A Vision and Roadmap for the Strategic Transformation of ... · Agri-food sector stakeholders in Croatia have converged on a vision for agriculture to “ produce more and high quality

A Vision and Roadmap for the Strategic Transformation of Agriculture and Rural Space

SUFINANCIRANO SREDSTVIMA EUROPSKE UNIJE

EUROPSKI POLJOPRIVREDNI FOND ZA RURALNI RAZVOJ: EUROPA ULAŽE U RURALNA PODRUČJA MJERA TEHNIČKA POMOĆ

EUROPSKI FOND ZA POMORSTVO I RIBARSTVO MJERA VII.1. TEHNIČKA POMOĆ

MINISTARSTVO POLJOPRIVREDE

Operativni programZA POMORSTVOI RIBARSTVO

ProgramRURALNOG RAZVOJA

CROATIA 2020-2030

B

This report is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in the report do not necessarily reflect the views of The World Bank Group, its Board of Executive Directors, or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work, which is drawn from multiple external sources. Nothing herein shall constitute, or be considered to be, a limitation upon or waiver of the privileges and immunities of The World Bank Group, all of which are specifically reserved.

i

This report was prepared by a World Bank Group technical team of staff and consultants led by Svetlana Edmeades and comprising Philip Van der Celen (lead author), David Lee, Demetris Psaltopoulos, Hrvoje Horvat, Erika Felix and Jela Bilandzija. The report benefited from advice provided by Austin Kilroy and Steve Goss (peer reviewers), Luka Bacic, Frauke Jungbluth (Manager for the Food and Agriculture Global Practice) and Elisabetta Capannelli (Country Manager for Croatia), World Bank Group. The Team acknowledges the invaluable support provided by the Ministry of Agriculture for the preparation of this report and in particular to Minister Marija Vučković, to State Secretaries Tugomir Majdak and Zdravko Tušek, and to Nikša Tkalec, Anita Sever, Bernardica Bošnjak, Marin Fak and Mislav Banek, among others.

A Vision and Roadmap for the Strategic Transformation of Agriculture and Rural Space

CROATIA 2020-2030

Table of Contents

Abbreviations and Acronyms ....................................................................................................................................................... v

Executive Summary ........................................................................................................................................................................1

1. Background ................................................................................................................................................................................. 3

2. Strategic Vision .......................................................................................................................................................................... 5

3. Opportunities ............................................................................................................................................................................. 7

4. Strategic Objectives and Critical Needs ................................................................................................................................. 9

STRATEGIC OBJECTIVE 1. Increase the Productivity and Climate Resilience of Agricultural Production ....................11Critical Need 1: Increase value-added of agricultural production ......................................................................................11Critical Need 2: Improve environmental sustainability of farming practices ..................................................................11Critical Need 3: Improve equity in the distribution of farm support ................................................................................12Critical Need 4: Improve correspondence between production systems and agro-ecological zones

characteristics .........................................................................................................................................................................12Critical Need 5: Improve the use and effectiveness of risk management instruments ...............................................13

STRATEGIC OBJECTIVE 2. Strengthen the Competitiveness of the Agri-Food System ...................................................14Critical Need 6: Strengthen market linkages in the agri-food sector, including supply aggregation .......................14Critical Need 7: Improve entrepreneurial capacity and opportunities of agri-food producers ..................................14Critical Need 8: Improve the enabling environment to respond to agri-food demands of consumers ...................15Critical Need 9: Improve the uptake of public and private agri-food quality schemes ...............................................15Critical Need 10: Improve labor skills in the agri-food chain ..............................................................................................16Critical Need 11: Improve the functionality of agricultural land markets .........................................................................16

STRATEGIC OBJECTIVE 3. Renew the Rural Economy and Improve Livelihoods in Rural Space ................................... 17Critical Need 12: Improve coordination and complementarity between interventions in rural areas,

including basic services ........................................................................................................................................................17Critical Need 13: Improve public infrastructure for modernizing agricultural production ..........................................18

STRATEGIC (CROSS-CUTTING) OBJECTIVE 4. Stimulate Agri-Food Innovation.............................................................18Critical Need 14: Facilitate capital investment focused on technology and innovation (Cross-Cutting) ...............18Critical Need 15: Improve access to R&DI and uptake of knowledge and technology supporting

decision-making and investments (including climate and sustainability) (Cross-Cutting) ................................19

5. Roadmap ...................................................................................................................................................................................20

ACTION A. Target public and private funds towards more productive agricultural investments..................................21Intervention A.1. Promote investments in productive assets, technologies, and innovations by farmers and

agri-businesses .......................................................................................................................................................................21Intervention A.2. Redistribute income support towards small and medium-sized producers, women

and young farmers ................................................................................................................................................................. 22Intervention A.3. Strengthen participatory, gender-sensitive, and evidence-based planning, monitoring,

and evaluation systems ........................................................................................................................................................ 23

iv

ACTION B. Scale-up climate-smart agriculture and sustainable land management that helps protect and regenerate agriculture’s natural resource base ................................................................................................................ 23

Intervention B.1. Reward continuous improvement in environment-, climate-, and animal-friendly practices and solutions in agricultural production systems .........................................................................................................24

Intervention B.2. Improve access to environmental and agro-climatic data for public and agri-food chain actors .............................................................................................................................................................................25

Intervention B.3. Expand the conversion towards organic and agro-ecological production systems .....................25Intervention B.4. Improve the access to irrigation water and efficiency of its use for producers ............................26

ACTION C. Facilitate diversified and integrated domestic agri-food markets .................................................................. 27Intervention C.1. Stimulate productive partnerships between producers and buyers in short supply chains ...... 27Intervention C.2. Improve organizational capacities in high-value agri-food chains .................................................28Intervention C.3. Strengthen support mechanisms for producers to comply with public and private food

safety, quality, and SPS standards .....................................................................................................................................29Intervention C.4. Facilitate the development of agri-food logistics hubs ........................................................................31

ACTION D. Empower more entrepreneurs (including youth and women) to create and develop agribusinesses ... 32Intervention D.1. Reduce the administrative and regulatory burdens facing producers and agri-businesses ...... 32Intervention D.2. Level the fiscal playing field for Croatian producers and agri-businesses..................................... 33Intervention D.3. Tailor risk management instruments towards the needs of smaller and medium-

sized producers and agri-businesses ............................................................................................................................... 33Intervention D.4. Support entrepreneurs (including youth and women) in starting new farms and

agribusinesses ........................................................................................................................................................................34

ACTION E. Link the agri-food sector to growth opportunities in the new economy ....................................................... 35Intervention E.1. Improve the market connectivity of rural areas ..................................................................................... 35Intervention E.2. Implement a national circular bio-economy plan .................................................................................36Intervention E.3. Promote agri-food destination tourism ...................................................................................................36Intervention E.4. Provide skills development opportunities to rural workers, particularly young people

and women, in line with agri-food sector needs ............................................................................................................ 37

ACTION F. Integrate national agricultural knowledge and innovation systems .............................................................. 38Intervention F.1. Establish stronger linkages between public and private advisors and scientific institutions .....38Intervention F.2. Develop a Central Agriculture Information System and Knowledge Hub ......................................39Intervention F.3. Digitize knowledge flows between public and private AKIS actors ................................................ 40Intervention F.4. Encourage innovation partnerships between producers, advisors, agribusinesses, and

scientific institutions ............................................................................................................................................................ 40

6. Linking the Interventions to Specific Measures for Key Sub-Sectors ................................................................................42

7. Linking the future NARDS to the CAP Strategic Plan ..........................................................................................................49

8. Results Monitoring Framework ..............................................................................................................................................50

9. Annexes .................................................................................................................................................................................... 55

Annex I: Linkages between Interventions, Critical Needs, and Strategic Objectives ....................................................... 56

Annex II: Cattle (Beef/Milk) Sub-Sector Analysis ...................................................................................................................60

Annex III: Pork Sub-Sector Analysis ............................................................................................................................................61

Annex IV: Cereal Sub-Sector Analysis ....................................................................................................................................... 62

Annex V: Vegetable Sub-Sector Analysis .................................................................................................................................. 63

Annex VI: Fruit Sub-Sector Analysis ...........................................................................................................................................64

Annex VII: Grapes and Wine Sub-Sector Analysis .................................................................................................................. 65

Annex VIII: Industrial Crops Sub-Sector Analysis ...................................................................................................................66

v

AECM Agri-Environment-Climate MeasuresAKIS Agriculture Knowledge and Innovation SystemsANC Areas with Natural ConstraintsBISS Basic Income Support for SustainabilityCAP Common Agriculture PolicyCBS Croatian Bureau of StatisticsCIS-YF Complementary Income Support for Young FarmersCMO Common Organization of the MarketsCRISS Complementary Redistributive Income Support for SustainabilityEAFRD European Agricultural Fund for Rural DevelopmentEAGF European Agricultural Guarantee FundEIP European Innovation PartnershipERDF European Regional Development FundESIF European Structural and Investment FundsEU European UnionFIS Phytosanitary Information SystemGAEC Good Agricultural and Environmental ConditionsGDP Gross Domestic ProductGHG Greenhouse GasGI Geographical IndicationGVC Global Value ChainHAMAG-BICRO Croatian Agency for SMEs, Innovations, and InvestmentsHAPIH Croatian Agency for Agriculture and FoodHBOR Croatian Bank for Reconstruction and DevelopmentICT Information and Communication TechnologyJRC Joint Research CentreLAG Local Action GroupLRMS Land Resources Management SystemMoA Ministry of AgricultureMSME Micro-, Small- and Medium EnterpriseNAEZ National Agroecological ZoningNAPNAV National Irrigation ProgramNARDS National Agriculture and Rural Development StrategyNDS National Development StrategyNGA Next Generation AccessPMEF Performance Monitoring and Evaluation FrameworkRAS Reimbursable Advisory ServiceR&D Research and DevelopmentSDG Sustainable Development GoalSMR Statutory Management RequirementsSO Strategic ObjectiveSPS Sanitary and Phytosanitary StandardsSTARS Strategic Transformation of Agriculture and Rural SpaceWB World BankWFD Water Framework Directive

Abbreviations and Acronyms

vi

1

Agri-food sector stakeholders in Croatia have converged on a vision for agriculture to “produce more and high quality and nu-tritious food at competitive prices, sustainably manage natural resources in a changing climate, and contribute to improved quality of life in rural areas and increased rural employment”. The agri-food sector is an important contributor to the econo-my and life of Croatia, and it is undergoing a process of transformation, where the primary sector is employing fewer people, but value addition and product development are becoming important drivers in this process, and where climate change is challenging the productive potential of many parts of the country and pointing towards the rethinking of the sustainability of agricultural support.

The strategic vision for agriculture is formulated around 4 strategic objectives: 1) Increase the Productivity and Climate Resilience of Agricultural Production; 2) Strengthen the Competitiveness of the Agri-Food System; 3) Renew the Rural Economy and Improve Livelihoods in Rural Space, and a cross-cutting objective 4) Stimulate Agri-Food Innovation. Underpinning each strategic objective are a set of critical needs that identify the changes required to achieve the four strategic policy priorities. To address the critical needs, specific interventions are formulated as a roadmap that links the broad objectives to specific actions.

All strategic objectives point towards improving the rural economy and contribute towards the overall economic develop-ment of Croatia. This would be achieved through improving the productivity of agriculture in a sustainable and climate-smart manner, focusing on strengthening the competitiveness of all productive units, while fostering better linkages between pro-duction and markets, generating more and better jobs in the rural economy along the agri-food value chain and not only in primary production activities. The clear focus of the strategic vision on innovation is critical for improving the economic development of agriculture and all its forward and backward linkages with other sectors of the economy.

The strategic vision was formulated using an evidence-based planning process, including economic analysis and stakeholder consultations. As such, it not only provides the cornerstone for development of rural areas of Croatia, as based on country priorities, but it also fulfills the strategic processes required of Croatia as a Member State of the European Union. It provides a framework for interventions in the sector during the transition period of the new Common Agricultural Policy (CAP) and enables the formulation of Croatia’s National CAP Strategic Plan for 2021-2027. The strategic vision for agriculture also takes into account the ongoing formulation of a National Development Strategy (NDS). Hence, all activities under the strategic vision will contribute towards the broader development objectives of Croatia. Among them is the integrated territorial devel-opment of rural areas, where natural resources and economic investments intersect and contribute towards modernizing the rural economy. This is driven by the need to improve the coordination and complementarity between interventions in rural areas and accelerate the transition to a smart and green rural economy. This, while adhering to the new directions of the EU under the Green Deal and Farm to Fork frameworks.

Underlying the Strategy is the more efficient use of public resources to stimulate private sector participation, through better targeting of agricultural support and improving the absorption of rural development funds. Croatia has a large potential to

Executive Summary

2

improve the performance of its agricultural sector and the rural economy and this strategic vision and roadmap provide the directions and outline the actions to guide this process of transformation and support the country turn its agricultural sector into an engine of growth.

3

This document outlines a vision and a roadmap for the strategic transformation of agriculture and rural space in Croatia for the 2020-2030 period. This document seeks to provide strategic guidance to the Ministry of Agriculture (MoA) (the client) with respect to the design, implementation, monitoring and evaluation of Croatia’s post-2020 agriculture and rural development strategies and plans funded mainly through the national budget as well as the European Union’s (EU) Common Agricultural Policy (CAP), Structural and Investment Funds (ESIF), and Horizon Europe. Specifically, the document provides a basis for the development of Croatia’s future National Agriculture and Rural Development Strategy (NARDS) and new CAP Strategic Plan, which must be prepared by the MoA in line with the programming requirements established for the next EU budget period (2021-2027). The 2020-2030 period covered by the vision and roadmap has been defined to encompass both the next EU programming period (2021-2027) as well as the transition years prior to and succeeding it. Importantly, the document lays out a vision and a roadmap for a strategic transformation that goes beyond the farm and considers challenges, opportunities, and actors influencing the broader agri-food sector from “farm-to-fork”, including agricultural production, post-harvest management and processing, aggregation and distribution, markets and consumer demand, as well as the Agricultural Knowledge and Innovation System (AKIS) that underpins the integrated agri-food sector and rural infrastructure and services that link the different components of the agri-food value chain. Other land use sectors (such as forestry and land-based aquaculture) fall outside the scope of this document, as requested by MoA.

The document incorporates inputs generated by sector, territorial, national, and EU strategic planning processes cur-rently underway in Croatia. First, the document integrates the outcomes of the extensive diagnostic work and stakeholder consultations regarding the agri-food sector and additional sub-sector-specific analyses, which were recently completed by the World Bank under the Strategic Transformation of Agriculture and Rural Space (STARS) Reimbursable Advisory Service (RAS) Project,1 highlighting the challenges, drivers, priorities, needs, and potential interventions in the sector. In addition, the document takes into account the strategic directions and planning framework laid down in the most recent legislative proposals presented by the European Commission for the CAP, the European Structural and Investment Funds (ESIF), and Horizon Europe2

1 Relevant STARS RAS reports produced by The World Bank include (i) Diagnostic Analysis: Agriculture & Rural Development, delivered in May 2019; (ii) Croatia Stakeholder Consultations and Priority-setting Results: Agriculture, Aquaculture, and Fisheries, delivered in July 2019; (iii) Strategic Vision Post-2020: Agriculture & Rural Development in Croatia, delivered in November 2019; (vi) Summary Report of Agriculture Stakeholder Consultations, delivered in March 2020.2 Relevant legal texts include: (i) European Commission proposal for a Regulation COM(2018) 392 on Common Agricultural Policy (CAP) Strategic Plans, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A392%3AFIN; (ii) European Commission proposal for a Regulation COM (2018) 393 on the Financing, Management, and Monitoring of the CAP, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A393%3AFIN; (iii) European Commission proposal for a Regulation COM(2018)394 on Common Organization of Markets, available at https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1530715098374&uri=CELEX%3A52018PC0394R%2801%29; (iv) the European Commission proposal for a Regulation establishing common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund and the European Maritime and Fisheries Fund, and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument COM/2018/375 final – 2018/0196 (COD), available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A375%3AFIN; and (v) the European Commission proposal for a Regulation establishing Horizon Europe – the Framework Programme for Research and Innovation, laying down its rules for participation and dissemination COM/2018/435 final - 2018/0224(COD), available at https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1540387631519&uri=CELEX%3A52018PC0435

1. Background

4

and is aligned with the strategic directions of the “European Green Deal” presented by the European Commission in December 2019.3 In particular, the document shares the ambition of the “European Green Deal” to transform the European economy for a sustainable future by (i) further reducing greenhouse gas (GHG) emission emanating from the agricultural sector and strengthening its capacity to adapt to climate change; (ii) supporting the decarbonization of local energy systems; (iii) mobilizing industry for a clean and circular economy; (iv) leveraging the power of digital and bio-based technologies; and (iv) transforming agri-food systems to become a provider of safe, sustainable, healthy, and high-quality foods; an engine for improved rural livelihoods; and a steward of ecosystems and biodiversity resources in production landscapes. The broad agri-food sector approach adopted in this document is also in line with the scope of the proposed European Commission’s “Farm to Fork” Strategy. Furthermore, the document incorporates, where relevant and appropriate, complementary strategic planning outputs supported by the World Bank in the framework of the ongoing National Development Strategy (NDS)4 and Slavonia RAS,5 as well as the Croatia Clusters Competitiveness and Global Value Chain (GVC) Assessment RAS.6

The document identifies the opportunities, objectives, needs, and specific interventions for the transformation of the agri-food sector in Croatia in the 2020-2030 period. The strategic vision and roadmap are focused on leveraging key development opportunities for Croatia’s agri-food sector and on establishing a results-based management framework where objectives, needs, and interventions are both explicit and evidence-based. Clear and logical links are established between proposed objectives and needs, and a proposed roadmap of interventions. The objectives, needs, and interventions were identified on the basis of (i) extensive sector diagnostic work completed by the World Bank; (ii) mapping of key drivers affecting the performance of the agri-food sector carried out jointly by the World Bank and MoA ; (iii) analysis of key agri-cultural sub-sectors undertaken by the Agriculture Faculty of the University of Zagreb and the Faculty of Agrobiotechnical Sciences of the University of Osijek; and (iv) numerous stakeholder consultations and a theory of change-driven priority-set-ting process.7

Structure of the document: Following an overview of the proposed vision for the transformation of agriculture and rural space in Croatia (Section 2), the document highlights the main development opportunities facing Croatia’s agri-food sector (Section 3), followed by the strategic objectives and sector needs (Section 4) that must be addressed to achieve the stra-tegic vision and seize the development opportunities. Next, the main lines of action to address the various sector needs are discussed in the form of a proposed roadmap of interventions (Section 5), including how these interventions translate into several key sub-sector-specific measures (Section 6 and Annex I). Linkages between the objectives and the needs presented in this report and the emerging CAP strategic planning framework are also provided (Section 7). These linkages will be fur-ther developed as the ongoing reform of the CAP is finalized by the EU in the course of 2020. Finally, the document includes a result monitoring framework organized around relevant performance indicators proposed for the future CAP as well as indicators currently applied in Croatia (Section 8). This framework will be further developed as the ongoing reform of the CAP and its Performance Monitoring and Evaluation Framework (PMEF) is finalized by the EU in the course of 2020 in line with the “Farm to Fork” Strategy.

3 Communication from the European Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Region – The European Green Deal COM(2019) 640 final, available at https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf; Annex to the Communication from the European Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Region – The European Green Deal COM(2019) 640 final ANNEX available at https://ec.europa.eu/info/sites/info/files/european-green-deal-communication-annex-roadmap_en.pdf4 The World Bank (2020) National Development Strategy Croatia 2030: Roadmap for a Better Future, Washington DC, 63pp.; The World Bank (2019) NDS Policy Note - Agriculture, Fisheries, and Food Processing in Croatia’s Food & Bio-Economy, Washington DC, 88pp.5 Relevant Slavonia RAS reports produced by the World Bank included: (i) Growth and Jobs in Slavonia, Baranja, and Srijem – Deliverables Report 1.1 Rapid Diagnostic, delivered in March 2019 (Revised April 2019); (ii) Growth and Jobs in Slavonia, Baranja, and Srijem – Deliverables Report 1.3.a. Review of ESIF Operational Programs 2014-2020; and (iii) Growth and Jobs in Slavonia, Baranja, and Srijem – Deliverables Report 1.2.a. Prioritization Framework for Strategic Projects, delivered in June 2019.6 World Bank (2017) Croatia Clusters and GVC Assessment, Washington DC, 154pp.7 The STARS RAS Report Using Priority-Setting and Theory of Change Methods for Developing Results-based Food and Bio-Economy Strategies in Croatia - Methodological Guidance Note for Stakeholder Consultations, which was produced by the World Bank and delivered to the MoA in November 2019, provides a detailed description of the Theory of Change and priority-setting methods used.

5

The agri-food sector stakeholders in Croatia have defined a shared vision that will “produce more and high quality and nutritious food at competitive prices, sustainably manage natural resources in a changing climate, and contribute to im-proved quality of life in rural areas and increased rural employment.” This statement recognizes the importance of addressing sustainable natural resource management in a context of accelerating climate change and consumer demand shifts. It also emphasizes the need to design a growth model for the agri-food sector that contributes to balanced territorial development, to nutrition and to social inclusion (including for women farmers, female rural workers8 and young people, who are among the groups with the biggest constraints to enter the labor market).

To realize this shared vision of success, future policies and programs can enable the re-positioning of Croatia’s agri-food sector in domestic, regional and international markets. Considering Croatia’s factor endowments, the comparative advan-tages linked to its geography and proximity to large and diverse EU markets, changing consumer preferences and growing domestic tourism demand, and fast-paced technological developments, future agriculture and rural development policies and programs can enable a more market-driven development of agriculture in Croatia, where improved productivity on-farm, efficiency gains along the value chain and competitiveness of Croatian products drive the agri-food system. Public support can enable large producers to materialize on economies of scale, while modernizing their production base and improving their efficiency, while small and medium-scale producers can optimize their production through diversification strategies and innovation. Improving the overall value added of the sector can generate more jobs in rural areas, strengthen rural livelihoods and promote the differentiation of Croatian products in the country and abroad. Croatia’s agri-food sector will increasingly seek to offer products in strategic product (fresh/perishable), consumer (convenience and indulgence), and market (circular bio-economy9) segments that are perceived by consumers/buyers to be of superior quality to those of its competitors even though their prices may be higher, in order to diversify the agri-food sector away from low value-added production. The latter will unquestionably remain an important part of Croatian agriculture, competing in different markets. A shift in sector policies towards increasing efficiency, diversification and product differentiation and finding new ways to valorize agri-food (by-)products is inevitable in the process of structural transformation of the sector.

Accelerating the structural transformation of Croatia’s agri-food sector in a climate-smart manner will be fundamental to strengthening its competitive position. The high shares of GDP and employment that still depend on the primary sector, the low levels of productivity, the existing rural/coastal-urban income divide, and the persistent link between poverty, vulner-ability, and agriculture, signal that the process of structural transformation of Croatia’s agri-food sector is not yet complete. Added to this are the more frequent extreme climatic events that constrain sector performance and significantly increase the risk to producers. This incomplete structural transformation constrains the competitive position of Croatia’s agri-food

8 Two in every five (40%) regular agricultural workers in Croatia are female, a slightly higher proportion than the corresponding EU-27 average (37.5%) (Eurostat, 2018).9 The EU defines bio-economy as the production of renewable biological resources and the conversion of these resources and waste streams into value added products, such as food, feed, bio-based products and bioenergy.

