09/2015
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4 A rm e n i a Agriculture Finance Bulletin State to Spend a Further AMD 550 Million on Cattle Purchases Agricultural Output Totaled AMD 328.4 Billion by August, 2015, Increasing 14.4% OPEC to Loan USD 25 Million for Infrastructure and Rural Support Programme Fish Exports to Russia Facing Obstacles
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Agriculture Finance Bulletin Edition #4, September 2015
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9)
IFC Publishes Aquaculture Sector Review ....................................................................................... 2 Russia Fails to Recognize Correspondence from the State Food Security Service .......................... 2 Ministry of Agriculture Website Wins Freedom of Information Award .......................................... 2 Grape Farmers Block Highway, Demand Crop be Purchased .......................................................... 3 Grape Harvest Estimated at 300,000 Tons ...................................................................................... 3 AMD 900 Million to be Invested in Apple and Walnut Cultivation Technologies in Alapars .......... 3 State to Spend a Further AMD 550 Million on Cattle Purchases .................................................... 3 Preferential Agro-Loans Total AMD 7.5 Billion – Issuance Delayed due to Economic Crises.......... 4 Agricultural Output Totaled AMD 328.4 Billion by August, 2015, Increasing 14.4% ...................... 4
Foreign Aid ................................................................................................................. 4 10) ENPARD Holds Conservation Technology and Best Practice Workshop ......................................... 4 11) USDA to Assist with Livestock Tagging and Registration ................................................................. 5 12) OPEC to Loan USD 25 Million for Infrastructure and Rural Support Programme ........................... 5
Private Sector.............................................................................................................. 5 13) 14) 15) 16) 17) 18) 19)
Despite Good Harvest, Fruit and Vegetable Prices Increase ........................................................... 5 Problems Selling Bumper Harvest ................................................................................................... 6 Yerevan Brandy Company to Purchase 35,000 Tons of Grape ........................................................ 6 351,300 ha Cultivated, Totaling 78.5% of Arable Land ................................................................... 6 10,000 Tons of Seed Potato to be Exported to Russia .................................................................... 7 Armenia’s Largest Slaughterhouse Completed ............................................................................... 7 Fish Exports to Russia Facing Obstacles .......................................................................................... 7
Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows to Armenia’s agricultural sector. This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa. Currently, BFC is implementing the “Financing the Agriculture Sector in Armenia” project for KfW.
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BFC. Agriculture Finance Bulletin.
State Initiatives 1)
IFC Publishes Aquaculture Sector Review
September 29th, 2015, http://www.armradio.am/en/2015/09/29/ifc-finds-export-investment-opportunities-for-armenian-fishproduction/
In its Armenia Aquaculture Sector Review, the International Finance Corporation (IFC) said product diversification, improvements to import and export procedures, food safety and the supply chain, and a reduction in red tape could improve the competiveness of Armenian fish products and open up new markets, according to the Ministry of Economy. The report was commissioned by the Ministry of Economy and produced through the IFC’s Armenia Investment Climate Reform Project. The sector review will prove a useful tool for policy makers and businesses alike, according to Deputy Minister of Economy Sergey Avetisyan. Aquaculture is a significant employer in Armenia, one of the country’s fastest growing sectors and an engine for export-driven economic growth.
2)
Russia Fails to Recognize Correspondence from the State Food Security Service
September 29th, 2015, http://www.arka.am/en/news/economy/safe_delivery_of_armenian_food_products_to_eeu_markets_discussed_in_yerevan/#s thash.vYNLVHH6.dpuf
Eurasian Economic Commission Board Member Robert Harutyunyan, held discussions with the State Food Security Service (SFSS) regarding issues with the export of Armenian products to the Eurasian Economic Union (EEU), particularly Russia. A major obstacle is Rosselkhoznadzor’s – Russia’s Federal Service for Veterinary and Phytosanitary Surveillance – difficulty in recognizing correspondence from the SFSS, said Harutyunyan. Closer cooperation between Armenian and EEU state bodies – particularly Rosselkhoznadzor – are required to resolve the issue, said the board member. Control agencies must also increase cooperation to prevent unsafe products from Armenia – including third-country products – arriving in the EEU, said Harutyunyan. The SFSS said it plans to modernize its operations - including its testing capabilities.
3)
Ministry of Agriculture Website Wins Freedom of Information Award
September 29th, 2015, http://telecom.arka.am/en/news/internet/armenian_ministry_of_agriculture_wins_golden_key_award_of_freedom_informati on_center/
The Ministry of Agriculture’s official website was awarded the Golden Key award for Best Government Agency Website by Armenian press freedom watchdog Freedom Information Center (FIC). The award was collected by Deputy Minister of Agriculture Armen Harutyunyan. Launched by FIC in 2003, the awards are distributed to the most open and closed government offices and organizations in an attempt to promote freedom of information.
