#13 BFC Armenia Agriculture Finance Bulletin

06/2016

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13 A rm e n i a Agriculture Finance Bulletin Viticulture and Winemaking Foundation to be Established EBRD Forum Supports Armenian Dairy Sector Development Armenian Agricultural Products Enter Chinese Market Fruit and Vegetable Exports Already Exceed 63,700 Tons in 2016

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Agriculture Finance Bulletin Edition #13, June 2016

Contents State Initiatives ........................................................................................................... 2 1) 2)

Viticulture and Winemaking Foundation to be Established ............................................................ 2 International Conference on Food Security Opens Dialogues ........................................................ 2

Foreign Aid ................................................................................................................. 2 3) 4)

EBRD Forum Supports Armenian Dairy Sector Development ......................................................... 2 EUR 3.3 Million Program for Organic Agricultural Projects ............................................................. 3

Private Sector.............................................................................................................. 3 5) 6) 7) 8) 9) 10) 11) 12) 13)

Russian-Turkish Rapprochement Causes Mixed Feelings in Armenia ............................................. 3 The Total Area of Armenian Greenhouses has Doubled in Five Years ............................................ 3 Armenian Agricultural Products Enter Chinese Market .................................................................. 3 Milk Producers Association Needed in Armenia for Further Development .................................... 4 Fruit and Vegetable Exports Already Exceed 63,700 Tons in 2016 ................................................. 4 Nagorno Karabakh’s Barley Crop will Exceed Domestic Demand ................................................... 4 Proper Nutrition Out of Reach for Many Armenians ...................................................................... 4 Grape Production Up, Wine Exports Down ..................................................................................... 5 Armenian Wheat Market Dominated by Two Companies .............................................................. 5

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.

BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

Phone: +41 44 784 22 22 Fax: +41 44 784 23 23

info@bfconsulting.com www.bfconsulting.com

BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Viticulture and Winemaking Foundation to be Established

June 23rd, 2016, https://armenpress.am/eng/news/851925/new-winemaking-foundation-to-be-established-in-armenia.html

The government of Armenia has decided to establish a viticulture and winemaking foundation. The decision was made in order to strengthen and further develop viticulture and winemaking in the country. The move is expected to improve production quality, expand product offerings and unify the Armenian brand as well as to increase popularity and boost sales abroad. The government will allocate AMD 103 million for the foundation’s establishment.

2)

International Conference on Food Security Opens Dialogues

June 16th, 2016, http://news.am/eng/news/332577.html

Speaking at an international conference on food security issues in Tbilisi, Georgia, Armenian Minister Agriculture Armen Harutyunyan stressed the need for dialogue and cooperation between the Ministries of Agriculture and Health for ensuring proper growth of healthy, nutritious food. In addition to opening a dialogue between two Armenian state entities, the conference also allowed Armenian and Georgian counterparts to begin to examine the prospect of mutual cooperation and regional solutions in food security.

Foreign Aid 3)

EBRD Forum Supports Armenian Dairy Sector Development

June 20th, 2016, http://finport.am/full_news.php?id=25221&lang=3

The "Innovation and Knowledge-Sharing in the Dairy Sector" forum, organized by the European Bank for Reconstruction and Development and supported by the Armenia's Ministry of Agriculture, took place in Yerevan this month. The initiative was designed to build capacity in the dairy sector by introducing innovative technologies to make it more efficient and productive, with the ultimate objectives to improve the quality and safety of Armenia's dairy products and to raise the overall competitiveness of the country's agribusiness sector. Following the forum, commercial famers in Armenia have training opportunities to improve all aspect of milk production, handling and marketing at the farm level.

The dairy sector contributes around a 21% share in the country's GDP, and around 36% of the labor force is engaged in this sector; therefore it is a vital sector of Armenia's economy. There is a large potential for further development and increased investment.

Around 80 participants, including commercial dairy farmers, local dairy producers, industry experts and representatives from the Ministry of Agriculture, attended the forum.

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BFC. Agriculture Finance Bulletin.

