Non-Member Countries, 2007 Update; BAH Analysis                                                       140
                                                                                                                                                         Trade Access

Four methods exist to help countries increase recognition of
sovereignty: transit, corridor development, harmonized documents
& procedures, and automated customs procedures
                                                   Methods to Increase Recognition of Sovereignty
                                                                                                         Harmonized Documents
                                                                                                         Harmonized Documents         Automated Customs
                                                                                                                                      Automated Customs
                           Transit
                           Transit                            Corridor Development
                                                              Corridor Development                           & Procedures
                                                                                                             & Procedures                 Procedures
                                                                                                                                          Procedures

                  Allows temporary                             Development of a tract                       Use of common             By developing
                  suspension of customs                        of land (such as a                           customs declaration       automated customs
                  duties or other taxes                        system of roads) that                        documents, such as the    procedures, countries
  Description




                  payable on goods                             allows a individuals from                    electronic transmission   will avoid delays that
  Description




                  originating from and/or                      a country to pass                            of data ahead of the      are endemic to paper-
                  destined for a third                         through another to                           arrival of cargo at the   backed transit systems,
                  country while under                          facilitate trade and                         transshipping point       thereby increasing
                  transport across the                         access a port                                Harmonization with        efficiency in the
                  territory of a defined                                                                    other countries creates   movement of goods
                  customs area                                                                              greater access to trade
                                                                                                            with partner countries

                  TIR Convention, used by                      A PPP was established                        Baltic Common Transit     COMESA and SADC
                  more than 32,000                             among transport                              Procedure signed          have launched
                  transport companies in                       operators in co-                             between Latvia, Estonia   programs that aim at the
                  over 50 countries in                         operation with the public                    and Lithuania to allow    consolidation and
                  Europe, central Asia and                     authorities and                              facilitated transit of    extension of
                  the Middle East, allows                      governmental                                 cargos carried by road    computerized customs
  Example
  Example




                  road transport operators                     institutions (as the                         transport                 procedures and
                  to cross borders in                          transport regulators) in                                               transport information
                  international and transit                    Namibia to establish the                                               systems
                  traffic without involving                    Walvis Bay corridor for
                  major procedures and                         landlocked neighbors
                  costs                                        countries to have
                                                               access to the Atlantic
                                                               Ocean
Source: Trade, Trade Facilitation and Transit Transport Issues for Landlocked Developing Countries; BAH Analysis
                                                                                                                                                                   141
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector

 Recommendations to Improve Kosovo’s Agriculture Sector
   – Overview
   – Recommended Diversified Crop Mix for Kosovo
   – Initiatives & Action Plan for Implementation
   – Reaching Kosovo’s Overall Potential




                                                          142
 The final deliverable for AgStrat covers three interrelated areas:
 crop diversification, initiatives & action plan to address constraints
 and projected impact for the program
                         Overview of Recommendation Types in AgStrat Study

                                                  Working with international and local horticulture and agriculture experts,
                                                   Working with international and local horticulture and agriculture experts,
                                                  our team developed a quantitative model to recommend a diversified list
                                                   our team developed a quantitative model to recommend a diversified list
                                                  of 10 crops for production in Kosovo
                                                   of 10 crops for production in Kosovo
                            Recommended
                             Recommended               – Crops were analyzed according to natural resource feasibility,
                                                        – Crops were analyzed according to natural resource feasibility,
                          Diversified Crop Mix
                          Diversified Crop Mix              production value, economic feasibility & value chain constraints
                                                            production value, economic feasibility & value chain constraints
                                                  For each of the top 10 recommended crops, we analyzed and developed
                                                   For each of the top 10 recommended crops, we analyzed and developed
                                                  “Go-to-Market” snapshots on information needed to facilitate market
                                                   “Go-to-Market” snapshots on information needed to facilitate market
                                                  entry
                                                   entry

                                                  Based on the recommended list of crops, as well as a baseline analysis
                                                  Based on the recommended list of crops, as well as a baseline analysis
                                                  of Kosovo’s agriculture sector, we propose 21 initiatives along seven
                                                  of Kosovo’s agriculture sector, we propose 21 initiatives along seven
      AgStrat Final                               main areas
                                                  main areas
      AgStrat Final
       Deliverable        Initiatives & Action
                           Initiatives & Action       – Each of the proposed initiatives includes duration,
                                                       – Each of the proposed initiatives includes duration,
       Deliverable
                                    Plan
                                    Plan                    implementation steps, indicators, potential risks // mitigation
                                                             implementation steps, indicators, potential risks mitigation
                                                            factors, milestones, key counterparts and cost
                                                             factors, milestones, key counterparts and cost
                                                  The action plan provides the sequencing of initiatives to support
                                                  The action plan provides the sequencing of initiatives to support
                                                  diversification of Kosovo’s crop mix
                                                  diversification of Kosovo’s crop mix

                                                  We have forecasted the potential impact using two methods if Kosovo
                                                  We have forecasted the potential impact using two methods if Kosovo
                                                  effectively implements the proposed initiatives
                                                  effectively implements the proposed initiatives
                                                       – Benchmark approach: Countries that Kosovo can aspire to
                                                       – Benchmark approach: Countries that Kosovo can aspire to
                           Kosovo’s Overall
                           Kosovo’s Overall                 mirror both economically (impact on GDP, employment and
                                                             mirror both economically (impact on GDP, employment and
                              Potential
                              Potential                     exports) and in terms of their agriculture sector (yield, value,
                                                             exports) and in terms of their agriculture sector (yield, value,
                                                            cropping intensity, job creation, investment)
                                                             cropping intensity, job creation, investment)
                                                       – Initiative-based approach: The projected return on investment at
                                                       – Initiative-based approach: The projected return on investment at
                                                            the initiative level and aggregate, sector level
                                                             the initiative level and aggregate, sector level


Sources : BAH Analysis
                                                                                                                                143
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector

 Recommendations to Improve Kosovo’s Agriculture Sector
   – Overview
   – Recommended Diversified Crop Mix for Kosovo
   – Initiatives & Action Plan for Implementation
   – Reaching Kosovo’s Overall Potential




                                                          144
We have developed a six step process for identifying Kosovo’s
diversified crop base
                                    Process for Identifying Kosovo’s Diversified Crop Base
                                                                  4a
                                                                  4a   Economic Feasibility




1 Universe of Ag
1                       2 Natural Resource
                        2                       3 Production
                                                3                                                     5 Value Chain
                                                                                                      5                   6 Final Crop
                                                                                                                          6
  Commodities                Feasibility             Value                                              Constraints          Ranking
                                                                  Identify commodities that can
                                                                  be produced economically
                                                                  and efficiently based on:
                                                                    – Demand in target markets
                                                                    – Lack of significant scale
                                                                      economies
                                                                    – High Value per weight
                                                                  4b Economic Attractiveness
                                                                  4b                                                        10 Ten
 167 Commodities        106 Commodities      Top 50 Commodities                                    Top 20 Commodities     Commodities
   Determine long         Filter out           Rank
                                                                                                       Examine short      Recommend
   list of all            commodities          commodities by
                                                                                                       list of            final list of
   possible               that cannot be       value per
                                                                                                       commodities        agricultural
   agricultural           supported by         hectare($/Ton X
                                                                                                       according to the   commodities
   commodities in         micro-climates       Tons/Hectare)
                                                                                                       investment         that Kosovo
   the world              in Kosovo            Select Top 50
                                                                                                       requirements,      should develop
   Categorize             Estimate             commodities
                                                                  Identify commodities that will       ease to produce,   Used as basis
   crops into             potential
                                                                  produce discernable                  and ease of        for detailed
   specific areas of      acreage for each
                                                                  economic impact according to:        market access      destination
   focus                  remaining crop
                                                                    – Labor intensivity                                   market and
                                                                    – Import substitution                                 investment
                                                                    – Potential for downstream                            analysis
                                                                      processing
 Source: BAH Analysis
                                                                                                                                         145
                                                                                                                                            1. Universe of Ag Commodities

For the first filter, we developed a list of 167 potential crops for
Kosovo focusing on four main categories of agricultural
production…
                                                                     Primary Agricultural Commodities*
    1
    1                                                                                             2
                                                                                                  2                   3
                                                                                                                      3                     4
                                                                                                                                            4
                                                                                                                                                  Spices,
                                                                                                                                                   Spices,
                                       Horticulture
                                       Horticulture                                                       Cereal
                                                                                                          Cereal      Oil Crops/Nuts
                                                                                                                      Oil Crops/Nuts             Stimulants
                                                                                                                                                 Stimulants

        Apples
        Apples                        Peaches
                                      Peaches                        Artichokes
                                                                     Artichokes                        Barley
                                                                                                       Barley             Almond
                                                                                                                          Almond                Saffron
                                                                                                                                                Saffron
        Apricots
        Apricots                      Pears
                                      Pears                          Asparagus
                                                                     Asparagus                         Canary Seed
                                                                                                       Canary Seed        Brazil nuts
                                                                                                                          Brazil nuts           Anise
                                                                                                                                                Anise
        Arecanuts
        Arecanuts                     Persimmons
                                      Persimmons                     Beans, green
                                                                     Beans, green                      Fonio
                                                                                                       Fonio              Cashews
                                                                                                                          Cashews               Chamomile
                                                                                                                                                Chamomile
        Avocados
        Avocados                      Pineapples
                                      Pineapples                     Cabbages
                                                                     Cabbages                          Maize
                                                                                                       Maize              Chestnuts
                                                                                                                          Chestnuts             Parsley
                                                                                                                                                Parsley
        Bananas
        Bananas                       Plantains
                                      Plantains                      Carrots, turnips
                                                                     Carrots, turnips                  Millet
                                                                                                       Millet             Hazelnuts
                                                                                                                          Hazelnuts             Cinnamon
                                                                                                                                                Cinnamon
        Blueberries
        Blueberries                   Plums
                                      Plums                          Kale
                                                                     Kale                              Oats
                                                                                                       Oats               Kolanuts
                                                                                                                          Kolanuts              Cloves
                                                                                                                                                Cloves
        Blackberries
        Blackberries                  Medlar
                                      Medlar                         Kohlrabi
                                                                     Kohlrabi                          Quinoa
                                                                                                       Quinoa             Pistachios
                                                                                                                          Pistachios            Cocoa beans
                                                                                                                                                Cocoa beans
        Mulberries
        Mulberries                    Quince
                                      Quince                         Brussels sprouts
                                                                     Brussels sprouts                  Rice
                                                                                                       Rice               Macadamia nuts
                                                                                                                          Macadamia nuts        Coffee
                                                                                                                                                Coffee
        Carobs
        Carobs                        Tangerines
                                      Tangerines                     Cauliflowers,
                                                                     Cauliflowers,                     Rye
                                                                                                       Rye                Walnuts
                                                                                                                          Walnuts               Ginger
                                                                                                                                                Ginger
        Cashew apple
        Cashew apple                  Watermelon
                                      Watermelon                     broccoli
                                                                     broccoli                          Sorghum
                                                                                                       Sorghum            Castor oil seed
                                                                                                                          Castor oil seed       Mate
                                                                                                                                                Mate
        Cherries
        Cherries                      Vinegrape
                                      Vinegrape                      Chilies, peppers
                                                                     Chilies, peppers                  Triticale
                                                                                                       Triticale          Coconuts
                                                                                                                          Coconuts              Nutmeg
                                                                                                                                                Nutmeg
        Cranberries
        Cranberries                   Bambara beans
                                      Bambara beans                  Celery
                                                                     Celery                            Wheat
                                                                                                       Wheat              Groundnuts
                                                                                                                          Groundnuts            Peppermint
                                                                                                                                                Peppermint
        Dates
        Dates                         Beans, dry
                                      Beans, dry                     Kidney beans
                                                                     Kidney beans                      Buckwheat
                                                                                                       Buckwheat          Hempseed
                                                                                                                          Hempseed              Pyrethrum
                                                                                                                                                Pyrethrum
        Figs
        Figs                          Lentils
                                      Lentils                        Cucumbers,
                                                                     Cucumbers,                        Flax fibre
                                                                                                       Flax fibre         Hops
                                                                                                                          Hops                  Tea
                                                                                                                                                Tea
        Gooseberries
        Gooseberries                  Lupins
                                      Lupins                         gherkins
                                                                     gherkins                          Jute
                                                                                                       Jute               Kapokseed
                                                                                                                          Kapokseed             Tobacco
                                                                                                                                                Tobacco
        Grapefruit
        Grapefruit                    Peas, dry
                                      Peas, dry                      Eggplants
                                                                     Eggplants                         Manila fibre
                                                                                                       Manila fibre       Karite nuts
                                                                                                                          Karite nuts           Vanilla
                                                                                                                                                Vanilla
        Kiwi
        Kiwi                          Pigeon peas
                                      Pigeon peas                    Radish
                                                                     Radish                            Ramie
                                                                                                       Ramie              Sunflowers
                                                                                                                          Sunflowers            Turmeric
                                                                                                                                                Turmeric
        Durian
        Durian                        Vetches
                                      Vetches                        Garlic
                                                                     Garlic                            Sisal
                                                                                                       Sisal              Linseed
                                                                                                                          Linseed               Thyme, bay leaves
                                                                                                                                                Thyme, bay leaves
        Tamarinds
        Tamarinds                     Cassava
                                      Cassava                        Kapok fibre
                                                                     Kapok fibre                       Alfalfa
                                                                                                       Alfalfa            Melonseed
                                                                                                                          Melonseed             Curry
                                                                                                                                                Curry
        Jackfruit
        Jackfruit                     Chicory roots
                                      Chicory roots                  Lettuce, chicory
                                                                     Lettuce, chicory                                     Mustard seed
                                                                                                                          Mustard seed          Basil
                                                                                                                                                Basil
        Passion fruit
        Passion fruit                 Potatoes
                                      Potatoes                       Mushrooms
                                                                     Mushrooms                                            Oil palm fruit
                                                                                                                          Oil palm fruit
        Pomegranate
        Pomegranate                   Sweet potatoes
                                      Sweet potatoes                 Truffles
                                                                     Truffles                                             Olives
                                                                                                                          Olives
        Lychee
        Lychee                        Taro
                                      Taro                           Okra
                                                                     Okra                                                 Poppy seed
                                                                                                                          Poppy seed
        Carambola
        Carambola                     Yams
                                      Yams                           Onions
                                                                     Onions                                               Rapeseed
                                                                                                                          Rapeseed
        Lemons, limes
        Lemons, limes                 Yautia
                                      Yautia                         Caper
                                                                     Caper                                                Safflower seed
                                                                                                                          Safflower seed
        Mangoes, guavas
        Mangoes, guavas               Juniper berries
                                      Juniper berries                Peas
                                                                     Peas                                                 Seed cotton
                                                                                                                          Seed cotton
        Oranges
        Oranges                       Table grape
                                      Table grape                    Courgette
                                                                     Courgette                                            Sesame seed
                                                                                                                          Sesame seed
        Other melons
        Other melons                  Tomatoes
                                      Tomatoes                       Pumpkins
                                                                     Pumpkins                                             Soybeans
                                                                                                                          Soybeans
        Papayas
        Papayas                       Leeks
                                      Leeks                          Spinach
                                                                     Spinach                                              Sunflower seeds
                                                                                                                          Sunflower seeds
Note (*): Not all crops listed; Horticulture includes fruits, vegetables, roots & tubers, and pulses
Source: FAOSTAT; UN Comtrade
                                                                                                                                                                       146
                                                                                                                                                                                                                                                                             1. Universe of Ag Commodities



  …and also mapped the type of historical agricultural production by
  municipality
                                                    Snapshot of Agricultural Commodities Produced by Municipality
                                   Ferizaj                          Gjakova                            Gjilan                                          Mitrovica                                               Peja                                       Pristina                                                        Prizren




                                                                                                                                                                                                                                                                 Novobërda
                                                                                                                                          Leposaviqi
                                                                                      Rahoveci




                                                                                                                                                                                                                                           F. Kosova




                                                                                                                                                                                                                                                                                                                                                Malisheva
                                                                                                                                                        Skenderaj
                                                                                                           Kamenica




                                                                                                                                                                                Z. Potoku




                                                                                                                                                                                                                                                                                                                                     Suhareka
                                                                                                                                                                                                                                                                                        Podujeva
                                                                                                                                                                                                                               Gllogovci
                        Kaçaniku



                                             Shtërpca




                                                                                                                              Mitrovica




                                                                                                                                                                    Vushtrria




                                                                                                                                                                                                                                                                                                               Dragashi
                                                                                                                                                                                                                                                                                                   Prishtina
                                                                            Gjakova




                                                                                                                                                                                            Zveçani




                                                                                                                                                                                                                                                                                                                          Prizreni
                                   Shtimja



                                                        Ferizaji

                                                                   Deçani




                                                                                                                                                                                                                                                       Lipjani
                                                                                                 Gjilani




                                                                                                                                                                                                                                                                              Obiliqi
                                                                                                                                                                                                      Istogu

                                                                                                                                                                                                                Klina

                                                                                                                                                                                                                        Peja
                                                                                                                      Vitia
Wheat                    ✓          ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓                      ✓          ✓          ✓
Rye                      ✓          ✓         ✓          ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓           ✓          ✓          ✓          ✓
Barley                   ✓          ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓                      ✓          ✓          ✓
Oats                     ✓          ✓         ✓          ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓           ✓          ✓          ✓          ✓
Maize                    ✓          ✓         ✓          ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓           ✓          ✓          ✓          ✓
Potato                   ✓          ✓         ✓          ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓           ✓          ✓          ✓          ✓
Tomato                   ✓          ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓                      ✓          ✓          ✓
Aubergine                           ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓                         ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓                      ✓          ✓          ✓
Pepper                              ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓                         ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓                      ✓          ✓          ✓
Pumpkin                  ✓          ✓         ✓          ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓           ✓          ✓          ✓          ✓
Mushroom                 ✓          ✓         ✓          ✓         ✓         ✓                    ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓         ✓            ✓         ✓          ✓           ✓          ✓          ✓          ✓
Cucumber                            ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓                         ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓                      ✓          ✓          ✓
Water melon                         ✓                    ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓                         ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓                      ✓          ✓          ✓
Cabbage                             ✓         ✓          ✓         ✓         ✓         ✓          ✓         ✓         ✓        ✓           ✓             ✓           ✓           ✓           ✓        ✓         ✓       ✓       ✓           ✓           ✓                      ✓         ✓          ✓           ✓          ✓          ✓          ✓




  Note: Grouped municipalities according to 2007 Household Survey produced by the Statistics Office of Kosovo
  Source: Surveyed Municipality Agriculture Offices
                                                                                                                                                                                                                                                                                                                                                       147
                                                                                                                        2. Natural Resource Feasibility

The natural resource feasibility filter is based on an in-depth
examination of six natural and manmade factors to determine the
different climate zones in Kosovo
                                                 Climate Zone Determination Factors

                                  Maximum temperature – Implies rainfall/irrigation requirements
                  Temperature
                  Temperature     Minimum temperature – Too low limits survival for certain fruit crops
                                  Average temperature – Not as telling as the max/min but important to understand overall climate

                                  Total annual solar radiation hours – A higher solar radiation could allow for late varieties and is
                     Solar
                     Solar
                                  good for germination of seeds, as well as maturation of annual industrial crops, fruits, and
                   Radiation
                   Radiation
                                  vegetables