2. Strategic Vision

6

sector and limits its potential contribution to economic growth, employment and income levels in rural areas. Accordingly, future agriculture and rural development policy and program priorities should be geared toward breaking down the existing link between poverty, vulnerability, and agriculture in Croatia by addressing structural constraints to transforming Croatia’s agri-food sector and achieving higher growth, employment and incomes in an inclusive manner. Considering the threats – and some opportunities – of climate change impacts and risks, climate mitigation and adaptation co-benefits ought to be fully integrated in these efforts.

7

Important agriculture and rural development opportunities are embedded in the macro trends and issues that are shaping the future of Croatia’s agri-food sector. The overall performance of Croatia’s agri-food sector is affected by several changing socio-economic, market, environmental, policy, and technological conditions. While these changes may pose challenges to realizing the strategic vision for Croatia’s agri-food sector, they also bring important development opportunities, which must be leveraged under future sector strategies and plans to advance the shared vision of success:

i. Growth and Employment: Croatia’s primary and food processing sectors have generally demonstrated a negative growth performance in recent years, whereas the rest of the EU displayed generally positive growth.10 Today, Croatia’s labor productivity levels achieve less than 20% of the levels achieved in the EU-15 and Croatia’s land productivity gap with the EU-15 has been widening to nearly 50%. These diverging trends indicate that the agri-food sector can be a source of economic growth, but Croatia has yet to tap into these growth opportunities and close the productivity gap. Improving the linkages between agricultural production and food processing constitutes an important opportunity area for Croatia given that the food processing industry in Croatia has demonstrated a strong potential to generate economy-wide effects on value addition and employment creation.11

ii. Trade and Consumption: While export values of agri-food products have increased in aggregate, Croatia’s agri-food trade balance in primary products and, especially, in processed food and beverage products has been worsening over the past decade. For example, in 2018, except for agricultural commodities, Croatia experienced trade deficits across all major agri-food product categories.12 While these trade imbalances suggest a weakening competitive position for Croatia’s agri-food sector, they also show opportunities to repositioning the sector towards greater value added and product and market differentiation strategy. Increasingly, consumer demand in the main (domes-tic and EU) markets for Croatian agri-food products is based not just on price and taste, but other value-adding factors and quality attributes such as health benefits, convenience, sustainability criteria, product origin, food safety, traceability, transparent labeling etc. Increasing the focus of agri-food production in Croatia on quantity and quality, while enabling strong and efficient linkages with strategic market segments - including those in the growing domestic tourism sector and the short value chains that characterize that sector - are an integral part of the proposed repositioning strategy.

10 Gross agricultural value added in Croatia declined by 4.4 percent each year on average between 2008 and 2017, while gross agricultural output declined by 3.7 percent in the same time frame. Meanwhile, the agriculture sector in the rest of the EU displayed generally positive growth with re-spect to the same indicators. Similarly, value added generated by Croatia’s food, beverage, and tobacco manufacturing industry declined on average 1.3 percent each year between 2011 and 2016, whereas in the same time frame, it increased on average 0.4 percent per year in the EU-28.11 The expanded value added of food processing accounts for 8.5% of total output in the economy, while that of agriculture accounts for 6.5% (in 2014). Meanwhile, the employment multiplier of food processing (2.61) is relatively high, but that of primary agriculture is low (1.43).12 European Commission (June 2019): Statistical Factsheet – Croatia, available at: https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agri-statistical-factsheet-hr_en.pdf

3. Opportunities

8

iii. Climate Change and Environmental Sustainability: Increasing climate variability and change are expected to have growing impacts on future agri-food sector performance. For example, it is projected that heat extremes will become the new norm during summer months, affecting precipitation patterns and, in turn, resulting in higher frequency of floods and droughts. Such changes are projected to adversely affect yields and result in soil degradation, resistant cycles of pests and diseases, agro-biodiversity loss, recurrent droughts and forest fires. On the other hand, Croatia has a signifi-cant opportunity to improve current agricultural productivity with climate-smart practices, access to green technologies, scaled public-private partnerships to ensure that sector productivity is efficient, diversified, and cost-effective.

iv. Regional and Territorial Development: Rural areas, where primary agriculture accounts for a large share of land use and livelihoods, continue to be closely associated with high poverty rates,13 especially in Eastern Slavonia.14 Households in Slavonia, Baranja and Srijem exhibit deprivation on multiple dimensions (economic development, physical infrastructure, social services, health and education), and the situation has worsened between 2011 and 2015, especially for low skilled, less educated women who have the highest rates of inactivity.15 However, rural de-velopment strategies that improve the access of the rural population to basic infrastructure and services have been demonstrated to improve the returns on producer income support and capital investments in the EU. Moreover, thanks to the primary agricultural sector’s backward and forward linkages to other sectors, primary sector growth affects economic opportunities across the agri-food value chain and in related sectors such as packaging, transport/logistics, tourism, bio-energy, health/pharmaceuticals, cosmetics, etc. In fact, the multiplier effects of changes in agricultural output and food processing appear to be particularly strong in Croatia.16 Strengthening these intra- and cross-sectoral linkages could therefore help unlock broad-based growth, improve incomes, and generate jobs in rural areas by diversifying the rural economy in an inclusive manner.

v. Results-Based Management: Future support programs financed under the CAP must be re-oriented towards ad-dressing national context-specific challenges and delivering positive impacts. Despite high levels of public agricultur-al expenditures in Croatia, their development impact has been mixed. In order to improve the efficiency, effectiveness, and equity of public agricultural expenditures, future support programs will have to be re-designed in a manner that strengthens the (i) focus on the sector’s most pressing development challenges; (ii) targeting and coherence of pro-posed intervention measures; and (iii) operational efficiency of program management systems. In this regard, the development of evidence-based and stakeholder-driven strategic planning, program implementation, and evaluation processes, methods, and tools (like the ones facilitated under the STARS RAS) could help program management systems shift their orientation from channeling resources/funds to the agri-food sector towards delivering results.

vi. Technology and Innovation: Technological developments in genetics, nano and precision technologies, remote sensing, traceability (blockchain), (big) data analytics, the internet of things, artificial intelligence, robotics, e-commerce, etc. are creating increasing opportunities to raise productivity, lower costs, reduce risks, improve value addition, and develop new markets for Croatia’s agri-food sector. Digital technologies hold particularly high potential as they significantly reduce costs of sharing information and conducting transactions in agri-food chains and in knowledge and innovation systems. They enable easy access to capital goods at lower costs, and also enable input use efficiencies that improve the economic and environmental performance and overall resilience of agri-food producers and processors.

13 Over one quarter (27%) of the rural population in Croatia is at risk of poverty, compared to 16% of those who live in towns and 12% of those who live in cities.14 While the headcount poverty rate for Croatia was 16.3% in 2011, it was between 24.9% (Osijek) and 33.9% (Brod-Posavina) in the five Slavonian counties using a poverty threshold of 60 percent of the median household consumption.15 Around 47% of women with secondary education were classified as inactive in rural areas of Slavonia (Slavonia RAS): http://documents.world-bank.org/curated/en/554611566303661972/pdf/Jobs-Challenges-in-Slavonia-Croatia-A-Subnational-Labor-Market-Assessment.pdf16 In 2014, Type I output multiplier (1.647) implies that production of US$ 1 million of primary agricultural output generates an additional economic stimulus of US$ 0.647 million in other sectors. The multiplier effect of food processing is even higher (1.785) in Croatia. However, the food process-ing multiplier has declined since 2000 (from 1.983 to 1.785).

9

The strategic vision for agriculture and rural development of Croatia is organized around four (4) strategic objectives. The strategic objectives reflect the policy priorities identified for the advancement of the strategic vision and to seize agri-culture and rural development opportunities in Croatia. These policy priorities are derived from extensive sector diagnostic work and stakeholder-driven priority-setting exercises.

To achieve the strategic objectives proposed for the future NARDS, fifteen (15) critical needs of Croatia’s agri-food sec-tor must be addressed. The critical needs are the key changes to be implemented in Croatia’s agri-food sector in order to achieve the strategic objectives proposed for the future NARDS. The critical needs are defined on the basis of (i) a strategic (situation) analysis of the factors that drive the main challenges and opportunities facing Croatia’s agri-food sector (iden-tified through the sector diagnostic work); (ii) the stakeholder priorities expressed during consultations and workshops; and (iii) the articulation of a theory of change that justifies critical needs on the basis of their potential contribution to the achievement of the strategic objectives/priorities proposed for the future NARDS. Figure 1 presents an overview of the link-ages (visualized as specific objectives) between the four broader strategic objectives/policy priorities and the fifteen more specific and targeted critical needs.

4. Strategic Objectives and Critical Needs

STRATEGIC OBJECTIVE I (SO1): Increase the Productivity and Climate Resilience of Agricultural Production

STRATEGIC OBJECTIVE III (SO3): Renew the Rural Economy and Improve Livelihoods in Rural Space

STRATEGIC OBJECTIVE II (SO2): Strengthen the Competitiveness of the Agri-food System

STRATEGIC OBJECTIVE IV (SO4): Stimulate Agri-food Innovation

10

Figure 1. Overview of Linkages Between Strategic Objectives and Critical Needs

STRATEGICOBJECTIVES

SPECIFICOBJECTIVES

CRITICAL NEEDS TO BE ADDRESSED

I. Increase the productivity and climate resilience of agricultural production

1.1: Increase farm efficiency and value addition1.2: Improve the sustainable management of soils, water and biodiversity1.3: Reduce climate change vulnerabilities and promote low emissions production1.4: Ensure higher and less volatile incomes for smaller producers

1. Increase value added of agricultural production

2. Improve environmental sustainability of farming practices

3. Improve equity in the distribution of farm support

4. Improve correspondence between production systems and agro-ecological zones characteristics

5. Improve the use and effectiveness of risk management instruments

6. Strengthen market linkages in the agri-food, including supply aggregation7. Improve entrepreneurial capacity and opportunities of agri-food producers8. Improve the enabling environment to respond to agri-food demands of consumers9. Improve the uptake of public and private agri-food quality schemes10. Improve labor skills in the agri-food chain11. Improve the functionality of agricultural land markets

12. Improve coordination and complementarity between interventions in rural areas, including basic services

13. Improve public infrastructure for modernizing agricultural production

14. Facilitate capital investment focused on technology and innovation (Cross-Cutting)

15. Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability) (Cross-Cutting)

2.1: Expand and diversify markets for Croatian agri-food products

2.2: Integrate MSMEs and young farmers in agri-food value chains

2.3: Facilitate producer access to strategic market segments

2.4: Facilitate access to agricultural land

3.1: Reduce rural poverty3.2: Generate more and better jobs in rural areas 3.3: Accelerate the transition to a smart and green rural economy

4.1: Mobilize more public and private investments in RDI in agri-food and rural businesses4.2: Improve technology transfer to farms, agrobusinesses, as well as other sectors and the rural population

II. Strengthen the competitiveness of the agri-food system

III. Renew the rural economy and improve livelihoods in rural space

IV. Stimulate agri-food innovation (Cross-Cutting)

11

STRATEGIC OBJECTIVE I.Increase the Productivity and Climate Resilience of Agricultural Production

Critical Need 1: Increase value-added of agricultural production

Description Increase the economic value created and retained by agricultural production through appropriate public expenditures and private investment focused on the development and adoption of improved technologies and suitable land, water, and input management practices, while improving post-harvest value-addition and/or diversifying the production structure towards higher-value crops and agri-food products.

Justification Low agricultural productivity in Croatia has historically been driven by low capital investments and R&D expenditures, compounded by problems of agricultural land consolidation and administration, small farm sizes that inhibit economies of scale, the limited reach and sustainability of agricultural irrigation systems, low adoption levels of best management practices and improved technologies, and limited access to relevant information for farm-level decision-making. Increasing agricultural productivity, however, requires an integrated approach that considers both a more efficient use of inputs, and a more market-driven output generation. This will drive the improvement in capacities for value-addition on-farm and along the value chain. It will also require the rethinking of the production mix to a more diversified production structure that incorporates a much greater emphasis on high-value agri-food products, produced in a climate-smart way. The growth and development opportunities in high value agri-food markets, which include the fresh/perishable as well as convenience and indulgence segments, are significant as they reflect consumer demands that drive many production trends, while enabling farmers to attain higher incomes by capturing a greater share of the consumer’s food expenditures. This is additionally true given Croatia’s burgeoning tourism sector and the opportunities that lie within.

Primary Links to Strategic Objective 1

Specific Objective 1.1: Increase farm efficiency and value addition

Specific Objective 1.4: Ensure higher and less volatile incomes for smaller producers

Critical Need 2: Improve environmental sustainability of farming practices

Description Provide incentives and develop new institutional responses to increase the transfer and levels of adoption of best environmental management knowledge, practices, technologies, and innovations that support conservation/organic/precision/regenerative agriculture, increased input use efficiencies, enhanced agrobiodiversity, climate-smart and reduced emissions farming practices, efficient and renewable energy uses, sustainable water use, and improved waste management and pollution control.

Justification Notwithstanding its quality land, water, and biodiversity resources, Croatia performs below the EU average in natural resource productivity, i.e. the efficiency with which the economy uses material resources to produce wealth.17 The Croatian agricultural sector faces several critical natural resource management constraints. These include a deteriorating water delivery infrastructure and limited access to irrigation water, problems of water pollution (in particular contamination by nitrates arising from the overuse of fertilizers in nitrate vulnerable zones), nearly a quarter of agricultural land at moderate to high risk of soil erosion by water,18 unsustainable farming practices (including a dependence on fossil fuels), and the negative performance of important soil health indicators such as loss of organic matter, increasing acidity, nitrogen loss, and relatively low carbon

17 European Commission, EU Environmental Implementation Review 2019 Country Report – Croatia, Commission Staff Working Document, Brussels, April 2019. https://ec.europa.eu/environment/eir/pdf/report_hr_en.pdf18 Husnjak, S., Simunic, I., and Tursic, I. “Soil Erosion Risk in Croatia,” Cereal Research Communications, 36(2008): 939-942. https://bib.irb.hr/datoteka/348414.Husnjak_CRC_2008.pdf

12

content across rural areas. The pressure on natural resource management can be expected to intensify in the future, as climate change impacts and risks accelerate and the demands on Croatian agriculture expand in line with increasing consumer food demands domestically and abroad. At the same time, the regulatory structure surrounding the agricultural sector will become increasingly more stringent, whether from the standpoint of water and waste management, renewable energy and its contribution to climate targets, or allowable farm production practices. Meanwhile, protecting and sustainably managing the country’s rich agricultural biodiversity, including genetic resources, offers value-adding opportunities by supplying diverse and nutritious food to higher value market segments, while increasing the climate resilience of producers by helping plants and animals adapt to climate change, preserving ecosystem health, and improving soil fertility and water quality.



Specific Objective 1.2: Improve the sustainable management of soils, water, and biodiversity

Specific Objective 1.3: Reduce climate change vulnerabilities and promote low emissions production


Critical Need 3: Improve equity in the distribution of farm support

Description Strengthen the targeting of (decoupled) direct payments and rural development investment support toward small and medium-sized agri-food producers and businesses and poorer agricultural areas and vulnerable groups (including women and young farmers) through improved eligibility criteria and capping of support under available measures, while conducting systematic public expenditure reviews.

Justification Agricultural labor productivity has been found to be positively associated with decoupled payments and rural development support. This stems from the ability of producers to reduce income risks and credit constraints, leading them to invest more and diversify away from low value crops, thus generating greater income by focusing on higher value agriculture. However, the shift away from low-value production is not yet evident in Croatia and much more needs to be done to fully turn income support into higher productivity, higher incomes and greater income stability. To date, the intended income-smoothing and risk-mitigating effects of income transfers have been offset by insufficient targeting towards smaller producers. More than one-third of direct payments go to the largest farms in Croatia (constituting only 6.5% of registered farms in 2016). Improving the targeting of income support towards smaller producers and capping Pillar I subsidies would likely result in positive diversification effects. First of all, small farms are not only the most technically efficient in Croatia, but also tend to have more diversified production systems compared to large, industrial farms, which are often characterized by mono-crop production systems. Secondly, improved targeting towards smaller producers would facilitate their access to investment finance by strengthening their liquidity position and mitigating their risk profile vis-à-vis financial institutions.




Critical Need 4: Improve correspondence between production systems and agro-ecological zones characteristics

Description Foster greater alignment between agricultural production systems and the agro-ecological features of the production landscapes by strengthening land use planning and promoting sustainable land management through improved data collection tools, integrated data management platforms, user-oriented systems for transferring knowledge and information, and enhancing the capability of producers and other sector participants to use the improved information and knowledge base.

13

Justification Producers' and government capacity to manage increasing variability and climate uncertainty, including through the development of climate smart production systems, will determine how well they can adapt to climate change, with some of the smaller producers facing greater risks due to inability to adapt. Croatia is characterized by diverse agro-ecological conditions that favor sector diversity. However, Croatia’s diverse agro-ecological conditions face important climate change vulnerabilities, including reduced precipitation in all seasons except winter, increasing average air temperature, and the potential for adverse climate events, in particular, higher frequency and intensity of dry periods and droughts with high intensity flooding events.19 For the agri-food sector, specifically, projected short-term variability and long-term climate change impacts may include biodiversity loss, lower yields, soil degradation and greater prevalence of pests and disease, all of which would potentially impact the production of key agricultural commodities and generate significant economic losses. Diminished surface runoff may affect groundwater levels, affecting drinking water supplies as well as water availability for irrigation during peak months. However, increased variability and climate change may create new diversification opportunities as well. Changing climate conditions for the country (hotter and drier, reduced precipitation especially during the growing period) may result in changing crop rotations in some farming areas and create additional suitable areas for orchards, vineyards and olive groves. Areas currently unsuitable for agriculture due to harsh climatic conditions may become more attractive due to increased temperatures coupled with the capability to provide adequate water (irrigation) for increased yields, especially for winter crops, due to milder winter conditions.



Specific Objective 1.2: Improve the sustainable management of soils, water, and biodiversity

Specific Objective 1.3: Reduce climate change vulnerabilities and promote low emissions production


Critical Need 5: Improve the use and effectiveness of risk management instruments

Description Increase the access of producers and MSMEs (especially smaller agri-food producers in particular women and young producers) to tailored financial and risk management solutions, through better targeting of public support for risk management measures, leveraging matching grant programs, and by enabling better risk assessments through the development of integrated data management platforms for decision-making that provide access to key production, market, and environmental/climate data.

Justification Although approximately 50% of total production is currently insured, it is estimated that this covers only 7-8% of registered farmers in Croatia. These numbers suggest that mainly medium and large producers currently purchase insurance. Similarly, access to credit remains limited for smaller agri-food producers and MSMEs as they continue to be perceived by commercial banks as higher credit risk-low return investment opportunities compared to large companies. For example, while development banks such as the Croatian Bank for Reconstruction and Development (HBOR) and the Croatian Agency for SMEs, Innovations, and Investments (HAMAG-BICRO) are involved in EU financial instruments aimed at facilitating financing for SMEs, their uptake remains low in Eastern Slavonia, Croatia’s primary agricultural region. Furthermore, improving the use and effectiveness of risk management instruments constitutes an important lever to mitigate climate change impacts and risks facing agricultural producers, while incentivizing the adoption of climate smart and improved environmental management practices.



19 World Bank, Agroecological and Climate Assessment, STARS Background Paper delivered to Ministry of Agriculture, Zagreb, May 2019.

14

STRATEGIC OBJECTIVE II.Strengthen the Competitiveness of the Agri-Food System

Critical Need 6: Strengthen market linkages in the agri-food sector, including supply aggregation

Description Promote greater horizontal coordination between producers by improving the level of organization of the large number of agri-food producers in Croatia, while facilitating increased cooperation between agri-food producers and buyers in the production, processing, and distribution of agri-food products, in particular through the development of quality products and new (digital) marketing channels.

Justification Well-functioning value chains help the agri-food sector to better create, deliver, and capture market value and opportunities by closely coordinating actions between upstream and downstream agri-food value chain stakeholders. In this context, commercially-oriented producer organizations with well-defined business models play a critical role in linking large numbers of smaller producers with buyers in strategic market segments downstream the agri-food value chain. However, despite the recent adoption of the Law on Unfair Commercial Practices in Croatia and the EU Directive on Unfair Trading Practices, weak horizontal linkages (among producers) and vertical integration (between producers and buyers of agri-food products) in the Croatian agri-food sector continue to weaken the negotiating position of many (especially smaller) Croatian producers, raise transactions costs, and undermine the competitive position of agri-food processors by constraining their access to sufficiently large volumes of products with uniform quality at competitive prices.


Specific Objective 2.1: Expand and diversify markets for Croatian agri-food products

Specific Objective 2.2: Integrate MSMEs and young farmers in agri-food value chains

Specific Objective 2.3: Facilitate producer access to strategic market segments

Critical Need 7: Improve entrepreneurial capacity and opportunities of agri-food producers

Description Increase the adoption of improved business management, financial literacy, record-keeping and accounting, marketing practices, and (digital) tools and skills for young farmers as well as agri-food and rural entrepreneurs, in particular women, which together respond to financial sector and agri-food market needs and requirements. Reduce fiscal and administrative burdens to attracting more young farmers and business start-ups to the agri-food sector and rural areas and provide more opportunities for women entrepreneurs including business development support services.

Justification Weak business management and planning capacity among small producers and MSMEs constrains their engagement with modern agri-food value chains and financial institutions. Meanwhile, complex regulatory and administrative procedures and parafiscal (non-tax) charges weaken the competitiveness of agribusinesses by creating a business environment that imposes high transaction costs, especially MSMEs.



15

Critical Need 8: Improve the enabling environment to respond to agri-food demands of consumers

Description Improve the access of agri-food chain actors to strategic production, market, and environmental/climate information as well as tailored financial, logistics, and technical support services required to access strategic market segments.

Justification Access to information (e.g. product volumes/quality/location, procurement needs, buyer/consumer preferences, weather forecasts etc.) and support services for agri-food value chains often help create the most value added in the agri-food sector by facilitating efficient market linkages between producers, producer groups/clusters, and buyers/consumers. In particular, the frequency of delivery necessary for a given food product is a key differentiating factor for profitability in Croatia’s agri-food sector. Therefore, advanced (cold chain) logistics functions (e.g. contracting, production planning, sorting and grading, packaging, cold storage, warehouse management, basic processing, labeling, sales and order tracking, transportation, payment processing) could significantly strengthen the competitive position of Croatia’s agri-food sector by shifting its existing production structure from one geared towards basic, daily use consumer and stockable product segments, towards higher value consumer (convenience20 and indulgence21), product (fresh/perishable22), and market (circular bio-economy23) segments that require more frequent delivery. However, only 30-40% of Croatian companies currently outsource logistics (compared to the EU average of 70%) and Croatia currently performs poorly on a range of logistics-related indicators. Especially for fresh/perishable agri-food products produced by smaller producers, market access and competitiveness are significantly weakened in the absence of third-party logistics providers who can provide transportation solutions and other coordination services to the broader agri-food value chain.





