If production increases, then why does import increase, why do prices rise?!

“Azerbaijan” newspaper published the information about the growth of agricultural production for January-May of the current year by 3.3%. Based on information received from the State Committee on Statistics (SSC), the “Azerbaijan” newspaper notes that the cost of all agricultural products in actual prices over  5 months of this year amounted to 2 billion 639.8 million manats. Of these, livestock production accounted for 2 billion 28.4 million manats, crop production - 611.4 million manats. Compared to the same period in 2021, agricultural production increased by 3.3%, including livestock by 2.8% and crop production by 5.1%.

The report says that spring field work in the country continued until June 1: “From the beginning of the year until this time,  382.6 thousand hectares  were sown with spring  crops. During this period, 63.4 thousand hectares were sown with grain and leguminous crops, of which 29.3 thousand hectares were sown with corn; 54.7 thousand hectares were sown with potatoes; 64.0 thousand hectares with vegetables; 20.0 thousand hectares with gourds; 104.3 thousand hectares with cotton; 11.4 thousand hectares with sunflower for grain; 11.4 thousand hectares with sugar beets - 5.0 thousand hectares; tobacco - 2.2 thousand hectares and 55.3 thousand hectares; annual grasses - 1 thousand hectares and other spring plants - 1.3 thousand hectares.

Another noteworthy information is related to the areas allocated for potatoes. Observations show that over the past few years, the area on which potatoes are cultivated has decreased significantly. The country cannot satisfy its own demand for potatoes and the price  for potatoes in the domestic market is much higher than in other countries.

Three months ago, the ASTNA.biz website  published that the price of potatoes in the Azerbaijani market is much higher than in neighboring countries: “Potatoes are offered to consumers in Azerbaijan for 1.20-1.30 manats per kilogram. In Iran the price  is  cheaper-  60-70 gepiks, in Turkey it is three times cheaper - for 35-38 gepiks, in Georgia it is 73% cheaper - for 74 gepiks.  In addition, it is reported that this year potatoes were planted on a total of 54.7 thousand hectares.

In 2005 Azerbaijan managed to expand the area under potato crops to 70.7 thousand hectares. In the same year, 1 million 83 thousand tons of potatoes were produced, which amounted to 128 kg of products per inhabitant of the country. Over the past 15 years, potato production has declined. Even in 2014, compared to 2005, production decreased by 32.2% to 819.3 thousand tons. But in subsequent years, production did not rise to the level of 2005. While the population of the country from 2005 to the end of 2020 year increased by 19.7% (1 million 672 thousand people), the production of potatoes, considered the second bread, during this time decreased by 4.2%. During this period, part of the population's need for potatoes was met by imports. In 2005, 31.6 thousand tons of potatoes were imported into the country for a total of $3.9 million, and in 2020, 182.6 thousand tons of potatoes worth $49.5 million. In 2019, compared to 2005, potato imports increased by 13.8 times in value terms and 6.1 times in physical weight. I should also note that over the past 15 years, not only the volume, but also the cost of imported potatoes has increased. So, if in 2005 the cost of importing 1 ton of potatoes was 123.4 dollars (113.5 manats at the exchange rate at that time), then in 2020 1 ton of potatoes was imported for 271 dollars (460.8 manats). In other words, over 15 years, potato imports increased 2.2 times in dollar terms and 4 times in manat terms. The increase in prices for potatoes on international markets over the past few years should have increased the interest of Azerbaijani farmers in this crop. However, problems in this area, especially the lack of irrigation water and quality seeds, hinder its development.

Another point is the reduction  of the area  for cultivation of tobacco this year. Thus, the report says that 2.2 thousand hectares are sown with tobacco. Sowing only 2.2 thousand hectares with tobacco this year means a complete failure of the state program for the development of tobacco growing adopted by the government.

Back in 2017, President Ilham Aliyev, at a nationwide meeting on the development of sericulture, tobacco and hazelnut growing in Gakh, said: “The first steps taken in connection with tobacco growing are yielding results. After this meeting, a very serious program will be adopted. Until 2021, the area under cultivation for tobacco production should be doubled. They should be brought from the current 3,200 to about 6,000 hectares. There are opportunities for this, and the relevant structures should seriously take up this work. In this case, if we take an average yield of 2 tons, then 12,000 tons of dry tobacco will be produced annually in Azerbaijan. This will be of great benefit to our country, our currency will not go abroad, on the contrary, we may also have export opportunities.”

The “State Program for the Development of Tobacco Growing in the Republic of Azerbaijan for 2017-2021”, adopted in 2017, analyzed the current state of the tobacco industry and noted that over the past 10 years, there has been a decline in the tobacco industry. The state program noted that in 2016, 2.4 thousand hectares were  allotted for tobacco, the production totaled 3.6 thousand tons, and these figures are significantly lower than the potential of this area.

