Sheep meat balance in Republic of Macedonia

Sheep meat balance ORIGINAL in Republic SCIENTIFIC of Macedonia PAPER Sheep meat balance in Republic of Macedonia Ana KOTEVSKA, Jovan AŽDERSKI, Dragi DIMITRIEVSKI Faculty of Agricultural Sciences and Food - Skopje, ul. Edvard Kardelj bb, 1000 Skopje, Republic of Macedonia, (e-mail: ana.kotevska@zf.ukim.edu.mk) Abstract Sheep meat is a traditional product for the Republic of Macedonia, with a decreasing production trend in the last fifteen years. The aim of the paper is to analyze the changes in the sheep meat balance and to measure the declining tendency of this sub-sector. The results show that the number of sheep as well as the sheep meat production decreased by one-third in the research period (1995-2009), whereas the meat exports increased by one-third. There are many factors contributing to this situation, resulting into an increased cost of production and a decreased the farmers return. In the conclusion of the article it is stated that governmental actions could have a significant role in order to avoid further deterioration of this sub-sector with huge social meaning for the Republic of Macedonia. Key words: sheep meat, balance, Macedonia Introduction Sheep production in Republic of Macedonia has a long tradition, supported by favorable natural conditions. The flocks are raised in ecologically clean zones, with pastures taking up more than half of the total agricultural land. In addition, the traditional markets where the Macedonian lamb is recognized for its quality further emphasize the potential of this sub-sector. However, this potential has not been fully utilized by all structures included in this production, since it is carried out in a traditional extensive manner, almost the same way as a century and a half ago (Dimitrievski, Ericson, in press; Dimitrievski et al., 2010). The significance of the sheep meat sub-sector can be observed through the fact that this is the main exportorientated sub-sector within the livestock complex. Moreover, this sub-sector produces one-third of the meat in the country and engages about 20 thousand families (Dimitrievski, Kotevska, 2008). The fact that this production is mainly located in the mountainous and rural areas, it adds a social dimension to the deteriorating development of this sub-sector. Besides the declining number of animals and produced quantities, the economic significance of this sector is increasing, as seen from the increased participation in the agricultural output, from 1.6% in 1998 up to 1.9% in 2008, with a peak of 12.2% in 2006 (SSO, 2005-2010) Material and Methods The official data from the State Statistical Office (SSO) for the period 1995-2009 were used for the analysis of the sheep meat sub-sector. These figures are further processed and structured into a balance of the sheep meat sub-sector, as a country model for its supply and demand of this commodity. The ending stocks are not included in the balance sheet, because there are no data available. Nevertheless, taking into consideration the seasonality of the production and the marketing of the sheep meat, which is taking place in the same calendar year, we assume that there are negligible amounts left as ending stocks. Although most of the slaughtered heads are lambs, this analysis also covers other sheep categories, hence the term sheep meat comprises both mutton and lamb meat. Proceedings. 43 46 rd th Croatian and 63 th rd International Symposium on Agriculture. Opatija. Croatia (315-319) XXX) Section 2. Agricultural Economics and Rural Sociology 315