Critical Need 9: Improve the uptake of public and private agri-food quality schemes

Description Scale up the adoption of better management practices and systems promoted under public and private quality standards and certification schemes, in particular schemes governing the food safety, quality, sanitary and phytosanitary (SPS), animal health and welfare, environmental/organic, traceability, origin, and labeling aspects of agri-food production, processing, and marketing.

Justification Agri-food producers and processors in Croatia have unrestricted access to the domestic and large, diverse, and rich EU markets. Nonetheless, smaller and medium-sized operations have difficulties seizing these opportunities and they face increasing competition in both domestic and external markets. In this context, the steady introduction of stringent public EU standards related to food safety and quality, environment, animal health and welfare, traceability, and consumer information continues to raise the bar for Croatia’s agri-food producers and processors to compete in both domestic and EU markets. At the same time, as part of the consolidation trend in the modern retail sector, retailers are increasingly managing their sourcing requirements and supply chain relationships with producers and processors through private standards to address health, transparency, and environmental concerns, which usually go beyond the public requirements, while retaining price-sensitive consumers. Meanwhile, barriers to enter the “indulgence” segment in the market, which includes voluntary quality standards such as organic food, green production and specialty products, and origin labels (GIs), can be high in the absence of adequate support services. Growth in alternative production systems and voluntary

20 The Convenience Segment includes consumers who have limited time to prepare food or knowledge of how to do so.21 The Indulgence Segment includes consumers who are often consuming food items to engage in an “experience”. This segment is quite profitable and includes organic food, specialty products, and origin labels.22 The Fresh/Perishable Segment includes a range of agricultural produce that can be sold in raw (e.g. asparagus, berries) or prepared forms (e.g. fresh pasta packaged and sold in supermarkets).23 The Circular Bio-economy Segment includes the production of renewable biological resources and the conversion of these resources and waste streams into value added products, such as food, feed, bio-based products and bioenergy.

16

quality standards for organic and other certified products is expected to continue to be higher than for conventional products in the future years, and specialty products create opportunities for smaller agri-food producers and processors to compete with larger market players. However, compliance costs associated with voluntary quality standards can be prohibitive in the absence of enabling policy conditions, strong producer organizations and tailored transition support, especially for smaller agri-food producers and processors and, in particular, for women and young producers and processors.





Critical Need 10: Improve labor skills in the agri-food chain

Description Strengthen education and training programs offered by government bodies, producer organizations, scientific institutions and advisory services in a manner that upgrades the technical skill levels of agri-food producers, processors, and workers, in particular women (who constitute a significant portion of agricultural workers), in line with the development needs of production and marketing systems that are increasingly capital and knowledge intensive, quality-oriented, managed sustainably, and enabled by new (digital) technologies.

Justification Various labor constraints affect the agri-food sector, including weak labor productivity levels, low labor force participation, emigration of young people from rural areas and towards other economic activities, and skills mismatches. For example, rural labor markets such as Eastern Slavonia are characterized by a shortage of high-skilled workers and a surplus of middle- and unskilled workers, which constitute an important constraint to repositioning the agri-food sector towards more value-adding activities. On the other hand, the integration of more young farmers and entrepreneurs in agri-food value chains could be particularly effective in improving labor productivity and competitiveness levels by implementing the technical changes required by increasingly capital, knowledge, and technology intensive production systems. Integration of women farmers and entrepreneurs into the agri-food value chain could also improve labor productivity and allow them to contribute to the transformation of the agri-food sector.





Critical Need 11: Improve the functionality of agricultural land markets

Description Facilitate efficient and transparent agricultural land administration and management systems that reduce the time and transaction costs associated with renting and selling both private and public agricultural land, while creating a market environment that incentivizes an efficient allocation of agricultural land towards its most productive use.

Justification Although Croatia has relatively abundant agricultural land, it generally remains underutilized. Agricultural land markets have an important role to play for efficient and sustainable land management and inclusive agricultural development. However, various governance factors continue to constrain agricultural land markets in Croatia, including institutional fragmentation, limitations in sector-based land policies and spatial planning, multiple legal regimes governing land status and ownership restrictions, weak enforcement of contractual obligations, and incomplete and outdated land management systems. Furthermore, while most of the agricultural land in Croatia is privately owned, a significant share of agricultural land (around 30%) remains publicly owned. Typically, state-owned land is assigned to long-term leases and rarely sold. However, the allocation of state-owned agricultural land suffers from inefficient and lengthy administrative procedures (mainly due to inconsistencies between land cadaster and land registration information). There is also a lack of systematic assessment of land potential and land-use alternatives to achieving optimal land uses and improved environmental and socio-economic conditions. This results in selection criteria often applied that restrict

17

productive agricultural investments, including criteria regarding land protection, farm practices, and even type of agricultural activity without a clear technical underpinning. At the same time, ex post controls to verify whether the restrictive selection criteria are actually adhered to once state-owned agricultural land has been allocated remain weak. Finally, high levels of agricultural subsidies tend to be associated with increases in land prices across the EU, including Croatia. Increasing land prices makes it harder for potential new farmers to enter agriculture (especially the young and the asset-poor, including women) and for existing farms to grow through purchasing or renting land.


Specific Objective 2.4: Facilitate access to agricultural land

STRATEGIC OBJECTIVE III.Renew the Rural Economy and Improve Livelihoods in Rural Space

Critical Need 12: Improve coordination and complementarity between interventions in rural areas, including basic services

Description Integrate territorial investments and related operational expenditures at the regional and local level supported through different sector programs in a manner that maximizes budget synergies and promotes increased linkages within and across natural resource-based sectors and value chains in rural areas, including improving the quality of basic public services in rural areas (e.g. waste management, education, care services which free up the time of rural women for productive work) and align them, where appropriate, with the needs of sustainable and circular bio-economies.

Justification The structural transformation process of the agricultural sector whereby a growing share of incomes and jobs are supported by value added activities could be further accelerated by leveraging the economic links between the agricultural sector, food processing, and other bio-based industries (e.g. feed production, bio-energy, packaging, health/pharmaceuticals, cosmetics etc.) and services (e.g. tourism, digital agriculture technology providers). However, the development of modern agri-food value chains and their smart integration with more knowledge-based and service-oriented sectors in the broader rural economy, critically depend on the development of a policy mix and institutional coordination mechanisms that improve the spatial targeting of public interventions in rural areas. Concretely, territorial development outcomes in terms of rural poverty alleviation, job creation, and green growth critically depend on the way in which government institutions in Croatia coordinate their interventions and engage with the private sector, civil society, and individuals at each spatial planning level. However, the effective coordination of multi-sectoral interventions and stakeholders in rural areas is often constrained by the administrative and territorial fragmentation of Croatian government institutions. Inadequate coordination between public, private, and civil society stakeholders at the national, regional, and sub-regional levels increases the risk of duplication of territorial investments and a lack of critical mass for impact.


Specific Objective 3.1: Reduce rural poverty

Specific Objective 3.2: Generate more and better jobs in rural areas

Specific Objective 3.3: Accelerate the transition to a smart and green rural economy

18

Critical Need 13: Improve public infrastructure for modernizing agricultural production

Description Upgrade physical infrastructure in rural areas, which supports the delivery of next-generation digital technology services, irrigation water, as well as renewable energy and energy efficiency improvements to agri-food producers and processors.

Justification Increased investment in smart and green infrastructure in rural areas could help close persistent territorial development gaps by connecting the agricultural sector and broader rural economy to new income, employment, and growth opportunities provided by modern agri-food value chains and more knowledge-based and service-oriented sectors, in particular the food processing, tourism, circular bio-economy, and ICT sectors. Although Croatia benefits from modern, well-developed road infrastructure, its rural infrastructure faces a number of distinctive development opportunities, including improving water delivery infrastructure and access to irrigation water; expanding Next Generation Access (NGA) broadband coverage at the national and (especially) rural levels; increasing energy efficiency particularly in the (rural) household and district heating sectors; and energy generation systems utilizing renewable (bio-based) sources such as distributed generation and mini-grid systems. Croatia, with its remote island regions, far away from power, heat and gas networks, could benefit significantly from developing such renewables-based energy generation systems.


Specific Objective 3.1: Reduce rural poverty

Specific Objective 3.2: Generate more and better jobs in rural areas

Specific Objective 3.3: Accelerate the transition to a smart and green rural economy

STRATEGIC (CROSS-CUTTING)OBJECTIVE IV.Stimulate Agri-Food Innovation

Critical Need 14: Facilitate capital investment focused on technology and innovation (Cross-Cutting)

Description Leverage public funds for rural development to incentivize closer linkages between scientific institutions and the agri-food sector and channel increased private investment into basic and applied research activities and achieve the introduction of new inputs, products, technologies, and solutions by agri-food producers and processors.

Justification The Croatian agri-food sector suffers from investment gaps in capital, technology, and R&D despite high public expenditure levels, which limits improvements in the efficiency, sustainability, and (product) innovation performance of Croatia’s agri-food system. Gross fixed capital formation per agricultural worker and per hectare of agricultural land have largely remained flat since 2000. While the manufacturing sector in Croatia, including food processing, has relative technological strength, Croatia's overall innovation performance significantly lags behind other EU nations. Croatia also lags significantly in agricultural R&D, spending (in 2016) one-third the level of average per capita investments in EU-28 countries and a small fraction of the levels in selected global competitors. World Bank analysis estimates that increasing R&D investments that close half of the R&D gap relative to EU-28 levels would increase agricultural labor productivity 11.9 percent in Croatia. Furthermore, the Croatian AKIS has a strong orientation towards basic research in the public sector and there is only limited support for research, development, and innovation by companies/faculties/institutes through tax incentives or other measures.


Specific Objective 4.1: Mobilize more public and private investments in RDI in agri-food and rural businesses

19

Critical Need 15: Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability) (Cross-Cutting)

Description Improve coordination, collaboration and partnerships between agri-food chain actors and knowledge generation and transfer institutions, increase public support for (basic and applied) research innovations and their dissemination and adoption, and invest in skills and knowledge of farm advisors, especially as regards compliance requirements and transformative innovations (digital technologies, climate-smart agriculture, information and data exchange).

Justification Croatia has many of the ingredients for a strong agricultural knowledge and innovation system (AKIS): many private actors, strong university research capacity, and key supporting institutions with good technical capacity (e.g. veterinary, phytosanitary, natural resource management, weather services, farm advisory, food safety services). However, due to the fragmented and poorly connected nature of the AKIS, there is no systematic and effective exchange and translation of research findings, knowledge, information, and innovations for farm or agroecological management, thus limiting the transferability and development impact of innovations in agri-food value chains and rural areas. Collaborations between governments, research institutions, and industry could play an important role in developing innovation and transferring technologies through innovation partnerships that are beneficial to both industry, society, and the environment. However, functional cooperation between public and private AKIS actors in terms of joint research, education, and advisory activities that act in synergy toward national goals is nearly non-existent. EU funds and programs provide important resources and institutional mechanisms to accelerate and scale up the transfer of knowledge and innovation across Croatia’s agri-food system. However, a well-organized system for transferring knowledge and innovation depends on adequately equipped and trained farm advisors that take part in research activities, as well as the active participation of farmers at all AKIS levels – from decision-making to research. Skills and knowledge of farm advisors must be continuously updated to respond to producer demands and deliver technologies and innovations that will transform the sector. In this context, the further development and effective collaboration of public and private advisory services is key, particularly in light of the growing need for specialized, customized services which the private sector will be particularly equipped to provide. Furthermore, digital tools could further strengthen the functionality and coordination of AKIS and the effective distribution and sharing of knowledge to producers, while responding to local needs. Institutional capacity building is required to respond to the dynamic nature of the AKIS, both at the level of stakeholders who form part of these institutions, as well as the coordination mechanisms between them.


Specific Objective 4.2: Improve technology transfer to farms, agribusinesses, as well as other sectors and the rural population.

20

To address the critical needs associated with each strategic objective, specific interventions are proposed, grouped under six (6) key lines of action. Each line of action consists of a sub-set of related interventions, which are aimed at ad-dressing specific agri-food sector critical needs identified under each strategic objective. In addition to a description of each intervention under each line of action, this section will highlight their primary links to the critical needs outlines in Section 4. Annex I provides an overview of the linkages between each interventions and the critical needs identified under each strate-gic objective. This section will also specify responsible agencies, potential funding sources, targeted actors, key sub-sectors, possible territorial foci, and thematic priorities covered under each intervention. While the MoA is the lead implementing agency for the future NARDS, other government agencies at the EU and national level would contribute to its implementation in the form of accompanying policy and institutional reforms, program (co)-financing, and technical support. The proposed actors, sub-sectors, and territories targeted under each intervention take into account the (i) outcomes of the diagnostic work completed under the STARS RAS; (ii) strategic directions, priorities, and programming requirements established by the EU as part of the ongoing reform of the CAP; and (iii) strategic initiatives launched by the Government of Croatia in parallel of the preparation of the future CAP Strategic Plan.

ACTION A: Target public and private funds towards more productive agricultural investments

ACTION D: Empower more entrepreneurs (including youth and women) to create and develop agribusinesses

ACTION B: Scale up climate-smart agriculture and sustainable land management that helps protect and regenerate agriculture’s natural resource base

ACTION C: Facilitate diversified and integrated domestic agri-food markets

ACTION E: Link the agri-food sector to growth opportunities in the new economy

ACTION F: Integrate national agricultural knowledge and innovation systems

5. Roadmap

21

ACTION A.Target public and private funds towards more productive agricultural investments

SPECIFIC INTERVENTIONS

A.1. Promote investments in productive assets, technologies, and innovations by farmers and agribusinesses

A.2. Redistribute income support towards small and medium-sized producers, women and young farmers

A.3. Strengthen participatory, gender-sensitive, and evidence-based planning, monitoring, and evaluation systems

Intervention A.1. Promote investments in productive assets, technologies, and innovations by farmers and agri-businesses

Description Support levels for capital investments on farms as well as in agri-food processing and marketing businesses would be increased. Eligibility and selection criteria for agri-food processing and marketing businesses would be established in consultation with the Ministry of Economy, Entrepreneurship and Crafts to avoid possible overlaps or inconsistencies with other government support measures. Specifically, increased (grant) support would target the introduction of assets, (digital) technologies, and innovative solutions enabling climate-smart and environmentally sustainable land use practices (see also Interventions B.1., B.3., B.4.) and higher value-added agri-food products, especially in sub-sectors that demonstrate important growth potential (such as fruit and vegetables) or generate limited value addition (such as livestock, industrial crops) (see also Intervention C.1., C.3., C.4.). Grant support would be further complemented by risk management instruments tailored to the needs of small and medium-sized producers and agri-businesses (see also Intervention D.3.). In addition, the coupled payments share of the direct payments’ envelope, which covers farm sub-sectors facing difficulties, would be limited and specified in a way that further incentivizes investments in efficiency and productivity improvements. Coupled payments are proposed to adhere with a maximum of 10 percent of the direct payments’ envelope. []. Support reductions would be targeted to farm sub-sectors which currently absorb most of this type of support, in particular, the beef and milk sub-sectors. Importantly, the proposed restrictions on coupled support would be compensated through granting the maximum share of the direct payments envelope to sectoral interventions (see also Intervention C.2.) as it allows for a more comprehensive set of sub-sector support tools to be deployed. In addition, the proposed restrictions would be compensated through increased direct payments for the adoption of better agri-environmental practices and conversion to organic and agri-ecological production systems. Furthermore, capital investments would also be enabled through cooperation mechanisms that support investments by farmers, producer groups, and agribusinesses in climate-smart and environmentally sustainable agriculture, improved agri-food chain integration, and quality schemes (see also Intervention C.1.). Crucially, systems for delivering knowledge and information required to implement the capital investments would be improved to respond to the needs of farmers and agri-businesses (see also Interventions F.1., F.2., and F3.). Finally, a tax on underutilized agricultural land would be introduced in consultation with the Ministry of Finance to further stimulate capital investments

Primary Link(s) to Critical Needs

• Increase value added of agricultural production

• Improve environmental sustainability of farming practices

• Improve the use and effectiveness of risk management instruments

• Strengthen market linkages in agri-food, including supply aggregation

• Improve the uptake of public and private agri-food quality schemes

• Facilitate capital investment focused on technology and innovation (Cross-Cutting)

22

Responsible Agency/ies

Ministry of Agriculture, Ministry of Economy, Entrepreneurship and Crafts, Ministry of Finance

Funding Source(s) EU-EAFRD-Investments, EU-EAFRD-Cooperation (Agri-Food Chain), EU-EAFRD Knowledge & Information, EU-EAFRD-Risk Management, EU-ERDF, National Budget

Targeted Actor(s) Farmers, Producer Groups, Food Processors

Key Sub-Sector(s) Fruit, Vegetables, Livestock, Industrial Crops

Territorial Focus N/A

Thematic Priority/ies

Competitiveness; Diversification; Enhanced Conditionality; Food Safety, Quality, and SPS; Crop/Animal Selection; Precision Agriculture; Animal Health & Welfare; Agri-food Chain Integration; Climate Adaptation; GHG Emissions Reduction; Ammonia Emissions Reduction; Tree Planting; Manure Management; Water Use; Water Quality; Renewable Energy; Energy Efficiency; Land Administration; Bio-Economy

Intervention A.2. Redistribute income support towards small and medium-sized producers, women and young farmers

Description Income support would be targeted more towards small and medium-size farmers as well as women and young farmers. Eligible farmers would not exclude farmers which are pluri-active, nor those whose principal business activity is not agricultural. However, a farm income threshold of a minimum of 30 percent of total farm income would be applied. In addition, inclusion in the farm register would be a pre-condition and a residence criterion would be specified. In the case of young farmers, it is proposed to set the maximum age limit at 40 years. In addition, required training and skills would be set at a level which does not restrict the pool of potential women and young farmers. Concretely, the redistribution of income support would involve capping of direct payments support at the threshold to be determined by the SP Regulation.24 It would also involve the transfer of capping funds to Complementary Redistributive Income Support for Sustainability (CRISS) and the EAFRD. There would thus be an increase in the CRISS share of the direct payments’ envelope, as well as in the relevant area-size threshold (reaching a limit of 30 hectares). A part of these funds would be transferred to the Round Sum Payment for Small Farmers mechanism. This would lead to an increase of the round sum provided to these beneficiaries on an annual basis and “compensate” small farmers for the adoption of conditionality in the new period. Finally, Complementary Income Support for Young Farmers (CIS-YF) is proposed to account for at least double the minimum threshold of the direct payments’ allocation defined in the proposed Regulation. Details regarding income redistribution will be specified further after the CAP reform package has been formally adopted. The political decisions taken in this regard by the MoA will be reflected in the national CAP Strategic Plan.



• Improve equity in the distribution of farm support

• Improve entrepreneurial capacity and opportunities of agri-food producers



Ministry of Agriculture

Funding Source(s) EU-EAGF-CRISS, EU-EAGF-CIS-Young Farmers, EU-EAGF-Small Farmers Payment

Targeted Actor(s) Small and Medium-Size Farmers, Young Farmers, Women Farmers

Key Sub-Sector(s) N/A



Young Farmers; Financial Inclusion; Enhanced Conditionality

24 The CAP SP Regulation proposal defines a threshold of EUR 60,000 and 100% reduction of support for amounts exceeding EUR 100,000.

23

Intervention A.3. Strengthen participatory, gender-sensitive, and evidence-based planning, monitoring, and evaluation systems

Description Institutional capacity to design strategic plans and support measures for agriculture and rural development would be strengthened in a manner that effectively leverages inputs from agri-food sector stakeholders, scientific institutions, and available research data and information. Specifically, investments would be made to (i) further develop planning, monitoring, and evaluation methods, tools, and processes, including underlying data management systems; (ii) build more advanced (in-house) analytical capabilities; and (iii) establish strategic partnerships with scientific institutions at home (in consultation with the Ministry of Science and Education) and abroad (in particular the Joint Research Center of the European Commission).





• Improve correspondence between production systems and agro-ecological zone characteristics



• Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability) (Cross-Cutting)


Ministry of Agriculture, Ministry of Science and Education

Funding Source(s) EU-Technical Assistance, National Budget

Targeted Actor(s) Managing Authority, Paying Agency, Advisory Services, Monitoring Committee, Scientific Institutions, European Commission (DG-AGRI)




Public Expenditure Reviews; Distributional Analysis; Scenario Modeling; Cost-Benefit Analysis; Theory of Change/Logical Frameworks; Stakeholder Engagement; Climate/Environmental & Disaster Risk Screening

ACTION B.Scale-up climate-smart agriculture and sustainable land management that helps protect and regenerate agriculture’s natural resource base


B.1. Reward continuous improvement in environment-, climate-, and animal-friendly practices and solutions in agricultural production systems

B.2. Improve access to environmental and agro-climatic data for public and agri-food chain actors

B.3. Expand the conversion towards organic and agro-ecological production systems

B.4. Improve the access to irrigation water and efficiency of its use for producers

24

Intervention B.1. Reward continuous improvement in environment-, climate-, and animal-friendly practices and solutions in agricultural production systems

Description Increased support in the form of broadly defined and area-based (eco-scheme) payments would be directed to eligible hectares and farmers for their adoption and maintenance of land use management commitments that go beyond statutory management requirements (SMR) and standards of good agricultural and environmental conditions (GAEC). The payments would be granted as an additional top-up to Basic Income Support for Sustainability (BISS) and would be linked to the environmental value generated by the farmers. In general, the payments would support eco-efficiency measures that further reduce input use and pollution flows emanating from farms, especially industrial operations. Specifically, the payments would support improvements in a number of national priority areas identified in consultation with the Ministry of Environment and Energy. They include (i) the adoption of climate smart agriculture practices that promote climate change adaptation, while mitigating GHG emissions, in particular through improved soil management (e.g. conservation tillage, cover crops, rotational grazing, composting) and irrigation practices that help prevent soil erosion, preserve soil functions, and maintain/enhance carbon storage in soils; (ii) improved animal waste and pollution control practices, in particular through manure treatment, odor and air pollution control, and improved animal diets/feed measures; (iii) further reductions in mineral fertilizer and pesticide use, in particular through integrated nutrient/pest/weed management, improved crop and animal selection, and digital agriculture solutions; and (iv) lower antibiotic use and improved animal health and welfare, in particular through improved animal diets/feed quality, animal housing conditions and husbandry practices, hygiene practices, animal selection, and vaccinations. The payments would target in particular Nitrate Vulnerable Zones in Croatia. The adoption of these better management practices and related environmental outcomes would be monitored on the basis of indicator-based farm management plans. The farm management plans would be aligned with a National Code(s) of Good Agriculture Practice. The Code(s) would distinguish between mandatory compliance criteria (SMR/GAEC), national priority areas for improvement (Eco-Schemes), and self-selected areas for improvements (AECM, See Intervention B.3). A points-based verification system would be applied whereby area-based payments would increase in line with the level of environmental performance of the farm as measured by objective indicators. Sub-sectors targeted by the eco-scheme(s) would be those with a relatively larger climate and environmental footprint such as livestock and industrial crop production. The payments would complement support provided for “hard” capital investments in green assets, technologies, and innovations under intervention A, in particular investments in digital agriculture technologies, energy efficiency improvements, manure storage, and efficient on-farm irrigation systems. Moreover, innovations that would enable the greening of conventional production systems would be supported in the context of different cooperation mechanisms (agri-food chain, EIP, LEADER) that bring together researchers, policy makers and agri-food sector stakeholders (see also Interventions C.1, E.2, F.4). Crucially, systems for delivering knowledge and information required to implement the better management practices and related capital investments would be improved to respond to the needs of farmers and agri-businesses (see also Interventions F.1, F.2, and F3).