                                  Pedological map of Kosovo and soil samples – Analysis of organic content, fertility, PH level,
        Natural




                   Soil Type
                   Soil Type      water capacity and need for drainage; For example, higher organic soils can allow for better crop
                                  cultivation and fertility


                                  Maximum precipitation, minimum precipitation, average precipitation and corresponding
                  Precipitation
                  Precipitation   time period - For example, maize, vegetables, and fruits require more water while cereals having
                                  a different growing season satisfy their water needs during winter/spring


                                  Elevation by region – Generally can grow all crop types up to an elevation of 700 meters while
                    Altitude
                    Altitude      only some forest production can be grown at higher elevations
        Manmade




                   Irrigation     Access to irrigated land by municipality and climate zone – Irrigation supplements rainfall
                    Irrigation
                                  particularly in the drier summer season for crops requiring more water



Source: BAH Analysis
                                                                                                                                                     148
                                                                                                                                           2. Natural Resource Feasibility-Temperature



Relatively small temperature variation exists across Kosovo with
Peja experiencing both the highest and lowest temperatures
                                                            Temperature Variation Across Kosovo

                                                                                                                   Podujeva Meteorological Station
                                                                                                                   Min Temp: -7.4C
                                            Mitrovica Meteorological Station                                       Max Temp: 26.3C
                                            Min Temp: -8.4C                                                        Average: 10.3C
                                            Max Temp: 28.8C
                                            Average: 10.4C
                                                                                                              Podujeva             Pristina Meteorological Station
                                                                                                  Mitrovica                        Min Temp: -7.5C
                                                                                                                                   Max Temp: 31.9C
                        Peja Meteorological Station                                                                                Average: 11C
                        Min Temp: -8.4C
                        Max Temp: 32.7C
                        Average: 12.2C                                                                             Pristina
                                                              Peja




                 Rahovec Meteorological Station
                 Min Temp: -2C
                 Max Temp: 29C
                                                                                        Rahovec                  Ferizaj                    Ferizaj Meteorological Station
                 Average: 8C
                                                                                                                                            Min Temp: -7.6C
                                                                                                                                            Max Temp: 30.7C
                                                                                                                                            Average: 10.6C
                                                                                    Prizren



                                                                                                  Prizren Meteorological Station
                                                                                                  Min Temp: 0C
                                                                                                  Max Temp: 29C
                                                                                                  Average: 11.5C

Note: Min, max, average temperatures are from: 2001-2008 for Prizren, Rahovec; 2002-2008 for Peja, Pristina, Ferizaj; 2003-2008 for Mitrovica; 2004-2008 for Podujeva; Data for Mitrovica, Rahovec,
Prizren, Podujeva was aggregated over these periods, but annual data was available for Ferizaj, Peja, and Pristina Meteorological Stations
Note: Data for meteorological stations cover 10 square km
Source: Meteorological Institute; BAH Analysis, UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002                                                           149
                                                                                                                                       2. Natural Resource Feasibility-Temperature



In addition, little temperature fluctuation occurs across the regions
during the growing season from March to October
                                                               Monthly Temperature for Kosovo
                                                                              (2005-2008, Celsius)

  35


                                                                                                                                                              Ferizaj
  25                                                                                                                                                          Peja
                                                                                                                                                              Pristina


                                                                                                                                                            Non-Growing Season
  15
                                                                                                                                                            Growing Season




    5                                                                                                                                                    Note: Temperature data
                                                                                                                                                         shown represents a sample
                                                                                                                                                         of data set. Complete
                                                                                                                                                         temperature analysis
                                                                                                                                                         included Meteorological
                                                                                                                                                         Institute data from 2001-
                                                                                                                                                         2008 and SWIK UNDP study
  -5                                                                                                                                                     data from 1977-1991
        Nov




        Nov




        Nov
        Nov




         Jun




         Jan




         Jun




         Jan
          Jul




          Jul
        Jan
        Jan




        Jun




        Jun
        Feb




        Feb
        Mar
         Apr
          Jul




          Jul
        Aug
        Sep




        Aug
        Sep
        Dec




        Dec




        Dec
        Mar
        Feb
        Feb




        Mar
        Apr




        Apr
        Mar
        Apr




        Sep
        Aug
        Sep




        Aug
        Dec




        May
        May




        Oct




        Oct




        Oct
        May




        May
        Oct




                     2005                                 2006                                  2007                                  2008


Note: Non-aggregated temperature data was only available for Ferizaj, Peja, and Pristina Meteorological Stations
Note: SWIK study contains historical temperature data from 1977 to 1991 for Dukadjini and Pristina
Source: Meteorological Institute; BAH Analysis, UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002
                                                                                                                                                                                 150
                                                                                                      2. Natural Resource Feasibility- Solar Radiation

Annual solar radiation is also almost uniform across Kosovo,
predominately falling between 2600 and 3000 total annual radiation
hours
                                                  Photosynthetically Active Radiation (PAR) Map
                                                                     (Total Annual Radiation Hours)




Source: UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002
                                                                                                                                                    151
                                                                                         2. Natural Resource Feasibility- Soil Type

According to the 1974 Soil Survey, there are 13 different
pedological units across Kosovo which can be subdivided into 26
soil types
                                                              Soil Types Across Kosovo




                                                                                                       Comments
                                                                                                       Comments
                                                                                            Kosovo benefits from the
                                                                                            Kosovo benefits from the
                                                                                            presence of 13 of the 28
                                                                                            presence of 13 of the 28
                                                                                            pedological units defined by the
                                                                                            pedological units defined by the
                                                                                            FAO-UNESCO 1988
                                                                                            FAO-UNESCO 1988
                                                                                            classification
                                                                                            classification

                                                                                             The soil types are thoroughly
                                                                                             The soil types are thoroughly
                                                                                            mixed so that most soil types
                                                                                            mixed so that most soil types
                                                                                            present can be found in most
                                                                                            present can be found in most
                                                                                            areas of the country
                                                                                            areas of the country

                                                                                            However, overall, the Western
                                                                                            However, overall, the Western
                                                                                            part of the country has more
                                                                                            part of the country has more
                                                                                            presence of alluvial soil while the
                                                                                            presence of alluvial soil while the
                                                                                            Eastern part has more presence
                                                                                            Eastern part has more presence
                                                                                            of vertisols and reddish-brown
                                                                                            of vertisols and reddish-brown
                                                                                            soils
                                                                                            soils




Source: 1974 Pedological Survey of Yugoslavia; BAH Analysis
                                                                                                                                 152
                                                                                                                                        2. Natural Resource Feasibility- Soil Type



However, most of Kosovo is comprised of six main pedological
units
                                                     Main Types of Pedological Units in Kosovo

                                           Characteristics
                                           Characteristics                                        Effects on Crops
                                                                                                  Effects on Crops                                 Composition
                                                                                                                                                   Composition

1
1                              Deep or very deep soils, possibly high water                  High vigour, high yield, late                     Sandy Loamy
       Alluvial                capacity, possibly high water table, possibly                 variety, good technological                       Loamy
       Alluvial
                               high fertility                                                maturity

2
2                              Shallow to medium depth, low to high water                    Possible nutritional disorders in                 Non calcareous
                               capacity, rich in swelling clays that crack in                springtime, unbalanced yield to                   Brownized
      Vertisols
      Vertisols                dry period, cold in springtime, dry in                        growth ratio, water stress in                     Leached with pseudogley
                               summertime                                                    midsummer, good maturity in low                   Eroded
                                                                                             yielding conditions
3
3
      Reddish
      Reddish                  Shallow to medium depth, low to medium                        Balanced yield growth ratio, good                 Sandy loamy
       Brown                   water capacity, adequate fertility                            technological maturity                            Loamy
       Brown                                                                                                                                   Leached

4
4                              Acidic soils with a hydromorphic layer                        Possible nutritional disorders in                 Umbric
      Podzol --
       Podzol                                                                                spring, unbalanced yield to growth
     Pseudogley
     Pseudogley                                                                              ratio, good maturity only in low
                                                                                             yielding conditions
5
5                              Very light structure, modification in color,                  Medium to good organic content,                   Eutric
     Cambisols
     Cambisols                 structure and consistency                                     low to medium water capacity,                     Dystric
                                                                                             adequate fertility

 6
 6                             Low deep soils with light structure &                         Modestly suited for agriculture                   Umbric
     Leptosols
     Leptosols                 presence of rock at maximum depth of 30                       use in plane or low slope zones,
                               cm, modest presence of organic matter,                        the soil structure and depth could
                               modest water capacity and fertility                           improve


Source:1974 Pedological Survey of Yugoslavia; UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002,BAH Analysis
                                                                                                                                                                                153
                                                                                                                                             2. Natural Resource Feasibility- Precipitation



Precipitation data indicates a range of annual rainfall from 598 mm
to 798 mm and is slightly higher than average in Peja and Rahovec
                                                             Precipitation Variation Across Kosovo*
                                                                                         (Millimeters)

                                       Mitrovica Meteorological Station
                                       Min Monthly Rainfall: 18.1mm                                                      Podujeva Meteorological Station
                                       Max Monthly Rainfall: 129.5mm                                                     Min Monthly Rainfall: 13.1mm
                                       Average Annual Rainfall: 649.7mm                                                  Max Monthly Rainfall: 125.5mm
                                                                                                                         Average Annual Rainfall: 598.7mm

               Peja Meteorological Station
               Min Monthly Rainfall: 38mm                                               Mitrovica                                           Pristina Meteorological Station
               Max Monthly Rainfall: 102.4mm                                                                                                Min Monthly Rainfall: 26.7mm
               Average Annual Rainfall: 798.8mm                                                                                             Max Monthly Rainfall: 72.6mm
                                                                                                                                            Average Annual Rainfall: 601.4mm
                                                                        Peja                               Podujeva




                                                                                                                            Pristina
                                                                        Rahovec                                                                  Ferizaj Meteorological Station
                                                                                                                                                 Min Monthly Rainfall: 29.6mm
                                                                                                         Ferizaj                                 Max Monthly Rainfall: 91.1mm
                                                                                                                                                 Average Annual Rainfall: 689.5mm
                                                                                      Prizren
                                  Rahovec Meteorological Station
                                  Min Monthly Rainfall: 44mm
                                  Max Monthly Rainfall: 96mm
                                  Average Annual Rainfall: 765mm                                       Prizren Meteorological Station
                                                                                                       Min Monthly Rainfall: 35mm
                                                                                                       Max Monthly Rainfall: 88mm
                                                                                                       Average Annual Rainfall: 716mm

Note: Min, max, average annual rainfall data are from: 2001-2008 for Prizren, Rahovec; 2002-2008 for Peja, Pristina, Ferizaj; 2003-2008 for Mitrovica; 2004-2008 for
Podujeva; Data for Mitrovica, Rahovec, Prizren, Podujeva was aggregated over these periods, but annual data was available for Ferizaj, Peja, and Pristina Meteorological Stations; (*)
Rainfall data was used to determine min and max values in order to compare across the stations; Data for meteorological stations cover 10 square km
Source: Meteorological Institute; BAH Analysis
                                                                                                                                                                                         154
                                                                                                                                      2. Natural Resource Feasibility- Precipitation



Across all the regions, precipitation is generally higher during the
beginning and the end of the growing season
                                                            Monthly Precipitation Across Kosovo
                                                                            (2005-2008, Millimeters)


200

                                                                                                                                                              Ferizaj
                                                                                                                                                              Peja
150
                                                                                                                                                              Pristina


                                                                                                                                                             Non-Growing Season
100                                                                                                                                                          Growing Season




  50                                                                                                                                                     Note: Rainfall data shown
                                                                                                                                                         represents a sample of data
                                                                                                                                                         set. Complete rainfall
                                                                                                                                                         analysis included
                                                                                                                                                         Meteorological Institute data
                                                                                                                                                         from 2001-2008 and SWIK
    0                                                                                                                                                    UNDP study data from 1977-




        Nov
        Nov




        Nov
        Nov




         Jun




         Jan




         Jun




         Jan
        Jan
        Jan




                                                                                                                                                         1991
        Jun




          Jul




          Jul




        Jun
          Jul




        Feb




        Feb




          Jul
        Mar
         Apr



        Aug




        Mar
        Feb




        Aug
        Sep
        Feb




        Dec




        Sep


        Dec




        Dec
        Apr




        Mar
        Apr
        Mar




        Apr
        Aug
        Sep


        Dec




        Aug
        Sep
        May
        May




        Oct




        Oct




        Oct
        May
        May




        Oct




                          2005                                  2006                                2007                                    2008


Note: Non-aggregated rainfall data was only available for Ferizaj, Peja, and Pristina Meteorological Stations
Note: SWIK study contains historical rainfall data from 1977 to 1991 for Dukadjini and Pristina
Source: Meteorological Institute; BAH Analysis, UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002
                                                                                                                                                                                     155
                                                                  2. Natural Resource Feasibility- Altitude



Cultivation occurs in a range of altitudes with low lying regions
best-suited for horticulture in the western portion of the country
                                         Altitude Across Kosovo
                                                (Meters)




                       Best Suited for
                        Horticulture:
                         300-500 m




Source: BAH Analysis
                                                                                                         156
                                                                                                                2. Natural Resource Feasibility- Irrigation



While only 17.4% of the arable land in Kosovo is irrigated, there is
a wide range of irrigation available throughout the regions
                                                                              Irrigation in Kosovo
                             Irrigation Scheme                                                       Irrigated Area by Municipality




Source:   Agriculture Household Survey, 2007, Statistics Office of Kosovo; BAH Analysis
                                                                                                                                                         157
                                                                               2. Natural Resource Feasibility- Climate Zones

The natural resource feasibility analysis reveals three primary
climate zones in Kosovo: Dukadjini, Kosovo Plains, and
Mountains…
                                     Overview of Climate Zones Across Kosovo



                                                                         Climate Zone 2:

                                                                          Kosovo Plains




                   Climate Zone 1:

                         Dukadjini




                                                                                     Climate Zone 3:

                                                                                       Mountains




Source:   BAH Analysis
                                                                                                                           158
                                                                                                 2. Natural Resource Feasibility- Climate Zones




…with each displaying unique characteristics across six areas
                                      Description of Climate Zones in Kosovo

                              Dukadjini (DK)
                              Dukadjini (DK)                      Kosovo Plains (KP)
                                                                  Kosovo Plains (KP)                              Mountains (MT)
                                                                                                                  Mountains (MT)

                       Milder temperatures because of           Similar to temperatures in DK, but           Lower temperatures due to
     Temperature
     Temperature       mountain and river influence             lower temperature extreme                    elevation

                       2500 to 3000                             2500 to 3000                                 1800 to 2600 depending on
   Solar Radiation
   Solar Radiation                                                                                           elevation

                       Alluvial, Vertisols, Reddish Brown       Alluvial, Vertisols, Cambisols,              Leptosoil, Calcic Vertisols,
       Soil Type
       Soil Type                                                Reddish Brown, Podzol Pseudoclay             Cambisols

                       Precipitation comes from the             Precipitation comes from the                 Has the highest rain and snow
Precipitation Trends
Precipitation Trends   northwest, peaks in the spring and       northwest after DK and receives              precipitation levels due to elevation
                       fall, and is higher than KP              lower rainfall

        Altitude
        Altitude       300-500 meters                           500-1000 meters                              1000-3000 meters

                       Presence of the Radoniqi-Dukadjini       Presence of the Ibër-Lepenc                  For the most part un-irrigated
       Irrigation
        Irrigation     and Drini i Bardhë systems               system in the north of K-P with only         except where coterminous with
                                                                informal irrigation in the South             large-scale systems

                       Dukadjini Agricultural Zone has a        Kosovo Plains Agricultural Zone has a        Mountainous Agricultural Zone has
                       milder continental climate being         continental climate that can be              the typical climatic characteristics
                       influenced by the Mediterranean          influened by the Russian anticyclone         of mountainous European areas
                       climate and Drina river. This zone       (winds). This zone has a shorter             with higher precipitation, lower
General Description
General Description    has a longer growing season than         growing season than DK, has less             yearly temperatures, and
                       KP or MT by two weeks, has good          access to irrigation facilities, and has     predominance of Leptosoil, Calcic
                       rainfall, better access to irrigation,   predominately Vertisols/Reddish              Vertisols, Cambisols soil types
                       and more Alluvial, Vertisols, and        Brown/Alluvial/ Cambisols/Podzol soil
                       Reddish Brown soil types.                types.

Source: BAH Analysis
                                                                                                                                                    159
                                                                                                             2. Natural Resource Feasibility- Climate Zones



The Kosovo Plains Zone has the most arable land, with 112K ha,
and the Mountains Zone has the least at 54K ha
                                                                  Breakdown of Total Arable Land
                   Total Arable Land by Municipality                                               Arable Land by Climate Zone
                                        (Ha, 2007)                                                                 (Ha, 2007)

                                                                                                                       111,898




                                                                                                     60,750
                                                                                                                                     54,258




                                                                                                                        Kosovo
                                                                                                       Dukadjini




                                                                                                                                       Mountains
                                                                                                                        Plains
Source: Agriculture Household Survey, 2007, Statistics Office of Kosovo; BAH Analysis
                                                                                                                                                         160
                                                                                                                                        2. Natural Resource Feasibility- Climate Zones



As a result, certain horticulture and cereal products can be better
developed as primary crops depending on the climate zone
                                                                       Overview of Crop Type by Zone

                                           Description                                          Crops Currently Grown                       Total Favorable Crops in Model

                           A longer growing season, milder                              Melon, pear, peaches, cherries,                    74 crops considered “most favorable” for
                           temperatures, higher rainfall, and more                      watermelon, pepper, tomatoes,                      this climate zone
                           alluvial, vertisols, and reddish brown soil
1 Dukadjini
1                                                                                       cucumbers, cabbage
                           types make Dukadjini ideally suited for
                           labor intensive horticultural crop cultivation
                           in deciduous fruits and vegetables
                           With less access to irrigation and soils that                Wheat, rye, barley, maize, potatoes,               45 crops considered “most favorable” for
                           are richer in organic matter such as                         onions, beans, peas                                this climate zone
2
2    Kosovo                Reddish Brown/Podzol/ Vertisols/
      Plains               Cambisols, Kosovo Plains is well suited for
                           industrial crop cultivation like winter cereal
                           and potato production
                           Mountainous agro-forest area is                              Cherries, hazelnuts, chestnuts, berries,           14 crops considered “most favorable” for
                           characterized by cooler temperatures,                        mushrooms                                          this climate zone
3 Mountains                shorter growing seasons, and soil types
3                          that limit possible agriculture production to
                           crops including select nuts and berries




                                                                                                                    105 crops for which there
                                                                                                                    105 crops for which there
                                           167 crops analyzed
                                           167 crops analyzed                                                      are favorable conditions in
                                                                                                                   are favorable conditions in
                                                                                                                             Kosovo
                                                                                                                             Kosovo


 Note: (*) 100+ crops includes: 27 vegetables, 23 fruit, 19 oil crops, 12 cereals, 10 spices & stimulants, 8 pulses, 6 roots & tubers
 Source: BAH Analysis
                                                                                                                                                                                      161
                                                                                                           3. Production Value



We then calculated the potential production value per hectare for
each remaining crop in order to select the top 50 high-value crops
                                Filtering Methodology to Identify 50 Strategic Crops


