Azerbaijan Vulnerable to Global Food Price Increases

A recent report by the Food and Agriculture Organization of the United Nations (FAO) says that in 2019, food prices worldwide reached the maximum level of the last 5 years. The report emphasizes that in December 2019, food prices were 2.5% higher than prices in November. Thus, this price increase continues in sequential order for three months. Since December 2014, prices for vegetable oil, sugar, and dairy products have reached the highest level. In addition, prices for sugarcane and palm oil also increased, reaching the highest level in five years.

Thus, according to studies conducted by the Food and Agriculture Organization of the United Nations (FAO), in the world market, food and agricultural prices in 2019 increased by 1.8% compared to 2018. The increase in the cost of food products on the world market did not discourage Azerbaijani importers at all. On the contrary, in 2019, a record volume of food and agricultural products was imported into the country. So, in 2019, food imports amounted to 1 billion 370.5 million US dollars, which is $ 274 million more than in the previous year. It should be noted that in the history of Azerbaijan, so many food products have never been imported into the country.

Table 1 shows that, with the exception of milk, imports of all other groups of food products increased. Last year, a record amount of wheat, meat, fruit and vegetables, and vegetable oil was brought into the country.

Table 1. Food imports in 2018-2019. Source: State Customs Committee

It should be noted that the cost of food imports has grown significantly compared to last year (Table 2).

According to the FAO report, the main reason for the increase in cereal prices in December by 1.4% compared with November is the growing demand for imports from China and logistics problems in France, where protests continue, as well as concerns about weather conditions in several key production regions of the country.

The report also notes that in the markets for fodder grain (feed) prices for basic grain products remained the same, and only the price of corn increased.

As for Azerbaijan, as it can be seen from Table 1, in 2019, more than half a million tons of wheat were imported into the republic in comparison with the previous year. In total, in 2019 the volume of wheat imported into the country from abroad amounted to 1 million 584.9 thousand tons. Government agencies do not react to such a serious increase in wheat imports and do not even explain the situation. On the contrary, Minister of Agriculture Inam Karimov, speaking at a meeting on the results of 2019 on January 13 with the participation of Ilham Aliyev, noted an increase in wheat production. He said: “We note that this year 3 million 538 thousand tons of crops were produced in grain production, which makes up the bulk of the sowing balance, which is 6.9% more than last year. Wheat yield increased by about 32.4% or 2 centners, which was 7.6% more than in 2018.”

In the near future we will return to the issue of import, production and use of wheat and to the speech of the Minister. Now I can say that in comparison with 2018, the import value of wheat brought into the country in 2019 increased by 12.6% (at $ 24 per ton). Despite the fact that the report released by the FAO indicates that the world grain price growth amounted to only 1.4%, in comparison with 2018, the cost of wheat in Azerbaijan increased almost 2 times. Thus, despite the growth of wheat production in the country in 2019, wheat prices rose sharply in the market during the harvest of wheat. In grain districts, in 2019 1 kg of wheat was offered at 40 qepiks, while in 2018 - at 22 qepiks.

The cost of imported milk has also increased significantly. So, in 2018, the cost of one ton of milk was $ 1,320, and in 2019, the cost increased by 19.6% (260 manat), amounting to $ 1,580. In the report presented by the FAO, the value of dairy products on the world market in 2019 increased by 3% compared to 2018.

It is also noted that the highest price increase was recorded during the year for milk powder and cheese, and at the same time there was a decrease in the cost of butter. As it can be seen from Table 2, the import value of butter imported into Azerbaijan decreased by 11.3%. Thus, the import value of 1 ton of butter imported in 2018 amounted to $ 5,750, and in 2019 the price decreased by 11.3% (650 manat), reaching $ 5,100.

Despite the fact that the Minister of Agriculture at the meeting at the end of 2019 noted that meat production in live weight increased by 3% in 2019, 51.5 thousand tons of meat was imported this year, which was 8.9 more % compared to 2018. The growth of meat imports occurred amid rising prices. Last year, compared to 2018, the import value of meat imported into the country grew by 4.8%. According to FAO studies, at the end of 2019 in the world market, the average cost of meat compared to 2018 increased by 5.7%.

Table 2. Import value of food products imported into the country in 2018-2019

Despite the fact that at a well-known meeting, the Minister of Agriculture noted an increase in production of fruits and vegetables by 8.8% in 2019, compared to 2018, fruits and vegetables were imported by 14% (42.7 thousand tons) more in the reporting year.

Along with this, the import value of fruit and vegetables increased by 3.7%. It should be noted that last year the import of fruits and vegetables increased. So, in 2019, in comparison with 2018, the export of fruits and vegetables increased by 1.2%, and their export value increased by 6.9%.

The average cost of fats and oils of vegetable and animal origin imported into the country last year decreased by 7.7% compared to 2018.

In FAO reports, the average cost of vegetable oils in December 2019 increased by 9.4% compared to November, reaching the highest level over the past 25 months. Thus, as it can be seen from the report prepared by the FAO, the increase in prices on the world market for food and agricultural products, in turn, had an impact on the Azerbaijani market. The report also says about the consistent continuation of price increases. The Azerbaijani government should take a number of important measures to insure the domestic market from rising prices in the global food market. The experience of developed countries shows that the sustainable satisfaction of food needs of any country through domestic production is the main condition for stable prices for food and agricultural products.

Azerbaijan has great potential and resource potential to provide itself with basic food products. In developed countries, agriculture is moving into the category of high-tech industries. The Azerbaijani government should redefine agricultural policy in this direction. So, building up scientific potential in the agricultural sector, introducing new, more advanced resource-saving technologies, and training specialists and scientists should be the main task. The monopoly in the production of agricultural products and their imports should be eliminated.