The reason for high prices for products is monopoly

According to the State Customs Committee (SCC), from January to September 2023, food products worth $1 billion 576.1 million were imported into the country, which is 2.3% less than in the same period last year. So, for 9 months of 2022, the cost of food imports amounted to $1 billion, $613.6 million. As you can see, from January to September of this year, food imports decreased by $37.4 million in value terms compared to the previous year. The reason is the fall in food prices on the world market. As an example, although wheat imported into the country this year increased in physical weight by 48.1 thousand tons, the cost of imports decreased by $51.3 million compared to the previous year. Imports of fats of vegetable and animal origin decreased in value terms by 31.3%, that is, by $62.1 million, while in physical weight, it decreased by only 5.6%.

It should also be noted that over the past decade (January-September), food imports have increased by 83.0%, and over the past 5 years - by 61.4%. In January-September of this year, imports of meat and meat products, milk and dairy products, rice from the main food products increased compared to the same period last year both in physical weight and in value terms.

For 9 months of this year, the largest increase occurred in wheat imports.

In January-September 2023, wheat imports in physical weight increased by 48 thousand 131 tons compared to the same period last year. For 9 months of 2023, the cost of imported tea increased by 8.2%, rice-by 12.8%, and so on.

In January-September of this year, imports of basic livestock products increased markedly compared to the same period of the previous year, both in physical weight and in value terms. So, for 9 months, imports of meat in value terms increased by 15.8%, in physical weight by 4.5%, imports of milk and cream increased in physical weight by 24.9%, in value terms by 44.4%, and imports of live cattle intended mainly for slaughter increased in value terms by 79.7%.

Over 9 months of 2023, wheat imports in physical weight increased by 48.1 tons, that is, by 6.4%. At the same time, the State Statistics Committee (SCC) indicated that 1 million 828 thousand tons of wheat were produced (in primary weight), that is, 97 thousand tons more than a year earlier. If the situation is really as described by the GCS, then wheat imports this year should not have increased so much. This is due to the fact that the GCS has been reducing wheat consumption for the last two years. Although the reason for this is not explained, the volume of wheat used for food production decreased from 2 million 533.9 thousand tons in 2020 to 2 million 62.3 thousand tons in 2021 and to 1 million 869.1 thousand tons in 2022. That is, in two years, the volume of wheat used for food production decreased by 664 thousand 782 thousand (26.2%). From this calculation, the volume of wheat imports should also have been reduced. But there is still uncertainty about the indicators of production and imports. It would be good if the SCC made a statement about these figures.

According to the SCC, until October 1, 3 million 100 thousand 900 tons of grain and leguminous crops, including corn, were harvested from the fields, or 1.7% more than in the same period last year. At the same time, in January-September of this year, along with wheat from grain crops, imports of corn and rice also increased in physical weight. Thus, according to the data provided by the State Customs Committee, 65.3 thousand tons of corn were imported into the country in 9 months of this year, which is 12.8% more than in the same period last year. Compared to the same period of the previous year, rice imports increased in physical weight by 6% and by 12.8% in value terms. (Table 1).

According to the data provided by the State Customs Committee, 30.2 thousand tons of meat worth $60.1 million were imported into the country in 9 months of this year.  And this is by 4.5% more in physical weight and by 15.8% in value terms compared to the same period of the previous year. On the other hand, during the same period, live cattle, mainly intended for slaughter, were imported into the country for $82.8 million, which is 79.7% more than in the same period last year. Along with this, the SCC indicated that over the 9 months of this year, meat production increased by 3.2%. Thus, according to the statistical committee, for 9 months of this year, 424 thousand 500 tons of meat were produced in live weight in the country, including poultry, which is 3.2% more than in the same period last year. The State Customs Committee also recorded a steady increase in prices for meat and meat products for 9 months of 2023. On the one hand, meat production, meat imports and the import of live cattle intended mainly for slaughter are growing, and on the other hand, meat prices are rising. It should also be noted that over the past year, meat prices in the world have fallen by 5.0%, while over the 9 months of this year, the prices of meat imported into the country have increased by 10.7% compared to the same period of the previous year.

The SCC indicated an increase in milk production by 1.7% over the 9 months of this year compared to the previous year. At the same time, 9.2 thousand tons of milk worth $18.7 million were imported into the country during the same time, which is more than a year earlier in physical weight by 24.9% and by 44.4% in value terms. It should also be noted that for 9 months of this year, the prices of imported milk increased by 15.7% compared to the same period of the previous year. And this is despite the fact that compared to the corresponding period last year, milk prices in the world fell by 23.9%.

The main fruit and vegetable products exported from Azerbaijan in January-September of this year, tomatoes, were potatoes, hazelnuts, apples, persimmons and pomegranates. Exports of fruits and vegetables, the country's main export products, increased by 11.8% in physical weight and by 7.1% in value terms over the first 9 months of this year. Exports of hazelnuts, apples, pomegranates have increased both in physical weight and in value terms.