Ministry of Agriculture, Ministry of Environment and Energy

Funding Source(s) EU-EAGF-BISS, EU-EAGF-Eco-Schemes, National Budget

Targeted Actor(s) Farmers, Producer Organizations, Advisory Services, Inspection Services

Key Sub-Sector(s) Livestock, Industrial Crops

Territorial Focus Nitrate Vulnerable Zones


Animal Health and Welfare; Food Safety, Quality, and SPS; Antibiotic Use; Pesticide Use; Soil Management; Carbon Sequestration; Ammonia Emissions Reduction; Manure Management; Nutrient Management; Water Quality; Water Use; Energy Efficiency; Renewable Energy; Precision Agriculture; Animal & Crop Selection; Climate Adaptation; GHG Emissions Reduction; Enhanced Conditionality

25

Intervention B.2. Improve access to environmental and agro-climatic data for public and agri-food chain actors

Description By organizing and storing data and information from different government agencies and scientific institutions about soils, land cover, climate crops, and water, among others, in databases, a National Agroecological Zoning (NAEZ) and Land Resources Management System (LRMS) would be developed. The NAEZ and LRMS would improve the capacity of public and agri-food chain actors to better understand the potential and constraints for agricultural production systems, products, and co-products considering current and projected regional agro-ecological conditions. Once operational, the NAEZ-LRMS tool, which would build on the ongoing process of identifying Areas Under Natural Constraints (ANC), could be used by the MoA and other government agencies (such as the Ministry of Environment and Energy) for climate change impact assessments, analysis of yield gaps, land degradation assessments, land use optimization modelling, and explaining adaptation behaviors to climate change. As a result, it would provide strategic guidance to investment decisions taken by the Ministry of Agriculture (see also Intervention A.3.), producers and agri-businesses (see also Interventions A.1 and C.1.), financial institutions (see also Intervention D.3) as well as stakeholders in the broader bio-economy (see also Intervention E.2). The NAEZ-LRMS tool would form an integral part of the Central Agriculture Information System and Knowledge Hub developed under Intervention F.2.






• Improve the functionality of agricultural land markets




Ministry of Agriculture, Ministry of Environment and Energy, Ministry of Science and Education

Funding Source(s) EU-Technical Assistance, EU-EAFRD Knowledge & Information, National Budget

Targeted Actor(s) Managing Authority, Paying Agency, Monitoring Committee, Scientific Institutions, Farmers, Producer Organizations, Bio-based Industry, Financial Institutions, Digital Agriculture Service Providers


Territorial Focus Areas Under Natural Constraints


Diversification; Precision Agriculture; Soil Management; Nutrient Management; Carbon Sequestration; Crop Selection; Climate Adaptation; Water Use; Water Quality; Integrated Landscape Management; Biodiversity Conservation; Bio-Economy; Climate/Environmental & Disaster Risk Screening; Knowledge and Innovation

Intervention B.3. Expand the conversion towards organic and agro-ecological production systems

Description Targeted and area-based payments would be provided to farmers with time-bound commitments to converting to organic and agro-ecological agricultural production systems. The support provided would compensate for the transition costs associated with the conversion process and complement the “hard” capital investments in sustainable assets, technologies, and innovations supported under intervention A.1 such as renewable energy use, tree planting, agro-biodiversity (genetic) resources. In general, the payments would support the substitution of conventional inputs (mineral fertilizers, pesticides) with biological alternatives, including the sustainable use of local agro-biodiversity (genetic) resources (e.g. autochthonous species/varieties) and ecological processes. Specifically, they would entail the adoption of techniques such as diversification, circular farming systems, enhanced crop rotation, regenerative grassland and pasture management (e.g. sowing improved varieties of pasture, holistic grazing strategies, pasture renovation), synergies across production

26

systems (e.g. agro-forestry, crop-livestock integration), habitat and ecosystem conservation and restoration, and integrated landscape management. Most of these measures would logically build on the better (eco-efficient) farming practices supported under Intervention B.1. The payments thus provided would target time-bound commitments implemented in Areas with Natural Constraints (ANC) and in the context of Natura 2000 Site Management Plans developed under the auspices of the Ministry of Environment and Energy. By doing so, the payments would contribute directly to the restoration of degraded land and the conservation status of key species and habitats. Cooperation mechanism (Agri-Food Chain, EIP, LEADER) could further help accelerate the conversion process by coordinating activities and investments between producers, market buyers, and other stakeholders in production landscapes. Crucially, systems for delivering knowledge and information required to implement the best management practices and capital investments that are necessary to convert production systems and comply with relevant standards and certification requirements would be improved in line with the needs of farmers and agri-businesses (see also Interventions F.1., F.2., and F3.)

Primary Links to Critical Needs



• Improve correspondence between production systems and agro-ecological zones characteristics




Ministry of Agriculture, Ministry of Environment and Energy

Funding Source(s) EU-EAFRD-AECM, EU-EAFRD-ANC, EU-EAFRD-Natura/WFD, National Budget

Targeted Actor(s) Farmers, Producer Organizations, Advisory Services


Territorial Focus Natura 2000 Sites, Areas with Natural Constraints


Organic Agriculture; Regenerative Agriculture; Agro-Ecology; Diversification; Sustainable Soil Management; Sustainable Pesticide Use; Sustainable Nutrient Management; Beekeeping Preservation and Improvement; Climate Adaptation; GHG Emissions Reduction; Carbon Sequestration; Ammonia Emissions Reduction; Quality Schemes; Biodiversity Conservation; Eco-System Restoration; Agro-Biodiversity; Tree Planting; Agro-Forestry; Integrated Landscape Management; Land Restoration; Bio-Economy; Renewable Energy

Intervention B.4. Improve the access to irrigation water and efficiency of its use for producers

Description The existing National Irrigation Program (NAPNAV) would be updated and revamped in coordination with the Ministry of Environment and Energy, the Croatian Water Agency (Hrvatske vode), and County governments. The revised NAPNAV would have a specific investment focus on (i) the construction, rehabilitation, and modernization of irrigation and drainage infrastructure on existing agricultural land; and (ii) adoption of new technologies in irrigated agriculture. Importantly, county-level permitting procedures for developing local irrigation and drainage systems would be streamlined further to support these investments. In addition, on-farm support and cooperation mechanisms (agri-food chain, EIP, LEADER) financed under the CAP would be leveraged to finance the investments (see also Interventions A.1., C1, E.1., F.4.), while financing options under other EU-funded programs, in particular those funded through the ERDF, would be assessed in coordination with the Ministry of Regional Development and EU Funds. The targeting of these investments would be guided by Flood Risk Management Plans and insights generated by the NAEZ-LRMS tool (see also Intervention B.2), whereas the adoption of the better irrigation water management practices would be further incentivized through area-based payments (see also Intervention B.1) and improved producer access to required knowledge and information (see also Interventions F.1, F.2, F.3). Key sub-sectors targeted by the investments would be those vulnerable to climate change impacts and risks (such as industrial crops) and those that are highly dependent on access to irrigation water (such as fruit and vegetables). In addition, investments would be complemented with capacity-building support for the introduction of participatory approaches to water management and the strengthening of water resource management institutions, which would be mainly

27

delivered through sectoral interventions (see also Intervention C.2.). The improved access to drainage and irrigation systems for producer thus promoted would be instrumental to further mitigating the (climate) risk profile of producers for financial institutions (see also Intervention D.3.), especially small and medium-sized producers. In addition, it would further enable producers to shift production from low value commodities towards higher value production systems, in particular fruit and vegetables








Ministry of Agriculture, Ministry of Environment and Energy, Croatian Water Agency (Hrvatske vode), Ministry of Regional Development and EU Funds, Counties

Funding Source(s) EU-Technical Assistance, EU-EAFRD-Investment, EU-EAFRD-AECM, EU-EAFRD-Cooperation (Agri-Food Chain/LEADER/EIP), EU-CMO, EU-ERDF, National Budget

Targeted Actor(s) Farmers, Producer Groups, Water User Associations

Key Sub-Sector(s) Fruit, Vegetables, Industrial Crops

Territorial Focus To be specified in updated NAPNAV


Water Use; Integrated Water Management; Precision Agriculture; Diversification; Climate Adaptation; Agri-Food Chain Integration; Knowledge and Innovation

ACTION C.Facilitate diversified and integrated domestic agri-food markets


C.1. Stimulate productive partnerships between producers and buyers in short supply chains

C.2. Improve organizational capacities in high-value agri-food chains

C.3. Strengthen support mechanisms for producers to comply with public and private food safety, quality, and SPS standards

C.4. Facilitate the development of agri-food logistics hubs

Intervention C.1. Stimulate productive partnerships between producers and buyers in short supply chains

Description Integrated investment, working capital, technical assistance, and marketing support would be provided to collaborations between agri-food producers and buyers of local products in strategic market segments, in particular agri-food processing and marketing operations, retailers, and hospitality services in the growing tourism sector. Support would focus on incentivizing improved linkages between producers, domestic buyers, and financial institutions in sub-sectors characterized by significant fragmentation (see Annex II, III, V, VI, VII),

28

in particular through the implementation of capital investments (see also Intervention A.1.), adoption of better management practices (see also Intervention B.1. and B.3.), improved business and financial management capacities (see also Intervention D.4), stronger producer organization (see also Intervention C.2.), compliance with (private) quality standards (see also Intervention C.3.), digital technology (e.g. marketing platforms) (see also Intervention F.3.), just-in-time distribution systems (see also Intervention C.4.), improved branding, packaging, and labeling (see also Intervention D.4.), as well as valorizing residues, by-products and waste streams (see also Intervention E.2.). All these activities, which would be harmonized with applicable horizontal polices of the EU, would seek to increase customer information and awareness in the domestic market with a view to promote traditional Croatian products and encourage the development of new ones, in particular among small producers. Producer access to required knowledge and information to implement these activities would be improved (see also Interventions F.1., F.2., F.3.), whereas investment grant support and other financial risk management tools would be leveraged to improve small and medium-size producers’, including women’s, access to commercial finance (see also Intervention D.3.)






• Improve the enabling environment to respond to agri-food demands of consumers


• Improve labor skills in the agri-food chain





Funding Source(s) EU-EAFRD-Cooperation (agri-food chain, LEADER), EU-EAFRD-Risk Management, EU-ERDF, National Budget

Targeted Actor(s) Farmers, Producer Groups, Food Processors, SMEs, Retailers, Wholesalers, Hospitality Services, Institutional Buyers, Clusters, Operational Groups, LAGs, Advisory Services

Key Sub-Sector(s) Wine, Fruit, Vegetables, Livestock



Diversification; Agri-tourism; Knowledge and Innovation; Business Management; Financial Literacy/Accounting; Sales and Marketing; Quality Schemes; Digital Agriculture; Climate and Environment; Agro-biodiversity; Bio-economy

Intervention C.2. Improve organizational capacities in high-value agri-food chains

Description The level of organization in producing and marketing agri-food products would be strengthened in key sub-sectors that can generate higher value-added, but suffer from significant fragmentation (see Annex II, III, V, VI, VII). Support would focus in particular on the establishment and strengthening of producer organizations through cooperation mechanisms (agri-food chain) and sectoral interventions. The latter would entail the full utilization (and even, extension) of the existing Operational Programs on Wine and Apiculture. In addition, it would encompass the completion of Operational Programs that are currently under preparation, in particular the Operational Programs on Fruit and Vegetables. Finally, new Operational Programs would be prepared for the Beef and Milk sub-sectors to compensate for the restrictions in coupled income support proposed under Intervention A.1. Improved organizational capacity would be instrumental to increased environmental and climate commitments (see also Interventions B.1. and B.3.), more viable productive and non-productive investments (including irrigation systems) (see also Interventions A.1. and B.5.), improved market linkages and efficient distribution systems (see also Intervention C.1. and C.4.), cost-effective compliance with public and

29

private food safety and quality standards (see also Intervention C.3.), the delivery of technical assistance and training (see also Interventions F.1., F.2., F.3.), and easier access to finance (see also Intervention D.3.). Capacity building efforts in relation to compliance requirements associated with public food safety and quality standards would be closely coordinated with the Croatian Agency for Agriculture and Food (HAPIH).








• Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability (Cross-Cutting)


Ministry of Agriculture, Croatian Agency for Agriculture and Food (HAPIH)

Funding Source(s) EU – CMO, EU-EAFRD-Cooperation (Agri-Food Chain), EU-EAFRD-Knowledge & Information

Targeted Actor(s) Farmers, Producer Groups, Inter-Branch Organizations, Operational Groups, Clusters, Advisory Services

Key Sub-Sector(s) Wine, Apiculture, Fruit and Vegetables, Livestock



Knowledge and Innovation; Agri-Food Chain Integration; Producer Organization; Water Use; Farm Management; Financial Literacy/Accounting; Sales and Marketing; Food Safety, Quality, and SPS; Quality Schemes; Enhanced Conditionality

Intervention C.3. Strengthen support mechanisms for producers to comply with public and private food safety, quality, and SPS standards

Description Targeted investments would be made in developing human resources, methods, processes, systems, and tools that enable the transparent and cost-effective delivery of risk-based public food safety, quality, and SPS policies and controls in line with new EU regulations. The latter encompass primarily regulations adopted in the context of the European Green Deal and future Farm to Fork Strategy, including the CAP’s new conditionality system25 that will replace the previous cross-compliance system for the programming period 2021-2027, as well as the EU’s newly proposed Single Market Program.26 Proposed investments would focus in particular on (i) strengthening the MoA’s administrative capacity in phytosanitary and food safety policy (especially biomedical, biotechnical, and food biotechnology fields) to ensure adequate relationship management with EU institutions and effective communication with agricultural producers regarding compliance requirements; (ii) increasing (in-house) IT capacity and upgrading the Central Veterinary Information System (SVIS) and Phytosanitary Information System (FIS), including registries, monitoring and control data management, resource planning systems, and integration with the proposed Central Agriculture Information System (see also Intervention F.2.); (iii) ensuring the effective implementation of mandatory monitoring and coordinated control programs in the field of food safety as well as plant, animal, and human health, especially monitoring the use of veterinary

25 The new conditionality system links EU support to farmers with requirements that beneficiaries must meet in regards basic environmental, cli-mate, public health, animal and plant health and animal welfare standards. The European Commission proposed that the basic standards should in-clude, in a simplified form, the Statutory Management Requirements (SMR) and the standards of Good Agricultural and Environmental Conditions (GAEC) of land. In the new programming period 2021-2027, 12 SMRs will be applied (and controlled by the Paying Agency), with two new ones to be introduced: in animal health and sustainable use of pesticides.26 The new Single Market Program will focus and support to a greater extent than before: i) Competitiveness of businesses, in particular support given to SMEs to scale up and expand across borders; ii) Consumer protection; iii) A high level of human, animal and plant health; iv) Effective enforcement of standards; v) IT tools and expertise that it uses to effectively enforce competition rules in the digital economy; vi) High quality European statistics.

30

medicinal products and pesticide residues in food (see also Intervention D.1.); (iv) increase the capacity of the Croatian Agency for Agriculture and Food (HAPIH) to implement phytosanitary risk assessment activities, including evaluation of plant protection products, monitoring of harmful organisms, and laboratory analysis of plant material; (v) increasing resources for emergency measures; and (v) fighting food-related fraud. In addition to supporting safe food production, prevention and eradication of animal diseases and plant pests, and improve animal health and welfare, these investments would promote improved market access for agri-food producers (see also Interventions C.1 and C.4) and strengthen the competitiveness of the agri-food industry through improved compliance with public standards (see also Intervention D.1). Meanwhile, compliance with quality schemes that go beyond minimum public food safety, quality, and SPS requirements would be incentivized further. In particular, the conversion of producers towards Good Agriculture Practices (GAP), organic certification, and Geographical Indications (GI) would be facilitated through tailored investment support (see also Intervention A.1), income support (see also Interventions A.2., B.1., B.3.), risk management (see also Intervention D.3.), and cooperation mechanisms (agri-food chain, LEADER) (see also Interventions C.1, E.3). Crucially, producer access to required knowledge and information to implement these compliance actions would be improved (see also Interventions C.2., F.1., F.2., F.3.). The latter would entail training and awareness raising of agriculture producers and other agri-food sector stakeholders in implementing SPS requirements, in particular the application of principles of good agriculture practice and integrated plant protection, with a view to ensure high standards of plant health protection and avoid yield losses.










• Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability (Cross-Cutting)


Ministry of Agriculture, Croatian Agency for Agriculture and Food (HAPIH), Ministry of Health, State Inspectorate

Funding Source(s) EU-Technical Assistance, EU-EAFRD-Cooperation, EU-EAFRD-Knowledge & Information, EU-CMO, EU-ERDF, National Budget

Targeted Actor(s) Farmers, Producer Groups, Food Processors, SMEs, Inter-Branch Organizations, Operational Groups, Clusters, Advisory Services, Inspection Services, Laboratories




Food Safety, Quality, and SPS; Quality Schemes; Traceability; Consumer Information/Labeling; Animal Health and Welfare

31

Intervention C.4. Facilitate the development of agri-food logistics hubs

Description An investment support program for the development of regional agri-food logistics hubs would be designed and implemented to help connect rural producers, particularly small and medium-sized producers, as directly as possible to rural, suburban, and urban markets through advanced cold chain logistics infrastructure and services, in particular the strategic segments identified in this document (i.e. fresh/perishable, convenience/indulgence). Key sub-sectors thus targeted encompass fruit, vegetable, and livestock. Tailored technical assistance, organizational capacity-building (e.g. business management, inventory management, standards compliance, sales and marketing, branding etc.), and skills development would accompany the physical investments (see also Interventions C.2., C.3., E.4., F.1.). Depending on the specific needs of the market segment targeted by the hub, it could offer a range of logistical services, including collection, transportation, sorting/grading, packaging, (cold) storage, (basic) processing, and/or distribution. In addition, complementary rural support infrastructure (e.g. roads, electricity, water etc.) (see also Intervention E.1) and reforms in the logistics services sector may be required. Decisions regarding the scope of the investments, including location, dimensioning, service offerings, and ownership/management models, would be guided by an in-depth assessment of regional production and market potentials and needs, including those of institutional buyers (e.g. schools, hospitals, corporate cafeterias etc.). The decisions would be supported, among others, by decision-making tools proposed for the future NARDS (see also Intervention A.3., B.3.). Financing would be provided through the investment support (see also Intervention A.1.) and cooperation mechanisms (agri-food chains, LEADER) proposed for the future NARDS (see also Intervention C.1. and E.1.), while financing options under other EU-funded programs, in particular those funded through the ERDF and CF, would be assessed in coordination with the Ministry of Regional Development and EU Funds and County governments.








• Improve coordination and complementarity between interventions in rural areas, including basic services

• Improve public infrastructure for modernizing agricultural production



Ministry of Agriculture, Ministry of Regional Development and EU Funds, Counties

Funding Source(s) EU-Technical Assistance, EU-EAFRD-Cooperation (agri-food chain/LEADER), EU-EAFRD-Investments, EU-EAFRD-Knowledge & Information, EU-ERDF, EU-CF, National Budget

Targeted Actor(s) Farmers, Producer Organizations, Logistics Service Providers, SMEs, Retailers, Wholesalers, Hospitality Services, Institutional Buyers, Clusters, Operational Groups, LAGs, Advisory Services

Key Sub-Sector(s) Fruit, Vegetable, Livestock



Diversification; Agri-Food Chain Integration; Food Safety, Quality, and SPS; Quality Schemes; Cold Chain Logistics; Sales and Marketing; E-Commerce; Basic Services; Regional Food Systems; Health and Nutrition

32

ACTION D.Empower more entrepreneurs (including youth and women) to create and develop agribusinesses


D.1. Reduce the administrative and regulatory burdens facing producers and agri-businesses

D.2. Level the fiscal playing field for Croatian producers and agri-businesses

D.3. Tailor risk management instruments towards the needs of smaller and medium-sized producers and agri-businesses

D.4. Support entrepreneurs (including youth and women) in starting new farms and agribusinesses

Intervention D.1. Reduce the administrative and regulatory burdens facing producers and agri-businesses

Description Procedures for accessing investment and income support provided under national agriculture and rural development programs would be streamlined, in particular through the development of digital information management platforms (see also Intervention F.2.), risk management instruments (see also Intervention D.3.), efficient enforcement of compliance requirements related to public standards under “enhanced conditionality, and advisory services that are better tailored to the needs of applicants/potential beneficiaries (See also Intervention F.1.). In addition, land administration and management systems would be further improved in coordination with the State Geodetic Administration, in particular through the continued automation of land administration services, quality improvement of real property data, and integration of cadaster and land registration services. Furthermore, recruitment processes for (seasonal) agricultural labor would be simplified. Finally, local permitting procedures for acquiring key assets required for modernizing agricultural production systems would be streamlined in coordination with the Ministry of Construction and Spatial Planning as well as County- and municipal-level governments, in particular for construction activities and the development of local irrigation systems (see also Intervention A.1.).




• Improve the functionality of agricultural land markets



Ministry of Agriculture, Ministry of Construction and Spatial Planning, State Geodetic Administration, Counties, Municipalities

Funding Source(s) EU-Technical Assistance; EU-EAFRD-Knowledge & Information; National Budget

Targeted Actor(s) Paying Agency, Farmers, Producer Organizations, Food Processors, SMEs




E-government; Competitiveness; Land Administration; Water Use; Construction and other Permits

33

Intervention D.2. Level the fiscal playing field for Croatian producers and agri-businesses

Description The impact of the current tax structure on agri-food sector competitiveness and profitability would be assessed. The assessment, which would be designed in consultation with the Ministry of Finance and the Ministry of Economy, Entrepreneurship and Crafts, would compare income, property, inheritance/gift, input, food, and other taxes applied in Croatia with those in key competitor countries in order to identify important discrepancies and identify areas for potential tax reforms. This would help bring the tax burden on Croatian producers and agri-businesses in closer alignment with competitor countries. The assessment and potential tax reforms would further support the shift towards evidence-based policy-making (see also Intervention A.3.), incentivize more capital investments (see also Intervention A.1.), and stimulate greater entrepreneurship and agri-food chain integration (see also Intervention C.1. and D.4.)