4)

EUR 3.3 Million Program for Organic Agricultural Projects

June 6th, 2016, http://news.am/eng/news/330924.html

The Austrian Development Agency and European Union are providing EUR 3.3 million for a program to develop several organic agricultural projects. The Ministry of Agriculture is currently reviewing grant proposals and is expected to select between 25 and 30 projects as part of the program. Projects that have already been accepted into the program include the manufacturing of dry fruits, honey and organic winemaking as well as a project on ecotourism. EUR 1.3 million of the budget will be used for grants while the rest of the budgeted amount will be used for technical support, export development, and organic farm cultures and manufacturing.

Private Sector 5)

Russian-Turkish Rapprochement Causes Mixed Feelings in Armenia

June 30th, 2016, http://finport.am/full_news.php?id=25297&lang=3 http://news.am/eng/news/334772.html

Businessmen involved in exporting fruits and vegetables from Armenia to Russia are concerned about what impact they might see as a result of the easing of tensions between Russia and Turkey. Russia banned the import of Turkish food late last year, which opened up markets for Armenian products to fill; however, if the Russian sanctions are lifted, many worry that Armenian products will lose favor in Russian markets.

The Armenian Ministry of Agriculture urged Armenian producers to elaborate long-term programs with Russian partners following the sanctions by building up a model of competiveness, and Deputy Agriculture Minister stated that the removal of the sanctions will have little effect on the agricultural sector in Armenia as the sector continues to diversify and increase in exports to other Eurasian Economic Union and middle east countries.

6)

The Total Area of Armenian Greenhouses has Doubled in Five Years

June 29th, 2016, http://arka.am/en/news/business/total_area_of_greenhouses_in_armenia_doubled_over_five_years/

The total area of greenhouses in Armenia is now around 1,220.8 hectares, more than double the amount in 2011; moreover, all greenhouses are now properly equipped with automated control systems. Armenian greenhouses are used for growing tomatoes, cucumbers, peppers, eggplants, garden radishes, beans, greens, potatoes, strawberries and flowers, and with the addition of greenhouse products, local high-quality fruits and vegetables are dominating local markets.

Other modern greenhouses built on 50 hectares are expected to be commissioned this year.

7)

Armenian Agricultural Products Enter Chinese Market

June 27th, 2016, http://arka.am/en/news/business/joint_armenian_chinese_company_begins_selling_armenian_agricultural_products_in_china

A joint Armenian-Chinese company has begun selling Armenian agricultural products near Shanghai, China. The joint company currently offers 12 kinds of Armenian made drinks, juices and canned goods.

The company believes that if they can get a foothold in one Chinese province, they will have the market necessary for increasing the production and processing of Armenian agricultural products.

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BFC. Agriculture Finance Bulletin.

8)

Milk Producers Association Needed in Armenia for Further Development

June 23rd, 2016, http://finport.am/full_news.php?id=25256&lang=3

Speaking at the "Innovation and Knowledge-Sharing in the Dairy Sector" forum, Yuri Sivov, Head of the Counseling Department of the Association of Milk Producers of Ukraine, noted that Armenia needs to establish its own milk producers association to foster better cooperation between Ukrainian experts and Armenian dairy producers. Mr. Sivov said that a similar association was founded in Georgia and has already increased dairy productivity by 50% there. He further added that no large investments need to be made in the Armenian dairy sector to double production, just increased awareness on proper methods.

9)

Fruit and Vegetable Exports Already Exceed 63,700 Tons in 2016

June 23rd, 2016, http://arka.am/en/news/economy/armenia_s_2016_fruit_and_ http://arka.am/en/news/economy/armenia_s_agricultural_output_in_january_april_2016_amounted_to_more_than_117_7

Fruit and vegetable exports from Armenia have exceeded 63,700 tons in 2016, already more than 80% of the total fruit and vegetable exports for all of 2015. 80 to 100 tons of cherries and 600 to 800 tons of apricots are exported daily, and these trends are expected to continue. This year’s agricultural output is expected to surpass 2015’s AMD 1,002.2 billion.

The National Statistics Service announced that the overall agricultural output from January 2016 through April 2016 amounts to more than AMD 117.7 billion, an increase of 4.1% over 2015. Highlighted among this growth were a 4% increase in fish farm products, a 3.3% increase in livestock production, and a near 10% increase in crop production.

The main markets for fresh Armenian fruits and vegetables are Russia, