Reasons for the Monthly Increase in Butter Prices in Azerbaijan

In recent months, an increase in the price of butter has been observed in Azerbaijan. Notably, this is the third price hike within a year. According to consumers, certain brands of butter that cost 19 manats per kilogram at the end of last year are now being sold for 24 manats, marking a nearly 30% increase.

Masima Mehdiyeva, a resident of Baku, shared that she can no longer afford butter: "When it was priced at 14-15 manats, we could barely buy it. Now, only margarine is available at that price, so we are forced to consume it because I can’t afford butter priced at 22-24 manats."

Azerbaijan is dependent on imports for its butter supply. The import of butter is facilitated with reduced customs duties. According to the decision of the Cabinet of Ministers, the period for lowering the customs duty on butter imports from 15% to 5% has been extended until the end of 2025.

According to the State Customs Committee, Azerbaijan imported 22,204 tons of butter and other dairy fats worth $123.97 million from January to September 2024. This represents a volume increase compared to the same period last year. The State Statistics Committee (SSC) reported that the average retail price of imported butter during this period was 20.9 manats per kilogram.

This indicates that the retail price of butter almost doubles by the time it reaches store shelves. However, responses from major retail networks on this issue were not obtained.

Interestingly, official data shows that domestic production of butter slightly exceeds imports. The SSC reported that 22,345 tons of butter were produced domestically from January to September 2024, exceeding import volumes by 141 tons.

In addition to imports, Azerbaijan also exports butter. From January to September 2024, Azerbaijan exported 7,392 tons of butter, mainly to Russia, which is currently experiencing a butter shortage. Exports during the same period last year amounted to just 800 tons. The average customs price for the exported butter was $6.19 per kilogram, or 10.5 manats.

Chairman of the Parliamentary Agrarian Committee, Tahir Rzayev, told "Turan" that although livestock production has increased in the country, so has consumer demand: "There are specific reasons for the price increase. The first issue is related to the import of butter, where certain traders take advantage of the situation. Even a minor increase leads to significant price hikes for other products."

He noted that many farmers still do not meet modern standards: "While modern technologies exist, issues remain in fattening livestock and producing milk and butter. This affects both production levels and price increases."

Rzayev added that if the quality of local products is not high, consumers will inevitably prefer imported products: "Globally, the prices of almost all livestock products are rising. If we are importing a product, we must also consider the costs of transportation and distribution to consumers, which leads to price increases."

Agricultural expert Vahid Maharramov offers additional explanations for the rising butter prices. He told Radio Azadliq that the monopoly over imports in Azerbaijan means that importers closely monitor global price trends: "When global prices drop, they do not lower their prices, citing transportation and storage costs. However, when prices rise, the monopolists immediately increase local prices."

Maharramov emphasized that the 24% increase in butter prices and the decline in production in Russia sent a strong signal to Azerbaijani monopolists. Russia has started importing butter from other countries due to increased demand, creating a shortage in the region. Local monopolists exploit this situation for profit.

According to Maharramov, producing one kilogram of butter requires 23 liters of milk with a fat content of 3.6%. "In Azerbaijan, the price of milk produced by farmers is above 1.5 manats per liter, and milk prices have increased over the past week, which also affects the cost of butter."

The economist highlighted that the annual per capita demand for butter in Azerbaijan is 7 kilograms, as noted by the Cabinet of Ministers in the minimum consumption basket. "This implies a production need of 70,000 tons per year. However, per capita consumption is only 3.5-4 kilograms. The butter labeled as domestic production is not entirely produced locally. Large volumes of butter are imported and simply packaged in Azerbaijan."