The rise in prices for "second bread" and the inadequate response of the ministry

An increase in prices for a number of agricultural products, as well as for potatoes was observed  in September compared  with the previous month, the  State Statistics Committee.

Since mid-October, prices for potatoes in markets and shops have increased by 40-50%, even Tovuz potatoes have risen in price by 70-80%. Thus, potatoes, which were previously sold to buyers for 60 qepiks, cost 1 manat, and high-quality Tovuz potatoes, offered for 70 qepiks, are sold for up to 1.20 manats. Naturally, the rise in prices for potatoes occurred against the background of a sharp decline in domestic products on the market. There have been reports and videos in the media about the shortage of local potatoes in the markets, in stores and post prices, for this reason, for this product.

A report prepared by Baku TV in connection with this problem says: “It turned out that despite the high demand for local products, there is a shortage of local potatoes in the markets. The sellers, who confirmed the rise in prices, also linked it to this ... According to the potato farmers, the yield in Gadabay and Dashkesan declined, and the farmers suffered serious losses. Therefore, it is expected that local potatoes will not be available to residents of the capital during the winter months (1). Although in the presented video, sellers selling potatoes on the market and buyers talk about the rise in price of the product, a spokesman for the Ministry of Agriculture claims that there have been no changes in prices for local potatoes.

An article on the website Virtualaz.org on October 25 said that “Local potatoes in Azerbaijan have risen sharply in the last 2-3 weeks. There are practically no local potatoes in Baku markets and supermarkets. In Gadabay and Dashkesan, yields have decreased, and farmers have suffered serious losses." Also virtualaz.org reports that "in Baku markets, the price of local potatoes has increased sharply over the past 10-15 days - by 40-60 gepiks." (2)  The article notes that the director of the Center for Agrarian Research of the Ministry of Agriculture Firdovsi Fikretzade said that prices for potatoes in Azerbaijan are formed under the influence of the regional market. This year, production in Iran, Pakistan, which are the main producers of potatoes, and in these countries themselves there was a need for imports. The director of the center further said: “The demand for Iranian potatoes has increased, prices have increased compared to last year. As a result, potatoes have risen in price in our country. A deficit has arisen even in countries such as Belarus, Ukraine, Kazakhstan, Uzbekistan, Russia. 

These countries used to export potatoes, but this year they were forced to meet their needs through imports”.

I should note that of 1 million 045 thousand 683 tons of potatoes consumed in Azerbaijan in 2020, only 97.9 thousand tons were imported from Iran and a very insignificant part - 171 tons from Pakistan (Table 1). While potatoes imported from Iran and Pakistan account for only 9.7% of total consumption, the impact of these two countries on potato prices in the Azerbaijani market could be so great that the price of potatoes has increased by 60-80 in recent days. %.

Why  are the "prices for potatoes in Azerbaijan formed under the influence of the regional market"? What is the reason? What is the problem? Instead of answering these questions, voicing the problems existing in this area, the director of the Center for Agrarian Research of the Ministry of Agriculture talks about Iran,  Pakistan and even about the situation in Belarus, which produces 615 kg of potatoes per year (6 times more than in Azerbaijan), in Iran, Pakistan. Paradoxical, isn't it? The director of the Center for Agrarian Research of the Ministry of Agriculture of Azerbaijan is trying to assess the situation not as the head of the State Institute, but as an expert of the regional research center. I wonder if the person who heads the Center for Agricultural Research knows what his duties and functions are? We have repeatedly written that non-professionals, random people who have no idea about the industry and the market economy were appointed to high posts in the Ministry of Agriculture and in the institutes under the Ministry ...

I should also note that in the Islamic Republic of Iran, potatoes are planted on an area of ​​150-160 thousand hectares during the year, and the country produces 5-5.3 million tons of potatoes. In Iran, 333 centners of production are received from each hectare, which is 2 times more than in Azerbaijan.

Table 1. Imports of potatoes in 2020 by country, quantity and value of imported potatoes. Source - State Statistical Committee

I should note that in 2005, Azerbaijan managed to increase the cultivated area for potatoes up to 70.7 thousand hectares. In the same year, 1 million 83 thousand tons of potatoes were produced, which amounted to 128 kg per capita in the country. Potato production has declined over the past 15 years. Even in 2014, production decreased by 32.2% compared to 2005, down to 819.3 thousand tons. In subsequent years, production also did not rise to the level of 2015. Imagine that from 2005 to the end of 2020, the country's population increased by 19.7% (1 million 672 thousand people), and the production of potatoes, which is considered the second bread, decreased by 4.2% during this time. During this period, part of the population's demand for potatoes was met by imports. If in 2005 the country imported 31.6 thousand tons of potatoes worth $ 3.9 million, then in 2020 it imported 182.6 thousand tons of potatoes worth $ 49.5 million. In 2019, compared to 2005, the import of potatoes increased 13.8 times in value terms and 6.1 times in physical terms. 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 then exchange rate), then in 2020 1 ton of potatoes was imported for 271 dollars (460.8 manats). That is, the import of potatoes over 15 years has grown 2.2 times in dollar terms, and 4 times in manat terms. The paradox is that there is a mysterious difference in potato import statistics.

