Changes in the world food market and the constant deplorable situation in Azerbaijan

The latest report, prepared and published in July by the UN FAO, notes that June is the third month in a row that the FAO Food Price Index has continued to decline. The FAO Food Price Index in June 2022 decreased by 2.3% compared to May, but it is still  by 23.1% higher than a year ago. The decrease in June  was due to the fall in prices for vegetable oils, grains and sugar in the world market (1). At the same time, prices for dairy products and meat increased.

According to published data, the FAO Cereal Price Index in June decreased by 4.1% compared to May, but is still by 27.6% higher than in June 2021. Although, after hitting a record high in May, world wheat prices fell 5.7% in June, they are still by 48.5% higher than last year.

One of the reasons for the decline in wheat prices in June is the expectation of an increase in grain production, including wheat in Canada, the Russian Federation and other major producing countries. FAO also notes in a widespread message that the demand for wheat from global importers has decreased.

What is the situation in Azerbaijan? The areas  sown with wheat and barley in Azerbaijan for 2022 totaled 1,019,934 hectares. Of these, 606 thousand 338 hectares are wheat crops, and 413 thousand 596 hectares are barley (2).

According to information for July 6, the process of harvesting winter grains on 72.6% of sown areas in the republic has completed. 2,163,875 tons of crops have been harvested from the fields. Calculations show that the average yield in the country this year is about 29.3 centners per hectare.

I should note that last year grain harvesting area  was by 10.7% more than this year. So, according to operational information as of July 4, 2021, grain harvesting completed on 81.3% of existing areas. On July 4, 2021, the Ministry of Agriculture told the press that the average grain yield is 32.3 centners (3).

Compared to the previous year, harvesting in 2022 was carried out on smaller areas, and the yield obtained from each hectare is  by three centners less than in the previous year.

The number of combines used in harvesting in 2022 was  by 2.9% more than the previous year, although the grain harvesting area was by 10.7% less than in the same period in 2021. So, if according to the Ministry of Agriculture, in 2021, 1,499 combines  were used for the grain harvesting process, this year 1,538 machines are involved in the harvesting. The course of grain harvesting this year shows that the production of grains in Azerbaijan, including wheat, will decrease compared to the previous year.  President Ilham Aliyev said that the level of self-sufficiency of the country in food wheat is 25%.

The FAO Vegetable Oil Price Index was 7.6% lower in June than in the previous month, a statement released by the FAO. The reason for this  is noted the lowering  prices for palm oil for third month in row. At the same time, as a result of lower demand in recent months, world prices for sunflower and soybean oils have fallen significantly.

In Azerbaijan, prices for vegetable oils have been seriously growing over the past year. While the demand for vegetable oils in the country is growing, production is declining and imports are increasing. Thus, the use of vegetable oil for food increased from 119.6 thousand tons (2015) to 152.8 thousand tons (2020).

The production of vegetable oils fell from 106.6 thousand tons (2015) to 75 thousand tons (2020). Imports of vegetable oils into the country increased from 129.1 thousand tons (2015) to 162.3 thousand tons (2020). In January-May 2022, imports of oils of vegetable and animal origin increased by 16.6% in physical weight and by 41.2% in value terms.

In June, the FAO Dairy Price Index was by 4.1% higher than in May. It is also noted that this figure is by 24.9% higher than in June 2021. All types of dairy products went up in price in June. FAO notes that the increase in the price of cheese came amid demand, which increased due to fears of a shortage before the end of the year. The report also notes that a heat wave at the beginning of the summer has further reduced the already low milk production in Europe. As before, under the influence of strong demand from importers, world prices for milk powder increased. The increase in butter prices was due to growing demand in Europe and supply uncertainty in the coming months.

Milk production in Azerbaijan is at a much lower level than demand. So, despite the international norm is 405 kg, Azerbaijan produces 200-220 kg of milk per person per year. Produced milk and dairy products provide 54% of the need.

In January-May 2022, milk production in Azerbaijan increased by 1.9% compared to the same period last year and amounted to 890.9 thousand tons. However, in January-May of this year, imports of milk and dairy products increased significantly. Compared to the same period last year, imports of milk in natural weight increased by 39.9%, butter in natural weight increased by 32.7% and 51.6% in value terms. Calculations carried out by us for individual months based on the data of the State Committee on Statistics (SSC) showed that in January and February of the current year, compared with the previous months, most of the livestock products produced cheese, cottage cheese, sour cream, sterilized whole milk, butter, in March, prices increased most for cheese, sour cream, butter, in April for cheese, in May for cheese and butter.