The program also noted that “The implementation of the State Program will help restore the traditions of tobacco growing in Azerbaijan, meet the needs of tobacco processing enterprises for raw materials through domestic production, in particular, increase agro-industrial potential of regions, improving the living conditions of the population in the regions, and reducing the import of tobacco and tobacco products, will make an important contribution to reducing drug addiction, the export of tobacco and tobacco products, and the development of other areas associated with the cultivation of tobacco. By 2021 year, the average yield in tobacco growing will be 20 centners, the sown area - 6 thousand hectares, and tobacco production - 12 thousand tons, said Ilham Aliyev ins the program. Unfortunately, the goals set in the State Program (increasing the sown area to 6000 hectares)  were not achieved,  and  the area under tobacco crops in 2022, compared to the year preceding the adoption of the State Program, decreased by 8.3% to 2.2 thousand hectares.

The information provided by the SSC states that  for June 1,  54.7 thousand tons of grain, 195.5 thousand tons of potatoes, 326.2 thousand tons of vegetables, 24.1 thousand tons of fruits and berries, 372.6 thousand tons of leaves of green tea were  harvested from the fields. Compared to the same period last year, potatoes, vegetables and fruits were harvested more, and grains and green tea  were harvested less.

The report notes that  compared with the same period  of last year, the production of grain and green tea over five months decreased, but the production of other agricultural products - potatoes, vegetables, fruits and berries increased. I should note that  over 5 months of the current year, except for wheat and rice, imports of crop products, with the exception of wheat and rice, increased. Imports of fruits and vegetables especially increased in physical weight by 2.1% and by 8.4% in value terms, as well as tea - increasing in physical weight by 5.6% and by 30.3% in value terms.

The information notes that in January-May 2022, livestock production increased by 2.8% compared to the same period in 2021; meat production in live weight, including poultry, increased by 3% percent and amounted to 220.1 thousand tons. It is reported that milk production amounted to 890.9 thousand tons, and egg production - 824.8 million pieces; accordingly, milk production increased by 1.9% and egg production by 3%.

In January-May of this year, imports of livestock products increased significantly. Thus, imports of meat  increased by 4.4%, and imports of live animals, imported mainly for slaughter, increased in value terms by 54.5%. There is also a serious increase in imports of milk and dairy products. Compared to the same period of  last year, milk imports increased in physical weight by 39.9%, butter imports increased in physical weight by 32.7%, in value terms by 51.6%, and imports of vegetable and animal fats in physical weight increased by 16.6%, in value terms - by 41.2%.

It is reported that by the beginning of June, 32.7 tons of cocoon had been produced, by 2.9 times more than in the same  period of  2021.  The information provided by the SSC regarding the increase in cocoon production has completely changed after two weeks. Thus,  in 2022, the production of cocoons in the country decreased significantly compared to the same period in 2021. Last year, until June 14, 428.29 tons of raw cocoon were delivered to procurement centers; and this year only 319 tons 366 kg, which is  by 25.4% less than in 2021.

I note with regret  that the SSC does not systematically reports on the progress of spring sowing, harvesting and agricultural production. For this reason, it is difficult to compare the work done during the season  and the  results with  the previous years.

Although the SSC showed an increase in agricultural production by 3.3% for 5 months of 2022, imports of food products in January-May of this year increased significantly. Thus, in January-May 2022, food products worth $875 million 67 thousand were imported into the country, by 15.9% more than in the same period of the previous year.

On the other hand, another report of the SSC noted that in January-May 2022, the consumer price index for food, drinks and tobacco products amounted to 117.9% compared to January-May 2021. The same report also noted that in May 2022, the consumer price index for food, beverages and tobacco products amounted to 120.2% compared to May of the previous year.

Our calculations based on information from the SSC for individual months, showed that  the price for livestock products during January-May of this year rose  more than  for other food products. Although the SSC indicated an increase in livestock production for January-May of this year at the level of 2.8%, in January-February of this year, prices for livestock products - lamb, beef and chicken, cheeses, cottage cheese, sour cream, sterilized whole milk, butter , and in March for chicken, cheeses, sour cream, butter, in April for chicken, cheeses, butter, in May for chicken, cheeses, butter increased even more compared to prices in previous months.

Also in April-May, prices for cucumbers, tomatoes and fresh potatoes increased compared to previous months. Thus, although it was indicated that in January-May of this year there was an increase in the production of a number of agricultural products, imports of the same name products into the country increased. The paradox is that the prices for these products on the domestic market continued to rise.