Guy Norton in Zagreb -

Once a sturdy pillar of Croatia's economy, the foundations of its agricultural sector are looking increasingly shaky as many of the nation's farmers continue to struggle with the transition from being part of a centrally planned economy to a free market system.

The break-up of the large estates formerly controlled by the state-owned collective farms during the Yugoslav era into small, privately owned plots in post-independence Croatia in the 1990s created hundreds of thousands of family farms. But at an average size of 5.6 hectares most farms in Croatia cannot hope to compete with their much larger, more efficient equivalents in the EU and beyond.

Although in the decade-long run-up to Croatia joining the EU on July 1 last year successive administrations preached the potential benefits of Croatian farmers gaining unfettered access to the EU's single market of 500m inhabitants, in reality the uncompetitiveness of much of Croatia's farming industry has meant the country is facing a rising tide of imports and sinking exports. Consequently, in 2013 Croatia's agricultural trade deficit widened to $1.2bn, up $250m on 2012.

No wonder, then, that farmers' representatives are concerned about the situation whereby Croatia now imports over 60% of all its food, whereas it was once self-sufficient in many areas of agricultural production. As Mato Mlinaric, president of NHS, the independent Croatian farmers' party, notes: "It's extremely worrying the overall state of arable and livestock farming in Croatia, where the import lobby is so powerful that it threatens to completely destroy Croatian agriculture."

One of the most dramatic side effects of the decline in farming has been the rural flight phenomenon in Croatia. Whereas in 1960 around 70% of Croats lived in rural areas, according to the 2011 population census that figure has slumped to around 40%. Furthermore, in many rural areas of Croatia unemployment is running at 50%, depressing the demand for locally produced food. According to the CIA World Factbook, agriculture in Croatia accounts for just 5% of GDP and 2.1% of the labour force, versus 6% and 7% respectively in the EU as a whole.

Making a pig's ear of it

The decline in Croatian agriculture is particularly noticeable in areas such as pig farming. Whereas pre-1991 Croatia reared over 2.1m pigs for slaughter, last year it reared less than around 800,000, down a third on 2012. As a result, an industry that once provided for all of Croatia's needs now covers less than 40%. The 60% balance is covered by imports, principally from the rest of the EU, which rears 10% more pigs than it requires.

Nor is there much likelihood of a reversal in the fall in pig production. According to Ernest Nad, head of the agriculture at the Croatian Chamber of Commerce in the eastern city of Osijek - the country's unofficial farming capital - the number of breeding sows has fallen more than 50% to under 100,000, from over 200,000 a decade ago. "I think it will take a long time to get back to the scope and size of production from the 1990s when we had a positive balance of payments in terms of pig production," says Nad.

Last year pork imports were worth €300m, while exports were a measly €20m. Because of the slump in the number of pigs being raised in Croatia, producers of specialty products such as Istrian prsut (Croatia's equivalent of Italian prosciutto) use imported pork 80% of the time to produce their prized cured meats. This not only reduces the value-added component of these products when exported, but has also complicated efforts to secure geographic protection status from the EU for such products, which would help to secure premium pricing at home and abroad. 

While prsut producers in Istria are looking to boost production from 250,000 hams a year to over a million by 2020, it remains unclear what benefit, if any, local pig farmers will derive from those ambitious plans. Three large vertically-integrated producers account for 60% of pork production in Croatia, with the 40% balance produced by small-scale producers that typically lack the economies of scale enjoyed by their European peers. For example, the typical pig farm in Croatia boasts just 10 breeding sows, while the typical pig farm elsewhere in the EU has over 100.

While some farmers have sought to concentrate their efforts on raising traditional indigenous breeds such as black Slavonian and spotted Turopolje pigs, the attempt to preserve Croatia's livestock heritage has been frustrated by misguided government policies.

Vladimir Margeta, a professor at the faculty of agriculture at Osijek University, points to the contradiction that the incentives for importing foreign hybrid breeds of pigs are higher than the subsidies for raising indigenous breeds. In practice, says Margeta, the current subsidy regime favours the big three pork producers which import common, foreign hybrid breeds, while discriminating against the family farms that specialise in rare, domestic breeds. As a result there are currently just 1,000 Slavonian and Turopolje breeding sows registered in Croatia, versus 35,000 foreign hybrid sows. "It is clear that once again so-called big farmers are being favoured at the expense of small farmers," says Margeta.

He adds that while the government professes to support family farms and rare indigenous breeds as part of preserving Croatia's rich agricultural heritage, its actions are in fact helping to drive both small farmers and their prized animals to extinction.

Furthermore, Margeta says the costs of bureaucracy - some 25% of Croatia's agriculture budget is spent on covering the cost of the 2,300 or so officials that administer the farming industry - and the poor drafting of Croatia's 2014-2020 rural development programme under which the country is eligible for around €350m of EU funds a year means that the outlook for its agriculture sector remains poor.

Meanwhile, a lack of preparation by the agriculture ministry has frustrated the attempts to export Croatian rare breeds to the EU, with the government's failure to monitor pig herds in Croatia for Auzejsky's disease leading to a ban on the transportation of live pigs to the EU. "Although the government knew it had to conduct monitoring for Auzejsky's disease it didn't do it," says Stjepan Kusec, president of SUS, the Croatian pig breeders association. "Pig farming in Croatia is being cut down right to the bone… Such moves such as the lack of preparation for live pig exports… means that the destruction of pig farming just continues."

So it's increasingly Croatian pig farmers' heads that are on the chopping block rather than their livestock's. Welcome to the culling fields of Croatia in year zero for the country's agricultural community.