The FAO released a report saying that the FAO Meat Price Index, having increased by an average of 1.7% compared to May, reached a record level – by 12.7%  more than in June 2021. It is also noted that the increase in prices on the world market for all types of meat, as well as the fact that prices for poultry meat have increased more than others, reaching a record level, as the supply on the world market is still limited due to the war in Ukraine and the spread of bird flu in the Northern Hemisphere. With China lifting its ban on meat imports from Brazil, beef prices have risen. The increase in world prices for mutton was caused by a reduction in export stocks in New Zealand.

Azerbaijan is unable to satisfy half of the demand for meat products through domestic production. Thus, if, in accordance with the international standard (WHO, FAO), the annual norm of meat per capita is 78 kg, then Azerbaijan produces up to 35 kg of meat per year, that is, only 44.8% of the need (part of it is satisfied for account of imports of live animals imported into the country for slaughter).

According to the press service of the SSC, in January-May of this year, meat production in live weight, including poultry meat, increased by 3% compared to the same period last year and amounted to 220.1 thousand tons. However, in January-May of this year, imports meat in physical weight increased by 4.4%, and imports of live cattle, imported mainly for slaughter, increased in value terms by 54.5%.

Our calculations  based  on data from the State Statistics Committee for individual months showed that in January-May of this year, livestock products rose in price. Compared to previous months, in January-February of this year, prices for such types of livestock products as lamb, beef and chicken meat increased, and in March-May, chicken meat rose in price most of all.

FAO released a statement saying that the FAO Sugar Price Index in June fell by an average of 2.6% compared to May and that the decline continues for the second month in a row. Decreased demand for sugar on world markets in June, as well as positive forecasts for sugar stocks were factors contributing to lower prices. The depreciation of the Brazilian real against the US dollar and the fall in ethanol prices prompted producers to increase sugar production, causing supply to increase and prices to decline in June. At the same time, the decline in prices was limited by uncertainty about Brazilian production volumes this season.

Azerbaijan is able to satisfy only 8-9% of the demand for raw materials for sugar production through domestic production. The remaining 91-92% are imported. Raw materials for sugar production (sugar cane) are imported mainly from Brazil and Mexico. In 2021, 303.7 thousand tons of raw sugar were imported into the country, which is 1.9 times more than in 2020. With a sharp increase in sugar imports, exports have seriously decreased. The export of white sugar in January-March 2022 amounted to 11.8 thousand tons, which is 34% less than in the same period in 2021.

I should also note that recently the UN published a report "The State of Food Security and Nutrition".  The report provides the latest data on the state of global food security and nutrition, including food prices and the availability of healthy foods. 

The report provides new evidence that the world is moving further and further away from the goal of ending hunger: “In 2021, 828 million people faced hunger – 46 million more than a year ago and 150 million more than in 2019” ( 4 -link).

The report also noted that “In 2021, about 2.3 billion people globally (29.3%) experienced moderate or severe food insecurity, an increase of 350 million from before the start of the COVID-19 pandemic. Nearly 924 million people (11.7% of the global population) are severely food insecure, an increase of 207 million from two years earlier. 45 million children under the age of five suffered from malnutrition, the most dangerous form of malnutrition, which increased the risk of death by 12 times. In addition, 149 million children under the age of five were stunted and stunted due to chronic dietary deficiencies in essential nutrients.”

Thus, the situation in the field of food security in the world, to put it mildly, is bleak. At the same time, world food prices are not stabilizing. According to FAO data published in June, prices on the world market for high-calorie foods (meat, milk, butter, etc.) increased in July this year compared to the previous month. Despite a slight decrease in prices for grain products, vegetable oils, sugar, prices for these products compared to the previous year are still very high.

I must note with regret that Azerbaijan meets its needs for wheat, vegetable oil, and sugar mainly through imports. In the last few years, imports of the main livestock products - meat, milk, butter - continue to grow. I believe that in order to eliminate dependence on food imports, the government should revise its agricultural policy. The main task facing the government should be the maximum satisfaction of the needs of the population in cheap and high-quality food and agricultural products through domestic production. Azerbaijan has all the resources to fully provide the population with food through domestic production.

1. https://www.fao.org/worldfoodsituation/foodpricesindex/ru/ 

2. https://fed.az/az/aqrar/azerbaycanda-taxil-bicinine-baslanildi-133588

3. https://az.trend.az/business/3449860.html