Ministry of Agriculture, Ministry of Finance, Ministry of Economy, Entrepreneurship and Crafts

Funding Source(s) EU-Technical Assistance, National Budget

Targeted Actor(s) Farmers, Young Farmers, Producer Organizations, Food Processors, SMEs, Wholesalers, Retailers




Competitiveness; Informal Economy

Intervention D.3. Tailor risk management instruments towards the needs of smaller and medium-sized producers and agri-businesses

Description Customized risk management solutions would be implemented that improve access to finance for smaller and medium-sized producers and agri-businesses. The design of these solutions would be closely coordinated with the Ministry of Finance, Ministry of Economy, Entrepreneurship and Crafts, and Ministry of Regional Development and EU Funds in order to avoid any overlap and maximize synergies with other financial instruments established in Croatia. In particular, lending to smaller and medium-sized producers and agri-businesses by private/commercial banks would be further incentivized by reducing financial risks through blended financial instruments, which combine commercial lending with risk sharing facilities (guarantees) and investment support (matching rural development grants). The instruments would focus in particular on smaller and medium-sized producers and agri-businesses in higher value sub-sectors and those located in vulnerable areas/lagging regions, such as Eastern Slavonia, which are insufficiently reached through existing risk management instruments. Moreover, investments in climate smart and environmentally sustainable assets, (digital) technologies, and solutions would be prioritized (see also Interventions A.1. and B.4.), in particular those proposed by young farmers, agri-businesses, and entrepreneurs involved in productive partnerships and agri-food chain collaborations (see also Interventions C.1. and D.4.). The use and effectiveness of the financial instruments would be further supported through better targeted income support to small and medium-sized producers, young farmers and women (see also Intervention A.2.) and through proposed improvements in land administration and management systems and (construction) permitting (see also Intervention D.1.) considering that both land and physical assets could be used as collateral for agricultural loans. In addition, they are supported by actions supporting organizational, technical, and business management/financial planning capacities in agri-food chains (see also Interventions C.1., C.2., E.4., F.1., F.2., F3.). Finally, the coverage and reach of agricultural insurance would be extended through the creation of mutual funds for smaller and medium-sized producers and use of commercial re-insurance markets for managing disaster risks. These actions would be supported further through the promotion of improved agriculture practices, infrastructure, technologies, and services in rural areas (see Interventions A.1., B.1., B.3., B.4., C.4., E.1., F.4.) as well as the development of data platforms and applications that enable improved access to production, market, environmental, and agro-climatic data for both public institutions and private agri-food chains stakeholders (see also Interventions B.2., F.2., F.3.).

34








Ministry of Agriculture, Ministry of Finance, Ministry of Economy, Entrepreneurship and Crafts, Ministry of Regional Development and EU Funds

Funding Source(s) EU-EAFRD-Investment, EU-EAFRD-Risk Management, EU-EAFRD-Cooperation (Agri-Food Chain), National Budget

Targeted Actor(s) Farmers, Producer Organizations, Food Processors, SMEs, HBOR, HAMAG-BICRO, Commercial Banks

Key Sub-Sector(s) Fruit and Vegetables, Wine, Livestock

Territorial Focus Eastern Slavonia


Financial Inclusion; Diversification; Climate Adaptation; GHG Emissions Reduction; Precision Agriculture; Knowledge and Innovation; Agri-Food Chain Integration

Intervention D.4. Support entrepreneurs (including youth and women) in starting new farms and agribusinesses

Description Installation grants would be provided to innovative farmers and rural entrepreneurs, in particular young and women farmers. Grant support would focus on rural business start-ups that seek to invest in new agricultural products, (digital) technologies, and agri-food chain services (see also Intervention C.4., F.4.), strengthening (just-in-time) market linkages (see also Intervention C.1., C.2., C.4.), and renewable energy solutions (see also Intervention E.2.). The design of this support measure would be closely coordinated with the Ministry of Economy, Entrepreneurship and Crafts as well as the Ministry of Regional Development and EU Funds in order to avoid any overlap and maximize synergies with other EU-funded programs tailored toward food-oriented start-ups in Croatia, in particular those funded through the ERDF. Crucially, access to required knowledge and information to implement these innovative actions would be improved (see also Interventions F.1., F.2., F.3.), especially aspects related to digital agriculture, quality schemes, bio-economy, business management/financial planning, and market promotion.








Ministry of Agriculture, Ministry of Economy, Entrepreneurship and Crafts, Ministry of Regional Development and EU Funds

Funding Source(s) EU-EAFRD-Young Farmers Installation, EU-EAFRD-Rural Business Start-Ups, EU-EAFRD-Knowledge & Information, EU-EAFR-Cooperation (Agri-Food Chain/EIP/LEADER), EU-ERDF

Targeted Actor(s) Young Farmers, Women Farmers, Entrepreneurs, Start-Ups, Clusters, Advisory Services, Regional Centers of Competence




Knowledge and Innovation; Farm Management; Agri-Food Chain Integration; Cold Chain Logistics; Renewable Energy; Digitization; Precision Farming, Smart Agri-Food Hubs

35

ACTION E.Link the agri-food sector to growth opportunities in the new economy


E.1. Improve the market connectivity of rural areas

E.2. Implement a national circular bio-economy plan

E.3. Promote agri-food destination tourism

E.4. Provide skills development opportunities to rural workers, particularly young people and women, in line with agri-food sector needs

Intervention E.1. Improve the market connectivity of rural areas

Description Territorial investments in the development of “Smart Villages” in rural areas would be supported. Smart Villages would help promote local development, halt rural outmigration, and create new rural jobs (especially outside the primary agricultural sector) by providing quality rural infrastructure and services to rural residents and businesses that enable the integration of agri-food value chains (see also Intervention C.1., C.4.) and the establishment of linkages between the agricultural sector and related sectors, in particular food processing, tourism, ICT, and new bio-economy value chains (see also Interventions C.1., C.4., E.2.). Priority rural infrastructure and services improvements would include those supporting the delivery of (irrigation) water (see also Intervention B.4.), cold chain logistics (see also Intervention C.4.), digital technology (see also Intervention F.3.), (bio-)waste management (see also Intervention E.2.), renewable energy (electricity, heating) (see also Intervention E.2.), and skills development services (see also Intervention E.4.). Key territories targeted by this intervention would include Dalmatia and Eastern Slavonia, which suffer from lower market accessibility compared to other regions in Croatia. The territorial investments would be coordinated primarily through the cooperation mechanisms (agri-food chain, LEADER) proposed for the future NARDS and the other regional and territorial development strategies developed for Croatia under the auspices of the Ministry of Regional Development and EU Funds.








Ministry of Agriculture, Ministry of Regional Development and EU Funds, Counties, Municipalities

Funding Source(s) EU-EAFRD-Cooperation (LEADER), EU-EFRD, EU-CF, EU-ESF+, National Budget

Targeted Actor(s) Rural Residents, Farmers, Producer Organizations, Food Processors, SMEs, Entrepreneurs, Start-Ups, Clusters


Territorial Focus Dalmatia, Eastern Slavonia


Competitiveness, Diversification; Agri-tourism; Cold Chain Logistics; Basic Services; Digitization; Knowledge & Innovation; Renewable Energy; Energy Efficiency; Bio-Economy; Smart Agri-Food Hubs

36

Intervention E.2. Implement a national circular bio-economy plan

Description A participatory and evidence-based planning approach (see also Intervention A.3.) would be adopted to the design and implementation of a national circular bio-economy plan in close coordination with the Ministry of Environment and Energy, the Ministry of Economy, Entrepreneurship and Crafts, as well as the Ministry of Science and Education. Key analytical inputs into the strategic planning process would be (i) a mapping existing stakeholders and initiatives in high potential bio-economy value chains, including bio-based energy, plastics, health products, and cosmetics (ii) an review of the legal and regulatory frameworks governing high-potential value chains; and (iii) an assessment of bio-mass (feedstock) potentials and trade-offs linked to high-potential bio-economy value chains using the National Agroecological Zoning (NAEZ) and Land Resources Management System (LRMS) (see also Intervention B.3.). The plan would lay out the specific actions, investments, and financing sources (both EU and national) for developing selected bio-economy value chains along a continuum of support from R&D- to-Piloting-to Scale Up. The proposed investments in sustainable biomass production, circular refining/processing of available biomass, and product marketing would be mainly implemented through the investment support (see also Interventions A.1.), cooperation mechanisms (LEADER, agri-food chain, EIP) (see also Interventions C.1., E.1., F.4.), and knowledge and information interventions (see also Interventions F.1., F.2., F.3.) proposed for the future NARDS. In this context, increased investment in agriculture research by domestice scientific institutions would be supported to develop solutions for sustainable food and biomass production in the service of the circular bioeconomy. Finally, financing options under other EU-funded programs, in particular those funded through Horizon European, ERDF, and ESF+, would be assessed in coordination with the Ministry of Regional Development and EU Funds











Ministry of Agriculture, Ministry of Environment and Energy, Ministry of Economy, Entrepreneurship and Crafts, Ministry of Science and Education, Ministry of Regional Development and EU Funds

Funding Source(s) EU-Technical Assistance, EU-EAFRD-Investment. EU-EAFRD-Cooperation (LEADER, agri-food chain, EIP), EU-EAFRD-Knowledge & Information, EU-Horizon Europe, EU-ERDF, ESF+, National Budget

Targeted Actor(s) Farmers, Producer Organizations, Food Processors, SMEs, Local Action Groups (LAGs), Bio-based Industries, Bio-based Industries Joint Undertaking (BBIJ), Scientific Institutions

Key Sub-Sector(s) Livestock, Industrial Crops, Olive, Grape and Wine



Diversification; GHG Emission Reduction; Manure Management; Waste Management; Renewable Energy; Energy Efficiency; Knowledge and Innovation; Bio-Economy

Intervention E.3. Promote agri-food destination tourism

Description In coordination with the Ministry of Tourism, an agri-food tourism product built around unique cultural/regional attributes and authentic culinary experiences involving local, high-value agri-food products would be integrated in the branding and marketing strategies of current and new tourism destinations and their tourism partners to incentivize longer stays, more repeat visitation, and higher average visitor spending. In this context, (digital) content and storytelling would be developed that responds to the culinary tastes and preferences of strategic consumers segments, in particular the “Indulgence” segment. The development of a food tourism product

37

offering in this manner would be supported through increased investments in local, higher value-added products that meet organic and private quality standards (see also Interventions A.1., B.4. and C.3.), productive partnerships in short supply chains (see also Intervention C.1.), the development of regional agri-food logistics hubs (see Intervention C.4.), and improved market connectivity of rural areas (see Intervention E.1.).


• Increase value-added of agricultural production





Ministry of Agriculture, Ministry of Tourism

Funding Source(s) EU-Technical Assistance, EU-EAFRD-Cooperation (LEADER), National Budget

Targeted Actor(s) Farmers, Producer Organizations, Tour Operators, Hospitality Services, Tourism Boards

Key Sub-Sector(s) Olive, Wine, Livestock, Fruit, Vegetable

Territorial Focus Istria, Dalmatia, Eastern Slavonia


Diversification; Agri-tourism; Quality Schemes; Agro-biodiversity

Intervention E.4. Provide skills development opportunities to rural workers, particularly young people and women, in line with agri-food sector needs

Description New mechanisms for delivering education and training to rural workers, in particular young people and women, would be implemented in coordination with other responsible government agencies that help address skills mismatches in modern agri-food chains, including newly emerging bio-economy value chains. Concretely, stronger engagement of and collaboration with industry stakeholders in the agri-food sector and other bio-based sectors would be pursued in the design and implementation of different skills development initiatives. These initiatives would include investments and active participation in (i) regional centers of competence; (ii) skills gap analyses for vocational education and training (VET) schemes; (iii) work-based learning schemes; (iv) productive agri-food chain partnerships (see also Intervention C.1.); and (v) the development of local bio-economy value chains (see also Intervention E.2.). Options would also be explored to further institutionalize the dialogue about sector-specific training requirements between government, business, and support service providers (e.g. through the establishment of Sector-based Skills Councils). The proposed investments would be mainly implemented through the cooperation mechanisms (LEADER) (see also Interventions E.1., E.2.), and knowledge and information interventions proposed for the future NARDS, while financing options under other EU-funded programs, in particular those funded through the ESF+, would be assessed in coordination with the Ministry of Regional Development and EU Funds.









Ministry of Agriculture, Ministry of Science and Education, Ministry of Economy, Entrepreneurship and Crafts, Ministry of Regional Development and EU Funds, Ministry of Labor and Pension System

Funding Source(s) EU-EAFRD-Knowledge & Information, EU-EAFRD-Cooperation (LEADER), EU-ESF+, National Budget

38

Targeted Actor(s) Rural Workers, Farmers, Producer Organizations, Food Processors, Bio-based Industries, Regional Centers of Competence




Knowledge and Innovation; Gender; Youth; Digitization; Food Safety, Quality, and SPS; Quality Schemes; Enhanced Conditionality; Farm Management; Sales and Marketing; Cold Chain Logistics; Renewable Energy; Energy Efficiency; Bio-Economy

ACTION F.Integrate national agricultural knowledge and innovation systems


F.1. Establish stronger linkages between public and private advisors and scientific institutions

F.2. Develop a Central Agriculture Information System and Knowledge Hub

F.3. Digitize knowledge flows between public and private AKIS actors

F.4. Encourage innovation partnerships between producers, advisors, agribusinesses, and scientific institutions

Intervention F.1. Establish stronger linkages between public and private advisors and scientific institutions

Description A learning center/system would be developed in partnership with scientific institutions that provides long- and short-term education and training programs for specialized advisors, with different modules related to thematic priorities (see below) that are customized to the specific needs of farmers. Potential private advisors that are interested in participating would be able to do so on a commercial basis. Building the technical capacity of public and private advisors in this manner would be instrumental to promoting more productive investments (see also Intervention A.1.), the implementation of climate and environmental commitments (see also Interventions B1., B.3.), improved producer organization and agri-food chain integration (see also Interventions C.1. and C.2.), compliance with public and private food safety, quality, and sanitary and phytosanitary standards (see also Intervention C.3.), the transfer of knowledge, information, and technologies to producers (see also Intervention F.3. and F.4.), and the development of new bio-economy value-chains (see also Intervention E.2.).










39


Ministry of Agriculture, Ministry of Science and Education

Funding Source(s) National Budget, EU-EAFRD-Knowledge & Information

Targeted Actor(s) Advisory Services, Scientific Institutions




Knowledge and Innovation; Animal Health and Welfare; Animal & Crop selection; Water Use; Water Quality; Ammonia Emissions Reductions; Manure Management; Sustainable Nutrient Management; Waste Management; Antibiotic Use; Sustainable Pesticide Use; Precision Agriculture; Sustainable Soil Management; Carbon Sequestration; Farm Management; Financial Literacy & Accounting; Sales & Marketing; Organic Agriculture; Agro-ecology; Regenerative Agriculture; Biodiversity Conservation; Agro-forestry; Food Safety, Quality, and SPS; Quality Schemes; Cold Chain Logistics; Community-led Local Development (LEADER); Climate Adaptation; GHG Emissions Reduction; Waste Management; Bio-Economy

Intervention F.2. Develop a Central Agriculture Information System and Knowledge Hub

Description An interactive MoA website would be established on the basis of a new knowledge hub and central agriculture information system. The website would encompass a “knowledge hub”, which enables technical inputs and feedback from users and brings together all publicly available data on Croatia’s agri-food sector and all the research results from EIP, H2020 and all previous VIP projects. The “knowledge hub” would be easily searchable and accessible to all interested visitors. The hub would form part of a new and integrated Central Agriculture Information System that encompasses all MoA databases (land, farm register, subsidies, register of animals, organic production, beekeeper registry etc,). The system would externally be presented as an interactive and user-friendly website supported by dedicated (mobile) applications. “Public good” data would be searchable and open for further analysis, and disaggregated at state, county or municipality level. “Private” data of individuals would not be made available through the system. Depending on the available applications (see also Intervention F.3.), the improved access to knowledge and information provided through the interactive website would help reduce the administrative burden on potential applicants/beneficiaries seeking investment and/or income support (see also Interventions A.1., A.2., B.1., B.3., B.4.), and would improve knowledge flows between public and private AKIS actors (see also Intervention F.3.), including market and agro-climatic information (see also Intervention B.2.).





• Improve the use of effectiveness of risk management instruments








Funding Source(s) National Budget, EU-Technical Assistance, EU-EAFRD-Knowledge & Information

Targeted Actor(s) Farmers, Producer Organizations, Food Processors, Paying Agency, Managing Authority, Monitoring Committee, Scientific Institutions, Advisory Services


40



Knowledge and Innovation; Food Safety, Quality, and SPS; Enhanced Conditionality; Digitization; Results-based Management; E-Government

Intervention F.3. Digitize knowledge flows between public and private AKIS actors

Description In conjunction with the development of a Central Agriculture Information System and Knowledge Hub (see Intervention F.2.), the development of (mobile) applications dedicated to proposed thematic priorities for producers, agribusinesses, and other AKIS actors would be supported. In particular, Application Programming Interfaces (APIs) would provide a hook for partners or third-party ICT developers to access public production, market, environmental, and/or agro-climatic data (see also Intervention B.2.). The partners or third-party ICT developers would use this public data to build applications or to offer new services for different information management systems that may be useful to farmers (e.g. calculating applications and decision-support tools), agricultural advisors, and/or scientific institutions (see also Intervention F.1.). The APIs would thus help boost open innovation in the AKIS by integrating new players (ICT start-ups, for example) and promoting the co-development of new digital agriculture applications (see also Intervention F.4.).



• Improve correspondence between production systems and agro-ecological zones’ characteristics

• Improve the use of effectiveness of risk management instruments



• Improve entrepreneurial capacity and opportunities of agri-food producer





Funding Source(s) National Budget, EU-EAFRD-Knowledge & Information

Targeted Actor(s) Farmers, Producer Groups, Food Processors, Inter-Branch Organizations, Scientific Institutions, Advisory Services, ICT Companies/Start-Ups.




Knowledge and Innovation; Precision Agriculture; Digitization; Results-based Management; E-Government

Intervention F.4. Encourage innovation partnerships between producers, advisors, agribusinesses, and scientific institutions

Description Support would be provided to public-private innovation partnerships involving producers, advisors, agribusinesses, and scientific institutions. The partnerships supported would follow a bottom-up and interactive innovation model whereby scientific institutions are focused on solving “real-world” issues and challenges that producers meet in the field. To implement this new innovation model, a program management system of frequent calls for applications would be developed to enable efficient responses to farmers’ needs and supporting the faster use of innovative solutions. In addition, organizational capacities across fragmented agri-food chains would be strengthened (see also Interventions C1. and C.2.). This system would help reduce the administrative burden facing producers and agri-businesses (see also Intervention D.1.), facilitate access to public funding for (bio-economy) research and innovation provided under different EU-funded programs (see

41

also Intervention E.2.), and improve the transfer of knowledge, information, and technology to producers (see also Intervention F.1.). Importantly, the broad-based dissemination of the results generated by the innovation partnerships would be supported through the development of new, digital information and communication systems and tools (see also Interventions F.2. and F.3.).







Ministry of Agriculture, Ministry of Science and Education, Ministry of Economy, Entrepreneurship and Crafts, Ministry of Regional Development and EU Funds

Funding Source(s) National Budget, EU-EAFRD-Cooperation (EIP, Agri-Food Chain), EU-EAFRD-Knowledge & Information, EU-Horizon Europe, EU-ERDF

Targeted Actor(s) Farmers, Producer Organizations, Food Processors, SMEs, Inter-Branch Organizations, Scientific Institutions, Advisory Services




Knowledge and Innovation; Diversification; Precision Agriculture; Digitization; Climate Adaptation; GHG Emissions Reduction; Ammonia Emissions Reduction; Water Use; Water Quality; Agro-Biodiversity; Crop/Animal Selection; Animal Health and Welfare; Antibiotic Use; Sustainable Pesticide Use; Sustainable Nutrient Management; Health and Nutrition; Waste Management; Bio-Economy

42

The interventions under the proposed roadmap will translate into the implementation of specific measures for key sub-sectors targeted under the future NARDS. Under the STARS RAS, the Agricultural Faculty of the University of Zagreb and the Faculty of Agrobiotechnical Sciences of the University of Osijek conducted in-depth analyses, including stakeholder surveys, focused on identifying the key assets, constraints, potentials and risks that characterize key agricultural sub-sectors in Croatia. Annexes II – VIII summarize the outcome of these analyses for the sub-sectors that were selected in consultation with the MoA. They encompass the livestock (beef, milk, pork), cereal, vegetable, fruit, grape and wine, and industrial crop27 sub-sectors. The tables below provide an overview of the specific measures proposed for each of these sub-sectors for the future NARDS based on the analyses completed by the Universities. In addition, the tables specify the relevant link to the agri-food sector-wide interventions outlined in Section 5.

27 Specific industrial crop value chains that were assessed as part of the analysis included sugar beet, rapeseed and industrial hemp.

6. Linking the Interventions to Specific Measures for Key Sub-Sectors

43

LIVESTOCK (BEEF, MILK, PORK)

Intervention Specific Sub-Sector Measure

A.1.

• Support investments in increased production capacities of small and medium-sized cattle and pig farms and producer organizations

• Support the diversification into value adding activities of small and medium-sized cattle farmers (e.g. calve fattening, cow-calf/suckler cow farming systems, on-farm slaughterhouse, milk processing, and agri-tourism) and pork producers (e.g meat processing)

• Increase investments in climate-smart and environmentally sustainable assets, technologies and solutions on both small-, medium-, and large-scale livestock operations, including investments in improved animal housing conditions, animal selection, technological processes, renewable energy use (e.g. biodigesters, solar panels), energy efficiency improvements, animal waste and pollution control (e.g. manure treatment/storage, odor and air pollution control), tree planting on pastures and grasslands , and digital technologies.

A.2.• Limit coupled support to the beef and milk sub-sectors, while shifting support towards sectoral interventions as well as direct payments

for the adoption of better agri-environmental practices and conversion to organic and agri-ecological production systems

B.1.

• Increase payments to small-, medium-, and large-scale livestock operations that adopt better management practices that go beyond minimum legal requirements, in particular practices that improve pasture management (e.g. rotational grazing), reduce animal waste and pollution, lower antibiotic use, and improve animal health and welfare (e.g. improved animal diets/feed quality, husbandry practices, hygiene practices, and vaccinations)

B.3.

• Increase payments to small-, medium-, and large-scale livestock operations committed to converting to organic and/or agri-ecological production systems, in particular in the context of Natura 2000 site management plans, that eliminate anti-biotic use, sustainably use local (genetic) biodiversity resources (autochthonous breeds), manage circular manure nutrient management systems, regenerate grasslands and pastures (e.g. sowing improved varieties of pasture, holistic grazing strategies, pasture renovation), build synergies across production systems (e.g. cow-calf system, agro-forestry, crop-livestock integration), conserve and/or restore habitat and ecosystems (e.g. tree planting on pasture land), and/or apply integrated landscape management.

C.1.• Support short supply chain linkages and partnerships between cattle farmers, producer organizations, and buyers downstream the beef

and dairy value chains, in particular through the development of cold chain infrastructure and services, including collection, (basic) processing (e.g. mobile slaughterhouses), packaging, cold storage, transportation, branding, and/or marketing

C.2.• Implement a sector-wide intervention for strengthening the capacity of producer organizations to jointly procure inputs, advise farmers

on feeding and better farm management practices, comply with (public and private) standards, and efficiently manage cold chain infrastructure and services

C.3.• Support the participation of small-, medium-, and large-scale livestock operations in quality schemes, including organic, Geographical

Indications, specialty products, and voluntary certification schemes (e.g. Global Gap, IFS International Food Standards, BRC Gold Standard, ISO (9001, 22000, 14001))

D.1.• Facilitate access to public agricultural land for small and medium-size cattle farms, in particular those involved in cow-calf/suckler cow,

organic, and/or agri-ecological production systems

D.3.• Design financial and risk management instruments that facilitate access to commercial credit and insurance for small and medium-sized

livestock (beef/milk/pork) operations

E.3.• Support marketing campaigns organized around fresh meat and processed (specialty/origin) meat and dairy products of autochthonous

breeds as part of food tourism destination initiatives

F.1.

