The situation has aggravated - imports have seriously increased, while exports are declining

Our calculations  based on the information from the State Customs Committee (SCC) showed that in January-July this year, the cost of food products imported to Azerbaijan was  by 17.99% higher than in the same period of last year. So, food products imported into the country  over seven months of 2022 totaled $1 billion 190 million 423 thousand, by $181.5 million more than in the same period last year.

In January-July of this year, unlike the indicators of previous years, there was a significant increase in the cost of importing a number of food products. For example, in January-July 2022, the cost of imported fats and oils of vegetable or animal origin increased by 13.5% compared to 7 months of 2021, tea - by 14.1%, wheat - by 49%, fruits and vegetables - by 10.7%, rice - by 34.8%. In January-July of this year, compared with the same period last year, imports of basic livestock products increased significantly both in physical weight and in value terms. So, over seven  months, milk imports increased in physical weight by 18.3%, butter - by 32.9%. Also, in value terms, imports increased - meat by 4.5%, milk - by 30.9%, butter - by 52.2%.

I should note that the final report of the FAO (Food and Agriculture Organization of the United Nations) distributed in July this year,  reads that  the FAO dairy product price index in June was an average of 24.9% higher than in June 2021,  and in June all types of dairy products became more expensive. The FAO report notes that cheese, milk powder, butter have risen in price the most, and the reason for the rise in price was an increase in demand in Europe and a decrease in milk production in the countries of the European Union.

In June of this year, the FAO Meat Price Index was in average by 12.7% higher than in June 2021. The statement  by the organization noted that prices for all types of meat have increased on the world market, but prices for poultry have increased more than others, reaching a record level, since due to the war in Ukraine and the spread of bird flu in the Northern Hemisphere, supply on the world market is still limited . After China lifted the 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.

It was noted that the FAO vegetable oil price index fell in July by 19.2% to its lowest level in the last 10 months.

In January-July this year, 429.8 thousand tons of wheat worth $154.6 million were imported into the country. Compared to the same period last year, wheat imports increased by 5.1% in physical weight and by 49% in value terms ( Table 1). In addition, compared with previous years, rice imports in January-July this year increased in physical weight by 16.9% and in value terms - by 34.8%.

I should also note that the average FAO grain price index in July was 147.3 points, by 19.1 points (11.5%) less than in June, but 21.0 points (16.6%) more than in July 2021. The decline in international prices affected all types of grain included in this index. In July, wheat prices on the world market fell by 14.5%. This is partly due to the agreement between Ukraine and the Russian Federation on the unblocking of the main Black Sea ports of Ukraine, and  the start of harvesting in the Northern Hemisphere  resulted in increase in harvesting.

Despite the  wheat prices on the world market fell by 14.5% in July, calculations showed that the cost of wheat imports to Azerbaijan in June decreased by only 4% compared to the previous month. Thus, the cost of wheat imports in June amounted to $419.29, and in July - $402.47.

In general,  over 7 months of 2022, cereals were imported into the country, products of the flour and cereal industry - malt; starch; inulin; wheat gluten, prepared products made from grain, flour, starch or milk; flour confectionery products by $307 million 914 thousand, which is 93.2% more than in the same period last year.

In January-July of this year, there was also a significant increase in the cost of importing a number of food products compared to the same period of the previous year (Table 2). Thus, dairy products, eggs, honey, etc. rose in price by 24.9%, vegetables and some edible root crops and tubers - by 13.5%, edible fruits, nuts and hazelnuts; zest (peel, outer colored layer of the pericarp of the fruit peel of various citrus fruits) and so on - by 9.2%, fats and oils of animal or vegetable origin, prepared edible fats, etc. - by 13.5%, finished grain products , flour, starch and milk, etc. - by 22.4%, cereals - by 49.5%, products of the flour-grinding industry; wheat gluten - by 45.7%, sugar and sugar confectionery - by 2.3%, various food products - by 10.6%.

Exports of fruits and vegetables, which are the main export commodities of the country, decreased by 4.1% in physical weight in January-July this year. The decrease occurred mainly in the export of tomatoes by 5.7%, apples - by 28.5% and persimmons - by 7.7%. At the same time, pomegranate exports also dropped significantly compared to the previous year. So, over seven months of this year, the export of pomegranates decreased compared to the same period  of last year in physical terms by 19.3% and in value terms by 18.8%.