In January-September 2023, the export of apples increased compared to the same period of the previous year in physical weight by 36.1% and by 33.0% in value terms, the export of pomegranates in physical weight - by 3.3 times, in value terms - by 2.7 times, hazelnuts in physical weight - by 20.0%, in value terms in real terms - by 19.7%.

Compared to the same period of the previous year, potato exports decreased in physical weight by 9.1% and by 11.6% in value terms, persimmon exports - by 43.2% in physical weight and by 45.7% in value terms (Table 2).

The conducted studies have shown that over the past few years there has been a reduction in the export of traditional export products. Thus, in January-September 2023, tomato exports decreased by $43 million 508 thousand in value terms, that is, by 25.9%, and in physical weight by 42 thousand 909 tons, that is, by 27.6%, compared to the same period in 2020. For 9 months of this year, tomato exporters earned $43.5 million less than three years ago. Compared to January-September 2019, the income of hazelnut exporters in the form of cash for the same period of this year decreased by $8 million. The revenues of persimmon exporters for the same period of this year decreased by $13.9 million compared to 9 months of last year and by $17.4 million compared to 9 months of 2021..

In January-September of this year, tea exports decreased in physical weight by 3.3 times and by 2 times in value terms, fats and oils of vegetable and animal origin - by 27.6% in physical weight and by 36.2% in value terms. For 9 months of this year, the incomes of tea exporters decreased by more than $ 5 million compared to the same period of the previous year, and the incomes of exporters of fats and oils of vegetable and animal origin - by more than $8.6 million.

Unfortunately, during the first 9 months of this year, the incomes of not only food exporters, but also cotton exporters have seriously decreased. Thus, for 9 months of this year, the income of cotton exporters as a whole decreased by $61.8 million compared to the previous year. If for 9 months of 2022 cotton was exported in the amount of $180.9 million , then for the same period of this year cotton exports amounted to $119.1 million in value terms . This is also 34.1% less than in the previous year (Table 3).

Thus, our research has shown that, although the prices of some food products on the world market are declining, these same products are imported into the country at high prices. Meat and dairy products can be cited as an example. If over the past year the prices of meat on the world market have decreased by 5.0%, and for milk - by 23.9%, then in 9 months the prices of meat imported to Azerbaijan have increased by 10.7% compared to the same period last year, and for milk - by 15.7%.

Monopolistic companies engaged in the import of food products, last year, when food prices in the world were high, imported food products into the country in large volumes exceeding the monthly, quarterly and even annual demand. As a result, although basic food products have become seriously cheaper on the world market, Azerbaijani consumers had to purchase these products on the domestic market at higher prices.

From our calculations based on the figures presented by the SCC, it can be seen that in 2022 more butter, fats and oils of vegetable and animal origin were imported into the country at a high cost than in the previous year. The bulk of them remained in warehouses.

The reduction in imports of fats of vegetable and animal origin from January to September of this year can also be attributed to a significant increase in imports of the same products in 2022. So, in 2022, a record amount of fats and oils of vegetable and animal origin was imported into the country - 171 thousand 801 tons for $ 297 million 490 thousand. In 2022, fats and oils of vegetable and animal origin were imported by 16 thousand 194 tons more than in the previous year. That is, the same amount of additional reserves has been accumulated for 2023. For 9 months of this year, there was a reduction in imports of fats of vegetable and animal origin by 6 thousand 420 tons, which is 2.5 times more than the remaining reserves of the previous year.

The reduction of imports of butter and other oils from milk this year by 14.0% was also possible due to the accumulated stock of butter in the previous year. So, in 2022, butter and other oils made from milk were imported into the country by 3 thousand 528 tons more than in the previous year, which is 1 thousand 551 tons more than the volume of butter imports that decreased in 9 months of this year (1977 tons). It should also be noted that in the coming months there may be a reduction in imports of these and other items of goods due to last year's balances.

Studies show that monopolistic companies engaged in the import of food products have imported large volumes of food into the country, exceeding monthly, quarterly and even annual demand, without predicting in advance the decline in prices occurring on the world market.

Despite the fact that these products became cheaper on the world market, exporting companies sold the products they stored in warehouses as stocks at a high price. As a result, despite the serious reduction in the cost of basic foodstuffs on the world market, Azerbaijani consumers were forced to continue to purchase these products at high prices. For this reason, the decline in prices on the world market did not have an impact on the domestic market of Azerbaijan.

I believe that the government of Azerbaijan should eliminate the existing monopoly on imports and strive to create a competitive environment in the market in order to prevent a serious increase in prices in the food market.

APPLICATIONS

Appendix 1

Table 1. Food imports for January-September 2022 and 2023 (quantity in tons, cost in thousand USD). Source: State Customs Committee.

Appendix 2

Table 2. Agricultural exports in January-September 2022 and 2023 (quantity in tons, cost in thousand USD). Source: State Customs Committee

Table 3. Agricultural exports in January-September 2022 and 2023 (quantity in tons, cost in thousand USD). Source: State Customs Committee