Ana KOTEVSKA, Jovan AŽDERSKI, Dragi DIMITRIEVSKI Results and discussion Production capacities for sheep production The farm structure in the Republic of Macedonia is represented by farm enterprises (most originating from former state-owned holdings) and family farms. According to the agricultural census in 2007, most of the sheep production with 749 thousands heads (94.37%) is carried out in family farms; whereas the remaining 45 thousands heads (5.63%) are bred by agricultural enterprises and cooperatives. The portion of sheep raised at family farms shows an uptrend in the total sheep number, especially after 1998, increasing from 91% to 96.7% in the period 1998-2007 (Dimitrievski, Ericson, in press). Sheep production is still based on indigenous, non-selected breeds such as Shar Mountain s and Ovce Pole s Pramenka and its-crossbreds. Genetic improvements have been performed by cross-breeding with merino, resulting with expansion of the number of those cross-breeds, and in more recent years, with the breed Wurttemberg (Dimitrievski, Kotevska, 2008; Dzabirski & Andonov, 1998). There has been a decreasing trend of sheep number in the last decade. The total number of sheep in the period of analysis has declined from 2320 thousands in 1995 to 755 thousands in 2009, or approximately 67% decrease compared to 1995. The sheep herd structure is steady in the whole period. Ewes take the largest share with about 70%, followed by lambs younger than 1 year with about 25%, while the remaining are rams and culled sheep (Tab. 1). The downtrend of sheep numbers, and consequently the production, is a result of a number of factors: low prices of meat, milk and wool; reduction in the fodder base; and high prices of fodder and bulk food (Dimitrievski et al., 2010; Dimitrievski, Ericson, in press). Furthermore, there is reduced availability of labour force for the sheep-keeping in the mountain areas which subsequently increases the costs of labour force. Beside the economic reasons such as availability and price of feed and labor, another reason for the negative development of the sector is the high participation of the family farms in the total production with their low capacity to face the non-favorable economic and market environment. Disease outbreaks and trade embargos in the last two decades, as well as the inconsistent agricultural policy in terms of supporting the production or export of lambs, additionally worsened the situation. Production of lamb meat The basic breeding orientations in the sheep breeding farms in the Republic of Macedonia are milk and meat production. Most lambs are born in January/February and are slaughtered in April/May. After weaning, the sheep are milked for cheese production. While the number of sheep has decreased, the yields - the average lambs per sheep and the slaughter weight - have remained stable. Consequently, the decline of sheep numbers resulted into a proportional decrease of slaughtered heads and sheep meat production. The total number of slaughtered heads in the sheep sub-sector peaked in 1996 with 1591 thousand heads, decreasing by two-thirds with 537 thousands heads in 2008 (Tab.1). The number of slaughtered lambs accounts for 80% of the total number of slaughtered heads. They are slaughtered at very small weight, corresponding to the age of 2.5-3 months old, thus the average gross weight of slaughtered heads is very low - about 18 kg for lambs, and 37 kg for culled sheep (Dimitrievski & Ericson, in press; Dzabirski & Andonov, 1998). The net-yield (ratio between gross and net weight) is accounted for approximately 50% for lambs and 44% for sheep (SSO, 1996-2010). Sheep meat accounts for average production of 6357 tons for the period 1995-2009 (Tab. 1), i.e. 24% of the average production of all types of meat. The production of sheep meat for the same period showed a downtrend. In comparison, the quantities of 9976 tons in 1995 have been reduced to 5225 tons in 2009, thus decreasing the production of sheep meat by half in 2009 as compared to 1995. 316 46 th Croatian and 6 th International Symposium on Agriculture

Sheep meat balance in Republic of Macedonia Table 1: Balance of sheep meat in Republic of Macedonia Year 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Mx Inventories (1000 heads) Total number 2.32 1.81 1.63 1.32 1.29 1.25 1.29 1.23 1.24 1.43 1.24 1.25 0.82 0.82 0.00 1.26 Lambs up to 1 year 0.42 0.47 0.36 0.29 0.33 0.29 0.32 0.28 0.33 0.34 0.33 0.32 0.23 0.20 0.20 0.31 Breeding sheep 1.74 1.23 1.18 0.95 0.87 0.89 0.90 0.88 0.83 1.01 0.83 0.86 0.55 0.59 0.52 0.92 Rams and barren sheep 0.16 0.11 0.09 0.08 0.09 0.07 0.07 0.07 0.09 0.09 0.08 0.07 0.04 0.03 0.03 0.08 Lambs per ewe 1.0 0.9 1.2 1.0 1.0 1.0 1.0 0.9 1.0 1.0 0.6 0.9 1.0 1.0 n.a 1.0 Lamb crop 1.78 