I should also note that, unfortunately, despite the increase in food import costs, income from exported products continues to decline. In January-June of this year, fruits and vegetables were mainly exported from Azerbaijan - tomatoes, potatoes, hazelnuts, apples, persimmons and pomegranates. With the exception of persimmon, exports of other products in physical weight decreased. Along with this, over the past two years, the export of goods has fallen sharply. Thus, compared with January-July 2020, the export of tomatoes for the same period of this year decreased by 19.4% in value terms, and by 26.9% in physical terms. This year, tomato exporters earned $32.4 million less than two years ago. The export of forest hazelnuts, compared with January-July 2019, decreased by 19.1% in physical weight and by 17.5% in value terms. Compared to 7 months of 2019, the income of hazelnut exporters decreased by $12.6 million. Compared to January-July last year, potato exports this year decreased in physical weight by 14.8%, in value terms - by 12.0% (Table 3).

I should also note that the State Statistics Committee  (SSC) showed an increase in livestock production over 6 months of this year by 2.8% against the backdrop of a significant increase in prices for livestock products, as well as a significant increase, compared to the same period last year, in imports staple livestock products. Thus, imports of meat increased by 6.3%, livestock intended mainly for slaughter - by 9.3%, imports of butter - by 32.9% and milk - by 18.3%. The decrease in the purchasing power of the population, while imports of livestock products have increased significantly and a sharp increase in prices for them, indicate a reduction in production.

Over the reported period, the value of imports of live animals, mainly intended for slaughter, increased by 9.3% compared to the previous year and amounted to $29 million 420 thousand.

The consumer price index of SSC  in January-July 2022 amounted to 113.0% compared to January-July 2021, including 118.7% for food, drinks and tobacco products.

According to the SSC, in July of this year, there was a stronger increase in prices for certain foodstuffs than in the previous month. These are rice, buckwheat, pasta, sausages, beef, lamb and chicken, sour cream, eggs, vegetable oils, lemons, tomatoes, onions, garlic, lentils, sugar and powdered sugar.

Our research has shown that while the income from exported food products is gradually decreasing, the amount of currency taken out of the country for food imports continues to grow significantly.

In January-June of this year, fruit and vegetable products - tomatoes, potatoes, forest hazelnuts, apples, persimmons and pomegranates - were mainly exported from Azerbaijan. With the exception of persimmon, exports of other products in physical weight decreased. However, tomato exports have declined sharply over the past two years.

In general, in January-July this year, food imported  was by $181.5 million more than in the same period of last year. And this means that entrepreneurs involved in imports had to spend more foreign currency on imports of the above products than in previous years. I regret to note that more than $1.9 billion allocated in recent years for food imports expands the business of farmers in other countries, further improving their social situation. Although the Azerbaijani peasants, farmers are much more in need of these funds.

The annual increase in food imports at a time when the purchasing power of the country's population is low can be explained by a decrease in agricultural production. In general, when considering import statistics, it can be concluded that the demand for food products in the country is actually made dependent on imports. For the benefit of monopolists interested in imports, this dependence continues to grow more and more. And a local product that cannot find a place in the domestic market is forced out of the markets. For the same reason agricultural production is declining from year to year. While local farmers have the opportunity to earn a good income from agricultural production, these opportunities are unfortunately missed.

Azerbaijan can fully satisfy its food needs through domestic production. Azerbaijan has favorable soil and climatic conditions for the production of basic foodstuffs and agricultural products. In addition to ensuring its own food security, Azerbaijan can export  large volumes of a number of food products and agricultural products to other countries. To do this, it is necessary to solve the problems existing in the industry and involve professionals, high-level specialists in the work.

APPENDIX 1

Table 1. Imports of food products (quantity in tons, value in $ thousand) in January-July 2021 and 2022 Source: SSC

APPENDIX 2

Table 2. Food imports (value in $ thousand in January-July 2021 and 2022) Source: State Customs Committee

APPENDIX 3

Table 3. Export of agricultural products (quantity in tons, value in $ thousand) in January-July 2021 and 2022 Source: State Customs Committee