• Build the technical capacity of public and private advisory services to advise livestock operations on public food safety, quality and SPS standards (in particular as regards antibiotics use), climate smart and environmentally sustainable practices (in particular as regards sustainable nutrient management), animal welfare, and modern farm holding management and animal production technologies (in particular as regards feed quality), including digital technologies

F.4.• Scale up breeding/animal selection and feed quality programs for key milk, (purebred) meat, and pig breeds, including autochthonous

breeds, through the organization of (re-)production clusters and innovation partnerships involving producers, advisors, agribusinesses, and scientific institutions

44

CEREAL


A.1.

• Support the diversification of small and medium-sized cereal farms and producer organizations towards value adding activities, including (basic) processing and storage of cereals, production of alternative cereals (e.g. triticale, spelt (dinkel) wheat, oats, millet, sorghum), and industrial crop production (e.g. soybeans, industrial hemp, sunflower) as part of crop rotation systems

• Increase investments in climate-smart and environmentally sustainable assets, technologies and solutions on both small-, medium-, and large-scale cereal farms, including investments in efficient (on-farm) irrigation and drainage systems, digital technologies enabling precision farming, and well-adapted crop varieties

B.1.• Increase payments to small-, medium-, and large-scale cereal farms that adopt better management practices that go beyond minimum

legal requirements, in particular practices that increase irrigation water use efficiency, reduce mineral fertilizer and pesticide use (e.g. integrated nutrient/pest/weed management), and improve soil management (e.g. conservation tillage, cover crops, composting)

B.2.• Improve access to agro-ecological data for cereal producers and other stakeholders along the value chain to better manage climate

change impacts and risks and identify diversification opportunities

B.3.

• Increase payments to small-, medium-, and large-scale cereal farms committed to converting to organic and/or agro-ecological production systems, in particular in the context of Natura 2000 site management plans, that promote diversification, use enhanced crop rotation, build synergies across production systems (e.g. feed crop-livestock integration), conserve and/or restore habitat and ecosystems, and/or apply integrated landscape management.

C.1.• Support short supply chain linkages and partnerships between cereal farmers, producer organizations, processors (mills), and

manufacturers of final (processed) cereal products for the development of new product lines

C.2.• Build the capacity of cereal producer organizations to jointly procure inputs, advise cereal farmers on better farm management practices,

comply with (public and private) standards, and efficiently manage (basic) processing and storage infrastructure

C.3.• Support the participation of small-, medium-, and large-scale cereal producers in quality schemes, including organic and other voluntary

certification schemes (e.g. Global Gap, IFS International Food Standards, BRC Gold Standard, ISO (9001, 22000, 14001))

E.2. • Assess options for developing local bio-economy value chains using cereal crop waste and residues (straw, corn stalks) as feed stock

F.1.

• Build the technical capacity of public and private advisory services to advise cereal farms on higher value crop production systems, climate smart and environmentally sustainable practices (in particular as regards agrochemical use enhanced crop rotation systems, and soil management), and modern farm management and production technologies (in particular as regard quality management and digital agriculture solutions)

45

VEGETABLES


A.1.

• Support investments in the production capacities of small and medium-sized vegetable farmers and producer organizations, in particular greenhouse vegetable production

• Support the diversification of small and medium-sized vegetable farms and producer organizations towards the production of higher value vegetable crops and introduction of value adding activities

• Increase investments in climate smart and environmentally sustainable assets, technologies, and solutions on both small-, medium-, and large-scale vegetable farms, including investments in hydroponic greenhouse production systems, efficient on-farm (drip) irrigation and drainage systems, digital technologies enabling precision farming, renewable energy use (e.g. biodigesters, solar panels), energy efficiency improvements, and well-adapted crop varieties

B.1.• Increase payments to small-, medium-, and large-scale vegetable farms that adopt better management practices that go beyond

minimum legal requirements, in particular practices that increase irrigation water use efficiency, reduce mineral fertilizer and pesticide use (e.g. integrated nutrient/pest/weed management), and improve soil management (e.g. conservation tillage, cover crops, composting)

B.2.• Improve access to agro-ecological data for vegetable producers and other stakeholders along the value chain to better manage climate


B.3.• Increase payments to small-, medium-, and large-scale vegetable operations committed to converting to organic production systems

and/or agri-ecological production systems that promote diversification, use enhanced crop rotation, or build synergies across production systems (e.g. crop-livestock or crop-aquaculture integration)

C.1.• Support short supply chain linkages and partnerships between vegetable farmers, producer organizations, and buyers downstream the

vegetable value chain, in particular food processors, wholesalers, retailers, and institutional buyers (e.g. schools, hospitals, corporate cafeterias)


on better farm management practices, comply with (public and private) standards, and efficiently manage cold chain infrastructure and services

C.3.• Support the participation of small-, medium-, and large-scale vegetable operations in quality schemes, including organic, Geographical

Indications, and other voluntary certification schemes (e.g. Global Gap, IFS International Food Standards, BRC Gold Standard, ISO (9001, 22000, 14001))

C.4.

• Support investments in cold chain infrastructure and services enabling improved access of small and medium-sized producers to wholesale, retail, and institutional markets, in particular through the development of producer- and/or buyer-led “agri-food logistics hubs” involved in the collection, (basic) processing, packaging, cold storage, transportation, branding, and/or marketing of (fresh) agri-food products


vegetable producers

E.4. • Roll out skills development program focused on harvest/post-harvest handling, quality standards, and cold chain logistics management

F.1.• Build the technical capacity of public and private advisory services to advise producers on modern farm management and production

technologies (in particular as regards greenhouse production and digital agriculture solutions) as well as climate smart and environmentally sustainable practices (in particular as regards irrigation management, agrochemical use, and soil management)

46

FRUIT


A.1.

• Support investments in the production capacities of small and medium-sized fruit farmers and producer organizations, in particular the establishment of new orchards and renewal of existing orchards

• Support the diversification of small and medium-sized fruit farms and producer organizations towards the production of higher value (autochthonous) varieties, introduction of (cold) storage, processing, and product finalization capacities and technologies, as well as launching complementary agricultural activities (e.g. beekeeping, agri-tourism)

• Increase investments in climate smart and environmentally sustainable assets, technologies, and solutions on both small-, medium-, and large-scale fruit farms, including efficient on-farm (drip) irrigation and drainage systems, improved production technologies (including digital technologies enabling precision farming), renewable energy use (e.g. biodigesters, solar panels), energy efficiency improvements, and production of quality seed and planting material for well-adapted crop varieties

B.1.• Increase payments to small-, medium-, and large-scale fruit farms that adopt better management practices that go beyond minimum

legal requirements, in particular practices that increase irrigation water use efficiency, reduce mineral fertilizer and pesticide use (e.g. pruning, integrated nutrient/pest/weed management), and improve soil management (e.g. cover crops, composting)

B.2.• Improve access to agro-ecological data for fruit producers and other stakeholders along the value chain to better manage climate


B.3.

• Increase payments to small-, medium-, and large-scale fruit operations committed to converting to organic production systems and/or agri-ecological production systems that promote diversification, biological pest controls, build synergies across production systems (e.g. perennial crop – pollinator and/or livestock integration), conserve and/or restore habitat and ecosystems, and/or apply integrated landscape management.

C.1.• Support short supply chain linkages and partnerships between fruit farmers, producer organizations, and buyers downstream the fruit

value chain, in particular food processors, wholesalers, retailers, and institutional buyers (e.g. schools, hospitals, corporate cafeterias)


on better farm management practices, comply with (public and private) standards, and efficiently manage cold chain infrastructure and services

C.3.• Support the participation of small-, medium-, and large-scale fruit operations in quality schemes, including organic, Geographical Indications,

and other voluntary certification schemes (e.g. Global Gap, IFS International Food Standards, BRC Gold Standard, ISO (9001, 22000, 14001))

• Launch campaigns promoting fruit consumption and domestic fruit through a national label

C.4.

• Support investments in cold chain infrastructure and services enabling improved access of small and medium-sized producers to wholesale, retail, and institutional markets, in particular through the development of producer- and/or buyer-led “agri-food logistics hubs” involved in the collection, (basic) processing, packaging, cold storage, transportation, branding, and/or marketing of (fresh) agri-food products


fruit producers

E.2. • Assess options for developing local bio-economy value chains using fruit crop waste and residues as feed stock

E.4. • Roll out skills development program focused on harvest/post-harvest handling, quality standards, and cold chain logistics management

F.1.

• Build the technical capacity of public and private advisory services to advise producers on modern farm management and production technologies (in particular as regards plant material, planting techniques, and digital agriculture solutions) as well as climate smart and environmentally sustainable practices (in particular as regards irrigation management, agrochemical use, soil management, and disease monitoring and control)

F.2.• Upgrade the fruit register with a view to provide an accurate insight into fruit production and integrate the register with the proposed

Central Agriculture Information System

F.4.• Scale up fruit species selection and propagation programs for (certified) planting materials, in particular for early and mid-early ripening

(autochthonous) fruit varieties, through innovation partnerships between producers, nurseries, advisors, agribusinesses, and scientific institutions

47

GRAPES & WINE


A.1.

• Support investments in the production capacities of small and medium-sized grape and wine farmers and producer organizations, in particular the establishment of new orchards/vineyards and renewal of existing orchards/vineyards (including replanting for health or phytosanitary reasons)

• Support the diversification of small and medium-sized farms and producer organizations into value adding activities, including higher value grape varieties (e.g. earlier maturing and seedless table grapes, autochthonous varieties), (basic) on-farm processing and (cold) storage, as well as launching complementary activities such as agri-tourism

• Increase investments in climate smart and environmentally sustainable assets, technologies, and solutions on both small-, medium-, and large-scale farms, including efficient on-farm (drip) irrigation and drainage systems (in particular for table grape production), digital technologies enabling precision farming, renewable energy use (e.g. biodigesters, solar panels), energy efficiency improvements, and well-adapted (disease resistant) crop varieties

B.1.• Increase payments to small-, medium-, and large-scale farms that adopt better management practices that go beyond minimum

legal requirements, in particular practices that reduce mineral fertilizer and pesticide use (e.g. pruning, integrated nutrient/pest/weed management) and improve soil management (e.g. cover crops, composting)

B.2.• Improve access to agro-ecological data for grape and wine producers and other stakeholders along the value chain to better manage

climate change impacts and risks and identify diversification opportunities

B.3.

• Increase payments to small-, medium-, and large-scale fruit operations committed to converting to organic, biodynamic, and/or agri-ecological production systems that promote diversification, use biological pest and weed controls (e.g. sheep, beneficial birds, insectaries), build synergies across production systems (e.g. perennial crop – pollinator and/or livestock integration), conserve and/or restore habitat and ecosystems, and/or apply integrated landscape management

C.1.• Develop short supply chain linkages and partnerships between grape producers, producer organizations, and buyers downstream the value

chain, in particular through the development of quality (autochthonous) grape production and cold chain logistics infrastructure and services


on better farm management practices, comply with (public and private) standards, and efficiently manage cold chain infrastructure and services, and promote products in EU and non-EU markets

C.3.

• Support the participation of small-, medium-, and large-scale grape and wine operations in quality schemes, including organic, Geographical Indications, and other voluntary certification schemes (e.g. Global Gap, IFS International Food Standards, BRC Gold Standard, ISO (9001, 22000, 14001))

• Strengthen HAPIH’s system of monitoring and checks in the wine sector in line with the new Wine Law (2019) to address the risks of fraudulent manipulation of wine and guarantee the quality, safety and traceability of wine products

D.1 • Address land registry and ownership issues on existing vineyards and potential new land for vineyards


grape and wine producers

E.2. • Assess options for developing local bio-economy value chains using wine-making waste and residues (grape pomace, grape stems, grape

leaves) as feed stock

E.3. • Support marketing campaigns organized around wines made with autochthonous grape varieties as part of food tourism destination

initiatives in both coastal and continental areas

E.4 • Roll out skills development program focused on harvest/post-harvest handling, quality standards, and cold chain logistics management

F.1.

• Build the technical capacity of public and private advisory services to advise producers on modern farm management and production technologies (in particular as regards plant material, planting techniques, digital agriculture solutions), quality standards (in particular as regards the International Organization of Vine and Wine (OIV) Code of Oenological Practices), and climate smart and environmentally sustainable practices (in particular as regards agrochemical use, soil management, and disease monitoring and control).

F.4.• Scale up autochthonous species selection, production, and propagation programs for (certified) planting materials through innovation

partnerships between producers, nurseries, advisors, agribusinesses, vine selection centers, and scientific institutions

48

INDUSTRIAL CROPS


A.1.

• Support investments in the production capacities of both small, medium, and large-sized producers and producer organizations as part of crop rotation systems with cereal crops

• Support the diversification of small and medium-sized farmers and producer organizations into value adding activities, including the production of higher value industrial crops (industrial hemp, sunflower) and cereals in the context of crop rotation systems

• Increase investments in climate-smart and environmentally sustainable assets, technologies and solutions on both small-, medium-, and large-scale farms, including investments in efficient (on-farm) irrigation and drainage systems, digital technologies enabling precision farming, and well-adapted crop varieties

B.1. • Increase payments to small-, medium-, and large-scale farms that adopt better management practices that go beyond minimum

legal requirements, in particular practices that increase irrigation water use efficiency, reduce mineral fertilizer and pesticide use (e.g. integrated nutrient/pest/weed management), and improve soil management (e.g. conservation tillage, cover crops, composting)

B.2.• Improve access to agro-ecological data for industrial crop producers and other stakeholders along the value chain to better manage

climate change impacts and risks and identify diversification opportunities

B.3.

• Increase payments to small-, medium-, and large-scale industrial crop farms committed to converting to organic and/or agri-ecological production systems, in particular in the context of Natura 2000 site management plans, that promote diversification, use enhanced crop rotation, build synergies across production systems (e.g. feed crop-livestock integration), conserve and/or restore habitat and ecosystems, restore degraded land , and/or apply integrated landscape management

C.1. • Facilitate increased investment in domestic processing/crushing capacities, while promoting exports of processed products to key growth

markets (e.g. sugar exports to the Middle East or Asia)

C.3. • Support the participation of small-, medium-, and large-scale industrial crop operations in quality schemes, including organic and other

voluntary certification schemes (e.g. Global Gap, IFS International Food Standards, BRC Gold Standard, ISO (9001, 22000, 14001))

E.2. • Assess options for developing local bio-economy value chains using intermediates, (by-) products, and waste of industrial crop

production and processing as feedstock, in particular for livestock feed (e.g. rape meal for dairy cows), renewable energy, advanced bio-fuels, and other bio-based products

F.1.

• Build the technical capacity of public and private advisory services to advise producers on higher value industrial, cereal, and lignocellulosic biomass production systems, climate smart and environmentally sustainable practices (in particular as regards enhanced crop rotation systems, agrochemical use, soil management, and disease monitoring and control), and modern farm management and production technologies (in particular as regards digital agriculture solutions)

49

The critical needs of Croatia’s agri-food sector will form the primary link between the future NARDS and CAP Strategic Plan. As part of the strategic visioning process, the relevant links between the agri-food sector’s critical needs and the proposed CAP Specific Objectives are also considered. Figure 2 provides an overview of the links between the fifteen (15) critical needs, the 4 (four) proposed strategic objectives for the future NARDS, and the 9 (nine) CAP Specific Objectives, respectively. Importantly, under the STARS RAS, a separate roadmap for Croatia’s future CAP 2021-2027 Strategic Plan has been developed, which specifies the primary and secondary links between the critical needs of the Croatian agri-food sector, the proposed CAP Specific Objectives, and the relevant sub-set of interventions presented in this document that would be financed under the CAP to help address the critical needs and achieve the CAP Specific Objectives. In addition, this roadmap has defined the expected outputs and results for each intervention based on available Indicator Fiches provided by the European Commission, which will guide the selection of the relevant performance indicators once official agreement is reached on the Performance Monitoring and Evaluation Framework (PMEF) for the post-2020 CAP.

7. Linking the future NARDS to the CAP Strategic Plan

Figure 2. Links between Croatian agri-food sector needs, and the objectives proposed for the NARDS and CAP

NARDS OBJECTIVES CROATIAN AGRI-FOOD SECTOR NEEDS CAP OBJECTIVES

I. Increase the productivity and climate resilience of agricultural production

1. Increase value added of agricultural production

2. Improve environmental sustainability of farming practices

3. Improve equity in the distribution of farm support

4. Improve correspondence between production systems and agro-ecological zones characteristics

5. Improve the use and effectiveness of risk management instruments

6. Strengthen market linkages in the agri-food, including supply aggregation

7. Improve entrepreneurial capacity and opportunities of agri-food producers

8. Improve the enabling environment to respond to agri-food demands of consumers

9. Improve the uptake of public and private agri-food quality schemes

10. Improve labor skills in the agri-food chain

11. Improve the functionality of agricultural land markets

12. Improve coordination and complementarity between interventions in rural areas, including basic services

13. Improve public infrastructure for modernizing agricultural production

14. Facilitate capital investment focused on technology and innovation (cross-cutting)

15. Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability) (cross-cutting)

Needs 2, 4, 5, 10, 13, 14, 15

Needs 3, 5, 6, 7, 10, 11, 15

Needs 2, 4, 10, 13, 15

Needs 2, 4, 10, 13, 15

Needs 1, 7, 10, 14, 15

Needs 1, 6, 7, 9, 10, 13, 14, 15

Needs 1, 2, 6, 9, 15

Needs 1, 6, 7, 10, 12, 13, 14, 15

Needs 14, 15

Needs 1, 2, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15

II. Strengthen the competitiveness of the agri-food system

III. Renew the rural economy and improve livelihoods in rural space

IV. Stimulate agri-food innovation (cross-cutting)

I. Support viable farm income & resilience

IV. Contribute to climate change mitigation and adaptation

V. Foster sustainable development and efficient management of natural resources

VI. Protect biodiversity, enhance ecosystem services, preserve habitats & landscapes

II. Enhance market orientation & increase competitiveness

III. Improve farmers’ position in the value chain

VII. Attract young farmers and facilitate business development

IX. Respond to societal demands on food and health

VIII. Employment, growth, social inclusion and local development in rural areas

CROSS-CUTTING: Fostering & sharing knowledge, innovation and digitalization

50

The results monitoring framework for the future NARDS would be organized around a standardized set of context, im-pact, and results indicators. The implementation performance of the future NARDS would be monitored at the level of the strategic and specific objectives as well as the critical needs identified for the strategy. Existing performance indicators that have been standardized either at the EU level (as part of the Performance Monitoring and Evaluation Framework of the CAP) or the national level (as part of the National Development Strategy) would be integrated in the results monitoring framework. The tables below provide an overview of the proposed framework using existing sets of performance indicators. Once the re-sults monitoring framework of the future CAP and National Development Strategy have been formally adopted, the proposed framework will need to be revised accordingly. In addition, baselines, milestones, and targets will need to be established for each performance indicator retained in the framework.

Strategic Objective Indicators

Indicator Name Reference/SourceLink(s) to CAP

Objectives

I. Increase the Productivity and Climate Resilience of Agricultural Production I, IV, V, VI

Total factor productivity in agriculture EU PMEF (I.6/C.28)

Labor productivity in agriculture and in the food industry EU PMEF (C.29)

Resource Productivity and Domestic Material Consumption EUROSTAT-SDG

Index of Farm Resilience, Adaptation potential to climate change EU PMEF (I.9/C.44)

Direct agricultural loss attributed to disasters EU PMEF (C.45)

II. Strengthen the Competitiveness of the Agri-Food System II, III, VII, IX

Enabling the Business of Agriculture Ranking WB

Ease of Doing Business Index WB

Age structure of farm managers EU PMEF (C.14)

The educational structure of employees in the food and bioeconomy sectors CBS

Agri-food Trade Balance EU PMEF (I.7/C.30)

Share of food processing, wood processing and bio-products in GDP and Total Export CBS

III. Renew the Rural Economy and Improve Livelihoods in Rural Space VIII

Agricultural entrepreneurial income EU PMEF (I.2/C.25)

Agricultural factor income per annual work unit (AWU) EU PMEF (I.3/C.24)

Evolution of agricultural income in areas with natural constraints (compared to the average) EU PMEF (I.5/C.26)

Turnover of the bioeconomy sector as percent of GDP JRC-DataM

Evolution of GDP per head in predominantly rural areas EU PMEF (I.23/C.09)

IV. Stimulate Agri-Food Innovation Cross-Cutting

European Innovation Scoreboard EIS

8. Results Monitoring Framework

51

Specific Objective Indicators

Indicator Name Reference/SourceLink(s) to

Critical Needs

1.1. Increase farm efficiency and value addition 1, 10, 11, 12, 13, 14, 15

Value added in agriculture EU PMEF (I.8/C.11)

Value added for primary producers in the food chain EU PMEF (I.8/C.11)

Farm Net Value Added (FNVA) EU PMEF (I.4/C.26)

1.2. Improve the sustainable management of soils, water, and biodiversity 2, 4, 9, 13, 14, 15

% of UAA under Natura 2000 EU PMEF (C.19)

Farmland Bird Index EU PMEF (I.18/C.35)

Percentage of species and habitats of Community interest related to agriculture with stable or increasing trends

EU PMEF (I.19/C.36)

Share of UAA covered with landscape features EU PMEF (I.20/C.21)

Agricultural area under organic farming EU PMEF (C.32)

Water exploitation index plus (WEI+) EU PMEF (I.17/C.37)

Gross nutrient balance on agricultural land (Phosphorus/Nitrogen) EU PMEF (I.15/C.38)

Nitrates in ground water EU PMEF (I.16/C.38)

Percentage of land in moderate and severe soil erosion on agricultural land/soil erosion by water

EU PMEF (I.13/C.40)

1.3. Reduce climate change vulnerabilities and promote low emissions production 2, 4, 9, 12, 13, 14, 15

Production of renewable energy from agriculture EU PMEF (I.21/C.41)

GHG emissions from agriculture + GHG emissions and removals from LULUCF EU PMEF (I.10/C.43)

Total soil organic carbon content in soils on agricultural land EU PMEF (I.11/C.39)

Ammonia emissions from agriculture EU PMEF (I.14/C.46)

1.4. Ensure higher and less volatile incomes for smaller producers 1, 2, 3, 4, 5, 6, 8, 14, 15

Improve the distribution of CAP support EU PMEF (I.24)

% variation of the index of agricultural factor income per AWU compared to the last 3-year average

EU PMEF (I.3./C.24)

2.1. Expand and diversify markets for Croatian agri-food products 1, 2, 6, 7, 8, 9, 14, 15

Agri-food exports EU PMEF (I.7/C.30)

Value of production under EU quality schemes EU PMEF (I.28/C.34)

2.2. Integrate MSMEs and young farmers in agri-food value chains 3, 5, 6, 7, 8, 9, 11, 14, 15

Evolution of number of new farm managers including new young farm managers. EU PMEF (I.21/C.16)

Number of new SMEs per year CBS

2.3. Facilitate producer access to strategic market segments 1, 2, 6, 7, 8, 9, 10, 14, 15

Antibiotic sales/use in food producing animals EU PMEF (I.26/C.47)

Risk and impacts of pesticides EU PMEF (I.27/C.48)

2.4. Facilitate access to agricultural land 1, 4, 7, 8, 11, 14, 15

Total utilized agricultural area (UAA) in absolute terms (ha) and as the share of UAA in different categories of land cover

EU PMEF (C.17)

3.1. Reduce rural poverty1, 3, 7, 8, 10, 12, 13, 14, 15

52

Evolution of Poverty Index in rural areas EU PMEF (I.25/C.10)

Number of women whose livelihoods and incomes were improved. WB

3.2. Generate more and better jobs in rural areas1, 6, 7, 8, 10, 12, 13, 14, 15

Evolution of the employment rate in predominantly rural areas EU PMEF (I.22/C.06)

Labor force directly employed by the agricultural holding and working regularly, in persons and in Annual Work Units (AWU).