1.15 1.36 0.90 0.87 0.85 0.87 0.78 0.79 0.97 0.54 0.79 0.56 0.58 n.a 0.91 Slaughtered heads 1.24 1.59 1.48 1.16 0.84 0.83 0.79 0.78 0.74 0.73 0.68 0.75 0.96 0.54 n.a 0.94 Supply-Demand Balance (1000 tons) Total supply 10.0 9.5 6.6 5.6 4.4 4.9 5.8 4.6 5.9 7.0 6.9 7.2 6.5 5.2 5.2 6.4 Production 10.0 9.5 6.6 5.6 4.4 4.9 5.8 4.6 5.9 7.0 6.9 7.2 6.5 5.2 5.2 6.4 Import 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total demand 10.0 9.5 6.6 5.6 4.4 4.9 5.8 4.6 5.9 7.0 6.9 7.2 6.5 4.5 5.2 6.3 Consumption 8.1 7.5 4.7 3.7 2.4 2.9 2.9 1.7 3.1 4.0 4.1 4.3 3.7 1.8 2.3 3.8 Export 1.8 2.1 1.8 1.9 2.0 2.0 2.9 2.9 2.8 3.0 2.7 2.9 2.8 2.7 2.9 2.5 Derived indicators (ratio) Level of self-supply 1.2 1.3 1.4 1.5 1.8 1.7 2.0 2.7 1.9 1.8 1.7 1.7 1.8 2.9 2.3 1.8 Net-trade 1.8 2.1 1.8 1.9 2.0 2.0 2.9 2.9 2.8 3.0 2.7 2.9 2.8 2.7 2.9 2.5 Consumption per capita (kg) 4.1 3.8 2.4 1.8 1.2 1.4 1.4 0.9 1.5 2.0 2.0 2.1 1.8 0.9 1.2 1.9 Prices (den/kg) Producer price (lambs carcass) 85 83 71 82 73 116 130 150 137 147 141 146 147 154 n.a 119 Export price 80 84 120 136 125 231 252 233 239 257 301 288 286 320 276 215 Source: SSO (1996-2010), Dimitrievski, Ericson (in press) Consumption of lamb meat Sheep meat is a delicacy nutritional product and is part of the diets of all religious groups in the Republic of Macedonia. On the other hand, the seasonal supply, and the high market price limit the consumption of sheep meat and it represents approximately a fifth (20%) of total meat consumption. The consumption of sheep meat in the Macedonian households for the period 1995-2008 displays a downtrend, from 8,140 tons consumed in 1995 down to 1719 tons in 2002, i.e. 79% less than 1995. In 2008 the consumption per capita was just 1.2 kg, whereas, in 1995 it was 4.1 kg/capita. In other words, the consumption of sheep meat per capita has been reduced by approximately 70%. These variations are explained by the fact that, on one side, the decreasing production and at the same time increasing exported quantities resulted in smaller supply at the domestic market and thus a higher price. On the other side, the quantities of meat that have not been exported during the diseases outbreaks and trade embargos caused oversupply at the domestic market and decreased the price at the domestic market. Foreign trade of lamb meat Lamb meat is the most important export-oriented commodity within the livestock complex. However, taking into consideration that the livestock complex participates with a slightly lower degree in the agri-food exports, and that the main export commodity group from the livestock complex - meat and edible meat offal - is taking up 4.3% from the total agri-food exports (Dimitrievski et al., 2010), lamb meat as an exporting commodity does not have such a significant contribution for the whole agri-food trade. Lamb meat takes the largest share in the total exports of this sub-sector. The exports for the period 1995-2009 show a gradual rise since the trough in 1997-2000, with an increasing level of stability after 2004 (Dimitrievski, Ericson, in press). The exported quantities of sheep meat for the period 1995-2009 vary from 1836 tons in 1995 to 3021 tons in 2004, while the average quantity of these products was 2491 tons. A significant increase in the export is registered in 2001 in comparison to 2000, with increase in export by Section 2. Agricultural Economics and Rural Sociology 317

Ana KOTEVSKA, Jovan AŽDERSKI, Dragi DIMITRIEVSKI 40.7%. The overall increase of the exported quantities in 2009 in comparison to 1995 was 59%, which is mostly a result of the overcoming the foot-and-mouth disease and increased agricultural support. Due to its low price and high quality, the Macedonian lamb is competitive on the international market. Greece and Italy are the main export destinations of the Macedonian lamb, absorbing about 90% of the export. The remaining 10% of the export are assigned for the ex-yugoslavian market. Except for some very small negligible amounts in 2008 (16 tons in total), there is no import of lamb and mutton meat in the Republic of Macedonia. Supply and demand balance of mutton and lamb meat The production of sheep meat satisfies