Sector at a Glance: The Georgian Sheep Market

Back in 2015, the Georgian sheep market was in the spotlight due to the increased demand for sheep from Arabic countries. Prior to 2015, Azerbaijan was the most important export destination for live sheep, while in 2015, in addition to Azerbaijan, Georgian sheep were exported to the United Arab Emirates, Jordan, Lebanon and Saudi Arabia. Current trends in the trade data show that exports of live sheep are decreasing, while exports of sheep meat are on the rise, which is a sign of sheep market development and increased potential for higher value added in the sheep value chain.

While generally switching from primary exports to more value addition is good news for the sector, the imports of live sheep and sheep meat dramatically increased in 2018, which might negatively affect domestic production. Particularly dangerous is re-export of sheep meat which requires strict control to ensure that imported foreign sheep meat is not re-exported as Georgian sheep meat. In the absence of control, there are food safety related risks which might adversely affect domestic sheep farmers and Georgia’s relations with its trade partners as well.

DOMESTIC PRICES

Month-on-month prices went almost unchanged in the category of food and non-alcoholic beverages (-0.1%). Compared to September 2017, the prices of food and non-alcoholic beverages increased by 1.8%, contributing 0.55 percentage points to the annual inflation rate. In September 2018, prices for fruit and grapes dropped by 9.9% compared to September 2017. According to Geostat data, prices declined mostly for plums (-35%), kiwi (-32%), apples (-24%), pears (-17%), lemon (-16%), and grapes (-14%). The low prices of fruit and grapes might be the result of a comparatively good harvest and increased production in 2018. 2017 was a bad year in terms of harvest for Georgia’s agriculture; a spring frost followed by a summer drought created unfavorable weather conditions for deciduous fruit trees. In addition, the Asian Stink Bug, an agricultural pest which attacks fruit trees and vegetables, damaged the crops. Consequently, we saw a significant annual decrease in production of the following crops in 2017: apples (-70%), plums (-55%), lemon (-53%), and pears (-48%).

2018 seems to be a good year not only for plums and apples, but for grapes as well. As of today, more than 230 000 tons of grapes have been processed; that is 72% higher compared to the previous year (134 000 tons). The revenues of Georgian grape growers this year were also higher compared to the previous year and exceeded to 300 million GEL. This indicator is 85% higher compared to the previous year (162 million GEL).

INTERNATIONAL PRICES

International prices decreased in September 2018. The Food Price Index, measured by the Food and Agriculture Organization (FAO), decreased by 7.4% in September 2018, compared to the previous year. Prices dropped for the following sub-categories: Vegetable Oil (-21.5%), Sugar (-21%), Dairy (-14.6%), and Meat (-4.5%).

TRADE HIGHLIGHTS

During September 2018, Georgia’s agricultural exports (including food) amounted to $59 mln, which is almost a quarter of total Georgian export value. While comparing this indicator to September 2017, it is down by 4%. As to imports, in September 2018, Georgia’s agri imports reached $88 mln, which constitutes 16% of total Georgian imports. Year on year (compared to September 2017), agricultural imports shrank by 7%.

EXPORT DIVERSIFICATION

As already mentioned in our previous publications, the country’s export/import diversification can be measured by the Herfindahl-Hirschman Index (HHI), which ranges from zero to one. The lower the HHI, the more diversified trade is. In the last month, Georgia’s export diversification stayed at the same level (HHI=0.11) as in June 2018, while export diversification by product slightly decreased.

IMPORT DIVERSIFICATIONLIGHTS

In September 2018 Georgia performed quite well in terms of its import diversification by country. The HHI index fell to its record low (HHI=0.09) since January 2017 mainly due to the shift from Ukrainian market to other trading partners. Import diversification by product also increased, yet it has remained more concentrated than usual since last July.

Development of organic production as part of the green economy

With a grant from the Austrian Development Agency, the Government of Georgia plans to support organic production by offering tax relief to organic producers. According to the Ministry of Environment Protection and Agriculture (MEPA), organic production is an important component of the green economy, which aims for sustainable development without degrading the environment.

For more information: www.commersant.ge/ge/post/biomeurneobebistvis-shegavatiani-sagadasaxado-rejimi-dawesdeba

Rural development program

The Ministry of Regional Development and Infrastructure announced the renewal of the state support program for rural development. According to the ministry representative, currently the ministry is working on the selection of projects to be implemented in regions.

For more information: www.bpn.ge/ekonomika/49556-regionuli-ganvitharebis-ministris-moadgile-2019-tslidan-soflis-mkhardatceris-programa-aghdgeba.html?lang=ka-GE