So, the State Committee on Statistics (SSC) in the section on the dynamics of imports of basic goods shows one figure for the import of potatoes, and in the section on stocks and use of potatoes - a completely different one. As can be seen from Table 2, in 2010 the difference was 35.7% (Table 2-import 1, import 2).

Table 2. Sown area of ​​potatoes (thousand hectares), potato production (thousand tons), import of potatoes (tons). Source - State Committee on Statistics  (SSC)

Of course, the currency that comes into the country from the sale of potatoes exported by Azerbaijan should be taken into account. So, in 2020, 81.4 thousand tons of potatoes were exported in the amount of 33.7 million dollars. This is 2.3 times less than the volume of imported potatoes and 46.5% less than its cost. Our studies show that the demand for potatoes in Azerbaijan is growing. In 2010, the country used 648 thousand tons as food, and in 2020 - 830.6 thousand tons of potatoes (Table 3).

Table 3. Stocks and use of potatoes, Source -  SSC

According to the norm established by the World Health Organization (WHO), the annual per capita consumption is 117 kilograms, while in 2019 Azerbaijan produced 101 kilograms of potatoes per capita. Not all of the products produced are used for consumption, some for livestock feed, some for seeds, and some for losses. Although SSC shows that the level of self-sufficiency in the potato crop is 87.8%, our calculations showed that in 2019 the per capita consumption of potatoes was 83 kg, which is 70% of the established international norm.

10 years ago, Azerbaijan ranked 7th in the production of potatoes per capita in the CIS. Since over the past period Tajikistan has overtaken Azerbaijan, our country dropped one line and took 8th place (Table 4).

Table 4. Potato production per capita in the CIS countries. Source – SSC

I should note that the soil and climatic conditions of Azerbaijan, in contrast to neighboring countries, make it possible to obtain crops from the same territory 2 or even 3 times a year. Azerbaijan can satisfy its need for potatoes by 100%. So what's the problem?

One of the main problems in potato production is the absence of water. For the production of competitive products, it is very important to increase productivity and improve product quality. To do this, it is necessary to manage the production process, to meet the need for irrigation water in a timely manner. Otherwise, potato production will not be profitable.

The  warming of the air as a result of climate change has increased the need for water for potatoes. The Azerbaijani government must take this factor into account in its activities.

One of the biggest problems is the absence of quality seeds. Azerbaijan cannot satisfy its need for potato seeds by domestic production even by 5%. The lack of quality seed material has long been a serious problem. One of the main reasons for the low yield is the use of ordinary potato tubers by villagers as seeds. In 2019, 170 thousand tons of potatoes were used as seeds. This year, according to the SSC, 170 centners of the crop per hectare were obtained from each hectare in the country. Of course, this figure is half that in neighboring Iran.

The lack of storage rooms and barns also creates serious problems for potato farmers. Due to the lack of barns, some of the potato tubers stored in primitive conditions deteriorate, and some are fed to livestock by the villagers. For these reasons, 40-50 thousand tons of potatoes are fed to cattle annually, and more than 70 thousand tons are losses (Table 2).

Monopoly and market entry problems also reduce the interest of potato growers and discourage production. The fact that the wholesale market is in the same hands limits the choice of farmers, and they are forced to agree to a disadvantageous price for them during the transaction. Potatoes bought from villagers at low prices are offered to buyers in the markets 2-3 times more expensive. The monopolies that have seized the potato market, importing potatoes from Russia, Iran and other countries at lower prices, thereby create an artificial obstacle to the promotion of domestic goods to the market. Azerbaijan has all the opportunities for the development of potato growing and doubling the increase in yields.

To implement the available opportunities, you should:

• organize, on the basis of contracts, uninterrupted supply of farms engaged in potato production with water for irrigation,
• provide, in accordance with the soil and climatic conditions of the regions,
• cultivation and zoning of high-yielding potato varieties that are resistant to stress factors,
• organize the training of highly qualified specialists, scientists in the field of potato growing.
• provide potato growers with access to preferential, cheap credit resources,
• take measures to encourage and facilitate access for potato farmers and villagers to quality inputs, storage facilities and markets.

Vahid Magerramov

1. https://www.youtube.com/watch?v=AiMXG5PAiRU
2. https://virtualaz.org/olke/194453