                                                                                Filtering Method Overview
                                                                                Filtering Method Overview
                                                                     This filter ranks over 100 crops according to their
                                                                      This filter ranks over 100 crops according to their
                                                                     production value
                                                                      production value
      100+ Crops
                                                                     The average crop yield data comes from the
                                                                      The average crop yield data comes from the
                                                      50 Crops       FAOStat database and is supplemented with expert
                                                                      FAOStat database and is supplemented with expert
                                                                     opinion
                                                                      opinion
                                                                     To determine price per crop, an average import
                                                                      To determine price per crop, an average import
                                                                     price per ton for the EU(27) was used as a proxy
                                                                      price per ton for the EU(27) was used as a proxy
                                                                        − The unit price per ton data comes from
                                                                        − The unit price per ton data comes from
                                                                          TradeMap, FAOStat, and is supplemented with
                                                                           TradeMap, FAOStat, and is supplemented with
                                                                          expert opinion
                                                                           expert opinion
                                                                     The production values for over 100 crops were
                                                                      The production values for over 100 crops were
                                                                     ranked and sorted to identify the top 50 crops with
                                                                      ranked and sorted to identify the top 50 crops with
                                                                     the highest production value
                                                                      the highest production value




                       Production Value per Hectare        Average Crop Yield         Unit Value
                                                       =                          X
                              (Euro/Hectare)                 (Ton/Hectare)            (Euro/Ton)



Source: BAH Analysis
                                                                                                                            162
 Source:
                         Cauliflowers,                    Mushrooms




                                                                                                                                                                                              500.0




                                                  17.5
                          brocccoli

                             Spinach                            Alfalfa




                                                                                                                                                                                       60.0




                                                  17.0
                              Onions                       Sugar beet




                                                  17.0




 FAOStat, BAH Analysis
                               Leeks                         Beetroot




                                                                                                                                                                           46.9 46.9




                                                  17.0
                             Kiwi fruit                    Tomatoes




                                                  17.0
                                                                                                                                                                                                                                                                 500 tons/hectare




                                Maize                    Chicory roots
                                                                                                                                                35.4 33.3




                                                  16.6
                           Peaches,                           Carrots,




                                                15.1
                           nectarines                         turnips
                                                          Cabbages,
                         Watermelons




                                                14.4
                                                            other
                              Sweet                         Brussels
                                                                          28.8 24.7 24.7




                                            12.0
                             potatoes                       sprouts

                               Apples                         Radish




                                            11.8
                                                              Lettuce,
                                Pears




                                            11.8
                                                              chicory
                                                         Cucumbers,
                         String beans

                                           10.1
                                                          gherkins

                         Pomegranate       10.0             Courgette

                                                             Chilies,
                           Artichokes
                                           9.7


                                                             peppers
                                                                                                                                                                                                      (Tons/Hectare)




                                                           Pumpkins,
                          Table grape
                                           9.2




                                                            squash

                         Strawberries                     Chamomile
                                          8.0




                         Beans, green                         Parsley
                                          7.3




                         Kidney beans                     Peppermint
                                          7.3
                                                                                                                                                                                                                       Average Crop Yield for the Top 50 Crops




                                                          Thyme, bay
                             Quinces
                                          7.3




                                                            leaves

                               Bulbs                             Basil
                                          7.1




                                Garlic                         Celery
                                          7.1




                            Vinegrape                      Eggplants
                                          7.1




                                                               Other
                              Apricots
                                          6.8
                                                                                         23.6 23.6 23.0 23.0 22.7 22.0 22.0 22.0 22.0 22.0 22.0 22.0 21.3 21.1




                                                              melons
                          Rice, paddy                    Persimmons
                                          5.9




                          Peas, green                        Potatoes
                                          5.9
                                                                                                                                                               18.5 18.3
                                                                                                                                                                                                                                                                 First we identified the yield for each crop, which ranged from 0.1 to
                                                                                                                                                                                                                                                                                                                                         3. Production Value




163
 Source:
                                                   Anise,                                                                                                                                   Saffron




                                                                                                                                                                                                                                                                                                                               16M
                                                  badian,

                                                 Apricots                                                                                                                                  Truffels




                                                                                                                                                                                                                                                                                                                        500K
                                              Blueberries                                                                                                                                Pine nuts




                                                                                                                                                                                                                                                                                                            5680
                                                                                                                                                                                      Cranberries,
                                             Mushrooms                                                                                                                                 Bilberries

                                               Artichokes                                                                                                                                    Hops


                                                    Garlic                                                                                                                             Cut flowers




                                                              1720 1700 1598 1399 1399 1383




 FAOStat, TradeMap, Comtrade, BAH Analysis
                                             Table grape                                                                                                                              Flower buds
                                                                                                                                                                                                                                                                                                  5231 5000 4885 4885




                                                  Beans,                                                                                                                               Currants,
                                                  green                                                                                                                              gooseberries
                                                                                                                                                                                      Tobacco,
                                                 Kiwi fruit                                                                                                                        unmanufactured
                                                 Lettuce,
                                                                                                                                                                                      Chicory roots
                                                 chicory

                                              Chamomile                                                                                                                               String beans

                                                                                                                                                                                      Blackberries,
                                                  Parsley
                                                                                                                                                                                       raspberries

                                              Peppermint                                                                                                                                Mulberries

                                              Thyme, bay
                                                                                                                                                                                                                                                                                                                                     (Euro/Ton)




                                                                                                                                                                                              Figs
                                                                                                                                                                                                      3550 3453 3436 3387 3292 3292 3210




                                                leaves

                                                    Basil                                                                                                                               Asparagus
                                                                                                                                                                                                                                                                                                                                                                                    prices ranged from 47 to 16M Euros/ton




                                              Groundnuts                                                                                                                                  Almonds
                                                                                                                                                                                                                                                                                                                                                  Unit Value for the Top 50 Crops




                                             Persimmons                                                                                                                                      Bulbs

                                                  Plums,
                                                                                                                                                                                    Juniper berries
                                                   sloes
                                               Peaches,
                                                                                                                                                                                       Poppy seed
                                                                                                                                                                                                                                         2890 2848 2848 2840 2489




                                               nectarines

                                                  Carobs                                                                                                                                  Walnuts

                                               Tomatoes                                                                                                                                  Hazelnuts

                                                                                                                                                                                     Chilies and
                                               Eggplants
                                                                                            1333 1331 1230 1228 1191 1191 1191 1191 1191 1158 1140 1130 1124 1105 1093 1071




                                                                                                                                                                                   peppers, green

                                             Peas, green                                                                                                                                  Cherries
                                                                                                                                                                            1005




                                              Cabbages,
                                                                                                                                                                                      Strawberries
                                                              983




                                                other
                                                                                                                                                                                                                                                                  2417 2408 2324 2176 2175




                                                Mustard
                                                                                                                                                                                        Chestnuts
                                                              969




                                                 seed
                                                                                                                                                                                                                                                                                           1827
                                                                                                                                                                                                                                                                                                                                                                                    Then we determined the unit value (Euro/ton) for each crop, where
                                                                                                                                                                                                                                                                                                                                                                                                                                                        3. Production Value




164
 Source:
                                             Strawberries                    Saffron




                                                                 17.4
                                                                                                                                                                                                            1600.0
                                                Peaches,                 Mushrooms




                                                                 17.0
                                                                                                                                                                                                    699.7
                                                nectarines
                                             Other melons               Chicory roots




                                                                16.4
                                                                                                                                                                                                 114.5
                                               Currants,                    Chilies,




                                                                                                                                                                                          52.8
                                                                            peppers




                                                                15.7
                                             gooseberries

                                                  Spinach                 Tomatoes




                                                                15.3
                                                    Celery              String beans
                                                                                                                                                           38.7 34.3




                                                                14.9




 FAOStat, TradeMap, Comtrade, BAH Analysis
                                                   Radish                   Beetroot




                                                               14.7
                                                                             Lettuce,
                                                    Leeks




                                                               14.4
                                                                             chicory
                                               Pumpkins,                 Chamomile




                                                               14.3
                                                squash
                                             Cauliflowers,
                                                                             Parsley




                                                               13.7
                                               broccoli

                                                Artichokes               Peppermint




                                                               13.6
                                                                         Thyme, bay
                                               Asparagus

                                                               13.3
                                                                           leaves

                                              Maize, green     13.2            Basil

                                              Table grape                    Truffels
                                                               12.3
                                                                                                                                                                                                                     (Euro/Hectare)




                                                    Alfalfa              Cut flowers
                                                               12.3




                                                  Apricots              Flower buds
                                                              11.6




                                                                         Cabbages,
                                                    Pears
                                                                                         29.2 29.0 26.2 26.2 26.2 26.2 26.2 25.0 24.4 24.4 24.3




                                                              11.2




                                                                           other
                                             Blackberries,
                                                                          Eggplants
                                                              11.0




                                              raspberries
                                                  Carrots,
                                                                        Persimmons
                                                                                                                                                                                                                                      Potential Production Value for the Top 50 Crops




                                                              10.0




                                                  turnips

                                                    Garlic                  Kiwi fruit
                                                              9.8
                                                                                                                                                                                                                                                                                        50 crops with the highest potential production value




                                             Beans, green                      Bulbs
                                                              9.7




                                                                        Cucumbers,
                                             Pomegranate
                                                              9.2




                                                                         gherkins

                                                   Apples                  Courgette
                                                              9.0




                                                 Cherries               Cranberries,
                                                              8.7




                                                                         bilberries
                                                 Potatoes                  Brussels
                                                              8.4
                                                                                                                                                22.8 21.1 20.9 20.2 18.8 18.8 18.6 17.8




                                                                            sprouts
                                                                                                                                                                                                                                                                                        We multiplied the yield and unit value per crop to identify the top
                                                                                                                                                                                                                                                                                                                                                              3. Production Value




165
                                                                                               4. Economic Attractiveness & Feasibility



These 50 crops were further filtered according to economic
feasibility and economic attractiveness…
                                   Filtering Methodology to Identify 20 Strategic Crops

         50 Crops

                                                               20 Crops              Filtering Method Overview
                                                                                     Filtering Method Overview
                                                                          This filter ranks the 50 crops according to their:
                                                                          This filter ranks the 50 crops according to their:
                                                                           − Economic feasibility
                                                                            − Economic feasibility
                                                                           − Economic attractiveness
                                                                            − Economic attractiveness
                                                                          Economic feasibility identifies and prioritizes:
                                                                          Economic feasibility identifies and prioritizes:
                                                                           − Crops with the highest demand by the EU
                                                                           − Crops with the highest demand by the EU
                                                                           − Crops that can be grown on small plots of land
                                                                           − Crops that can be grown on small plots of land
                                                                           − Crops with the highest EU import price/ton
                                                                           − Crops with the highest EU import price/ton
                           Six Dimensional Filter
                                                                          Economic attractiveness identifies and prioritizes:
                                                                          Economic attractiveness identifies and prioritizes:
  4a
  4a                                  4b
                                      4b                                   − Crops that can be highly labor intensive
                                                                            − Crops that can be highly labor intensive
         Economic Feasibility
         Economic Feasibility           Economic Attractiveness
                                        Economic Attractiveness
                                                                           − Crops being imported by Kosovo that could be
                                                                            − Crops being imported by Kosovo that could be
     1     Demand in Target             1                                     produced locally
                                                                              produced locally
     1                                  1      Labor Intensivity
              Markets
                                                                           − Crops that have greater potential for high-value
                                                                            − Crops that have greater potential for high-value
                                                                              processing
                                                                              processing
          Lack of Significant
     2
     2
          Economies of Scale
                                        2
                                        2     Import Substitution         The final ranking of crops is derived from the
                                                                          The final ranking of crops is derived from the
                                                                          consolidation of these six rankings, and leads to the
                                                                          consolidation of these six rankings, and leads to the
                                                                          selection of the top 20 crops
                                                                          selection of the top 20 crops
     3 High Value per Weight            3       Potential for
     3                                  3
                                            Downstream Processing



Source: BAH Analysis
                                                                                                                                     166
                                                                                                                                                4. Economic Attractiveness & Feasibility



       …using a combination of agriculture databases and expert
       analysis to determine the results of each filter
                                                                        Calculation Methodology and Data Sources


                                                                   Calculation Methodology
                                                                   Calculation Methodology                                            Data Source
                                                                                                                                      Data Source                      Weight
                                                                                                                                                                       Weight

                                 1. Demand in        Ranked and prioritized crops in order of decreasing demand          Comtrade, FAOStat,
                                                                                                                         Comtrade, FAOStat,
                                 1. Demand in        Ranked and prioritized crops in order of decreasing demand          http://france.usembassy.gov/irs-euro.html,     25%
                                                                                                                         http://france.usembassy.gov/irs-euro.html,     25%
4A. Economic Feasibility
4A. Economic Feasibility




                                Target Markets
                                Target Markets       by the EU (27)
                                                     by the EU (27)                                                      BAH Analysis
                                                                                                                         BAH Analysis

                                  2. Lack of
                                  2. Lack of         Crops that can be grown on small farms (less than 5 ha)
                                                      Crops that can be grown on small farms (less than 5 ha)
                                 Significant
                                 Significant         received the highest ranking while crops grown on large
                                                      received the highest ranking while crops grown on large            Surveyed Agriculture Experts, BAH Analysis
                                                                                                                         Surveyed Agriculture Experts, BAH Analysis     15%
                                                                                                                                                                        15%
                                Economies of
                                Economies of         farms (greater than 50 ha) received the lowest ranking
                                                      farms (greater than 50 ha) received the lowest ranking
                                     Scale
                                     Scale
                                                     Top quartile of crops with the highest import value per ton into
                                                      Top quartile of crops with the highest import value per ton into
                               3. High Value per
                               3. High Value per     the EU received the highest ranking while the lowest quartile
                                                      the EU received the highest ranking while the lowest quartile      Surveyed Agriculture Experts, BAH Analysis
                                                                                                                         Surveyed Agriculture Experts, BAH Analysis     20%
                                                                                                                                                                        20%
                                    Weight
                                     Weight          of crops with the lowest import value per ton received the
                                                      of crops with the lowest import value per ton received the
                                                     lowest ranking
                                                      lowest ranking
4B. Economic Attractiveness




                                                     Highly labor intensive crops requiring more than 500 hours/ha
4B. Economic Attractiveness




                                                      Highly labor intensive crops requiring more than 500 hours/ha      Centro Ricerche Produzioni Vetetali (CRPV):
                                                     per year for cultivation and harvest received the highest           Centro Ricerche Produzioni Vetetali (CRPV):
                                                      per year for cultivation and harvest received the highest          COLTURE ARBOREE II COSTI DI                    20%
                              1. Labor Intensivity
                              1. Labor Intensivity   ranking while low labor intensive crops requiring less than         COLTURE ARBOREE COSTI DI                       20%
                                                      ranking while low labor intensive crops requiring less than        PRODUZIONE 2008, BAH Analysis
                                                                                                                         PRODUZIONE 2008, BAH Analysis
                                                     100 hours/ha per year received the lowest ranking
                                                      100 hours/ha per year received the lowest ranking
                                                     If the annual import value is greater than 250,000 Euros, this
                                                      If the annual import value is greater than 250,000 Euros, this
                                  2. Import
                                   2. Import         crop could be considered for import substitution and received
                                                      crop could be considered for import substitution and received      Kosovo Customs Data, BAH Analysis
                                                                                                                         Kosovo Customs Data, BAH Analysis               5%
                                                                                                                                                                         5%
                                 Substitution
                                 Substitution        a higher ranking
                                                      a higher ranking
                                                     Crops that could be used to produce many high-value
                                                      Crops that could be used to produce many high-value
                                3. Potential for
                                3. Potential for     processed products in Kosovo received the highest ranking
                                                      processed products in Kosovo received the highest ranking
                                 Downstream
                                 Downstream                                                                              Surveyed Agriculture Experts, BAH Analysis
                                                                                                                         Surveyed Agriculture Experts, BAH Analysis     15%
                                                                                                                                                                        15%
                                                     while crops with few processing options received the lowest
                                                      while crops with few processing options received the lowest
                                  Processing
                                   Processing        ranking
                                                      ranking




                 Source:           BAH Analysis
                                                                                                                                                                                      167
                                                                                                                4. Economic Attractiveness & Feasibility



After combining the filters on a weighted basis, we identified 20
potential high-value, economically attractive and feasible crops
                                                      Selection of 20 Strategic Crops
               Crop          Target Market   Economies      High Value/   Labor Intensivity      Import           Downstream        Weighted     Rank
                                       d
                              Demand 25%              vv
                                             of Scale 15%            ff
                                                            Weight 20%                  20%                 d
                                                                                              Substitution 5%                d
                                                                                                                 Processing 15%      Score

Chilies and peppers, green        1               1             1                1                  1                   1             1.0000       1

Strawberries                      1               1            0.75              1                 0.01                 1             0.9005       2

Mushrooms                         1               1            0.75              1                 0.01                 1             0.9005       2

Peaches and nectarines            1               1            0.5               1                  1                   1             0.9000       4

Blackberries, raspberries        0.75             1             1                1                 0.01                 1             0.8880       5

Cherries                         0.75             1             1                1                 0.01                 1             0.8880       5

Kiwi fruit                        1               1            0.75             0.67                1                   1             0.8840       7

Truffles                          1               1             1               0.67                0                   1             0.8840       7

Cucumbers and gherkins            1               1            0.5               1                  1                  0.67           0.8505       9

Cut flowers                       1               1             1                1                  0                  0.33           0.8495       10

Flower buds                       1               1             1                1                  0                  0.33           0.8495       10

Pears                             1               1            0.5              0.67                1                   1             0.8340       12

Cranberries and bilberries        0.5             1             1                1                  0                   1             0.8250       13

Saffron                           0.5             1             1                1                  0                   1             0.8250       13

Table grape                       1               1            0.75              1                  0                  0.33           0.7995       15

Apples                            1               1            0.25             0.67                1                   1             0.7840       16

Asparagus                        0.25             1             1                1                 0.01                 1             0.7630       17

Currants and gooseberries        0.25             1             1                1                  0                   1             0.7625       18

Bulbs                            0.75             1             1               0.33               0.01                 1             0.7540       19

Lettuce and chicory              0.75             1            0.75              1                 0.01                0.33           0.7375       20

Source:      BAH Analysis
                                                                                                                                                        168
                                                                                                                      5. Value Chain Constraints

We further analyzed the remaining crops across the agriculture
value chain to better understand the challenges and opportunities
that would be faced in introducing them to Kosovo

   Investment, Production, and Market Access Considerations Along the Agriculture Export Value Chain

      1 Investment
      1                      2 Production
                             2                                        3 Market Access
                                                                      3


                               Production                                                                          Distribution in
          Pre-Production                            Post Harvest
                                  and                                    Storage            Transportation            Foreign
            Investment                               Handling
                               Harvesting                                                                             Markets

           Time to first       Crop                Quality control    Product shelf life   Refrigeration            Distance to
           Revenue             management          including lab      Cold chain and       requirements             markets
           Skills              (production         testing            pre-cooling          Perishability in         Type of customer
           development         planning,           Sorting, grading   requirements         transport
                               planting, pruning                                                                    Demands for
           required                                Packaging          Product              Local transportation     reliability
                               harvesting)
           Infrastructure,                                            segregation          from storage facility    Flexibility of
           machinery &         Inputs (seeds,                         requirements         to various ports or
                               fertilizer,                                                                          delivery
           equipment                                                  Pre-treatment        airports
           investment          pesticides, etc.)
                                                                      requirements         International
           Soil                                                       Humidity             transport through
           preparation                                                requirements         land, air, or
                                                                                           maritime shipping