EU PMEF (C.13)

Share of people employed in the food industry and bioeconomy CBS

3.3. Accelerate the transition to a smart and green rural economy1, 2, 4, 7, 8, 9, 10, 12, 13, 14, 15

Gross fixed capital formation in agriculture EU PMEF (C.27)

Increase the output of the food and bio-economy sectors CBS

4.1. Mobilize more public and private investments in RDI in agri-food and rural businesses 1, 5, 7, 12, 14, 15

Share of CAP budget for knowledge sharing and innovation EU PMEF (I.1)

4.2. Improve technology transfer to farms, agribusinesses, as well as other sectors and the rural population

1, 2, 6, 7, 9, 14, 15

Number of advisors integrated within AKIS (compared to total number of farmers) EU PMEF (R.1)

Intermediate Results Indicators by Critical Need

Indicator NameReference/Source

Link(s) to Interventions

Critical Need 1. Increase value-added of agricultural productionA.1, A.3, B.2, B.3, B.4, C.1, C.2, C.3, C.4, E.2, E.3., E.4, F.1, F.2, F.4

Production of animal products EUROSTAT

Production of fruit primary EUROSTAT

Production of vegetables primary EUROSTAT

Production of oil crops EUROSTAT

Organic crop production by crops EUROSTAT

Organic livestock of animals EUROSTAT

Organic production of animal products EUROSTAT

Investments in renewable energy production capacity, including bio-based (MW) EU PMEF (R.15)

Critical Need 2. Improve environmental sustainability of farming practicesA.1, A.2, A.3, B1, B.2, B.3, B.4, C.3, E.2, F.1, F.2, F.3, F.4

Share of agricultural land covered by supported action which lead to a sustainable use of pesticides in order to reduce risks and impacts of pesticide

EU PMEF (R.37)

Share of agriculture land under commitments for managing landscape features, including hedgerows

EU PMEF (R.29)

Share of agricultural land under management commitments supporting biodiversity conservation or restoration

EU PMEF (R.27)

Area in Natura 2000 sites under commitments for protection, maintenance and restoration

EU PMEF (R.28)

Area supported for tree planting and creation of woodland, including agro-forestry EU PMEF (R.17)

53

Share of irrigated land under commitments to improve water balance EU PMEF (R.22)

Share of agricultural land under management commitments for water quality EU PMEF (R.20)

Share of farmers with support in investments related to care for the environment or climate EU PMEF (R.23)

Share of agricultural land under management commitments beneficial for soil management

EU PMEF (R.18)

Share of agricultural land under commitments to reducing emissions, maintaining and/or enhancing carbon storage (permanent grassland, agricultural land in peatland, forest, etc.)

EU PMEF (R.14)

Share of agricultural land under commitments to improve climate adaptation EU PMEF (R.12)

Share of agricultural land under commitments related to improved nutrient management EU PMEF (R.21)

Share of agricultural land under commitments to reduce ammonia emission EU PMEF (R.19)

Share of livestock units covered by supported action to limit the use of antibiotics (prevention/reduction)

EU PMEF (R.36)

Share of livestock units covered by supported action to improve animal welfare EU PMEF (R.38)

Share of livestock units under support to reduce GHG emissions and/or ammonia, including manure management

EU PMEF (R.13)

Direct use of energy in agriculture and food processing EU PMEF (C.42)

Energy savings in agriculture EU PMEF (R.16)

Critical Need 3. Improve equity in the distribution of farm support A.2, A.3, D.3, D.4

Percentage additional support per hectare for eligible farms below average farm size (compared to average)

EU PMEF (R.6)

Percentage additional support per hectare in areas with higher needs (compared to average) EU PMEF (R.7)

Share of farmers benefitting from coupled support for improving competitiveness, sustainability or quality

EU PMEF (R.8)

Number of people from minority and/or vulnerable groups benefitting from supported social inclusion projects

EU PMEF (R.35)

Critical Need 4. Improve correspondence between production systems and agroecological zones characteristics

A.3, B.1, B.2, B.3, B.4, E.2, F.1, F.2, F.3

Share of agricultural area in different categories of areas facing natural or other specific constraints (ANCs)

EU PMEF (C.20)

Utilized agricultural area (UAA) that is farmed with low, medium or high input intensity EU PMEF (C.33)

Livestock density EU PMEF (C.23)

Critical Need 5. Improve the use and effectiveness of risk management instrumentsA.1, A.3, B.1, B.2, B.3, B.4, C.1, C.2, C.4, D.3, D.4, F.2, F.3

Share of farms with CAP risk management tools EU PMEF (R.5)

Critical Need 6. Strengthen market linkages in the agri-food sector, including supply aggregation

A.1, C.1, C.2, C.3, C.4, D.2, E.1, F.2, F.3

Share of farmers participating in supported Producer Groups, Producer Organizations, local markets, short supply chain circuits and quality schemes

EU PMEF (R.10)

Share of value of marketed production by Producer Organizations with Operational Programs

EU PMEF (R.11)

Critical Need 7. Improve entrepreneurial capacity and opportunities of agri-food producersA.2, C.1, C.2, C.3, C.4, D.1, D.2, D.3, D.4, E.2, E.3, F.3

Number of young farmers setting up a farm with support from the CAP EU PMEF (R.30)

Number of existing women producers and entrepreneurs supported (for market linkages, access to strategic value chains, access to finance, business development support

WB

54

Number of new women producers and entrepreneurs supported to access markets, finance, skills, business development support services

WB

Number of bioeconomy businesses developed with support EU PMEF (R.32)

New jobs in supported projects EU PMEF (R.31)

Critical Need 8. Improve the enabling environment to respond to agri-food demands of consumers

B.2, C.1, C.2, C.3, C.4, D.1, D.2, D.3, D.4, E.1, F.1, F.2, F.3

Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system (Ease of Doing Business)

WB

Logistics Performance Index WB

Critical Need 9. Improve the uptake of public and private agri-food quality schemesA.1, B.1, B.3, C.1, C.2, C.3, C.4, D.1, E.3, E.4, F.1, F.2,

Share of UAA covered by income support and subject to conditionality EU PMEF (R.4)

Critical Need 10. Improve labor skills in the agri-food chain C.1, C.3, E.4, F.1

Share of farm managers who have attained basic and full education levels in agriculture EU PMEF (C.15)

Participation rate of youth and adults in formal and non-formal education and training in the last 12 months

CBS-SDG

Number of women workers whose skills were enhanced WB

Critical Need 11. Improve the functionality of agricultural land markets B.2, D.1

Procedures, time and cost to transfer a property and the quality of the land administration system (Ease of Doing Business)

WB

Critical Need 12. Improve coordination and complementarity between interventions in rural areas, including basic service

C.4, E.1, E.2, E.3, E.4

Rural population covered by a supported Smart Villages strategy EU PMEF (R.33)

Number of women supported to link to agri-food tourism value chains WB

Critical Need 13. Improve public infrastructure for modernizing agricultural production C.4, E.1

Share of rural population benefiting from improved access to services and infrastructure through CAP support

EU PMEF (R.34)

Total irrigable land EU PMEF (C.18)

Critical Need 14. Facilitate capital investment focused on technology and innovationA.1, A.2, A.3, B.1, B.4, C.1, C.3, C.4, D.1, D.2, D.3, D.4, E.1, E.2, E.4, F.1, F.2, F.3, F.4

Share of farmers benefitting from support to precision farming technology through CAP EU PMEF (R.3)

Share of farmers receiving investment support to restructure and modernize, including to improve resource efficiency

EU PMEF (R.9)

Critical Need 15. Improve access to R&DI and uptake of knowledge and technology supporting decision-making and investments (including climate and sustainability)

B.2, C.1, C.2, C.3, E.1, E.2, E.4, F.1, F.2, F.3, F.4

Share of farmers receiving support for advice, training, knowledge exchange, or participation in operational groups to enhance economic, environmental, climate and resource efficiency performance.

EU PMEF (R.1)

Share of farmers receiving support for advice/training related to environmental- climate performance

EU PMEF (R.24)

55

9. Annexes

56

I. IN

CR

EASE

TH

E PR

OD

UC

TIV

ITY

AN

D C

LIM

ATE

RES

ILIE

NC

E O

F A

GR

ICU

LTU

RA

L PR

OD

UC

TIO

N

Cri

tica

l Nee

ds

Spec

ific

Inte

rven

tio

ns

1.

Incr

ease

val

ue

adde

d of

ag

ricu

ltur

al

prod

ucti

on

2.

Impr

ove

envi

ronm

enta

l su

stai

nabi

lity

of

farm

ing

prac

tice

s

3.

Impr

ove

equi

ty in

th

e di

stri

buti

on o

f fa

rm s

uppo

rt

4.

Impr

ove

corr

espo

nden

ce

betw

een

prod

ucti

on s

yste

ms

and

agro

-eco

logi

cal z

ones

ch

arac

teri

stic

s

5.

Impr

ove

the

use

and

effe

ctiv

enes

s of

ris

k m

anag

emen

t in

stru

men

ts

A.1.

Pr

omot

e in

vest

men

ts in

pro

duct

ive

asse

ts, t

echn

olog

ies,

and

inno

vatio

ns

by fa

rmer

s an

d ag

ribus

ines

ses

ll

l

A.2.

Re

dist

ribut

e in

com

e su

ppor

t tow

ards

sm

all a

nd m

ediu

m-s

ized

pro

duce

rs,

wom

en a

nd y

oung

farm

ers

ll

A.3.

St

reng

then

par

ticip

ator

y, ge

nder

-sen

sitiv

e, a

nd e

vide

nce-

base

d pl

anni

ng,

mon

itorin

g, a

nd e

valu

atio

n sy

stem

sl

ll

ll

B.1.

Re

war

d co

ntin

uous

impr

ovem

ent i

n en

viro

nmen

t-, c

limat

e-, a

nd a

nim

al-

frien

dly

prac

tices

and

sol

utio

ns in

agr

icul

tura

l pro

duct

ion

syst

ems

ll

l

B.2.

Im

prov

e ac

cess

to e

nviro

nmen

tal a

nd a

gro-

clim

atic

dat

a fo

r pub

lic a

nd

agri-

food

cha

in a

ctor

sl

ll

l

B.3.

Ex

pand

the

conv

ersi

on to

war

ds o

rgan

ic a

nd a

gro-

ecol

ogic

al p

rodu

ctio

n sy

stem

s l

ll

l

B.4.

Im

prov

e th

e ac

cess

to ir

rigat

ion

wat

er a

nd e

ffici

ency

of i

ts u

se fo

r pr

oduc

ers

ll

ll

C.1.

St

imul

ate

prod

uctiv

e pa

rtne

rshi

ps b

etw

een

prod

ucer

s an

d bu

yers

in

shor

t sup

ply

chai

nsl

l

C.2.

Im

prov

e or

gani

zatio

nal c

apac

ities

in h

igh

valu

e ag

ri-fo

od c

hain

s

ll

C.3.

St

reng

then

sup

port

mec

hani

sms

for p

rodu

cers

to c

ompl

y w

ith p

ublic

and

pr

ivat

e fo

od s

afet

y, qu

ality

, and

SPS

sta

ndar

dsl

l

C.4.

Fa

cilit

ate

the

deve

lopm

ent o

f agr

i-foo

d lo

gist

ics

hubs

ll

D.3.

Ta

ilor r

isk

man

agem

ent i

nstr

umen

ts to

war

ds th

e ne

eds

of s

mal

ler a

nd

med

ium

-siz

ed p

rodu

cers

and

agr

i-bus

ines

ses

l

l

D.4.

Su

ppor

t ent

repr

eneu

rs (i

nclu

ding

you

th a

nd w

omen

) in

star

ting

new

fa

rms

and

agrib

usin

esse

sl

l

E.2.

Im

plem

ent a

nat

iona

l circ

ular

bio

-eco

nom

y pl

anl

ll

E.3.

Pr

omot

e ag

ri-fo

od d

estin

atio

n to

uris

ml

E.4.

Pr

ovid

e sk

ills

deve

lopm

ent o

ppor

tuni

ties

to ru

ral w

orke

rs, p

artic

ular

ly

youn

g pe

ople

and

wom

en, i

n lin

e w

ith a

gri-f

ood

sect

or n

eeds

l

F.1.

Esta

blis

h st

rong

er li

nkag

es b

etw

een

publ

ic a

nd p

rivat

e ad

viso

rs a

nd

scie

ntifi

c in

stitu

tions

l

ll

F.2.

Deve

lop

a Ce

ntra

l Agr

icul

ture

Info

rmat

ion

Syst

em a

nd K

now

ledg

e Hu

b l

ll

l

F.3.

Digi

tize

know

ledg

e flo

ws

betw

een

publ

ic a

nd p

rivat

e AK

IS a

ctor

s l

ll

F.4.

Enco

urag

e in

nova

tion

part

ners

hips

bet

wee

n pr

oduc

ers,

advi

sors

, ag

ribus

ines

ses,

and

scie

ntifi

c in

stitu

tions

ll

An

nex

I:

Lin

kage

s be

twee

n I

nte

rven

tion

s, C

riti

cal N

eeds

, an

d St

rate

gic

Obj

ecti

ves

57

II. S

TREN

GTH

EN T

HE

CO

MPE

TITI

VEN

ESS

OF

THE

AG

RI-

FOO

D S

YST

EM

Cri

tica

l Nee

ds

Spec

ific

Inte

rven

tio

ns

6.

Stre

ngth

en m

arke

t lin

kage

s in

agr

i-foo

d,

incl

udin

g su

pply

ag

greg

atio

n

7.

Impr

ove

entr

epre

neur

ial

capa

city

and

opp

ortu

nitie

s of

agr

i-foo

d pr

oduc

ers

8.

Impr

ove

the

enab

ling

envi

ronm

ent

to r

espo

nd

to a

gri-f

ood

dem

ands

of

cons

umer

s

9.

Impr

ove

the

upta

ke o

f pub

lic

and

priv

ate

agri

-foo

d qu

alit

y sc

hem

es

10. I

mpr

ove

labo

r sk

ills

in t

he

agri

-foo

d ch

ain

11. I

mpr

ove

the

func

tion

alit

y of

ag

ricu

ltur

al la

nd

mar

kets

A.1.

Pr

omot

e in

vest

men

ts in

pro

duct

ive

asse

ts,

tech

nolo

gies

, and

inno

vatio

ns b

y fa

rmer

s an

d ag

ribus

ines

ses

ll

A.2.

Re

dist

ribut

e in

com

e su

ppor

t tow

ards

sm

all a

nd

med

ium

-siz

ed p

rodu

cers

, wom

en a

nd y

oung

farm

ers

l

B.1.

Re

war

d co

ntin

uous

impr

ovem

ent i

n en

viro

nmen

t-,

clim

ate-

, and

ani

mal

-frie

ndly

pra

ctic

es a

nd s

olut

ions

in

agr

icul

tura

l pro

duct

ion

syst

ems

l

B.2.

Im

prov

e ac

cess

to e

nviro

nmen

tal a

nd a

gro-

clim

atic

da

ta fo

r pub

lic a

nd a

gri-f

ood

chai

n ac

tors

ll

B.3.

Ex

pand

the

conv

ersi

on to

war

ds o

rgan

ic a

nd a

gro-

ecol

ogic

al p

rodu

ctio

n sy

stem

s l

C.1.

St

imul

ate

prod

uctiv

e pa

rtne

rshi

ps b

etw

een

prod

ucer

s an

d bu

yers

in s

hort

sup

ply

chai

nsl

ll

ll

C.2.

Im

prov

e or

gani

zatio

nal c

apac

ities

in h

igh

valu

e ag

ri-fo

od c

hain

s

ll

ll

C.3.

St

reng

then

sup

port

mec

hani

sms

for p

rodu

cers

to

com

ply

with

pub

lic a

nd p

rivat

e fo

od s

afet

y, qu

ality

, an

d SP

S st

anda

rds

ll

ll

l

C.4.

Fa

cilit

ate

the

deve

lopm

ent o

f agr

i-foo

d lo

gist

ics

hubs

ll

ll

D.1.

Re

duce

the

adm

inis

trat

ive

and

regu

lato

ry b

urde

ns

faci

ng p

rodu

cers

and

agr

i-bus

ines

ses

ll

ll

D.2.

Le

vel t

he fi

scal

pla

ying

fiel

d fo

r Cro

atia

n pr

oduc

ers

and

agri-

busi

ness

esl

ll

D.3.

Ta

ilor r

isk

man

agem

ent i

nstr

umen

ts to

war

ds th

e ne

eds

of s

mal

ler a

nd m

ediu

m-s

ized

pro

duce

rs a

nd

agri-

busi

ness

es

ll

D.4.

Su

ppor

t ent

repr

eneu

rs (i

nclu

ding

you

th a

nd w

omen

) in

sta

rtin

g ne

w fa

rms

and

agrib

usin

esse

sl

l

E.1.

Im

prov

e th

e m

arke

t con

nect

ivity

of r

ural

are

asl

l

E.2.

Im

plem

ent a

nat

iona

l circ

ular

bio

-eco

nom

y pl

anl

E.3.

Pr

omot

e ag

ri-fo

od d

estin

atio

n to

uris

ml

l

E.4.

Pr

ovid

e sk

ills

deve

lopm

ent o

ppor

tuni

ties

to ru

ral

wor

kers

, par

ticul

arly

you

ng p

eopl

e an

d w

omen

, in

line

with

agr

i-foo

d se

ctor

nee

dsl

l

F.1.

Esta

blis

h st

rong

er li

nkag

es b

etw

een

publ

ic a

nd

priv

ate

advi

sors

and

sci

entifi

c in

stitu

tions

l

ll

F.2.

Deve

lop

a Ce

ntra

l Agr

icul

ture

Info

rmat

ion

Syst

em

and

Know

ledg

e Hu

b l

ll

F.3.

Digi

tize

know

ledg

e flo

ws

betw

een

publ

ic a

nd

priv

ate

AKIS

act

ors

ll

l

58

III. R

ENEW

TH

E R

UR

AL

ECO

NO

MY

AN

D IM

PRO

VE

LIV

ELIH

OO

DS

IN R

UR

AL

SPA

CE

Cri

tica

l Nee

ds

Spec

ific

Inte

rven

tio

ns

12. I

mpr

ove

coor

dina

tion

and

com

plem

enta

rity

be

twee

n in

terv

enti

ons

in r

ural

are

as, i

nclu

ding

ba

sic

serv

ices

13. I

mpr

ove

publ

ic in

fras

truc

ture

for

mod

erni

zing

ag

ricu

ltur

al p

rodu

ctio

n

C.4.

Fa

cilit

ate

the

deve

lopm

ent o

f agr

i-foo

d lo

gist

ics

hubs

ll

E.1.

Im

prov

e th

e m

arke

t con

nect

ivity

of r

ural

are

asl

l

E.2.

Im

plem

ent a

nat

iona

l circ

ular

bio

-eco

nom

y pl

anl

E.3.

Pr

omot

e ag

ri-fo

od d

estin

atio

n to

uris

ml

E.4.

Pr

ovid

e sk

ills

deve

lopm

ent o

ppor

tuni

ties

to ru

ral w

orke

rs, p

artic

ular

ly y

oung

peo

ple

and

wom

en, i

n lin

e w

ith a

gri-

food

sec

tor n

eeds

l

59

IV. S

TIM

ULA

TE A

GR

I-FO

OD

INN

OV

ATI

ON

Cri

tica

l Nee

ds

Spec

ific

Inte

rven

tio

ns

14. F

acili

tate

cap

ital

inve

stm

ent

focu

sed

on

tech

nolo

gy a

nd in

nova

tion

(Cro

ss-C

utti

ng)

15. I

mpr

ove

acce

ss t

o R&

DI a

nd u

ptak

e of

kn

owle

dge

and

tech

nolo

gy s

uppo

rtin

g de

cisi

on-

mak

ing

and

inve

stm

ents

(inc

ludi

ng c

limat

e an

d su

stai

nabi

lity)

(Cro

ss-C

utti

ng)

A.1.

Pr

omot

e in

vest

men

ts in

pro

duct

ive

asse

ts, t

echn

olog

ies,

and

inno

vatio

ns b

y fa

rmer

s an

d ag

ribus

ines

ses

l

A.2.

Re

dist

ribut

e in

com

e su

ppor

t tow

ards

sm

all a

nd m

ediu

m-s

ized

pro

duce

rs, w

omen

and

you

ng fa

rmer

sl

A.3.

St

reng

then

par

ticip

ator

y, ge

nder

-sen

sitiv

e, a

nd e

vide

nce-

base

d pl

anni

ng, m

onito

ring,

and

eva

luat

ion

syst

ems

l

B.1.

Re

war

d co

ntin

uous

impr

ovem

ent i

n en

viro

nmen

t-, c

limat

e-, a

nd a

nim

al-fr

iend

ly p

ract

ices

and

sol

utio

ns in

agr

icul

tura

l pr

oduc

tion

syst

ems

l

B.2.

Im

prov

e ac

cess

to e

nviro

nmen

tal a

nd a

gro-

clim

atic

dat

a fo

r pub

lic a

nd a

gri-f

ood

chai

n ac

tors

l

B.4.

Im

prov

e th

e ac

cess

to ir

rigat

ion

wat

er a

nd e

ffici

ency

of i

ts u

se fo

r pro

duce

rsl

C.1.

St

imul

ate

prod

uctiv

e pa

rtne

rshi

ps b

etw

een

prod

ucer

s an

d bu

yers

in s

hort

sup

ply

chai

nsl

l

C.2.

Im

prov

e or

gani

zatio

nal c

apac

ities

in h

igh

valu

e ag

ri-fo

od c

hain

s

l

C.3.

St

reng

then

sup

port

mec

hani

sms

for p

rodu

cers

to c

ompl

y w

ith p

ublic

and

priv

ate

food

saf

ety,

qual

ity, a

nd S

PS s

tand

ards

ll

C.4.

Fa

cilit

ate

the

deve

lopm

ent o

f agr

i-foo

d lo

gist

ics

hubs

l

D.1.

Re

duce

the

adm

inis

trat

ive

and

regu

lato

ry b

urde

ns fa

cing

pro

duce

rs a

nd a

gri-b

usin

esse

sl

D.2.

Le

vel t

he fi

scal

pla

ying

fiel

d fo

r Cro

atia

n pr

oduc

ers

and

agri-

busi

ness

esl

D.3.

