* Yields halved in Croatia, huge profit losses across region
* Producers in Bosnia say situation worst since 1992-95 war
* Future bleak with infrastructure old, little new
* Farmers threaten protests; calls for export ban, tax cut
By Daria Sito-Sucic
KALESIJA, Bosnia, Aug 20 As crops wilt and die
in the Balkans, farmers struck down by a particularly harsh
drought this year are rueing the region's failure to upgrade
irrigation networks and invest in a long-term agricultural
Hot, dry weather in eastern and southern Europe has piled
pressure on world grain markets already reeling from huge
drought damage in the United States.
The toll in Bosnia, where surface soil temperatures in the
south have hit 47 degrees Celsius (116 Fahrenheit), is estimated
at almost $1 billion - a huge blow to a country where the
farming sector accounts for 20 percent of employment and about
10 percent of economic output.
The cost to neighbouring Serbia, where agriculture last year
accounted for about 12 percent of gross domestic product (GDP),
is around $2 billion, and up to $250 million in Croatia, where
yields have also been halved.
"It's a disaster," said Zoltan Pinkert, a farmer in the
fertile flatlands of Baranja in north-east Croatia. "Everything
was top-notch, and then the drought came. We've had less than 10
percent of the rain compared to normal years, and the damage to
corn crops is 100 percent."
The region is no stranger to drought and farmers usually get
by until the next growing season.
But producers in Bosnia say things have not been so bad
since the end of the country's 1992-95 war and are threatening
to block major roads and border crossings from early September
unless the government pays outstanding subsidies and acts to
protect domestic production.
The future looks bleak. Cash-strapped governments in the
region, all facing recession, say the money is not there to
invest in modern farming methods.
The former Yugoslavia is still plagued by weak governance
and a tradition of wholesale change in policy and personnel with
each change of government, impeding the creation of a long-term
strategy to develop farming.
Bosnia does not have an agriculture ministry at the state
level but only at the level of its two autonomous regions - the
Muslim-Croat federation and the Serb Republic.
CORN "AS RARE AS GOLD"
Policy-making is hostage to a complex system of
power-sharing since the war, based on ethnic quotas, slowing the
adoption of myriad laws and regulations needed for the country
to catch up with the European mainstream.
This institutional inertia already threatens to deprive
Bosnia of its main export market for milk and meat in Croatia
when Zagreb joins the EU next year.
Critics argue the problem has been years in the making. "We
are paying for the lack of systematic agricultural policy over
the past 20 or even 50 years," said Damir Kovacic, agricultural
marketing lecturer at Zagreb University. "We're always surprised
when the drought hits in the summer," he said.
The World Bank, which in May approved a $40 million loan to
improve the irrigation system in Bosnia, said the countries of
the Balkans had huge agricultural potential, but lacked the
infrastructure and strategy.
"Former Yugoslavia used to have one of the most advanced
irrigation and drainage systems," said Holger Kray, the World
Bank's lead officer for agriculture and rural development in
Europe and Central Asia.
"Unfortunately, these systems have degraded, eroded," Kray
told Reuters by telephone from Washington. "This is not only
about functional budgetary shortages but also frequent turnover
in the management of these systems."
Mate Brlosic, head of the Croatian Agriculture Chamber, said
corn would be "as rare as gold" in Croatia this year.
"The recovery will last several years for vineyards and
orchards, and livestock farming will also feel the impact for
years, due to lack of cattle food," he told Reuters on Monday.
"We've not had a clear agricultural strategy for 20 years.
Regulations change with every change of power."
The difference upgraded farming methods can make is
illustrated by a few green fields in Bosnia's breadbasket
"We have used modern technology to improve the water regime
in some fields and switched to a new animal feeding mix,"
Dzenadin Veispahic, general manager of the privately owned
Spreca dairy farm, told Reuters.
Even then, the drought will cost the farm more than $300,000
"We are on yellow alert regime when it comes to cattle
watering," he said, meaning the farm was negotiating with local
authorities to tap river water and enlist the help of the fire
Vladimir Usorac, head of the farmers' association in
Bosnia's Serb Republic, said the effects of bad harvests were
cumulative. "This is the fourth consecutive year that
agriculture has suffered enormous losses because of bad weather,
and many producers will not have the means to start the
production cycle next year," he said.
Experts estimate it would cost about $2.5 billion to
overhaul irrigation networks in Serbia, the biggest agricultural
producer in the former Yugoslavia.
But there is little sign of such a long-term strategy
emerging. The focus, instead, is on emergency remedies.
In Serbia, where the corn yield is expected to be half the
projected 7 million tonnes, trade officials last week called on
the government to ban the export of grain, in particular corn,
soybean, sunflower seed and wheat.
Such a move would spell additional uncertainty for regional
markets, particularly Bosnia, which have traditionally relied on
Serbia in the event of shortages.
Croatian unions want tax on food cut so producers are not
priced out of the market, but the government is resisting.
Agriculture Minister Tihomir Jakovina said the Croatian
government was considering a partial lifting of fees on the
lease of agricultural land and increasing customs fees on
exports of grain and corn to avoid shortages.
The only glimmer of hope for Croatia is the EU funds that
will become available when it becomes the bloc's 28th member in
July next year, money that could be invested in a long-term
strategy to revive farming.
Deputy Prime Minister Radimir Cacic has compared the
country's approach to agriculture to that of "primitive tribes".
"If there is rain, there will be crops, there will be
electricity," he said in the run-up to last year's election. "If
there is drought, there'll be nothing. This has to change."
(Additional reporting by Zoran Radosavljevic in Zagreb and Matt
Robinson in Belgrade; Editing by Matt Robinson and Pravin Char)