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4)
Grape Farmers Block Highway, Demand Crop be Purchased
September 25th, 2015, http://news.am/eng/news/287781.html
Disgruntled grape farmers blocked the Yerevan-Ararat highway demanding the remainder of the harvest be purchased. The highway was reopened only after Prime Minister Hovik Abrahamyan gave assurances that wineries owned by the Governor of Ararat Ruben Abrahamyan and Minister of Parliament Arayik Grigoryan would immediately buy their crop. While payment details were not forthcoming, Governor Abrahamyan registered farmers unable to sell their crop on the day, promising a solution.
5)
Grape Harvest Estimated at 300,000 Tons
September 25th, 2015, http://arka.am/en/news/economy/armenian_grape_harvest_expected_to_be_about_300_000_tons/
This year’s grape harvested is estimated at 300,000 tons – a 20,000 ton increase year-on-year, according to Minister of Agriculture Sergo Karapetyan. To date, 32 of Armenia’s 49 grape processors purchased 80,000 tons of the fruit – a decrease of 20,000 tons compared to 2014. However, procurement has yet to begin in the Vayots Dzor region, said Karapetyan. Under the instruction of President Serzh Sargsyan, grape processors and the Ministry of Agriculture are cooperating to ensure the harvest is purchased in its entirety.
6)
AMD 900 Million to be Invested in Apple and Walnut Cultivation Technologies in Alapars
September 19th, 2015, http://armenpress.am/eng/news/819275/alapars-apple-and-walnut-to-be-introduced-in-armenian-andrussian-markets.html
In Alapars, roughly AMD 700 million has been invested in equipping 29.3 hectares of apple and walnut orchards with state-of-the-art technologies – including drip irrigation and anti-hail systems – with a further AMD 200 million to be invested in additional equipment and storage facilities over the next two years, according to Director of Caucasus Food Bagrat Sargsyan. The harvest will be sold on the Armenian and Russian markets, he added. The technologies allow 200 walnut trees to be planted per hectare, instead of the usual 80-100, while 2500 apples trees can be grown per hectare, instead of 400, said Minister of Agriculture Sergo Karapetyan. The Minister visited the orchard in the company of President Serzh Sargsyan. The orchard has 10 permanent employees with a further 30-50 seasonal workers.
7)
State to Spend a Further AMD 550 Million on Cattle Purchases
September 17th, 2015, http://www.vestikavkaza.ru/news/Minselkhoz-Armenii-prosit-deneg-na-zakupku-telok.html
To meet increased demand, a further AMD 550 million will be invested in 453 cattle on top of the 257 already acquired this year, according to Minister of Agriculture Sergo Karapetyan. The animals will be distributed across 35 farms, he added. Cattle numbers increased to 775,000 heads from January to July 2015, a 3.6% increase year-on-year, while miniature cattle breeds increased 7.2% to 981,000 heads over the same period. Page 3
BFC. Agriculture Finance Bulletin.
8)
Preferential Agro-Loans Total AMD 7.5 Billion – Issuance Delayed due to Economic Crises
September 9th, 2015, http://finport.am/full_news.php?id=23018&lang=3
Due to the downturn in the Armenian economy and the collapse of the Russian ruble, banks tightened borrowing conditions and delayed the disbursement of preferential agricultural loans from April to May this year, said Minister of Agriculture Sergo Karapetyan. Despite this, AMD 7.5 billion in preferential loans were issued for autumn agricultural activities, with the state subsidy increasing by 2 percentage points to 6%, leaving farmers with an interest rate of 8%, added the Minister. Outstanding agro-loans totaled AMD 162.5 million as of June 30, 2015, according to ArmInfo. The market leader was ACBA Credit Agricole Bank, with a portfolio worth AMD 87 billion, added Karapetyan.
9)
Agricultural Output Totaled AMD 328.4 Billion by August, 2015, Increasing 14.4%
September 9th, 2015, http://finport.am/full_news.php?id=23021&lang=3 http://armenpress.am/eng/news/818088/exports-of-armenian-agricultural-products-exceed-index-of-precious-year.html
From January to July, 2015 – despite a heatwave and AMD 7 billion in hail damage across 78 communities – gross agricultural output increased 14.4% to AMD 328.4 billion, with yields totaling 33 quintals per hectare, an increase of 10.6 quintals year-on-year, according to Minister of Agriculture Sergo Karapetyan. During the same period, vegetable output totaled 23,000 tons – of which 22,000 was sold, a 4% increase year-on-year – while fruit output totaled 11,800 tons. Both the fruit and vegetable harvest saw year-onyear increases, with exports up 72%, said Karapetyan. The grape harvest, which exceeded estimates, will be procured in full, with 3,000 tons already exported. Meanwhile, the cattle and pig population increased 4.3% and 11.4%, respectively. Regular cattle breeds saw an increase of 3.6% to 775,000 heads, while miniature cattle saw an increase of 7.2% to 981,000 heads, said the Minister. With 80 additional anti-hail systems installed across Armenia since last year, losses decreased by half, added the Minister. The heatwave affected mainly greenhouse crops, and tomatoes in particular. However, with area under cultivation increasing by 18,500 hectares to 351,200 hectares this year, the losses have been compensated, said Karapetyan.
