Why Are Prices for Potatoes and Tomatoes So High?

Recently, Deputy Prime Minister Ali Ahmedov and Minister of Agriculture Inam Karimov raided the agricultural fair in Baku, the Yashyl ​​Bazaar market and a supermarket. The Cabinet of Ministers said in a statement that the purpose of the government"s audit of the market was to identify artificially high prices: "The government is always closely monitoring the issue of preventing artificial price increases and is taking the necessary measures in this direction." The press service of the Cabinet of Ministers also said that during the raids a big difference was revealed between prices at the bazaar and at the fair: "The government should seriously think about this issue. We must not allow excessive price increases for goods. If someone artificially raises prices, the government can respond with economic measures. One of such measures may be an increase in the number of outlets and intermediaries. This will create an opportunity to settle prices." Ali Ahmedov told reporters that at present, the population"s need for food and nutrition is mainly met through local production.

It should be noted that the raids carried out under the leadership of Ali Ahmedov show that, as in previous years, this year there was a rise in prices for agricultural products. In January-August last year, prices for tomatoes and potatoes were more expensive, and this fact was announced by the State Statistics Committee in September 2018. In that year, the reason for the high cost of tomatoes and potatoes was due to a decrease in the production and import of these products. So, in 2018, compared with the previous year, potato production decreased by 15 000 tons, and import - by 10 600 tons (Table 1). In that year, the export of potatoes increased by 9 000 tons. In 2018, the volume of potatoes used as food was 721 435 tons, which is 10 000 tons less than in the previous year.

In general, over the course of 10 years, potato production has declined significantly, while imports have increased significantly. So, in 2008, with the production of 1 million 77 thousand tons of potatoes in the country, in subsequent years it was impossible to bring the level of potato production to 1 million tons. Compared to 2010, the import of potatoes in 2016 increased by almost 3 times. During this period, the export of potatoes was also not sustainable. Table 1 shows that after 2010, there has been a decrease in potato exports. In the republic, every 5 years there is a decrease in sown areas for potatoes by 5 thousand hectares. So, according to the State Statistics Committee, in 2005 the cultivated area for potatoes was 70 thousand ha, in 2010 already 65 thousand ha, and in 2015 - 60 thousand ha. The decrease in sown area is associated with a decrease in interest in this area. In the Ganja-Gazakh region, potato farmers say crop yields have dropped 25-30 quintals this year. Farmers and peasants face a number of problems during production, one of which is a shortage of quality seeds.

The country's need is 200 thousand tons of high-quality potato seeds. For example, in 2014, a total of 368 tons of potatoes of the first and second reproduction were produced. But these seeds do not constitute 1% of the need. 2.2 thousand tons of potato seed were imported into the country from Russia, Turkey and Ukraine, which is slightly more than 1% of the demand. Seed deficiency continues to be a problem. One of the main problems of low productivity is the use of ordinary potato tubers as seed material. Another reason is the lack of technology. From the end of the 90s of the last century to this day, the number of potato harvesters has dropped from 42 to 5, the number of tractors from 40 000 to 17 000, and the number of ploughs from 13 000 to 1 000. Of course, this level of technical support creates serious problems in the production of potatoes, making it impossible to carry out sowing, planting and harvesting at the optimum time. The lack of storage rooms and warehouses creates serious problems for farmers involved in the production of potatoes. According to the State Statistics Committee, 60-100 thousand tons of potatoes are lost during the year. The presence of a monopoly and problems with entering the market kill the desire of the manufacturers, dampen their enthusiasm and distance them from their production. The fact that the wholesale market is in the same hands limits the choice of farmers; they are forced to agree to prices that are unfavorable for them. Cheap potatoes purchased from farmers are sold at bazaars 2-3 times more expensive. Otherwise, monopolists, importing potatoes from Russia, Iran, Georgia and other countries at a cheaper price, create artificial obstacles for local produce.

Irrigation and lack of water is one of the main problems. For the production of competitive products, an important condition is to increase productivity and improve its quality. For this, the production process must be manageable, and the need for irrigation must be met on time. Otherwise, potato production will be disadvantageous.

The interest rates of credit resources offered to agricultural producers in Azerbaijan are very high, which increases the cost of the production. In the production of tomatoes, in their import and export, the situation is almost the same. By the way, from the botanical viewpoint both potatoes and tomatoes belong to the type of angiosperms, the dicotyledon class, the nightshade order, and the nightshade family, i.e. are very close relatives to each other.... The reason for the increase in the cost of tomatoes is a decrease in production and imports, as well as an increase in exports, that is, the presence of a small supply. The press noted that in August last year, tomatoes rose in price, and customers were offered tomatoes at a price of 1-3 manats per kilogram. In 2018, compared with the previous year, tomato production decreased by 15 thousand tons and import - by 2 thousand tons (Table 2). Moreover, in 2018, compared with 2017, 18.4 thousand tons more tomatoes were exported. A decrease in tomato production and import, as well as an increase in exports, caused a decrease in supply on the market by 23.4 thousand tons, which, in turn, ended in a price increase.

It should be noted that in January-July of this year, 132.7 thousand tons of tomatoes were exported. This year, compared to the same period last year, tomato exports decreased by $ 3 million.

In total, according to our studies, the reason for the increase in prices for vegetable products is a low supply. The information provided by the State Statistics Committee shows that in Azerbaijan, the consumption of potatoes and tomatoes per person decreased significantly (Table 3). During the year, according to the WHO standards, the consumption of potatoes per person should be 117 kg, and in Azerbaijan in 2018, 89.8 kg were produced per capita. Not all products are consumed. Part of it is used as livestock feed. Thus, in 2018, potato consumption per person amounted to 73.5 kg. , this is 62% of the established norm. For comparison, we note that in the CIS countries in 2017, 675 kg per person were produced in Belarus, 523 kg in Ukraine, 238 kg in Kyrgyzstan, 201 kg in Russia, and 197 kg in Kazakhstan. In Armenia, the production of potatoes is 2 times more than in Azerbaijan, 184 kg per person.

The main reason for the high cost of potatoes is low productivity. In Azerbaijan, on average, 15 tons of potatoes are obtained from each ha. In Armenia, this figure is 25 tons. For this reason, the cost of their crops is cheaper. In Armenia, currently 1 kg of potatoes is two times cheaper than ours - 34-36 gapiks (100-120 drams).

It would be nice if Ali Ahmedov and others were looking for reasons for the high prices of agricultural products not only in the markets. There are many reasons for high prices. We noted some.

However, we did not understand the words of the officials "we should not allow unlimited price increases". Is there a limitless increase in prices or is it within limits? How can this verge be determined? The words "the purpose of the audit is to reveal facts of artificially inflating prices" and "if someone artificially inflates prices, then the government can respond with economic measures" could be hardly understood either. How will they be able to determine whether market-generated prices are artificial or not? Or who can say where there is a boundary between optimal and artificial price? All that is absurd. Yes, of course, chaos reigns in the food market, however, there is a way out. We invite the government of Azerbaijan and Ali Ahmedov to assist in solving the problems of producers, to eliminate the monopoly in wholesale markets and imports. Then the market will be put in order.