Source:    BAH Analysis
                                                                                                                                              169
                                                                                                                   5. Value Chain Constraints

More specifically, this final Value Chain Constraints filter focused
on investment required, ease to produce, and ease of market
access
                         Overview of Value Chain Constraints Analysis Filter Dimensions

  1
  1                           Time to First Revenue and Life of Plant: Time required until first full harvest and productive life of plant;
                              Capital cost to plant and cultivate
                              Skills Development: Requirements for training and skills development needed to familiarize with test plots or
           Investment
            Investment        to introduce new varieties of existing crops
             Required
             Required         Infrastructure, Machinery & Equipment: Cost for irrigation systems given crop water requirements; Cost for
                              equipment, climate control and hail cover
                              Soil Preparation: Soil analysis, fertilization, and other preparation required to ensure healthy soil


  2                           Crop Management: Knowledge and expertise required for successful planning and overall crop management
  2
                              -- planting, setting of fruit, pruning, harvesting, etc.
                              Inputs: Complexity and cost of inputs for pest management, fertilization, disease management, etc.; Difficulty
      Ease to Produce         of compliance with regulations in target markets
      Ease to Produce
                              Quality Control: Specificity of product quality requirements, number and specificity of grades for fresh and
                              processed varieties, requirements for lab testing
                              Sorting, Grading and Packaging: Needed frequency of collection, difficulty of sorting and grading,
                              infrastructure required for packing, labeling, drying and other post-harvest processes

  3
  3
                              Storage: Storage life of products, importance of uninterrupted cold chain and pre-cooling, requirements for
      Ease of Market
      Ease of Market          segregation of products to control odors, requirements for pre-treatment, humidity requirements, etc.
         Access
         Access               Transportation: Refrigeration requirements, perishability during transport, etc.
                              Distribution to Markets: Distance to markets, type of customer (retailer, wholesaler, processor), demands for
                              reliability and flexibility of delivery




Source:   BAH Analysis
                                                                                                                                               170
                                                                                                                           5. Value Chain Constraints




We developed a scale that defines required investment levels …
                                        Required Investment Ranking Description


                Weight                                                  Description
                         Almost no time is required until first harvest occurs
                         Productive life of the plant is greater than 20 years
                         Expertise for test plots or new varieties already exists
                         Minimal cost for irrigation, machinery, and other equipment
                         Minimal time is required until first harvest occurs
                         Productive life of the plant is 11-20 years
                         Expertise for test plots or new varieties already exists or can be obtained with minimal difficulty
                         Reasonable costs for irrigation, machinery, and other equipment
                         Slightly longer amount of time is required until the first harvest occurs
                         Productive life of the plant is 2-10 years
                         Some expertise exists, but additional expertise will be obtained with greater difficulty
                         Higher costs for irrigation, machinery, and other equipment
                         Significant time is required until the first harvest occurs
                         Productive life of the plant is 1 year or less
                         Little expertise or familiarity with test plots and new varieties with needed expertise difficult or expensive to
                         obtain
                         Prohibitive costs for irrigation, machinery, and other equipment




Source:   BAH Analysis
                                                                                                                                                   171
                                                                                                                                                                      5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment
                                                            Required Investment Analysis and Rank

        Crop                         Type of Crop                        Time to First Harvest                     Productive Life                   Investment Cost*                Score
                            Multi annual                                3-4 years                               Up to 25 years                    Up to 100,000 Euro/ha


                            Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of virus-free stocks & rootstock,
      Apples                and update training and pruning techniques
                            Infrastructure, Machinery & Equipment Needed: Drip irrigation system with fertilization, hail storm net cover set on proper poles and
                            wires, a tractor, a crusher and weed sprayer, chemical sprayer, fork lift and a motor harvester/pruning carriage
                            Soil Selection & Preparation: Conducting a soil analysis, selecting medium quality calcareous/ alkaline (iron clorosis) or slightly acid
                            soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation)
                            Multi annual                                2-3 years                               up to 20 years                    From 10,000-60,000
                                                                                                                                                  Euro/Ha

 Blackberries/              Skill Development: Very simple crop so minimal additional training is needed about how to grow, harvest, etc.
 Raspberries                Infrastructure, Machinery & Equipment Needed: Small tractor with a crusher or motor cultivator, eventually a drip irrigation system with
                            fertilization
                            Soil Selection & Preparation: Conducting a soil analysis, selecting marginal and slightly alkaline/slightly acid soils, and preparing soil
                            (soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation)
                            Multi annual                                3-4 years                               25+ years                         Up to 100,000 Euro/ha


     Cherries               Skill Development: Additional knowledge is required to introduce new varieties particularly for sweet cherries
                            Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and
                            wires, a tractor, a crusher, a weed sprayer, a chemical sprayer, a motor harvester/pruning carriage
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light drained soils, and preparing soil (soil ripping, soil drainage,
                            medium depth plough, organic and chemical fertilization, squaring and trees plantation)




Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included
Source: BAH Analysis
                                                                                                                                                                                              172
                                                                                                                                                                      5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment (cont’d)
                                                            Required Investment Analysis and Rank

        Crop                         Type of Crop                       Time to First Harvest                     Productive Life                    Investment Cost*                Score
                            Multi annual                              2-3 years                                 Up to 20 years                    From 10,000 to 60,000
                                                                                                                                                  Euro/Ha

  Cranberries/              Skill Development: Very simple crop so minimal additional training is needed about how to grow, harvest, etc.
   Bilberries               Infrastructure, Machinery & Equipment Needed: A small tractor with a crusher or motor cultivator, eventually a drip irrigation system
                            with fertilization
                            Soil Selection & Preparation: Conducting a soil analysis, selecting acid soils, and preparing soil (soil drainage, medium depth plough,
                            organic and chemical fertilization, squaring and trees plantation)
                            Multi annual                              2-3 years                                 Up to 20 years                    From 10,000 to 60,000
                                                                                                                                                  Euro/Ha

  Currants/                 Skill Development: Very simple crop so minimal additional training is needed about how to prune, grow, and harvest
 Gooseberries               Infrastructure, Machinery & Equipment Needed: A small tractor with a crusher or motor cultivator, eventually a drip irrigation system
                            with fertilization
                            Soil Selection & Preparation: Conducting a soil analysis, selecting slightly acid soils rich of humus, and preparing soil (soil drainage,
                            medium depth plough, organic and chemical fertilization, squaring and trees plantation)
                            Multi annual                              3-4 years                                 Up to 25 years                    Up to 100,000 Euro/Ha


                            Skill Development: Additional knowledge is required to produce kiwi since it is not currently produced in Kosovo including varieties to be
         Kiwi               cultivated, pruning and harvesting techniques, basic parasite and fungal control, etc.
                            Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and
                            wires, a tractor, a crusher, a weed sprayer, a chemical sprayer , a fork lift, a motor harvester/pruning carriage
                            Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) soils, and preparing soil (soil
                            ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation)




Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included
Source: BAH Analysis
                                                                                                                                                                                              173
                                                                                                                                                                    5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment (cont’d)
                                                           Required Investment Analysis and Rank

        Crop                         Type of Crop                       Time to First Harvest                     Productive Life                   Investment Cost*               Score
                            Multi annual                               3-4 years                               Up to 20 years                     Up to 100,000 Euro/Ha


    Peaches/                Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of free virus stocks & rootstock,
   Nectarines               and update training and pruning techniques
                            Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and
                            wires, a tractor, a crusher, a weed sprayer, a chemical sprayer, a fork lift , a motor harvester/pruning carriage
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light and drained soils, and preparing soil (soil ripping, soil drainage,
                            medium depth plough, organic and chemical fertilization, squaring and trees plantation)
                            Multi annual                               3-4 years                               up to 25 years                     Up to 100,000 Euro/Ha

                            Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of free virus stocks & rootstock,
       Pears                and update training and pruning techniques
                            Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and
                            wires, a tractor, a crusher, a weed sprayer, a chemical sprayer a fork lift , a motor harvester/pruning carriage
                            Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) soils, and preparing soil (soil
                            ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring & trees plantation)
                            Multi annual                               From the first year                     Up to 5-7 years                From 60,000 up to
                                                                                                                                              150,000/250,000 Euro/Ha
                            Skill Development: Additional knowledge is needed to update varieties and introduce new production models and techniques (e.g.
                            mulching, etc.)
  Strawberries              Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded
                            by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are
                            needed as per cultivation of horticultural crop (e.g. medium tractor, tiller, crusher, sprayer, etc.)
                            Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) or slightly acid soils, and
                            preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and stolon
                            plantation)
Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included; Modern greenhouses cost 150,000 Euro/ha and plastic tunnels are 40,000 Euro/ha
Source: BAH Analysis
                                                                                                                                                                                            174
                                                                                                                                                                      5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment (cont’d)
                                                            Required Investment Analysis and Rank

        Crop                         Type of Crop                        Time to First Harvest                    Productive Life                   Investment Cost*                 Score
                            Multi annual                                2-3 years                              Up to 25 years                    Up to 100,000 Euro/Ha


                            Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of free virus stocks & rootstock,
  Table Grape               and update training and pruning techniques
                            Infrastructure, Machinery & Equipment Needed: Drip irrigation system with fertilization, a hail storm net cover set on proper poles and
                            wires, a tractor, a crusher and a weed sprayer, a chemical sprayer, a fork lift and a motor harvester/pruning carriage
                            Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) or slightly acid soils, and
                            preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation)
                            Annual to Multi annual                      From first to third year               1-3 years                         Up to 10,000 Euro/Ha


                            Skill Development: Since simple crop, minimum additional knowledge is required (e.g. varieties)
       Bulbs                Infrastructure, Machinery & Equipment Needed: Related to annual crop cultivation machineries (tractor, tiller) and a light plough to
                            harvest the bulbs
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil
                            drainage, medium depth plough, organic and chemical fertilization)
                            Multi annual                                All year long but mostly               Strictly correlated to            Up to 150,000/250,000
                                                                        from early spring to late              the species                       Euro/Ha
                                                                        autumn

   Cut flowers              Skill Development: Significant and sophisticated level of knowledge is required
                            Infrastructure, Machinery & Equipment Needed: High investment and production costs due to greenhouse construction and
                            maintenance
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline (iron clorosis) or slightly acid soils, and
                            preparing soil (soil drainage, medium depth plough, organic and chemical fertilization)



Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included
Source: BAH Analysis
                                                                                                                                                                                              175
                                                                                                                                                                    5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment (cont’d)
                                                           Required Investment Analysis and Rank

        Crop                         Type of Crop                       Time to First Harvest                    Productive Life                  Investment Cost*                 Score
                            Multi annual                               All year but mostly from               Strictly correlated to           Up to 150,000/250,000
                                                                       early spring to late autumn            the species                      Euro/Ha
                            Skill Development: Significant and sophisticated level of knowledge is required
  Flower Buds               Infrastructure, Machinery & Equipment Needed: High investment and production costs due to greenhouse construction and
                            maintenance
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline (iron clorosis) or slightly acid soils, and
                            preparing soil (soil drainage, medium depth plough, organic and chemical fertilization)
                            Multi annual                               2-3 years                              Up to 20 years                   From 60,000 to150,000/
                                                                                                                                               250.000 Euro/Ha
                            Skill Development: More knowledge required for variety selection & cropping techniques due to its long term producing species
                            Infrastructure, Machinery & Equipment Needed: : Cost reflects production in plastic tunnels but the production period could be
   Asparagus                expanded by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and
                            equipment are needed as per cultivation of horticultural crop (e.g. medium tractor, tiller, crusher, sprayer, etc.)
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil
                            ripping, soil drainage, medium depth plough, organic and chemical fertilization, dig the ditch 60x20 (as largeness x depth) and rhizome
                            plantation)
                            Annual                                     From late spring to early              Annual                           From 60,000 to150,000/
                                                                       autumn                                                                  250,000 Euro/Ha
                            Skill Development: Low to medium level of additional knowledge required to introduce new growing techniques, varieties and related
     Chilies/               marketing
                            Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded
     Peppers
                            by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are
                            needed as per cultivation of horticultural crop (medium tractor, tiller, crusher, sprayer, etc.)
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil
                            drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and young plant plantation)

Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included; Modern greenhouses cost 150,000 Euro/ha and plastic tunnels are 40,000 Euro/ha
Source: BAH Analysis
                                                                                                                                                                                            176
                                                                                                                                                                    5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment (cont’d)
                                                           Required Investment Analysis and Rank

        Crop                        Type of Crop                       Time to First Harvest                      Productive Life                  Investment Cost*                Score
                            Annual                                    From late spring to early                Annual                            From 60,000 to150,000/
                                                                      autumn                                                                     250,000 Euro/Ha
                            Skill Development: Low/medium level of knowledge required to introduce new growing techniques, varieties, related marketing
  Cucumbers/                Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded
   Gherkins                 by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are
                            needed as per cultivation of horticultural crop (medium tractor, tiller, crusher, sprayer, etc.)
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil
                            drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and young plant plantation)
                            Annual                                    From late spring to early                Annual on inoculated              From 60,000 to150,000/
                                                                      autumn                                   substrata                         250,000 Euro/Ha
                            Skill Development: Production knowledge needed is not complicated, but production requires intensive cultivation methods , a particular
                            location for production (also greenhouses), and inoculated substrata not currently available in Kosovo but could be imported. Training
  Mushrooms                 needed for varieties such as champignons and pleurotus
                            Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded
                            by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are
                            needed as per cultivation of horticultural crop (medium tractor, tiller, crusher, sprayer, etc.)
                            Soil Selection & Preparation. No soil preparation needed as production is done on inoculated substrata
                            Annual                                    From late spring to summer               Annual                            From 60,000 to150,000/
                                                                                                                                                 250,000 Euro/Ha
    Lettuce &               Skill Development: Medium level of knowledge required to introduce new growing techniques, varieties, related marketing
     Chicory                Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels but the production period could be expanded
                            by investing in large green houses with higher investment costs but also higher revenues; medium tractor, tiller, crusher, sprayer, etc.
                            Soil Selection & Preparation: Conducting a soil analysis, selecting slightly calcareous/ alkaline or slightly acid soils, and preparing soil
                            (soil drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and young plant plantation)


Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included; Modern greenhouses cost 150,000 Euro/ha and plastic tunnels are 40,000 Euro/ha
Source: BAH Analysis
                                                                                                                                                                                            177
                                                                                                                                                                      5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops
according to investment commitment (cont’d)
                                                            Required Investment Analysis and Rank

        Crop                         Type of Crop                        Time to First Harvest                     Productive Life                   Investment Cost*                Score
                            Multi annual                                From the first year                     Up to 7 years                     From 10,000 to 60,000
                                                                                                                                                  Euro/Ha
                            Skill Development: Medium level of knowledge is required as this crop requires a very precise use of the agricultural techniques for soil
      Saffron               preparation, harvesting and selecting techniques
                            Infrastructure, Machinery & Equipment Needed: Costs based on production in open field with very good soil preparation; Medium
                            tractor, tiller, crusher, sprayer, etc.
                            Soil Selection & Preparation: Conducting a soil analysis, selecting light and drained soils, and preparing soil (soil ripping, soil drainage,
                            medium depth plough, organic and chemical fertilization, bulb plantation)
                            Multi annual                                From the 4/5 years                      Up to 50-80 years and             From 10,000 to 60,000
                                                                                                                more                              Euro/Ha
                            Skill Development: Medium level of knowledge is required including: inoculation of trees such as hazelnut, oak, beech, poplar, cultivated
                            in neutral or slightly alkaline soils, cultivation techniques (irrigation in late spring/summer particularly in beginning of crop production,
      Truffles              simple maintenance of the planted inoculated tree), harvesting requires the training of a sniffing dog able to understand where the truffles
                            are
                            Infrastructure, Machinery & Equipment Needed: Cost based on setting up production in ornamental trees. Medium tractor, tiller,
                            crusher, sprayer, etc.
                            Soil Selection & Preparation: Conducting a soil analysis, selecting medium quality slightly calcareus/ alkaline soils or slightly acid soils,
                            and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, squaring and young plant plantation)




Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment
is considered a production cost and not upfront investment cost; Land cost not included
Source: BAH Analysis
                                                                                                                                                                                              178
                                                                                                                                 5. Value Chain Constraints



We next created a scale that defines the levels for the “ease of
production” ranking …
                                                   Ease of Production Ranking Description


   Weight                                                                       Description
                         Extensive expertise exists for overall crop management
                         Input costs are minimal, input requirements are straightforward, and regulatory compliance is easily obtained
                         Product quality/grade requirements are minimal and easily obtainable
                         Simple sorting/grading/etc. procedures, minimal and inexpensive infrastructure requirements
                         Sufficient expertise exists for overall crop management
                         Input costs are reasonable, input requirements are understandable, and regulatory compliance can be obtained
                         Product quality/grade requirements are manageable and obtainable
                         Understandable sorting/grading/etc. procedures, reasonable infrastructure requirements
                         Some expertise exists for overall crop management
                         Input costs are higher, input requirements can be unclear, and regulatory compliance can require significant effort
                         Product quality/grade requirements can be extensive and can be difficult to obtain
                         Several sorting/grading/etc. procedures, significant infrastructure requirements
                         Minimal expertise exists for overall crop management
                         Input costs are prohibitive, input requirements are unclear, and regulatory compliance requires significant effort
                         Product quality/grade requirements are extensive and difficult to obtain
                         Extensive, complicated sorting/grading/etc. procedures, prohibitive infrastructure requirements




Source:   BAH Analysis
                                                                                                                                                         179
                                                                                                                                          5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production
                                                    Ease of Production Analysis and Rank
          Crop                                                                 Explanation                                                               Score
                         Crop Management: Additional knowledge and expertise is needed in training and pruning to improve quality of
                         harvesting
                         Inputs: Pest management is relatively simple as long as weather forecasts are observed and followed; the cost of pest
                         management and fertilization is relatively low; compliance with regulations in target markets is possible with average
                         effort
      Apples             Quality Control: Processes to produce fresh, intact product (no pinches, hail storm damage, etc.) are fairly simple to
                         master. Categorization by diameter is required with ow quality products (small diameter, defects) are generally sent for
                         processing. Lab testing needed to determine level of pest residuals
                         Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and
                         machinery to select, package, label products
                         Crop Management: This crop requires minimal additional training for pruning and quality harvesting
                         Inputs: Pest management is not complex since the crop has practically no parasites, cost of pest management and
                         fertilization is very low, compliance with regulations in target markets can be easily obtained
 Blackberries/           Quality Control: Procedures are minimal and obtainable, fresh intact product is selected meeting quality requirements
 Raspberries             while the lower quality is generally processed, practically no need for lab testing for pest residuals since the species has
                         no parasite
                         Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures
                         and modest infrastructure requirements
                         Crop Management: Additional knowledge and expertise is needed to introduce new varieties, train and prune the trees,
                         and improve quality harvesting
                         Inputs: Pest management is not complex since the crop has few parasites, cost of pest management and fertilization is
                         low, compliance with regulations in target markets can be easily obtained
     Cherries            Quality Control: Fresh intact product needs to be categorized by diameter, low quality products (low diameter, defects)
                         generally sent for processing, need lab testing to determine level of pest residuals
                         Sorting, Grading & Packaging:The crop is harvested by hand, requires simpler sorting and packaging procedures and
                         modest to high infrastructure requirements