Foreign Aid 10) ENPARD Holds Conservation Technology and Best Practice Workshop September 14th, 2015, http://agriculture.einnews.com/article/286220099/4s-Z9bPEGYanAMD3
A conservation technology and best practice workshop – organized through the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD) and implemented by the UN’s Food and Agriculture Organization (FAO) – was held in Armenia, according to EU Neighbourhood Info Centre. Page 4
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Due to climate change, drought, soil degradation, erosion and indiscriminate land use, Armenia faces a challenge to protect air, water and soil quality, maintaining the fertility of arable land. The workshop presents the advantages of contemporary technologies and best practice in cereal production. Through ENPARD, the EU will provide Armenia with EUR 25 million in support over 3 years.
11) USDA to Assist with Livestock Tagging and Registration September 9th, 2015, http://ru.1in.am/1112768.html http://news.am/eng/news/286505.html
After a successful pilot in Vayots Dzor comprising 23,000 cattle, the State Food Safety Service (SFSS) with the assistance of the United States Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service – will tag and register all domestic livestock, facilitating the prevention and containment of brucellosis and other diseases, said SFSS Director Armen Hayrapetyan. Ronald Luis, a Swiss expert assisting the SFSS, noted that success depends on the active participation of farmers and refresher training for local specialists. The USDA is also providing its expertise on import and export protocols.
12) OPEC to Loan USD 25 Million for Infrastructure and Rural Support Programme September 3rd, 2015, http://www.tert.am/ru/news/2015/09/03/nowcontract/1780989
The Organization of the Petroleum Exporting Countries (OPEC) is to loan USD 25 million to the Armenian Infrastructure and Rural Finance Support Programme through its Fund for International Development (OFID), according to the Ministry of Foreign Affairs. The program aims to improve water supply and irrigation systems in 7 provinces – prioritizing the poorest areas – increasing productivity and reducing poverty in the process, according to the Ministry.
Private Sector 13) Despite Good Harvest, Fruit and Vegetable Prices Increase September 29th, 2015, http://www.arka.am/en/news/economy/prices_of_fruits_and_vegetables_grow_despite_heavy_crops/#sthash.mVJHqw56.dpu f
Despite a plentiful harvest, fruit and vegetable prices continue to rise. The price of foodstuffs increased 0.3% from July to August, while consumer prices rose 0.7% over the same period, according to the National Statistical Service (NSS). The hike was driven by meat, soft drinks, vegetables and potatoes – the former two rising 11.8% over the period and 15% year-on-year. Since most consumers do not go to villages to buy fruit and vegetables, re-sellers are able to command high prices in the cities, according to the Director of consumer rights watchdog Informed and Protected Consumer, Babken Pipoyan. Moreover, farmers do not benefit from bumper crops, as these cause problems with sales, he added. To prevent consumer price hikes and provide a good deal for farmers, Pipoyan recommends re-seller regulation and price-setting. According to the NSS, agricultural output totaled AMD 328.4 billion from January-July, a 14.8% increase year-on-year. Inflation is projected at 4% (±1.5%). Page 5
BFC. Agriculture Finance Bulletin.
14) Problems Selling Bumper Harvest September 24th, 2015, http://www.armenianow.com/economy/66448/armenia_agriculture_crop_cucumber_farmers_sale_minister
The combination of a bumper harvest and the Russian economic crisis has left farmers unable to sell their produce, according to Vazgen Safaryan, Director of the Domestic Commodity Producers Union. Armenian processors are heavily reliant on the Russian market, leading to a drop in revenues. Lack of cash, compounded by the continued crisis, has led to a drop in demand for local produce, said Safaryan. The government’s decision to subsidize loans by a further 3% should help, he added, with most farmers obliged to sell produce to meet interest payments. The stress has led to several protests. Cucumber farmers in Armavir province dumped dozens of tons of the vegetable while threating to close highways, following the example of grape growers, according to reports. Safaryan believes the glut will lead to shortages next year, with farmers reducing cultivation in response.