the needs of the Republic of Macedonia, making this product the only livestock commodity that has market surpluses intended for export. The coefficient of self-supply of these products is higher than 1 during the whole period. It varies from 1.23 in 1995 to 2.89 in 2008 showing the increasing market surpluses. Anyway, the production of lamb is still in decline. Taking into consideration that there is no import of mutton or lamb s meat, it can be concluded that the sheep meat supply consists of domestically produced quantities only. In average, 58% of the domestic production of sheep meat is consumed by the domestic market, while the remaining 42% is exported. Considering that no sheep meat is imported in the Republic of Macedonia, the net-trade is positive. Prices The analysis of the deflated sheep meat price displays an uptrend, with three distinct development phases. In the first phase (1995-1999) the price was on average 79 den/kg (1.43 /kg). The second phase (2000-2002) is characterized by an increasing trend of the price due to the re-opening of the international markets (the economic embargo to Serbia, the foot-and-mouth disease outbreak and internal political conflict in Macedonia are left behind), as well as the introducing of governmental measures for minimal buy-out price of lambs as a condition for eligibility for export subsidies. In the third phase (period after 2002) the prices tend to stabilize again, at the level of 145 den/kg (2.38 /kg), on average i.e. about 80% higher than in the price in the first phase. The producer prices of sheep production commodities are low, with commonly accepted conclusion that they do not cover the costs of working in that sub-sector. This is confirmed by the analysis showing that a break-even price for lamb meat for year 2009 was 151.6 den/kg (2.47 /kg) (Milevska, 2010). Therefore, it can be concluded that these prices are not stimulating for the sheep-breeders to expand the flocks or to introduce more up-to-date equipment which would increase the income. The export price of sheep meat in the period 1995-2009 ranged from 80 den/kg (1.61 /kg) in 1995 to 320 den/kg (5.27 /kg) in 2008, i.e. at an average price for the period of question of 215 den/kg (3.57 /kg). The analysis of the export price shows the same development pattern as at the producer price. Conclusion The long tradition and favorable natural conditions are not sufficient to maintain a positive development of the sheep sub-sector, nor is the recognition of the Macedonian lamb meat as a high-quality product at the traditional international market. The alarming signals of weakening of this sub-sector indicate that immediate actions must be taken, in order to avoid further deterioration of this sub-sector, especially since it plays an important social role in the less-favored and rural areas. The government could and should have a critical role in improving the situation in this sub-sector. The weak points of the sub-sector can be pointed out as focal points for improvement. For instance, the consistent and focused agricultural policy can contribute in stabilizing and increasing the herd size. The structural policy and measures can compensate the low financial capacity of the farmers and enhance farmers knowledge and management techniques. For example, the genetic improvements, accelerated lambing, and better management practices can increase the lamb production. In addition, the social program can help in overcoming the employment issue in this subsector. Although this paper considers the sheep meat only, the revenue coming from milk should be noted as well, especially if processed into high quality cheese products. Generally, the balance of the sheep meat shows that once this sub-sector was a very important for the Republic of Macedonia in the recent history. The markets for this product still exist, with increasing demand especially at international level. With elimination of most of the negative circumstances this sub-sector can easily regain its position in the Macedonian economy. 318 46 th Croatian and 6 th International Symposium on Agriculture

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