Source:   BAH Analysis
                                                                                                                                                                  180
                                                                                                                                          5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production (cont’d)
                                                    Ease of Production Analysis and Rank
          Crop                                                                 Explanation                                                               Score
                         Crop Management: This crop requires minimal additional training for quality harvesting
                         Inputs: Pest management is not complex since the crop has practically no parasites, cost of pest management and
                         fertilization is very low, compliance with regulations in target markets can be easily obtained
  Cranberries/           Quality Control: Procedures are minimal and obtainable, fresh intact product is selected meeting quality requirements
   Bilberries            while the lower quality is generally processed, practically no need for lab testing for pest residuals since the species has
                         practically no parasite
                         Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures
                         and modest infrastructure requirements
                         Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality
                         harvesting
                         Inputs: Pest management is not complex since the crop has very few parasites, cost of pest management and
                         fertilization is very low, compliance with regulations in target markets can be easily obtained
  Currants/
                         Quality Control: Procedures are minimal and obtainable, fresh intact product is selected meeting quality requirements
 Gooseberries            while the lower quality is generally processed, practically no need for lab testing for pest residuals since the species has
                         few parasite
                         Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures
                         and modest infrastructure requirements
                         Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality
                         harvesting
                         Inputs: Pest management has low complexity since the crop has practically no parasites, cost of pest management and
                         fertilization is low, compliance with regulations in target markets is easily obtainable
          Kiwi           Quality Control: Procedures are fairly simple, fresh intact product needs to be categorized by diameter, low quality
                         products (small diameter, defects) generally sent for processing, need lab testing to determine level of pest residuals
                         Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and
                         machinery to select, package, label products




Source:   BAH Analysis
                                                                                                                                                                  181
                                                                                                                                           5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production (cont’d)
                                                      Ease of Production Analysis and Rank
          Crop                                                                  Explanation                                                               Score
                          Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality
                          harvesting
                          Inputs: Pest management requires some technical assistance resulting in medium complexity, cost of pest management
                          and fertilization is medium, compliance with regulations in target markets can be achieved with medium difficulty
    Peaches/
                          Quality Control: Procedures are fairly simple, fresh intact product (no pinches, hail storm damage, etc.) needs to be
   Nectarines             categorized by diameter, low quality products (small diameter, defects) generally sent for processing, need lab testing to
                          determine level of pest residuals
                          Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and
                          machinery to select, package, label products
                          Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality
                          harvesting
                          Inputs: Pest management is relatively simple as long as weather forecasts are observed and followed, cost of pest
                          management and fertilization is medium, compliance with regulations in target markets is possible with average effort
          Pears           Quality Control: Procedures can be easy, fresh intact product (no pinches, hail storm damage, etc.) needs to be
                          categorized by diameter, low quality products (small diameter, defects) generally sent for processing, need lab testing to
                          determine level of pest residuals
                          Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and
                          machinery to select, package, label products
                          Crop Management: This crop requires minimal additional training for introduction of new varieties and quality harvesting
                          Inputs: Pest management is not complex, pest management and fertilization costs are medium, compliance with
                          regulations in target markets can be obtained with medium difficulty
  Strawberries            Quality Control: Procedures are easy and obtainable, fresh intact product is selected meeting quality requirements while
                          the lower quality is generally processed, strong need for lab testing due to pest residuals
                          Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures
                          and modest infrastructure requirements




Source:    BAH Analysis
                                                                                                                                                                   182
                                                                                                                                            5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production (cont’d)
                                                     Ease of Production Analysis and Rank
          Crop                                                                  Explanation                                                                Score
                          Crop Management: Additional knowledge and expertise is needed to train and prune the trees, and improve quality
                          harvesting
                          Inputs: Pest management requires weather forecasting and technical assistance and has a medium complexity, cost of
                          pest management and fertilization is relatively high, compliance with regulations in target markets is possible with
  Table Grape             average effort
                          Quality Control: Procedures can be easy, fresh intact product needs to be categorized by quality size, need lab testing
                          to determine level of pest residuals
                          Sorting, Grading & Packaging: Harvesting occurs in different intervals; requires significant, specialized infrastructure to
                          select, package, label products
                          Crop Management: Minimal expertise is required for crop management particularly directed to production techniques
                          and quality harvesting
                          Inputs: Pest management has a low complexity, cost of pest management and fertilization is low, compliance with
                          regulation in target market can be achieved with minimal effort
          Bulbs           Quality Control: Requirements are minimal and easy to meet, the bulbs are selected by calibre and the lowest are kept
                          for seed
                          Sorting, Grading & Packaging: Harvesting occurs one time, requires simple sorting and packaging procedures, and
                          modest infrastructure requirements
                          Crop Management: Significant expertise is required particularly for production techniques and high quality harvesting
                          Inputs: Pest management needs some technical assistance and has a medium/high complexity related to the cultivated
                          species, cost of pest management and fertilization is medium, compliance with regulations in target markets can be
                          difficult
  Cut Flowers             Quality Control: Procedures can be difficult to obtain while flowers are selected by quality size, residual testing could be
                          required
                          Sorting, Grading & Packaging: Continuous harvesting is needed, and requires significant, specialized infrastructure to
                          select, package, label products




Source:    BAH Analysis
                                                                                                                                                                    183
                                                                                                                                       5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production (cont’d)
                                                    Ease of Production Analysis and Rank
          Crop                                                               Explanation                                                              Score
                         Crop Management: Significant expertise is required particularly for production techniques and high quality harvesting
                         Inputs: Pest management needs some technical assistance and has a medium/high complexity related to the cultivated
                         species, cost of pest management and fertilization is medium, compliance with regulations in target markets can be
                         difficult
  Flower Buds            Quality Control: Procedures can be difficult to master as different species of flowers have different requirements for
                         quality, color and size. There are multiple sorts per flower type. Residual testing is required.
                         Sorting, Grading & Packaging: Continuous harvesting is needed, and requires significant, specialized infrastructure to
                         select, package, label products
                         Crop Management: Additional knowledge and expertise is required particularly directed to crop production techniques
                         and high quality harvesting
                         Inputs: Pest management is not complex, cost pest management and fertilization is low, compliance with regulations in
                         target markets can be obtained with medium difficulty
   Asparagus             Quality Control: Procedures are minimal and easy to obtain, small/medium shoots have a better quality, larger shoots
                         could be processed, residual testing is required
                         Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers,
                         not machines, select, package, and label products
                         Crop Management: Additional knowledge and expertise is required particularly directed to crop production techniques
                         and quality harvesting
                         Inputs: Pest management has a medium complexity, average costs for pest management and fertilization, compliance
     Chilies/            with regulations in target markets can be obtained with medium effort
     Peppers             Quality Control: Procedures are minimal and easy to obtain, fresh intact product is selected by size, the lowest quality
                         product is processed, need of lab testing for pest residuals
                         Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers,
                         not machines, select, package, and label products




Source:   BAH Analysis
                                                                                                                                                               184
                                                                                                                                       5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production (cont’d)
                                                    Ease of Production Analysis and Rank
          Crop                                                               Explanation                                                              Score

                         Crop Management: Additional knowledge and expertise is required particularly directed to crop production techniques
                         and quality harvesting
                         Inputs: Pest management has a medium complexity, average costs for pest management and fertilization, compliance
  Cucumbers/             with regulations in target markets can be obtained with medium effort
   Gherkins              Quality Control: Procedures are minimal and easy to obtain, fresh intact product is selected by size, the lowest quality
                         product is processed, need of lab testing for pest management residuals
                         Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers,
                         not machines, select, package, and label products
                         Crop Management: Additional expertise is required for crop management particularly for production techniques and
                         quality harvesting
                         Inputs: Pest management is not complex and has practically no parasites, cost of pest management and fertilization is
                         low, compliance with regulations in target markets are easily obtained
  Mushrooms              Quality Control: Procedures are minimal and easy to obtain, higher quality products can be of all sizes and will have no
                         defects while the other products are processed, lab testing for pest residuals is minimal
                         Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers,
                         not machines, select, package, and label products
                         Crop Management: Medium expertise is required particularly directed to new variety testing and quality harvesting
                         Inputs: Pest management is not complex, cost of pest management and fertilization is low, compliance with regulations
    Lettuce &            in target markets is easily obtainable
     Chicory             Quality Control: Procedures are minimal and easy to obtain, higher quality products can be of all sizes and will have no
                         defects while the other products are processed, lab testing for pest management residuals is needed
                         Sorting, Grading & Packaging: Harvesting occurs in different times and requires collection infrastructure where
                         workers, not machines, select, package, and label products




Source:   BAH Analysis
                                                                                                                                                               185
                                                                                                                                       5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop each crop
based on ease of production (cont’d)
                                                    Ease of Production Analysis and Rank
          Crop                                                                Explanation                                                             Score
                         Crop Management: Additional knowledge is required for crop introduction and diffusion, production techniques, quality
                         harvesting, and destemming
                         Inputs: Pest management is not complex since the crop has practically no parasites, cost of pest management and
                         fertilization is low, compliance with regulations in target markets is easy to obtain
      Saffron            Quality Control: Requirements are managable and obtainable, fresh intact stigmas of different sizes are selected and
                         processed, no need of lab testing for pest management residuals
                         Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers
                         select products and machines dry, package, and label products
                         Crop Management: Minimal expertise is required in crop production techniques and quality harvesting
                         Inputs: Pest management is not complex and is related to the host species, cost of pest management and fertilization is
                         low, compliance with regulations in target markets can be obtained with average difficulty
                         Quality Control: Procedures can be difficult to obtain and require high quality standardization in shape, size, smell,
     Truffles            denomination of origin, etc., high quality intact products are of mixed sizes, the lowest quality is processed, need lab
                         testing for fertilizer residuals
                         Sorting, Grading & Packaging: Procedures are complex, the crop needs a trained dog for harvesting, requires
                         specialized workers, not machines, to select, package, and label products




Source:   BAH Analysis
                                                                                                                                                               186
                                                                                                                        5. Value Chain Constraints

For the final component of the Value Chain Constraints, we created
a scale that defines the level of difficulty in getting products to
market…
                                      Ease of Market Access Ranking Description


                         Weight                                     Description

                                  Long product storage life, minimal storage requirements
                                  Low perishability, minimal transport requirements
                                  Close proximity to markets, reliable demand, flexible delivery

                                  Relatively long product storage life, reasonable storage requirements
                                  Relatively low perishability, reasonable transport requirements
                                  Relatively close proximity to markets, fairly reliable demand and flexible delivery

                                  Relatively short product storage life, several storage requirements
                                  Relatively high perishability, several transport requirements
                                  Relatively significant distance to markets, fairly unreliable demand and inflexible
                                  delivery

                                  Short product storage life, extensive storage requirements
                                  High perishability, extensive transport requirements
                                  Significant distance to markets, unreliable demand, inflexible delivery




Source:   BAH Analysis
                                                                                                                                                187
                                                                                                                                       5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops based on
the ease of market access rankings
                                                Ease of Market Access Ranking Description
          Crop                                                               Explanation                                                              Score
                         Storage: Very long storage life (up to 9 months according variety) obtained with cold chain or modified atmosphere in
                         controlled humidity, pre treatment needed for longer storage
                         Transportation: Refrigeration required for long distances, modest perishability
      Apples             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could easily reach distant
                         markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer,
                         processor), crop requires medium reliability of demand, delivery can be flexible
                         Storage: Very short storage life (up to 15-20 days) obtained with cold chain, no treatment needed for storage
                         Transportation: Refrigeration required for transportation, very high perishability
 Blackberries/
                         Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach short to medium
 Raspberries             distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery
                         Storage: Very short storage life (up to 1 month) obtained with cold chain. Pre-cooling required in most conditions.
                         Transportation: Refrigeration required for transportation, very high perishability
     Cherries            Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach long distance
                         markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery
                         Storage: Very short storage life (up to 15-20 days) obtained with cold chain, no treatment needed for storage
                         Transportation: Refrigeration required for transportation, very high perishability.
  Cranberries/
                         Distribution to Markets: Close proximity to markets but must meet quality standards, crop most likely will not reach
   Bilberries            distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery
                         Storage: Very short storage life (up to 15-20 days) obtained with cold chain, no treatment needed for storage
                         Transportation: Refrigeration required for transportation, very high perishability.
  Currants/
                         Distribution to Markets: Close proximity to markets but must meet quality standards, crop most likely will not reach
 Gooseberries            distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery



Source:   BAH Analysis
                                                                                                                                                               188
                                                                                                                                          5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops based on
the ease of market access rankings (cont’d)
                                                 Ease of Market Access Ranking Description
          Crop                                                                 Explanation                                                               Score
                          Storage: Very long storage life (up to 8 months) obtained with cold chain or modified atmosphere in controlled humidity,
                          no need for pre treatment for longer storage
                          Transportation: Refrigeration required for long distances, modest perishability
          Kiwi            Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets
                          given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor),
                          crop requires medium reliability of demand, delivery can be flexible
                          Storage: Short storage life (up to 1/2 month) obtained with cold chain and pre cooling, no need for pre treatment for
                          longer storage but pre cooling may be needed when fresh product is stored
    Peaches/              Transportation: Refrigeration required for long distances, medium to high perishability
   Nectarines             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets
                          given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor),
                          crop requires reliability of demand and a modest flexibility of delivery
                          Storage: Long storage life (up to 6-7 months according variety) obtained with cold chain or modified atmosphere in
                          controlled humidity, pre treatment needed for longer storage
                          Transportation: Refrigeration required for long distances, modest perishability
          Pears           Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets
                          given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor),
                          crop requires medium reliability of demand, delivery can be flexible
                          Storage: Very short storage life (up to 15 days ) obtained with cold chain and pre-cooling could be required if stored
                          Transportation: Refrigeration required for long/medium distances, very high perishability
  Strawberries            Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach short to medium
                          distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                          retailer, processors), crop requires strong reliability of demand, no flexibility in delivery




Source:    BAH Analysis
                                                                                                                                                                  189
                                                                                                                                            5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops based on
the ease of market access rankings (cont’d)
                                                 Ease of Market Access Ranking Description
          Crop                                                                  Explanation                                                                Score
                          Storage: Medium storage life (up to 4 month) obtained with cold chain, pre cooling could apply when fresh product is
                          stored
                          Transportation: Refrigeration required for transportation, medium perishability
  Table Grape             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets
                          given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor),
                          crop requires medium reliability of demand, delivery can be flexible
                          Storage: Medium/long storage life (up to 6 month according to variety) obtained with cold chain or modified atmosphere
                          in controlled humidity, some pre treatment needed for packaging
                          Transportation: Refrigeration required for long distances, low perishability in low humidity
          Bulbs           Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach very distant
                          markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer,
                          processor), crop requires medium reliability of demand, delivery can be flexible
                          Storage: Very short storage life (up to transportation period) obtained with cold chain, pre cooling could apply for better
                          conservation in transport
                          Transportation: Refrigeration required for transportation, very high perishability
  Cut Flowers             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets
                          given value of crop and perishability but must have speedy transport, products can be purchased by every type of
                          costumer (wholesalers, retailer, processors), crop requires strong relationships with buyers, no flexibility in delivery
                          Storage: Very short storage life (up to transportation period) obtained with cold chain, pre cooling could apply for better
                          conservation in transport
                          Transportation: Refrigeration required for transportation, very high perishability
  Flower Buds             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets
                          given value of crop and perishability but must have speedy transport, products can be purchased by every type of
                          costumer (wholesalers, retailer, processors), crop requires strong relationships with buyers, no flexibility in delivery




Source:    BAH Analysis
                                                                                                                                                                    190
                                                                                                                                           5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops based on
the ease of market access rankings (cont’d)
                                                 Ease of Market Access Ranking Description
          Crop                                                                 Explanation                                                                Score

                         Storage: Very short storage life (up to 15 days ) obtained with cold chain, pre cooling could apply for better conservation
                         Transportation: Refrigeration required for transportation, very high perishability
   Asparagus             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach medium distant
                         markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery
                         Storage: Short storage life (up to 1 month ) obtained with cold chain, pre cooling could apply
                         Transportation: Refrigeration required for transportation, very high perishability
     Chilies/
                         Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach medium distant
     Peppers             markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery
                         Storage: Short storage life (up to 1 month ) obtained with cold chain
                         Transportation: Refrigeration required for transportation, very high perishability
  Cucumbers/
                         Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach medium distant
   Gherkins              markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires strong reliability of demand, no flexibility in delivery
                         Storage: Short storage life (up to 15 days) obtained with cold chain, but better to be consumed fresh
                         Transportation: Refrigeration required for transportation, very high perishability
  Mushrooms              Distribution to Markets: Close proximity to markets but must meet quality standards, products can be purchased by
                         every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in
                         delivery




Source:   BAH Analysis
                                                                                                                                                                   191
                                                                                                                                        5. Value Chain Constraints



…and analyzed the potential for Kosovo to develop crops based on
the ease of market access rankings (cont’d)
                                                Ease of Market Access Ranking Description
          Crop                                                                Explanation                                                              Score
                         Storage: Medium storage life (up to 15 days ) obtained with cold chain
    Lettuce &            Transportation: Refrigeration required in transportation, very high perishability
     Chicory             Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach nearby markets
                         given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer,
                         processors), crop requires high reliability of demand, and no flexibility in delivery
                         Storage: No storage life since flowers are harvested and immediately processed inside the farm
                         Transportation: No refrigeration required, minimal transportation requirements, very low perishability
      Saffron            Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach long distant
                         markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers,
                         retailer, processors), crop requires low reliability of demand, flexibility in delivery
                         Storage: Short storage life (up to 15 days) obtained with cold chain but better to be consumed fresh
                         Transportation: Refrigeration required for transportation, very high perishability
     Truffles            Distribution to Markets: Close proximity to markets but must meet quality standards, products will be distributed in
                         specialized shops of connoisseurs and could be processed as truffle cream or stored under olive oil, crop requires strong
                         reliability of demand and no flexibility of delivery




Source:   BAH Analysis
                                                                                                                                                                192
                                                                                                                                                              6. Final Product Selection

Based on this final analysis, ten strategic export crop categories
were identified including bulbs, lettuce/chicory, asparagus, apples,
and table grapes
                                                Selection of 10 Strategic Crops in Diversified Crop Mix
                                         Filter 4 – Economic                                               Step 5 – Value Chain Constraints                                Step 6
               Crop                 Top 20 Rank            Weighting            Investment Required                      Ease to Produce       Ease of Market Access     Final Rank
  Bulbs (flower)                           19                  0.75                                                                                                           1

  Lettuce/chicory                          20                  0.50                                                                                                           2

  Asparagus                                17                  1.25                                                                                                           3

  Apples                                   16                  1.50                                                                                                           4

  Table grape                              15                  1.75                                                                                                           5

  Cucumbers/gherkins                       9                   2.75                                                                                                           5

  Currants/gooseberries                    18                  1.00                                                                                                           7

  Saffron                                  13                  2.00                                                                                                           7

  Cranberries/bilberries                   13                  2.00                                                                                                           7

  Kiwi fruit                               7                   3.00                                                                                                           7

  Pears                                    12                  2.25                                                                                                          11

  Chilies/peppers                          1                   4.00                                                                                                          12

  Blackberries/raspberries                 5                   3.25                                                                                                          13

  Cherries                                 5                   3.25                                                                                                          13

  Strawberries                             2                   3.75                                                                                                          15

  Mushrooms                                2                   3.75                                                                                                          15

  Peaches/nectarines                       4                   3.50                                                                                                          17

  Truffles                                 7                   3.00                                                                                                          18

  Cut flowers                              10                  2.50                                                                                                          19

  Flower buds                              10                  2.50                                                                                                          19
Note: Top 20 ranking determined by economic feasibility and attractiveness filter; Harvey ball scale is as follows: 1-    ; 2-   ; 3-   ; 4-
Source: BAH Analysis                                                                                                                                                                  193
Finally, we created ‘Go To Market’ snapshots which include four
main components: supply, demand, infrastructure, and variety
selection
                                               Overview of ‘Go To Market’ Components

                                 Supply                                                                 Demand
            Determine largest suppliers of selected crop varieties                 Determine the largest importers of selected crop
            by volume                                                              varieties by volume
            Assess whether suppliers are increasing or decreasing                  Assess whether buyers are increasing or decreasing
            quantity exported                                                      quantity demanded
            Analyze growing season gaps and potential to take                      Evaluate opportunities to take advantage of seasonal
            away market share                                                      prices
            Identify relevant supplier trends (e.g. oversupply of                  Identify relevant buyer trends (e.g. changing customer
            crop variety, increasing quality standards/regulations,                preferences in taste, shape, color; buyer/supplier
            supplier consolidation, new technologies, etc.)                        relationship dynamics)


                                                                 ‘Go To Market’
                                                                  ‘Go To Market’
                                                                   Components
                                                                   Components
                             Infrastructure                                                        Variety Selection
          Determine infrastructure requirements for production,
                                                                                   Identify the types of varieties that exist for a particular
          such as greenhouse capacity and irrigation networks
                                                                                   crop
          Assess onsite processing and packaging
                                                                                   Examine the unique characteristics that define each
          requirements
                                                                                   variety category
          Identify distribution infrastructure needs for roads, air
          transport, shipping, collection centers, cold chain, etc.