15) Yerevan Brandy Company to Purchase 35,000 Tons of Grape September 13th, 2015, http://newsland.com/news/detail/id/1606141/
The Yerevan Brandy Company (YBC) will buy 35,000 tons of grapes this year, paying AMD 150 per kilogram of Ararat grape and AMD 140 per kg of Tavush grape – which have a lower sugar content – according to CEO Igor Arakelyan. The company aims to purchase the entire Tavush harvest, added Arakelyan, while loaning AMD 245 million worth of fertilizers to farmers interest free. With the Russian market accounting for 70% of sales, the depreciation of the ruble is worrying – however, the company is keeping prices unchanged to guarantee sales, said Arakelyan, with no decrease in exports expected. In fact, the number of distillers at YBC’s plant are set to increase from 3 to 8, amounting to an AMD 1.64 billion investment, according to the CEO. Other processors will start procurement this week, beginning with the Ararat region, followed by Tavush, said Minister of Agriculture Sergo Karapetyan. The grape harvest totaled 295,000 tons, up from 261,000 tons in 2014 – of which 184,000 tons were purchased – added the Minister.
16) 351,300 ha Cultivated, Totaling 78.5% of Arable Land September 9th, 2015, http://www.arka.am/en/news/economy/farmland_in_armenia_to_exceed_350_000_hectares_in_2015_agriculture_ministry_/
In 2015, arable land totaled 447,000 hectares, of which 351,300 hectares (78.5%) is under cultivation, an increase of 18,500 hectares year-on-year, according to Minister of Agriculture Sergo Karapetyan. Area of arable land under cultivation totaled 74.4% in 2014 and 63% in 2010, added the Minister. In 2015, grain cultivation increased by 11,000 hectares, fodder by 3,200 hectares, vegetable cultivation by 2,500 hectares, watermelon and gourd by 1,000 hectares and potatoes by 1,000 hectares.
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17) 10,000 Tons of Seed Potato to be Exported to Russia September 9th, 2015, http://www.agroxxi.ru/mirovye-agronovosti/armenija-gotova-postavit-v-rf-do-10-tys-tonn-semennogokartofelja.html
Armenia is to export 10,000 tons of seed potatoes to Russia by early 2016, according to Hrachya Berberyan, Chairman of the Agrarian-Farmers Union. While similar in quality, European seed potatoes are twice as expensive, with Russia currently importing from the Netherlands at EUR 900-1000 per ton compared to the EUR 500 per ton price of the Armenian variety. Moreover, the seed potatoes are grown at more than 2000 meters above sea level, significantly reducing the use of pesticides and the risk of parasite contamination. The first batch will be delivered in November. Considering low production costs, duty-free export to the Eurasian Economic Union (EEU) and subsequent low price, the Union believes the product will easily win market share in Russia, and has requested the government provide interest free loans to spur development, added the Chairman. According to the Ministry of Agriculture, as of late July, a total of 263,000 tons of vegetables, 161,000 tons of fruit and 76,000 tons of potato were harvested.
18) Armenia’s Largest Slaughterhouse Completed September 3rd, 2015, http://www.azatutyun.am/content/article/27225040.html
Golden Axe, and Armenian-Iranian joint venture, has completed a 2,400 square meter halal slaughterhouse in Masis, capable of processing 1000 sheep and 200 cattle a day. The slaughterhouse – Armenia’s largest – is set to significantly increase exports of sheep to Iran, according to Minister of Agriculture Sergo Karapetyan. In 2013, almost 118,000 sheep worth USD 15 million were exported, with 85% heading to Iran. Due to a lack of halal abattoirs, Armenian sheep have hitherto principally been exported to Iran and the Gulf States live. The sheep population increased from 470,000 in 2010 to 690,000 last year. In 2013, Karapetyan said the sheep population could be tripled, as only 25% of Armenia’s 1,000,000 hectares of mountain pasturelands are in use. However, Iran’s attempt to lease Armenian pastureland in 2013 was blocked in response to concerns over environmental impact and national security. According to the National Statistical Service (NSS), total livestock, meat and meat product exports reached USD 50.6 million last year, accounting for 3.3% of the country’s export revenue.
19) Fish Exports to Russia Facing Obstacles September 1st, 2015, http://news.am/eng/news/283997.html
Fish farmers are having problems exporting to their primary market – Russia – with Zhamanak newspaper reporting that products are either barred or destroyed with no further justification. However, Nvard Arakelyan, spokesperson for the State Food Safety Service (SFSS), said the one-time destruction of 200 kg of sturgeon is the only case known to the agency, adding that, despite requests, an explanation has not been forthcoming. Director of the Russian Institute of Strategic Development, Andranik Nikoghosyan, who also imports fish from Armenia, believes the problems are due to ignorance of Eurasian Economic Union (EEU) regulations, reiterating that Armenian products are not destroyed, according to Zhamanak.
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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content. The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners. Copyright of articles is retained by their authors.