Ta

ilor r

isk

man

agem

ent i

nstr

umen

ts to

war

ds th

e ne

eds

of s

mal

ler a

nd m

ediu

m-s

ized

pro

duce

rs a

nd a

gri-b

usin

esse

s

l

D.4.

Su

ppor

t ent

repr

eneu

rs (i

nclu

ding

you

th a

nd w

omen

) in

star

ting

new

farm

s an

d ag

ribus

ines

ses

l

E.1.

Im

prov

e th

e m

arke

t con

nect

ivity

of r

ural

are

asl

l

E.2.

Im

plem

ent a

nat

iona

l circ

ular

bio

-eco

nom

y st

rate

gy a

nd in

vest

men

t pla

nl

l

E.4.

Pr

ovid

e sk

ills

deve

lopm

ent o

ppor

tuni

ties

to ru

ral w

orke

rs, p

artic

ular

ly y

oung

peo

ple

and

wom

en, i

n lin

e w

ith a

gri-f

ood

sect

or n

eeds

ll

F.1.

Esta

blis

h st

rong

er li

nkag

es b

etw

een

publ

ic a

nd p

rivat

e ad

viso

rs a

nd s

cien

tific

inst

itutio

ns

ll

F.2.

Deve

lop

a Ce

ntra

l Agr

icul

ture

Info

rmat

ion

Syst

em a

nd K

now

ledg

e Hu

b l

l

F.3.

Digi

tize

know

ledg

e flo

ws

betw

een

publ

ic a

nd p

rivat

e AK

IS a

ctor

s l

l

F.4.

Enco

urag

e in

nova

tion

part

ners

hips

bet

wee

n pr

oduc

ers,

advi

sors

, agr

ibus

ines

ses,

and

scie

ntifi

c in

stitu

tions

ll

60

Annex II: Cattle (Beef/Milk) Sub-Sector Analysis

Assets Constraints

• Unrestricted access to high value EU markets

• Significant EU funding for sub-sector investments available under the CAP

• Sufficient agricultural land (pasture and feed crops) and water resources available

• Relatively high average cattle density compared to other EU Member States

• High value autochthonous breeds (Busa, Istrian Cattle, Slavonian Syrmian Podolian), and good genetic quality of non-autochthonous breeds (Simmental, Holstein)

• Mixed production systems reduce exposure to negative price developments in single commodity

• Production unit enlargement, introduction of modern technologies and genotypes, and vertical supply chain integration deployed by large fattening and dairy operations

• Optional labeling system (“Meat from Croatian Farms”) operational for meat from animals that have been born, fattened, and slaughtered in Croatia

• Reduction of the national cattle herd by over 13% over the past 5 years with negative impact on calf numbers for beef production

• Large number of small cattle farms (68% holding less than 6 heads), whereas small number of large fattening and dairy operations account for the bulk of domestic production (20% of milk suppliers deliver over 80% of milk and 70% of fattened beef delivered by farms holding more than 1000 heads)

• Limited number of well-functioning producer organizations or cooperatives (five for milk, two for beef) despite strong CAP incentives.

• High dependency on land- and production-based (coupled) income support (for milk production, fattening beef, and suckler cows), which is distributed inequitably

• Limited labor availability

• Weak farm management and feeding practices among small cattle farms

• Limited access to pasture land, especially for small and medium-sized farmers, due to land classification and administration constraints

• Limited access to finance for working capital and long-term investments for small and medium-sized farmers

Potentials Risks

• Employment opportunities created by relatively labor-intensive processing of fresh meat and milk

• Growth in high value market segments in the EU, including organics, grass-fed beef, and processed (specialty/origin) dairy products (butter, cheese, yoghurt), as well as dairy importing countries outside the EU (Asia and Africa)

• Direct marketing of (fresh) meat and processed dairy products to high value local (urban) retail and growing tourism/hospitality sectors.

• Cow-calf/suckler cow farming and agri-tourism providing alternative income opportunities for small dairy farms

• Green growth opportunities generated through new renewable energy production, energy efficient technologies, and digital agriculture solutions

• Higher profits in alternative meat and dairy production systems such as (dairy) goat and sheep farming

• Increased ecosystem services generated by extensive cattle farming in high-ecological value landscapes

• Net trade deficit of 210,000 tons for milk (equivalent) and about 7,200 tons for beef (2015), and nearly half of fattening calves entering feedlots imported (128,000 in 2018)

• Competition from cost-competitive imports likely to intensify under future trade agreements (e.g. EU Mercosur, Australia, New Zealand)

• Low and volatile milk prices and declining per capital milk and beef consumption in the EU

• Rising input costs (primarily protein and mineral components of animal feed), including high import levels of animal fodder and fattening calves

• Compliance costs with stricter public environmental, animal welfare, food safety and hygiene, traceability, and agricultural GHG emissions reduction standards

61

Annex III: Pork Sub-Sector Analysis

Assets Constraints



• Long-standing tradition of pig breeding and associated feed crops

• High domestic consumption levels of pork meat (36 kg per capita, almost 12% above EU average)

• Developed pork processing industry

• High value autochthonous breeds (Black Slavonian, Turopolje, and Banija Spotted Pig), including a growing number of Black Slavonian sows, which are very adaptable to small-scale and low input production systems

• Wide range of specialty and origin products that are pork-based

• Optional labeling system (“Meat from Croatian Farms”) in place for meat from animals that have been born, fattened, and slaughtered in Croatia and steadily growing over the past 8 years

• Steady reduction of number of pigs over the past 10 years (136,000 sows in 2010 compared to 99,000 in 2018)

• Large number of small pig farms (2/3 of pig farms in Croatia own up to 10 sows and gilts), whereas 124 large pig farms (with more than 50 animals) account for more than ½ of the breeding herd

• Limited labor availability

• Unfavorable age and education structure, weak farm management, and limited use of modern technologies among small and medium-sized pig farms

• Limited access to finance for working capital and long-term investments for small and medium-sized farmers

• Unorganized/individual sales of fatteners and fattened pigs by small and medium-sized pig farmers (without a contract) to intermediaries/production aggregators due to lack of processing infrastructure as slaughterhouses mainly source from large farmers

• Scale of operations of smaller processors that produce specialty and origin products and source from small and medium-sized producers remains small (approximately 10% of processed pork on the Croatian market)

Potentials Risks

• Significant imports of piglets (700,000) and pig meat (70%) make a large market space for pig domestic production.

• Employment opportunities created by relatively labor-intensive processing of fresh meat

• Growth in high value market segments in the EU, including organics and processed (specialty/origin) meat products, as well as pork meat importing countries outside the EU (especially China)

• Direct marketing of fresh pork meat and processed (specialty/origin) pork meat products of autochthonous breeds to high value local (urban) retail and growing tourism/hospitality sector

• Agri-tourism providing alternative income opportunities for small pig farms working with autochthonous breeds

• Green growth opportunities generated through new renewable energy production, energy efficient technologies, and digital agriculture solutions

• Circular bio-economy opportunities in recycling food wastes, crop residues and by-products from food processing as feed stock for the pig sector

• Significant imports of pork meat with the trade deficit fluctuating between 203,000 and 372,000 tons over the past four years and the net trade deficit amounting to EUR 319.6 million in 2018, including imports of large quantities of specific pork categories by domestic meat processing industry

• Declining per capital pork meat consumption in the EU (in favor of poultry consumption)

• High input costs, including high import levels of fattening piglets (about 400,000 per year) by medium-sized pig farms and genetic materials (reproductive sows and boars) by large pig farms

• Spread of infectious diseases (e.g. African Swine Fever)

• Compliance costs with stricter public environmental, animal welfare, food safety and hygiene, traceability, and agricultural GHG emissions reduction standards

62

Annex IV: Cereal Sub-Sector Analysis

Assets Constraints

• Favorable agro-ecological conditions for growing cereal crops, which account for 60% of arable land (primarily maize (29.3%), wheat (16.9%), and barley (6.3%))

• Sufficient agricultural land and water resources available

• Long-standing tradition of growing cereal crops, which is concentrated mainly in Eastern Croatia (Slavonia and Baranja)



• Quality of cereal products comparable with EU competitors

• Mostly formal (i.e. contract-based) relationships between producers and buyers, including agricultural input financing arrangements and other support services

• Large number of small producers with fragmented land parcels

• Limited number of well-functioning producer organizations or cooperatives

• Cereal yield gap compared to EU-15 average despite average annual yield growth of 3.7% between 2013 and 2018

• Limited access to irrigation water

• Limited access to (public) agricultural land, especially for small and medium-sized farmers, due to land administration constraints.

• Except for wheat and malting barley, few value adding activities involving cereal crops as they are mainly used as animal feed

• Limited (on-farm) storage and (basic) processing capacity and dependency on small number of intermediaries/production aggregators (traders) and processors, in particular milling and livestock fattening operations

Potentials Risks

• Diversification into higher value cereal crops (triticale, spelt (dinkel) wheat, oats, millet, sorghum) and integration of industrial crops (rapeseed, soybeans, sunflower) as part of crop rotation systems

• Increasing cereal consumption per capita in the EU and globally

• Production of organic livestock feed lagging behind demand

• Climate mitigation and adaptation opportunities provided by climate smart agricultural practices (reduced/zero tillage management, crop rotation systems) and digital agriculture solutions (precision farming)

• Circular bio-economy opportunities in recycling crop residues (straw, corn stalks) as feed stock for renewable energy plants (e.g. biofuels) or other bio-based industries (e.g. bioplastics)

• Net exporter of primary cereals products, but net importer of processed (final) cereal products and competitive pressures from imports from other EU and non-EU countries (e.g. growing production from Black Sea region)

• Vulnerable to climate change impacts and risks as cereal product yield and quality highly dependent on agro-ecological (weather) conditions

• High input costs combined with low and variable (quality-driven) prices weaken margins for producers

• Compliance costs with stricter public environmental standards, in particular as regards the use of pesticides, fertilizers, and soil management

• Fungicide resistance and vulnerability to pests, diseases, and weeds in monocropping systems

63

Annex V: Vegetable Sub-Sector Analysis

Assets

• Favorable agro-ecological conditions for growing vegetable crops, especially thermophilic species

• Quality of vegetable products comparable with EU competitors


• Long-standing tradition of growing vegetable crops

• No large extensive agricultural land required for agricultural holdings to be economically viable and competitive

• Multi-crop rotation systems that preserve soil quality applied



• Well-established vegetable processing industry with considerable processing capacity to produce a diverse range of semi-processed and processed vegetable products

• Quality of Croatian vegetable processing industry recognized in regional markets

• Mostly formal (i.e. contract-based) relationships between producers and buyers, including the provision of agricultural input financing and other support services

Potentials

• Increased consumer demand for vegetable products driven by a growing tourism sector in the domestic market and shifting consumer preferences in other EU countries as demonstrated by the growth in high value market segments, including organics, specialty/origin products

• High and increasing domestic vegetable prices

• EU as a whole is a net importer of vegetables indicating potential opportunities for regaining market shares through product differentiation

• High profit margins for local producers of fresh convenience products

• Diversify small and medium-sized producers of low value cereal and industrial crops toward fresh vegetable production

• Employment opportunities created by relatively labor-intensive production and processing of fresh vegetables

• Direct marketing of fresh vegetable to high value tourism/hospitality and local (urban) retail sectors by organized producers (especially as the entry of foreign retail chains creates new potential market outlets)

• Climate mitigation and adaptation opportunities provided by organic and climate smart agricultural practices (tillage management, crop rotation) and digital agriculture solutions (precision farming)

• Circular bio-economy opportunities created by hydroponic greenhouse production systems as demonstrated by the growing number of hydroponic producers in Croatia (mainly tomato, bell pepper, cucumber, and lettuce)

Constraints

• National agricultural production structure biased towards cereals and industrial crop production (only about 0.6 % of total arable land and just over 1.5% of agricultural holdings engaged in vegetable production)

• Unfavorable education structure, weak entrepreneurial and marketing capacity, and limited use of modern technologies

• Limited access to finance for working capital and long-term investments for small and medium-sized producers

• Limited access to irrigation water (no established irrigation system on more than 90% of holdings)

• Average vegetable yields remain below those obtained in competitor countries in the EU (Spain, Italy, France)

• Organic vegetable production underdeveloped, and few value adding activities undertaken by producers

• Small producers (s.o. 8,000 – 50,000 EUR) account for the majority (around 77.5%) of vegetable producers in Croatia

• Limited number of well-functioning producer organizations or cooperatives generating marketable volumes

• Unorganized marketing and distribution, including underdeveloped cold chain logistics infrastructure and services

• Limited labor availability (both permanent and seasonal workers)• Small number of intermediaries/production aggregators (traders) and processors

dominating the market (with intermediaries collecting around 70% of total production), which produces imbalanced supply chain relationships

• Excessively long payment terms for many suppliers to the distressed Agrokor/Fortenova Group, which represents about 30% of the national vegetable market

• Food processing industry dependent on imported fresh vegetables due to insufficient availability of domestic products (importing up to 90% from EU and other neighboring countries)

Risks

• Competitive pressures from imports from other EU and non-EU countries as demonstrated by the growing trade deficit over the last five years (with the net import value of vegetables amounting to EUR 102.9 million in 2018)

• Increased use of international quality standards (e.g. GLOBAL GAP) by processors and retailers domestically and in export markets

• High cost of imported inputs (combined with overhead costs and imbalanced supply chain relationships) weakens margins for producers, in particular seeds and fertilizers

• Vulnerable to climate change impacts and risks as open field production systems still dominate the sub-sector

• Compliance costs with stricter public environmental standards, in particular as regards the use of pesticides, fertilizers, and soil management.

64

Annex VI: Fruit Sub-Sector Analysis

Assets

• Favorable agro-ecological conditions for growing a diverse range of fruits




• Increasing number of intensive orchards and larger producers

Potentials

• Shifting consumer preferences in other EU countries as demonstrated by the growth in high value market segments, including specialty/origin products and organic products

• Growing tourism sector provides direct marketing opportunities

• Strengthen competitive position by growing early and mid-early ripening (autochthonous) fruit varieties (apple, pear, peach, apricot, and plum)

• High profit margins for local producers of fresh convenience products

• Employment opportunities created by relatively labor-intensive production and processing of fruit

• Climate adaptation and mitigation opportunities provided by organic and climate smart agricultural practices (soil management, pruning, drip irrigation) and digital agriculture solutions (precision farming)

• Integration of complementary agricultural production systems in fruit growing (e.g. beekeeping)

• Circular bio-economy opportunities created by by-products/waste of fruit production and processing (peel, stone pits, pruned fruit biomass)

Constraints

• Lack of regionalization of fruit production in line with agro-ecological conditions contributes to sub-optimal yields for most fruit species and variable product quality levels that undermines product selling price

• Dependence on imported plant material of standard varieties due to a lack of quality fruit seedlings from local nurseries (including for production of certified reproductive material), which contribute to fruit species that are poorly adapted to agro-ecological conditions as well as the needs in strategic market segments (fresh vs processed)

• No targeted production of fruit varieties for processing (juices, marmalades, compotes etc.); instead table varieties are used

• Relatively low per capita consumption of fruit in Croatia compared to the EU average• Small producers dominate the fruit production structure • Unfavorable education and age structure, weak entrepreneurial and marketing capacity, and limited

use of modern technologies (e.g. tall greenhouses) by producers• Limited access to irrigation water • High investment cost for starting a fruit plantation combined with limited access to finance for working

capital and long-term investments for small and medium-sized producers• Relatively high consumption of pesticides (approximately 18 % of total consumption of pesticides in

Croatia) and a number of pesticides for certain species not registered in Croatia• Organic fruit production underdeveloped; fruit processing industry dependent on imported organic

fruit due to insufficient availability of domestic products• Few investments in value adding activities undertaken by small fruit producers (e.g. cold storage,

processing, branding/marketing etc.)• Insufficient producer organizations or cooperatives generating marketable volumes (there are

currently four recognized producer organizations, which bring together 72 producers and represent a total value of marked production of only HRK 9.14 million)

• Underdeveloped cold chain logistics infrastructure and services (sorting, storage, processing, packaging, distribution), which is critical to extend the period of supply to the market beyond the regular harvest season

• Limited labor availability (both permanent and seasonal workers), including lack of skills (e.g. pruning, harvesting, application of new technologies etc.)

Risks

• Competitive pressures from imports from other EU and non-EU countries (annual net trade deficit of around 130,000 ton)

• Vulnerable to climate change impacts and risks (e.g. extreme weather events such prolonged periods of drought, frost, hail etc.)

• Vulnerable to newly emerging pests and diseases


65

Annex VII: Grapes and Wine Sub-Sector Analysis

Assets Constraints

• Favorable agro-ecological conditions for growing a diverse range of grapes and wines, including organic wines

• Numerous autochthonous grape varieties 151 of which 82 are kept in the national collection or in certified nurseries owned by the Agriculture Faculty of the University of Zagreb


• Long-standing tradition of growing grapes and wine



• Low rate of vineyard renewal leads to a decrease in the total area under vineyards and a high average age of the vineyards (20% of vineyards are over 30 years old)

• Lack of systematic clonal and sanitary selection of the planting material (between 30-40% of total grape planting material is certified and barely 0.05% of grape plating material for autochthonous varieties), which contributes to prevalence of disease in vineyards that cultivate autochthonous grape varieties

• Small producers dominate Croatia’s grape production structure (45.8% have an area of less than 0.5 ha)

• Unfavorable education and age structure, weak entrepreneurial and marketing capacity, and limited use of modern technologies by producers

• High investment cost for starting a grape and/or wine production business combined with limited access to finance for working capital and long-term investments for small and medium-sized producers


• Organic wine production underdeveloped and few investments in value adding activities undertaken by small grape producers (e.g. processing, storage, branding/marketing etc.)

• Mostly informal relationships (“grey market”) between producers and buyers

• Limited number of well-functioning producer organizations or cooperatives generating marketable volumes

• Underdeveloped cold chain logistics infrastructure and services for table grapes, which is critical to extend the period of supply to the market beyond the regular harvest season

• Limited labor availability (both permanent and seasonal workers)

• Small number of large wineries dominating the market, which produces imbalanced supply chain relationships with the large number of grape producers

• Outdated land registers or unclear ownership of vineyards and land limiting access to investment support and further expansion of wine-growing areas (in particular in Northwestern Croatia, Istria, Kvarner and Dalmatia)

• Limited recognition of Croatian wines on both EU and non-EU markets

Potentials Risks

• Growing tourism sector provides direct marketing opportunities for earlier ripening varieties of table grapes and autochthonous wines as well as income diversification opportunities through wine destination tourism

• Shifting consumer preferences in other EU countries as demonstrated by the growth in high value market segments, including specialty/origin products and organic wines

• Employment opportunities created by relatively labor-intensive production of grapes

• Climate adaptation and mitigation opportunities provided by organic and climate smart agricultural practices (soil management, pruning, drip irrigation) and digital agriculture solutions (precision farming)

• Circular bio-economy opportunities created by by-products of grape and wine production

• Relatively low price of grapes and high labor cost weakens margins for grape producers

• Competitive pressures from imports from other EU and non-EU countries (e.g. grape imports from North Macedonia)

• Vulnerable to climate change impacts and risks (e.g. extreme weather events such prolonged periods of drought, excessive rainfall, hail etc.)


66

Annex VIII: Industrial Crops Sub-Sector Analysis

Assets Constraints

• Favorable agro-ecological conditions for growing industrial crops

• Sufficient agricultural land and water resources available, including approximately 500,000 ha of degraded/neglected agricultural land that could be revitalized through industrial crops that thrive in low fertility soil (e.g. miscanthus x giganteus)

• Long-standing tradition of growing and processing a number of industrial crops, in particular sugar beet (concentrated mainly in Central and Eastern Croatia), rapeseed, and industrial hemp (until the 1990s)

• Positive growth for key industrial crops in recent years in Croatia, in particular rapeseed and industrial hemp production



• Small producers relatively well organized in producer organizations compared to other sub-sectors (except for lignocellulosic biomass producers)

• Mostly formal (i.e. contract-based) relationships between producers and buyers, including the provision of agricultural input financing and other support services

• Industrial crop production tends to be capital intensive with a few large companies dominating the sub-sector (e.g. sugar beet)

• Wide crop rotation required to maintain soil health

• Large number of small producers with fragmented land parcels (in particular for sugar beet)

• Declining production and yield gaps compared to EU-15 average despite average annual yield growth for sugar beet


• Small number of intermediaries/production aggregators (traders) and processors dominating the market, in particular for sugar beets and rapeseed, which produces imbalanced supply chain relationships

• Limited use of intermediates, by-products, and waste from processing industrial crops

• Underdeveloped national market and limited (specialized) harvesting and processing capacities for newly emerging industrial crops (e.g. industrial hemp, rapeseed, lignocellulosic biomass energy crops), which contribute to exports of unprocessed products (e.g. hemp seeds, rapeseeds)

• High cost and limited availability of quality planting material for lignocellulosic biomass energy crops such as miscanthus x giganteus as well as lack of producer knowledge and experience with cultivating these crops

Potentials Risks

• Important EU and national regulatory reforms recently implemented, in particular EU sugar quotas abolished (in 2017), new EU renewable energy targets (2018 RED II Directive) limiting the use of conventional crop-based biofuels and increasing the share of advanced biofuels (using lignocellulosic biomass) by 2030, and use of whole industrial hemp plant allowed for industrial production (in 2019).

• Growth opportunities in EU market segments (e.g. organic livestock feed, advanced biofuel) and non-EU markets (e.g. increasing sugar consumption in the world market)

• Climate mitigation and adaptation opportunities provided by organic and climate smart agricultural practices (tillage management, crop rotation) and digital agriculture solutions (precision farming)

• Industrial crops well-suited for inclusion in crop rotation systems applied in the cereal sub-sector (maize, wheat) by both small and large producers, especially rapeseed (particularly with wheat) as it is winter grown, requires limited investment, and thrives in low fertility soil.

• A broad range of circular bio-economy opportunities in using intermediates, (by-)products, and waste of industrial crop production and processing as feedstock for livestock operations (e.g. sugar beet molasses/cossettes, rape cake/meal); renewable energy plants producing biodiesel (e.g. rapeseed oil), biogas (e.g. sugar beet pulp/silage), bioethanol (e.g. sugar beet juices/molasses/pulp), and heat and electricity (e.g. biomass energy crops); and other bio-based industries such as health, nutrition, and cosmetics (e.g. hemp seed oil/protein/flour)

• Competitive pressures from imports from other EU and non-EU countries (e.g. negative trade balance for sugar)

• Low market prices and margins for producers, especially for sugar (in the first years following the abolition of the quota regime) and rapeseed (when compared to other oil seeds such as sunflower seed, pumpkin seed, soybean)

• Downward demand pressures for a number of industrial crops in the EU, in particular declining sugar consumption and weak consumer interest in rapeseed oil

• Vulnerable to climate change impacts and risks as product yield and quality highly dependent on agro-ecological (weather) conditions

• Fungicide resistance and vulnerability to pests, diseases, and weeds in monocropping systems (e.g. leaf spot disease in sugar beets)


• Loss of honeybees and other beneficial insects due to uncontrolled pesticide use

67

68

Documents

A Vision and Roadmap for the Strategic Transformation of ... · Agri-food sector stakeholders in Croatia have converged on a vision for agriculture to “ produce more and high quality