Source : BAH Analysis
                                                                                                                                                 194
                                                                                                                      Go To Market Snapshot- Bulbs

Demand for bulbs is increasing in Eastern Europe, with
lilies and tulips among the most popular varieties.
Prices for bulbs fluctuate, depending on the season
                                                            ‘Go To Market’ Snapshot -- Bulbs

                Supply
                Supply                                    Demand
                                                          Demand                      Infrastructure
                                                                                       Infrastructure                  Variety Selection
                                                                                                                       Variety Selection

      The Netherlands, New                         Japan, North America (US        Bulbs do not require             There are several species of
      Zealand and the US are the                   and Canada) and Western         greenhouses, as they can         bulbs in the market including
      largest world suppliers of                   Europe (mainly Holland) are     be grown in open fields or       Lily, Tulip, Calla Lily
      bulbs                                        the largest import markets      semi-covered fields (using       (Zantedeschia),
      Kenya is the main supplier                   for bulbs                       plastic rain cover) to protect   Ornithogalum, Iris, Bagonias
      to European markets (also                    From October to April,          from rain                        and Gladioli
      South Africa, Zimbabwe,                      prices are higher for bulbs     Either machines or hand-         Each species has various
      Ethiopia to a smaller extent)                because worldwide supply is     labor can be used for            sub-species. For example,
      South America (Colombia,                     lower; conversely, prices are   cultivating bulbs                there are over 100 varieties
      Ecuador and Chile in                         lower from April-September      If machines are used, simple     of Cala Lilies but only 10-15
      particular) supplies North                   because worldwide supply is     tractor machinery and            are commonly seen
      America                                      higher                          extraction bulb diggers are      Varieties are differentiated
                                                   Overall demand for bulbs        most commonly seen               based on color and value
      New Zealand and Australia
                                                   has increased in Eastern                                         (price)
      mainly supply Asia                                                           A consistent reliable source
                                                   European countries such as                                       Lilies have high market
                                                                                   of water is necessary, such      value but are difficult to
                                                   Bulgaria, Hungary, Romania      as overhead irrigation, drip
                                                   and Russia in recent years                                       grow, while Daffodils are
                                                                                   irrigation or storage tanks      easier to grow but receive a
                                                   There is an emergence of        Cold storage facilities are      lower value in the market
                                                   the Middle Eastern market       required for bulbs




Source:   Managing Director, Bloomz New Zealand, 2010                                                                                               195
                                                                                                                                              Go To Market Snapshot- Lettuce/Chicory

Hydroponic greenhouses are used for lettuce/chicory and a
cold chain system is required for fresh varieties; iceberg
lettuce is becoming increasingly popular in Eastern Europe
                                                          ‘Go To Market’ Snapshot -- Lettuce/Chicory

                 Supply
                 Supply                                        Demand
                                                               Demand                                        Infrastructure
                                                                                                              Infrastructure                           Variety Selection
                                                                                                                                                       Variety Selection

      Spain, the US, and the                          Canada, Germany and UK                          Hydroponic greenhouses                          Romaine, leaf, butterhead
      Netherlands are the three                       are the top lettuce importers                   are typically used for lettuce.                 and iceberg lettuce are the
      largest exporters of lettuce,                   making up 19%,18% and                           All lettuce types are                           most common varieties of
      making up 32%,19% and                           17% of world imports                            germinated with sprinklers                      lettuce in the market
      7% of world exports                             respectively in 2008                            and subsequently irrigated                      Some studies show that
      respectively in 2008                            Lettuce prices are                              with drip, sprinkler, or                        consumers are opting to
      In the US, lettuce exports                      characterized by wide intra-                    furrow; all lettuce types                       replace iceberg lettuce with
      have increased continuously                     seasonal variation largely                      require frequent irrigations                    leaf and romaine lettuce in
      in value since 1989 when an                     because of an increasing                        to minimize moisture stress                     their home-made salads for
      estimated $60.5 million                         overlap of harvest periods                      Fresh cut lettuce requires                      added taste, texture, and
      worth was exported                              among producing areas,                          cold chain. After harvest,                      variety. Eastern Europe,
      compared to a record of                         production expansion to                         lettuce is transported to a                     however, has seen a surge
      $275.2 million in 2004                          new areas, and weather                          cooling shed and distribution                   in the availability of iceberg
      US lettuce exports mainly                       conditions                                      center where it is stored at                    lettuce, with consumers
      go to Canada, Mexico and                                                                        35 to 36° F                                     favoring its crispy texture
      Japan, whereas Spain and                                                                        Technological                                   Historically, leaf and
      Netherlands’ exports tend to                                                                    improvements, mainly in                         romaine lettuce have
      stay in Europe                                                                                  packing materials, have                         received higher prices than
                                                                                                      been largely responsible for                    iceberg and other head
      China is the world’s leading                                                                                                                    varieties
      producer of lettuce, followed                                                                   the increase in availability of
      by the US; however, a large                                                                     different varieties and ready-
      portion of China’s                                                                              to eat salads
      production is consumed
      domestically

Source:   USDA Foreign Agricultural Service; USDA Economic Research Service; TradeMap; Agricultural Issues Center ,University of California                                            196
                                                                                                                     Go To Market Snapshot- Asparagus

Supply of asparagus is increasing faster than demand,
causing prices to drop, although white asparagus is
holding up well
                                                               ‘Go To Market’ Snapshot -- Asparagus

                 Supply
                 Supply                                          Demand
                                                                 Demand                   Infrastructure
                                                                                           Infrastructure                 Variety Selection
                                                                                                                          Variety Selection

     The largest exporter of                          The top asparagus               Asparagus is highly              The two forms of asparagus
     asparagus is Peru, which                         importers are the US, the       perishable and requires a        in the marketplace are white
     exported about 90,000 metric                     EU and Japan                    cold chain system.               and green asparagus. White
     tons (mt) in 2006. Mexico, the                   Due to intense competition      Asparagus is typically           asparagus in generally
     second largest exporter,                         from Mexico and Peru, US        partially cooled during          canned/jarred and green
     supplied about 50,000 mt,                        exports of asparagus have       washing, selection, and          asparagus is either sold
     and the US exported about                        been declining while imports    packing, and then hydro-         fresh or frozen/chilled
     10,000 mt in the same year.                      have been steadily              cooled to near 32 °F after       About 40%of asparagus
     Out of the three, only Peru’s                    increasing                      packing                          grown in Peru is green and
     export market share has                          Consumer demand is based        Processing of asparagus for      shipped to the U.S. market,
     grown each year over the last                    on freshness, length and        pickling can bring growers a     while the rest is white, which
     several years                                    diameter of the stalks, color   price premium and can be         is processed and sent to the
     China is one of the leading                      of spears, tightness of the     sold in winter months when       EU market
     producers of white                               spear tips, and the extent of   prices are higher given          White asparagus is widely
     (canned/jarred) asparagus.                       bruising                        lower supply                     used in Europe and Asia,
     Spain, Germany, Netherlands                      World demand is growing         Asparagus needs to be            while green asparagus is
     and France are major buyers                      slower than supply in many      blanched and sterilized          popular in the US
     of China’s white asparagus,                      markets, causing prices to      before being placed in cans      White asparagus is
     accounting for 80% of                            drop. Peruvian asparagus                                         generally priced higher than
     China’s total asparagus                          producers have already                                           green asparagus
     exports in 2008. However,                        experienced falling prices in
     production is predicted to                       the US and Europe
     drop by 20% in 2010 due to
     continued low prices

Source: USDA/FAS , Agricultural Issues Center ,University of California                                                                                 197
                                                                                                                                               Go To Market Snapshot- Apples

Global apple exports and imports are increasing and
China is by far the leading world supplier. Apples can be
stored fresh for up to 4-5 months
                                                                    ‘Go To Market’ Snapshot -- Apples

                 Supply
                 Supply                                           Demand
                                                                  Demand                                          Infrastructure
                                                                                                                   Infrastructure                Variety Selection
                                                                                                                                                 Variety Selection

       China is the largest exporter                    Russia is the world’s largest                        Drip irrigation system is       There are several thousand
       of apples, supplying the                         importer of apples, importing                        generally used for apples       varieties of apples but some of
       world with 1.5 million metric                    1.1 billion metric tons in                           Ultra-Low Oxygen (ULO)          the most common ones are
       tons in 2008/09; China’s                         2008/09, 4% more than the                            cold storage facilities can     Gala, Golden Delicious, Granny
       exports are forecast to surge                    previous year                                        keep apples fresh for 4-5       Smith, Liberty and Red
       more than 15% due to new                         Overall world imports of                             months. Producers may           Delicious
       plantings in the northwest                       apples are forecast up 20%                           decide to store apples until    Liberty apples, which are scab-
       provinces and increased                          due to strong demand for                             the off-season, when they       resistant, are grown commonly
       demand from Asia and the                         high quality fruit from the US                       can sell them for higher        in Belarus, Germany, Italy and
       Middle East                                      and from Chile and other                             prices                          Latvia
       The EU is the second                             Southern Hemisphere                                  Apples to be sold fresh into    Jonagold (a combination of
       largest apple exporter in the                    countries during their off-                          the marketplace should be       Golden Delicious and Jonathan)
       world; production is forecast                    season. World demand has                             harvested at a later maturity   apples are one of the major
       down 4% due to reduced                           also expanded for healthy                            than apples that are pre-       varieties grown worldwide and
       area in Poland and                               snack and off-season fruit                           destined for long-term          are popular in Europe. Jonagold
       pollination problems in                          Consumers tend to buy                                storage                         accounted for nearly 60% of
       Spain                                            apples based on color,                                                               apple production in Belgium. It
       Global apple exports have                        though color does not effect                                                         is also an important variety in
       jumped 15% in the past 3                         taste or texture                                                                     Japan, and is the third most
       years mainly due to growth                                                                                                            important variety in Canada
       in China and the EU apple                                                                                                             Gala apples are also becoming
       markets, favorable weather                                                                                                            increasingly popular in Europe
       and improved management                                                                                                               because they are considered to
                                                                                                                                             be high quality

Source: USDA/FAS ; Agricultural Issues Center ,University of California; Cornell University, College of Agricultural and Life Sciences                                         198
                                                                                                                              Go To Market Snapshot- Table Grape

Chile and the US are the leading table grape suppliers to
the world; high quality requirements must be met for
table grapes to be successfully marketed
                                                        ‘Go To Market’ Snapshot -- Table Grape

               Supply
               Supply                                     Demand
                                                          Demand                                   Infrastructure
                                                                                                    Infrastructure                  Variety Selection
                                                                                                                                    Variety Selection

    Chile is the largest world                The EU, US and Russia are                       Chilean and South African          The more than 60 varieties
    supplier of fresh table grapes,           the top table grape importers                   grapes are shed packed             of table grapes are grouped
    exporting 850,000 metric tons             The EU accounts for about 1/3                   because they tend to be            into three groups: red, black,
    (mt) in 2008/09; the US is the            of world imports but the                        sent to distant markets,           green (also called white)
    second largest supplier,                  economic crisis is expected to                  whereas most grapes from           Thompson Seedless grapes
    exporting 336,045 mt in                   reduce EU imports by 4% in                      the US are field packed            (green) are one of the most
    2008/09, followed by Italy                2009/2010                                       Table grapes should be             commonly grown grapes in
    Chile and US accounted for ½              Lack of decay, cracked                          quickly stored in a cold           the US an Chile. These
    of global grape exports in                berries, stem browning,                         storage facility at a              grapes are popular because
    2009                                      shriveling, sunburn and insect                  temperature of 30-32° F            they are seedless, have thin
    Southern hemisphere                       damage are important factors                    Table grapes typically             skin and crisp texture
    exporters are expected to                 for consumer acceptance; high                   require a hot, dry climate,        While green grapes are
    continue expanding exports                consumer acceptance is also                     deep well-drained soil and a       commonly consumed in the
    due to demand by northern                 attained for fruit with high                    large amount of irrigation         US, red grapes are more
    hemisphere consumers for off-             Soluble Solids Concentration                    water                              popular in Europe
    season fruit                              (SSC) ratio                                     Because of their high quality
    China is the largest producer,            Croatian customers prefer                       requirements at the point of
    but a small exporter due to low           table grape varieties with big                  sale, table grapes demand
    quality and handling capacity             berries, such as those                          hand labor, technical
    Macedonia, Montenegro and                 imported from Italy, Spain,                     knowledge and experience
    Bosnia are large suppliers of             South Africa and Chile.
    table grapes to Eastern                   Macedonian grapes are
    Europe                                    considered to be lower quality

Source: USDA/FAS; UC Davis Horticulture Crops Research Laboratory; USAID/Macedonia AgBiz Program; TradeMap
Note : Exported quantity in tons, data was used from 2004-2008                                                                                                    199
                                                                                                                                        Go To Market Snapshot- Cucumbers/Gherkins

Cucumbers / gherkins are highly labor intensive crops
that can either be processed or sold fresh; global demand
has remained stable
                                                    ‘Go To Market’ Snapshot -- Cucumbers/Gherkins

                Supply
                Supply                                         Demand
                                                               Demand                                       Infrastructure
                                                                                                             Infrastructure                                 Variety Selection
                                                                                                                                                            Variety Selection

      Mexico, Spain, and                             Germany, US and UK are                            Cucumbers are grown in                             The main types of
      Netherlands are the top                        the largest importers of                          either open field or                               cucumbers are pickling
      three exporters of                             cucumbers / gherkins,                             greenhouses. Greenhouse                            cucumbers (gherkins) and
      cucumbers / gherkins in the                    making up 26%, 19% and                            cucumbers are grown                                fresh salad (slicing)
      world. Mexico and Spain’s                      8% of world imports                               hydroponically. Drip                               cucumbers
      exports grew by 12% and                        respectively in 2008                              irrigation supplies nutrients
      2% respectively from 2004-                     Consumption of gherkins                           and water to each plant
      2008, while Netherlands’                       has remained stable and                           Gherkins are very labor
      exports have gone down                         generally remains consistent                      intensive, as they have to be
      slightly for the same years                    year-round                                        hand-picked and growing
      Spain and the Netherlands                      Consumers of cucumbers /                          and maintaining them
      are the cheapest producers                     gherkins tend to be most                          requires craftsmanship and
      of fresh cucumbers in                          driven by price, but flavor                       crop knowledge
      Europe1                                        and texture are also                              A cold chain needs to be set
      Due to its labor-intensive                     important attributes                              up for fresh crops.
      nature, gherkin production is                                                                    Processed gherkins must be
      being moved to countries                                                                         packed in a jar within 20 hrs
      such as Serbia and India,                                                                        to maintain freshness
      where labor is relatively
      cheap




Source: USDA/FAS; UC Davis Horticulture Crops Research Laboratory; TradeMap; Gherkin trader , Koeleman Foods International
Note (1): The Netherlands is able to produce cucumbers cheaply in part because it uses hydroponic greenhouses, which boost production. While cucumbers are grown in open fields in Spain,
cheaper immigrant labor (mainly from Romania) is utilized, bringing down costs                                                                                                              200
                                                                                                                                     Go To Market Snapshot- Currants/Gooseberries

Ukraine is a significant exporter and importer of
currants / gooseberries; currant prices have been
dropping in the last decade so some caution is required
                                                     ‘Go To Market’ Snapshot – Currants/Gooseberries

                 Supply
                 Supply                                           Demand
                                                                  Demand                                        Infrastructure
                                                                                                                 Infrastructure                      Variety Selection
                                                                                                                                                     Variety Selection

     Gambia and Ukraine are the                         Poland and Ukraine are                               Currants are machine                  There are 4 sections of
     leading exporters of                               among the top importers of                           harvested. Full production is         economically important
     currants/gooseberries. In                          currants / gooseberries in                           achieved in year 4 (3+ years          currant species within the
     2008, Gambia alone                                 Europe. Asia is also a                               after planting) with a yield of       genus: black currants, red
     accounted for over 90% of                          popular market, with                                 7,000 lbs                             and white currents,
     world exports. Ukraine                             Indonesia and Malaysia as                            Due to their fibrous, shallow         ornamental currants, and
     accounted for 6%. India is the                     top importers                                        roots, currants are ideal for         golden currants
     third leading exporter,                            The market for black                                 drip irrigation                       Red currants (mostly sold
     accounting for a little over 1%                    currants is primarily for                            Sprayers and tractors are             fresh) are the most common
     of exports                                         processed (concentrate)                              other equipment generally             type of currant found in the
     Commercial production of                           product which is a global                            used for currants                     European market
     currants and gooseberries                          market. Producers therefore                                                                Black currants, which are
     has had limited success in the                                                                          Fruit for processing is               less common in the
                                                        are often competing with low                         generally hand-picked when
     U.S. due to a federal ban that                     cost producers in Eastern                                                                  European market, are
     was placed on Ribes plants                                                                              fully sized but not                   mostly used for processing
                                                        Europe                                               completely ripe. Unripe
     (includes currants /                               The increase in currant                                                                    (juice, jam)
     gooseberries) which were                                                                                currants can be placed in
                                                        production in the last                               cold storage for a few days,
     thought to have caused                             decade has led to low fruit
     disease in pines. The federal                                                                           if necessary, while
                                                        prices globally                                      gooseberries can keep for
     restriction was lifted in 1996,
     but there is still confusion                                                                            up to 2 weeks
     regarding the legality of
     growing these plants



Source: TradeMap; British Columbia Ministry of Agriculture; University of Kentucky, College of Agriculture                                                                        201
                                                                                                                                       Go To Market Snapshot- Saffron



Saffron is highly labor-intensive and sells at very high
prices, but buyers should be weary of counterfeit supply

                                                                 ‘Go To Market’ Snapshot -- Saffron

                 Supply
                 Supply                                        Demand
                                                               Demand                                       Infrastructure
                                                                                                             Infrastructure              Variety Selection
                                                                                                                                         Variety Selection

      Spain is the world’s largest                    The major importers of                           Saffron is an extremely         Iran is able to produce a
      saffron exporter, making up                     saffron in 2008 were Italy,                      labor-intensive crop, as        very high quality saffron at
      46% of world exports,                           US, UAE and France                               more than 80% of                favorable prices because
      though production                               High consumer demand is                          production must be done by      labor is relatively cheap.
      decreased from 20 metric                        shown for saffron with depth                     hand (harvesting, drying,       Three main varieties of
      tons to 5 metric tons in the                    of color (dark red with no                       packaging)                      Iranian saffron include:
      last several years because                      yellow plant parts mixed in),                    Immediate post-harvest          Select Pushali, ‘Coupe’
      growers have sought less                        flavor intensity and fresh                       processing gives the best       Sargol, and Mashad. The
      labor-intensive crops                           aroma                                            saffron spice quality. After    first two varieties are higher
      While Iran produces over                        Global demand for saffron is                     harvest, flowers are taken to   grade, due to their high
      90% of the world’s raw                          under pressure due to its                        warehouses where stigmas        coloring strength and fine
      saffron, it is not the largest                  high price; however,                             are separated from each         flavor components
      exporter because it lacks a                     bringing down prices may                         bud by hand. Once the           Unlike Iranian varieties,
      strong processing system.                       compromise supply because                        stigmas have been               Spanish varieties (Mancha
      Spain processes and re-                         saffron is labor-intensive                       removed, they are lightly       Select and Mancha
      exports about 40% -50% of                       Saffron prices at wholesale                      dried over charcoal embers.     Superior) tend to leave the
      Iran’s saffron                                  and retail rates range from                      Saffron for processing is       yellow "tails" on the
      There is a large supply of                      US$500-$5,000/pound. In                          sold in plastic bags placed     stamens, making the red
      counterfeit saffron in the                      Western countries, the                           in cardboard boxes              coloring less deep than
      world because it is easy to                     average retail price is                          Saffron for retail and food     Iranian varieties
      manipulate the coloring and                     $1,000/pound. A pound                            service is sold in tins
      sell at a high price                            comprises between 70,000
                                                      to 200,000 threads.


Source:   World Applied Sciences Journal, The Third Afghan National Conference of Saffron in Herat Province , 2008, TradeMap                                            202
                                                                                                                                          Go To Market Snapshot- Cranberries

 Global cranberry supplies have been decreasing
 but demand continues to rise, mainly in North
 America and UK, causing prices to increase
                                                               ‘Go To Market’ Snapshot -- Cranberries

                  Supply
                  Supply                                         Demand
                                                                 Demand                                         Infrastructure
                                                                                                                 Infrastructure                 Variety Selection
                                                                                                                                                Variety Selection

   The largest exporters of                             The largest world importers                     Man-made wetlands or bogs             Cranberries are native to
   cranberries are Canada, Chile                        of cranberries in 2008 were                     are used for harvesting               North America, where there
   and US, making up 37%, 25%                           US, Canada and UK                               cranberries                           are more than 100 varieties
   and 16% of world exports                             While supplies of                               Sprinkler systems are used to         The most common varieties
   respectively in 2008*                                cranberries have decreased                      hydrate berries and some              are Early Blacks, Howes
   While both Canada and the US’                        in recent years, global                         growers have water reservoirs         and Stevens. Although Early
   exports have decreased by 2-3%                       demand continues to rise,                       adjacent to the bogs for ready        Black is not as productive as
   between 2004-2008, Chile’s                           causing prices to go up. In                     water supply                          other varieties, it is popular
   exports have increased by 31%                        2007, frozen berries sold at                    Flooding is used for                  because of its earliness in
   for the same years                                   levels above $1.50/pound                        harvesting of processed               ripening and its ability to
   US cranberry production was                          and concentrate sold at                         cranberries only. Water               grow in many types of
   down 10% in 2009 possibly due                        levels between $80 and                          harvesting requires proper            cranberry soil. Howes are
   to cooler, wet weather in                            $100+/gallon                                    handling and storage to               popular because they are
   Massachusetts and Wisconsin,                         The popularity of                               maintain quality                      well-colored, glossy and
   which reduced pollination and                        cranberries has been                            Cranberries for the fresh             frost resistant
   caused frost that damaged bogs                       increasing in recent years                      market are harvested
   95% of the US cranberry market                       due to strong marketing                         mechanically without flooding,
   is made up of processed                              campaigns and evidence of                       using a picking machine that
   cranberries; only about 5 % of                       the fruit's health benefits                     combs the berries off the
   the total cranberry crop is sold                                                                     vines
   for fresh fruit
   Cranberries are not commonly
   grown in Europe

Source: USDA, FAS, TradeMap
Note : Export/import data for cranberries was found on TradeMap which groups cranberries with other fresh fruits of the genus Vaccinium                                        203
                                                                                                                                  Go To Market Snapshot- Kiwis



  New Zealand and Italy are the leading suppliers of kiwis
 in the world and mainly export the Hayward variety

                                                                  ‘Go To Market’ Snapshot -- Kiwis

                 Supply
                 Supply                                        Demand
                                                               Demand                            Infrastructure
                                                                                                  Infrastructure                   Variety Selection
                                                                                                                                   Variety Selection

   In 2008, New Zealand was the                                                                                                 The most common varieties
                                                     The top importers of kiwis in          Frequent irrigation is required
   leading exporter of kiwis in the                                                                                             of kiwi are: Hayward, (green
                                                     the world are Belgium,                 for kiwis, either through a drip,
   world, followed by Italy and Chile.                                                                                          flesh, fuzzy skin) Zespri Gold
                                                     Germany, Spain, Netherlands            minisprinkler or undervine
   The three countries exported                                                                                                 and Green, (established by
                                                     and Japan, making up 12%,              sprinkler system. Kiwifruit vines
   34%, 25% and 13% of kiwis in                                                                                                 New Zealand’s Zespri Group)
                                                     9%, 9%, 5% and 5% of                   need more irrigation than
   the world respectively                                                                                                       Hardy Kiwi (does not have
                                                     imports respectively                   grapes or fruit trees under
                                                                                                                                hair) and Kiwigold (yellow
   In 2007, Italy produced over                      EU countries are primarily             similar soil and weather
                                                                                                                                flesh)
   500,000 tons of kiwis, while New                  supplied by the top EU                 conditions
   Zealand produced 385,000 tons                                                                                                95% of Italian kiwis are of the
                                                     exporters (Italy, France and           Once harvested, kiwis are
                                                                                                                                Hayward variety. Hayward is
   China, Chile, France, Greece,                     Greece). Europe is also a              carried in field boxes to packing
                                                                                                                                also the dominant variety
   Japan and the US are also                         significant market for Chile, as       stations. The fruits are
                                                                                                                                grown in New Zealand and
   significant producers                             60% of Chilean kiwis were              mechanically conveyed across
                                                                                                                                Chile
   In 2007, New Zealand exported                     imported by Europe in 2006             a brushing machine that
                                                                                            removes the hairs and, in some      Zespri Gold is considered a
   60% of its kiwis to Europe and                    Japan and the US are also a
                                                                                            plants, the styles and sepals as    difficult product because it
   30% to Asia, mainly to Japan                      key importers of Chilean kiwis.
                                                                                            well                                has a shorter selling season
   About 70% of Italy’s kiwis are                    The US also imports from New                                               than the traditional Green
   exported, mostly to other EU                      Zealand                                Kiwis are packed in a fiberboard
                                                                                                                                variety. Only 17-18% of New
   countries                                                                                or wooden boxes
                                                                                                                                Zealand’s kiwi exports were
   Continued growth in world kiwi                                                           Kiwis are placed in cold storage    of the Zespri Gold variety in
   production, together with                                                                for up to one year at 0°C to        2007
   improved storage facilities, have                                                        maximize their storage life
   allowed kiwi sales in the northern
   and southern hemispheres to
   overlap, resulting in declining
   export prices
Source:   Fresh Plaza Kiwi Report 2007, USDA Foreign Agricultural Service, 2001, TradeMap                                                                         204
                                                                                                           Go To Market Snapshot- Pears

World pear exports are expanding due to increasing
demand from Russia and Asia. Some pear varieties,
such as D’Anjou, require cold storage in order to ripen
                                                   ‘Go To Market’ Snapshot -- Pears

                 Supply
                 Supply                          Demand
                                                 Demand                      Infrastructure
                                                                              Infrastructure               Variety Selection
                                                                                                           Variety Selection

          China, the EU and the US       Russia is the world’s largest   A drip irrigation system with    There are over 3,000 known
          accounted for half of global   importer with 360,000 metric    fertilizers is most often used   pear varieties grown around
          pear exports in 2009           tons in 2008/09. Russia is      for pears                        the world but the most
          US pear exports are            likely to purchase 10% more     Pears that have been             common varieties include
          projected to gain 10% due to   this year due to smaller        graded and packed are            Bartlett, D’Anjou, Bosc,
          greater purchases from         domestic supplies and           either sent to cold storage or   Comice and Forelle
          Brazil and Russia; EU          higher demand for               sent via truck or rail for       Red and Green Anjou
          exports are also expected to   inexpensive fruit from China    shipment to fresh market         varieties have been most
          rise by 7% and China’s by      EU imports are expected to      Canned pears are packaged        popular among Russian
          5% due to growing demand       fall slightly in 2010 due to    in either lugs or bins and are   consumers, while the
          from Asian markets             demand being filled by          loaded on cannery trucks         Bartlett variety remains the
          World pear exports are         ample domestic supplies         with fork-lift equipment         most common variety sold
          forecast to expand 4% in                                       D'Anjou and Comice               worldwide
          2010 due to expected higher                                    varieties will not ripen
          demand from Canada and                                         unless they have been held
          Russia                                                         8 -10 weeks in cold storage
          Slightly larger world
          production is predicted,
          resulting from favorable
          weather and improved
          management practices




Source:    USDA, FAS, TradeMap                                                                                                           205
                                                                                                                                         Detailed Go To Market Snapshot- Table Grapes

    We selected one crop, Table Grapes, to do a more comprehensive
    review and identified major players and trends impacting the
    market          Breakdown of Supply and Demand and Related Trends

                                                                                                             Quantities Exported, 2004-2008 (in tons)                              CAGR
                    Breakdown of Supply, 2008
                    Breakdown of Supply, 2008                                           1000000
                                                                                                                                                                Chile               5%
                                                                                          800000

                                                                                          600000                                                                    US             10%
                            Other 1
                             31%
                                                 Chile
                                                                                                                                                                    Italy           2%
                                                 34%
                                                                                          400000
                                                                                                                                                                    South Africa    2%
                                                                                          200000                                                                    Netherlands    11%
                                                 US
        South Africa, 6%                        15%                                              0
                                       Italy
              Netherlands               9%                                                                 2005             2006             2007            2008
                  5%



                   Breakdown of Demand, 2008                                                                 Quantities Imported, 2004-2008 (in tons)
                   Breakdown of Demand, 2008
                                                                                           800000
                                                                                                                                                                                   CAGR
                                                   US
                                                  16%                                      600000                                                                     US            2%


                                      Other 2
                                                      Netherlands
                                                                                           400000                                                                    Netherlands   15%
                                                          9%
                                       55%
                                                         Germany                                                                                                      Germany      -0.2%
                                                           8%
                                                                                           200000                                                                     UK             4%
                                                         UK 7%                                                                                                       Canada          3%
                                                                                                  0
                                                         Canada 5%
                                                                                                          2004          2005          2006          2007        2008


Note (1) : Includes supply from 86 other countries such as Turkey, Egypt, Mexico, Spain, India, Brazil, Greece, Argentina, China, Hong Kong
Note (2): Includes supply from 136 other countries such as France, Hungary, Hong Kong, Poland, Mexico, Belgium, Ukraine, Czech Republic, China, Bangladesh
Source: TradeMap                                                                                                                                                                           206
                                                                                                Detailed Go To Market Snapshot- Table Grapes



Table grapes have specific infrastructure requirements that are
critical for successful production, processing, and distribution
                               Infrastructure Requirements for Table Grapes

                      Drip Irrigation System: A typical irrigation system for table grapes includes pumps, filters, and pipes. The type
                      of catching pump depends on the area of grapes to be irrigated with the system (e.g. larger pump is required for
                      larger areas of land). Water quality determines the type of filters required (e.g. river water with algae requires a
                      different filter than underground water with sand). Typically use plastic pipes for the primary and secondary
                      distribution lines. Primary lines must be in place prior to planting during soil preparation while secondary lines
                      must be put in before trees start to sprout. Drip or spray sprinklers can be used. Injectors distribute fertilizer
      Production
       Production     throughout system
    Infrastructure
     Infrastructure   Hail Storm Net Cover: Assemble during the year of first grape harvest or earlier in the life of the tree if hail
                      storms occur once per year on average. Hail storm net is positioned 3-4 meters over the grape trees. Quality
                      plastic nets last approximately 10-12 years. Will need to replace one time since the grape system lasts around
                      25 years
                      Factory Shed: Storage facility required for harvesting equipment, tractor, sprayer, rotary tiller, forklift, carriage to
                      transport to collection center

                      Cooling System: Required if don’t pack and sell grapes immediately 1-2 days after harvest. Grapes can
                      be stored up to 3-4 months. Cooling system has two main components: pre-cooling chamber and cold
                      chamber. Grapes enter the pre-cooling chamber (20° Celsius) right after harvest and are moved to the cold
   Processing and
   Processing and     chamber (around 5° Celsius) after a couple days. Each cooling system has a capacity of 25 metric tons
      Packaging
       Packaging      and stores up to 100 metric tons of fruit per year
    Infrastructure
     Infrastructure   In/Out Weighing System: Capable of weighing up to 20 ton trucks. In the packaging line,1 weighting
                      system is required for every 10 workers packaging and weighing boxes
                      Outside of packaging, no other processing occurs for table grapes
                      Road Transport: Table grapes are typically delivered by road since they can be expensive to transport
                      long distances. Use refrigerated trucks at around 5° Celsius
      Distribution
      Distribution
                      Air and Sea Transport: Requires cold storage containers or facilities around 5° Celsius
    Infrastructure
     Infrastructure
                      Distribution Center: A center typically has a receiving storage chamber, cold storage facilities, and cold
                      trucks of varying sizes according to business capacity
Sources: Interviews
                                                                                                                                                 207
                                                                                                                                                 Detailed Go To Market Snapshot- Table Grapes

  Seeded grapes continue to be the main variety of table grapes
  produced by the EU; prices for the Italia variety have been
  dropping in the past few years due to limited demand
                                                                         Table Grapes Variety Overview

  Table Grape Varieties of EU’s Top Three Producers                                                                          Average Grower’s Price, Italy 2
           (Italy, Spain, Greece, 2007-2009)                                                                         (Price in Euro/Kg, Marketing Year 2007-2010)
           Italy                                            Greece
                                                                                                         Euro per Kg                                                                                             It alia
    Victoria,                                                                                        1.50                                                                                                        Victoria
                                                                                                                                                                            1.40
      Red                                                                                                                                                                                                        Red Globe
                                                                                                                     1.32
     Globe,                                                                                                                               1.19                                                                   Seedless
                                                      Seedless                                       1.25                                            1.15
   seedless                                             34%
      34%                                                                                            1.00                                                                                 1.01
                                                                                                                        0.94
          Italia (seeded)1                                           Seeded                                                                 0.95
                 66%                                                  66%                                      .83                                                                               0.66
                                                                                                     0.75                   0.68
                                                                                                                                            0.73            0.68
                                                                                                                                                                                                   0.73
                                                                                                                0.80                                                             0.68
                                                                                                                                   0.51                            0.54                                    0.43
                                                                                                                                                                                               0.56
                                   Spain                                                             0.50            0.53                           0.51                                                    0.39
                                                                                                                                                                          0.41
                                                                                                                                                                                        0.44
                                                                                                                                            0.47                                                          0.31
                                                                                                     0.25                   0.43
                                                                                                                                                                                   0.25
                                                                                                                                                                           0.24
                                                                                                                                             0.14
                           Seedless  Seeded                                                          0.00
                             30% (Aledo, Ideal,




                                                                                                              June
                                                                                                              June
                                                                                                              June




                                                                                                               Oct
                                                                                                               Oct
                                                                                                               Oct




                                                                                                               Nov
                                                                                                               Dec
                                                                                                               Nov
                                                                                                               Dec
                                                                                                               Nov
                                                                                                               Dec




                                                                                                               July
                                                                                                               July
                                                                                                               July




                                                                                                              Sept
                                                                                                              Sept
                                                                                                              Sept




                                                                                                               Aug
                                                                                                               Aug
                                                                                                               Aug
                                    Muscatel,
                                    Domingo,
                                    Napoleon)
                                                                                                                        2007/08                            2008/09                         2009/10
                                      70%



Source: USDA Foreign Agricultural Service, GAIN Report , EU-27 Fresh Deciduous Fruit Annual, 2009
Note (1): Production of seedless grapes in Italy continues to be marginal, due to their lower profitability, particularly in terms of yields, although their prices are substantially higher than seeded grapes
(2) Italian growers' prices are used as a proxy because Italy produced 63.5% of all table grapes produced in the EU market. Prices of Italia during the current marketing year have decreased by 21% in
             October 2009 compared to the previous year, and 31% lower than two years ago. This is a result of the limited demand from both domestic and export markets. Greece has been experiencing a
             partially similar situation, with producer prices averaging well below last year’s levels. An additional factor in Greece and for seedless table grapes in Spain is the strong Euro exchange rate,
             compared to the British pound and other currencies.
                                                                                                                                                                                                                            208
                                                                                               Detailed Go To Market Snapshot- Table Grapes



A number of success factors exist for marketing table grapes, all of
which require a concerted strategy among producers
                                 Success Factors for Effectively Marketing Table Grapes
1
1
       Identify retailers,
        Identify retailers,
         importers and           Contact retailers about buying Fresh Grapes from the
          importers and
     distributors of Fresh       exporting country
      distributors of Fresh
     Grapes in each target       Partner with designated distributors for delivery of Fresh
     Grapes in each target
             market              Grapes from exporting country
             market
                                                                                                               Comments
                                                                                                               Comments
2
2                                                                                                         None of these steps will
                                                                                                           None of these steps will
                                 Implement plans through associations and producers to
                                                                                                          be successful unless all
                                                                                                           be successful unless all
                                 enforce certifications including GlobalGAP, BRC, IFS
     Implement and refine
      Implement and refine       Develop optimal packaging requirements such as grape                     the fresh grape
                                                                                                           the fresh grape
       quality control and
       quality control and                                                                                producers are on the
                                                                                                           producers are on the
                                 bunches in punett, breathable bag, etc.
    packaging requirements
    packaging requirements                                                                                same page and support a
                                 Enforce sanitary inspections so that Pesticide Residue                    same page and support a
                                 Analyses for shipments meet target market requirements                   unified strategy
                                                                                                           unified strategy
                                                                                                          Associations should
                                                                                                           Associations should
3
3                                                                                                         develop internal market
                                                                                                           develop internal market
                                 Develop fund for marketing events to attract attention and               controls to make sure
                                                                                                           controls to make sure
       Design marketing
       Design marketing          recognition of Fresh Grapes from export country
                                                                                                          that all members adhere
                                                                                                           that all members adhere
    program to launch Fresh
    program to launch Fresh      Develop targeted, strategic marketing efforts for specific
                                                                                                          to the program and
                                                                                                           to the program and
       Grapes Campaign
       Grapes Campaign           countries and regions, as in the case of Chilean
                                 blueberries in London                                                    produce table grapes that
                                                                                                           produce table grapes that
                                                                                                          meet a certain level of
                                                                                                           meet a certain level of
                                                                                                          quality and freshness
                                                                                                           quality and freshness
4
4
                                 Market entry will not be immediate as the table grape
     Launch ad campaigns in
      Launch ad campaigns in     market has established producers and exporters
       target markets touting
        target markets touting      – Countries entering the market will need to
    the quality and freshness
     the quality and freshness           differentiate themselves by delivering high quality
           of Fresh Grapes
           of Fresh Grapes               for better prices


Sources: Interviews
                                                                                                                                         209
Table of Contents

 Overview of Deliverable

 Baseline Analysis of Agriculture Sector

 Recommendations to Improve Kosovo’s Agriculture Sector
   – Overview
   – Recommended Diversified Crop Mix for Kosovo
   – Initiatives & Action Plan for Implementation
   – Reaching Kosovo’s Overall Potential




                                                          210
  Twenty-one initiatives will support implementation of crop
  diversification and address Kosovo’s agriculture challenges for
  both traditional and new crops
                                                                                      Overview of Proposed Initiatives
                                         1                       A.   Improve business viability and coordination of associations
                                                                 B.   Introduce and strengthen extension system to promote traditional crops and improve diversity
                                             Leveraging Small
                                             Leveraging Small    C.   Increase and diversify types of financial products available to smallholder farmers
                                             Farmers Potential
                                             Farmers Potential   D.   Improve cadastral system and test effectiveness of pilot land consolidation program
                                         2                       A.   Develop and launch donor coordination activities for agriculture
                                                                 B.   Create market intelligence system and communication plan
                                              Demand-Driven
                                              Demand-Driven      C.   Improve capacity of collection centers, pack houses and cold storage
                                                 Focus
                                                 Focus           D.   Establish centralized organization to oversee marketing & export promotion of agriculture goods
       Crop Diversification Initiative




                                         3                     A.     Rehabilitate the large-scale irrigation system in Kosovo
                                                               B.     Increase use of small-scale irrigation systems
                                              Infrastructure
                                               Infrastructure  C.     Support development of greenhouses
                                             Capacity Building D.
                                             Capacity Building        Increase energy competitiveness of the agriculture sector
                                         4                       A. Prioritize and develop rural roads using cost-benefit analysis and PPPs
                                                                 B. Develop air perishables plan and remove regulatory and market obstacles
                                              Transportation
                                              Transportation     C. Analyze and communicate cost advantages of the new Tirana highway

                                         5                       A. Establish a centralized, strengthened organizational model for food safety and quality control
                                               Government
                                               Government        B. Help private quality control labs to achieve international certification
                                               Agriculture
                                                Agriculture      C. Establish program to protect the environment against pesticide and input misuse
                                               Regulations
                                               Regulations
                                         6
                                                                 A. Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo
                                              Trade Access
                                              Trade Access       B. Develop and execute interim response to subsidies in neighboring countries
   0

Sources : BAH Analysis                                                                                                                                                     211
             The primary initiative will be a crop diversification program which
             will bring significant volumes of high value crops to market by the
             end of the third year
                                                              Initiatives to Increase the Value and Diversity of Kosovo’s Agricultural Output
                                      1
                                                                      Increase Value and              Increase Value and             Increase Value and            Increase Value and
                                          Leveraging Small
                                          Leveraging Small           Diversity of Kosovo’s           Diversity of Kosovo’s          Diversity of Kosovo’s         Diversity of Kosovo’s
                                          Farmers Potential
                                          Farmers Potential           Agricultural Output             Agricultural Output            Agricultural Output           Agricultural Output
                                                                            (Year 1)                        (Year 2)                       (Year 3)                    (Year 4&5)
                                      2
                                                                 1. Communicate the high        1. Continue year one            1. Continue year one and      1. Continue previous years
                                           Demand-Driven
                                           Demand-Driven            priority crops to farmers      programs to include             two programs – focus          programs – shift
                                              Focus
                                              Focus                 and agribusiness               additional farmers;             on services to ensure         financial support from
                                                                    owners and identify         2. Develop capacity of crop-       that a broad base of          grants to sustainable
    Crop Diversification Initiative




                                      3                             champions for specific         specific co-ops and             small farmers are             forms of loans and
                                                                    crops;                         associations                    participating and             insurance;
                                           Infrastructure
                                            Infrastructure       2. Develop test plots for                                         successful;                2. Focus support on multi-
                                                                                                3. Complete crop-specific
                                          Capacity Building
                                          Capacity Building         priority crops and begin       value chains for storage,    2. Develop market                annual crops that are
                                                                    extension services;            packing, labeling,              linkages and provide          reaching maturity (e.g.
                                      4                          3. Begin to provide cost-         transportation;                 technical support for         kiwi)
                                                                    share grants, insurance                                        domestic and export
                                                                                                4. Design and implement            sales of new, high-value
                                           Transportation           and loans for producers        marketing programs in
                                           Transportation           of new crops;                                                  crops;
                                                                                                   Kosovo and in target
                                                                 4. Visit fairs to develop         export markets;
                                      5
                                                                    relationships and market    5. Make test shipments to
                                            Government
                                            Government              intelligence                   buyers;
                                            Agriculture
                                             Agriculture
                                            Regulations
                                            Regulations          Improve yields and value in       Continued improvement             Kosovo produces and        Kosovo produces and
                                      6                           high priority crops already     in yields and values. First           sells significant       sells growing volumes
                                                                  grown in small quantities         shipments of new high-           volumes of new high-          of new high-value
                                           Trade Access            in Kosovo (e.g. gherkins,         value crops made to                  value crops            crops. Multi-annuals
                                           Trade Access
                                                                      table grape, chicory)          domestic and export                                            come to market.
0                                                                                                            buyers

Sources : BAH Analysis                                                                                                                                                                     212
 Initiatives can be executed using full resources or achieving “quick
 wins”
                  Recommended Initiatives: Implementation with Quick Wins & Full Resources
                                      Quick Wins
                                      Quick Wins                                              Full Resources
                                                                                              Full Resources

    Crop            Ramp up production of high-value crops already          Develop production, sales and exports of significant
     Crop
Diversification     grown in Kosovo (e.g. gherkins, table grape, chicory)   volumes of high-value crops realizing efficiency gains
Diversification
                    and address value chains gaps                           throughout the value chain
                                                                            Improve the effectiveness of associations and coops
                    Develop extension and “coop-like” services by
                                                                            in areas such as input purchase, labor and
 Leveraging
 Leveraging         building relationships between lead firms and
                                                                            equipment sharing and marketing
Small Farmers
Small Farmers       growers (PPP model)
                                                                            Develop extension services through both PPP and
  Potential
  Potential         Implement a guarantee program for equipment
                                                                            public models
                    leasing and finance
                                                                            Implement land consolidation programs
                    Improve coordination of donor spending on
                    agriculture production and marketing
                                                                            Improve the organization and processes for food
                    Development market information system including
                                                                            safety and quality and attain a European-level of
Demand-Driven
Demand-Driven       farm gate and market pricing in Kosovo target
                                                                            quality
   Focus
   Focus            countries
                                                                            Develop a functional public-private investment
                    Attract private investment to collection, packhouse
                                                                            promotion organization for agriculture
                    and storage businesses


                                                                            Invest in the financial and engineering sustainability
Infrastructure
 Infrastructure     Finance development of water-efficient small-scale      of the formal irrigation system
   Capacity
    Capacity        irrigation systems and modern greenhouse through        Develop over 200 additional hectares of
    Building
    Building        grants programs                                         greenhouses with a marketing chain for climate-
                                                                            controlled crops


                                                                                                                                     213
 Initiatives can be executed using full resources or achieving “quick
 wins” (cont’d)
            Recommended Initiatives: Implementation with Quick Wins & Full Resources (cont’d)
                                    Quick Wins
                                    Quick Wins                                             Full Resources
                                                                                           Full Resources

                  Publicize the economic benefits of the Tirana
                                                                         Use an economic model to prioritize farm-to-market
                  highway and attract Albania-based freight forwarders
Transportation
Transportation                                                           road projects and develop the rural road network
                  to Kosovo
                                                                         through construction PPPs
                  Obtain ICAO license for air freight pick-ups at ICAO
                                                                         Centralized organizational structure driving
                                                                         compliance of national and international food safety
                                                                         standards, thereby increasing exports of agriculture
                  Work with MAFRD, KFVA, and Ministry of Health to
                                                                         goods
 Government
 Government       improve food safety inspections
                                                                         Developing system of private quality labs that are
 Agriculture
  Agriculture     Establish alliances with inputs importers to provide
                                                                         internationally recognized and have developed
 Regulations
 Regulations      training to farmers in proper application of inputs,
                                                                         bilateral agreements with key exporting countries
                  thereby driving increase in production value
                                                                         Fully automated tracking system tracking sales and
                                                                         distribution of all inputs, thereby decreasing the
                                                                         presence of counterfeit pesticides to less than 1%
                                                                         Focus on improved capacity of all trade officials in
                  Develop the data needed to enforce CEFTA               GoK, including Department of Trade (MTI), Kosovo
                  information sharing provisions (Art 44) on all         Customs, Dept of Bilateral Affairs (MFA), Office of
                  countries placing subsidies on agriculture goods       the President and KFVA, to negotiated trade
Trade Access
Trade Access
                  Develop an inter-ministerial council for trade and a   agreements with regional countries
                  “rapid reaction force” to respond to trade issues      Develop legitimate trade responses developed for all
                  affecting agriculture                                  subsidies placed on agriculture goods, driving an
                                                                         increase in domestic consumption


                                                                                                                                214
             All initiatives can be implemented in a phased approach during
             roll-out of crop diversification…
                                                                                             Proposed Implementation Timeline
                                                                                Initiative                                               Year 1   Year 2   Year 3   Year 4 & 5
                               Crop Diversification Initiative
             Small Farmers




                               A. Improve business viability and coordination of associations
              Leveraging

               Potential




                               B. Introduce and strengthen extension system to promote traditional crops and improve diversity

                               C. Increase and diversify types of financial products available to smallholder farmers

                               D. Improve cadastral system and test effectiveness of pilot land consolidation program
Driven Focus




                               A. Develop and launch donor coordination activities for agriculture
  Demand-




                               B. Create market intelligence system and communication plan

                               C. Improve capacity of collection centers, pack houses and cold storage

                               D. Establish centralized organization to oversee marketing & export promotion of agriculture goods
Infrastructure




                               A. Rehabilitate the large-scale irrigation system in Kosovo
   Capacity
   Building




                               B. Increase use of small-scale irrigation systems

                               C. Support development of greenhouses

                               D. Increase energy competitiveness of the agriculture sector
 Trade Regulations Transport




                               A. Prioritize and develop rural roads using cost-benefit analysis and PPPs

                               B. Develop air perishables plan and remove regulatory and market obstacles

                               C. Analyze and communicate cost advantages of the new Tirana highway

                               A. Establish a centralized, strengthened organizational model for food safety and quality control
        Gov’t Ag




                               B. Help private quality control labs to achieve international certification

                               C. Establish program to protect the environment against pesticide and input misuse

                               A. Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo

                               B. Develop and execute interim response to subsidies in neighboring countries

  Sources : BAH Analysis                                                                                                                                                         215
  … and are consistent with the strategy developed by MAFRD
                                                                                         Agriculture Opportunities Strategy Initiatives
                                                                                                 Increase value and diversity of agricultural output (0)
                                                                                                  Increase value and diversity of agricultural output (0)
             Agriculture and Rural Development Plan                                              Improve coordination and business services of
                                                                                                  Improve coordination and business services of
                                                                                                 associations (1a)
                                                                                                  associations (1a)
                       (ARDP) Framework                                                          Introduce and strengthen extension services (1b)
                                                                                                  Introduce and strengthen extension services (1b)
                           (2009-2013)                                                           Increase and diversify types of financial products
                                                                                                  Increase and diversify types of financial products
                                                                                                 available to smallholder farmers (1c)
                                                                                                  available to smallholder farmers (1c)
                                                                                Axis 1
                                                                                Axis 1           Improve cadastral system (1d)
                                                                                                  Improve cadastral system (1d)
                                                                                                 Increase access and use of market information (2b)
                                                                                                  Increase access and use of market information (2b)
                      Kosovo Agri-Rural Development                                              Improve capacity of collection centers (2c)
                                                                                                  Improve capacity of collection centers (2c)
                                                                                                 Establish centralized org for marketing and promotion
                                                                                                  Establish centralized org for marketing and promotion
                                                                                                 (2d)
                                                                                                  (2d)
                                                                                                 Ensure compliance with quality and safety standards (5 a
                                                                                                  Ensure compliance with quality and safety standards (5 a
                                                                                                 & b)
                                                                                                  & b)
           Axis 1                      Axis 2                     Axis 3
                                                                                                 Encourage farm enterprise diversification (0)
                                                                                                 Encourage farm enterprise diversification (0)
                                  Environment &                   Rural                          Promote sustainable and alternative land use (1d)
                                                                                                 Promote sustainable and alternative land use (1d)
     Competitiveness              Improved Land               Diversification   Axis 2
                                                                                Axis 2           Establish program to protect the environment against
                                                                                                 Establish program to protect the environment against
                                       Use                    and Quality of                     pesticide and input misuse (5c)
                                                                                                 pesticide and input misuse (5c)
                                                                Rural Life
                                                                                                 Introduce PPP extension services in rural areas (1b)
                                                                                                  Introduce PPP extension services in rural areas (1b)
                                                                                                 Increase types of financial products for rural farmers (1c)
                                                                                                  Increase types of financial products for rural farmers (1c)
                                                                                                 Brand and market local products (e.g. Rahovica table
                                                                                                  Brand and market local products (e.g. Rahovica table
                                                                                Axis 3           grapes) (2d)
                                                                                                  grapes) (2d)
                                                                                Axis 3
                                                                                                 Increase use of small scale irrigation systems (3b)
                                                                                                  Increase use of small scale irrigation systems (3b)
     Axis 4 Community-Based Local Development Strategies                                         Create and rehabilitate roads in rural areas (4a)
                                                                                                  Create and rehabilitate roads in rural areas (4a)
                                                                                                 Increase competitiveness and access to energy (3d)
                                                                                                  Increase competitiveness and access to energy (3d)

                                                                                                 Increase value and diversity of agricultural output (0)
                                                                                                  Increase value and diversity of agricultural output (0)
                                                                                                 Improve coordination and business services of
                                                                                                  Improve coordination and business services of
                                                                                Axis 4
                                                                                Axis 4           associations (1a)
                                                                                                  associations (1a)
                                                                                                 Introduce PPP extension services for communities (1b)
                                                                                                  Introduce PPP extension services for communities (1b)

Sources : Agriculture and Rural Development Plan (ARDP) 2009-13, BAH Analysis                                                                              216
                                                                                                                                            Crop Diversification Initiative
Initiative: Increase the Value and Diversity of Kosovo’s Agricultural Output (Year 1)
Duration: 5 years                                                                          Supporting Analysis: pp18, 26, 29 (AgStrat Baseline)

Description                                                Implementation Steps
    Currently there are not many types of crops or         1.    Communicate high priority crops to farmers/agribusiness owners and identify champions for crops
    diverse varieties of each crop cultivated in                 a. Identify farmers/associations capable of growing top crops identified in the crop diversification model
    Kosovo. This is a legacy of the Yugoslav                     b. Articulate benefits of growing top crops and potential varieties to farmers, determine which crops
    production system and of a sector that is                          they would consider cultivating, and select 2-4 new crops and specific crop varieties for test plots
    focused primarily on local tastes. This puts the             c. Introduce new varieties and expand volumes of high yield/value crops already produced in Kosovo
    sector at risk, exacerbates the trade deficit, and                 (e.g. gherkins, grape, chicory)
    reduces the livelihoods of farmers.                    2.    Develop test plots for priority crops and begin extension services
    The crop diversification initiative is designed to           a. Select organizations or technical experts that can provide the necessary knowledge and extension
    help Kosovo address these challenges and                           services needed for farmers to successfully grow quality, high yield crops
    bring significant volumes of high value crops to             b. Begin trainings with identified pilot farmers to explain in detail how to grow each crop, including
    market by the end of the third year. The first                     planting, seed varieties, pesticide use, and water irrigation
    year of the crop diversification initiative will: 1)         c. Discuss planting techniques required to cultivate varieties that will meet customer preferences for
    communicate the high priority crops to farmers                     taste, color, shape, size, etc. as well as meet or exceed quality requirements and safety standards
    and agribusiness owners and identify                         d. Plant and monitor varieties in test plots. At the end of the growing season, analyze which varieties
    champions for specific crops, 2) develop test                      are best suited for production in which areas and document lessons learned and changes for
    plots for priority crops and begin extension                       production in year two
    services, 3) begin to provide cost-share grants,       3.    Begin to provide cost-share grants, insurance, and loans for producers of new crops
    insurance and loans for producers of new                     a. Establish credit/insurance mechanisms for farmers producing new pilot varieties
    crops, and 4) visit fairs to develop relationships           b. Establish a small grants program with cost-share
    and market intelligence                                4.    Visit fairs to develop relationships and market intelligence
                                                                 a. Conduct market analysis for top crops and varieties selected to have a thorough understanding of
                                                                       the potential customers, targeted customer buying preferences, and main competitors supplying
                                                                       these products (leverage MIS once launched)
                                                                 b. Determine quality requirements and safety standards specific to each target market
                                                                 c. Analyze the distribution channels and identify distributors, wholesalers, and retailers
                                                                 d. Identify and attend select trade fairs (e.g. Fruit Logistica) as participants to begin to develop
                                                                       relationships and gather market intelligence
Indicator                                                  Key Risks / Mitigation Plans                                  Key Milestones
    Increase in export value                                    Farmers do not want to grow new crops or varieties:        1% increase in export value
    Increase in jobs                                            Detail benefits from growing each crop (potential          30 smallholder farmers and 2 largeholder
    Number of farmers participating in test plots               farm gate prices for products meeting quality              farmers participating in test plots
    Yield of test plots for each crop                           requirements, processing potential, size of target         50% of farms achieve at least an average yield
    Proportion of harvest meeting quality and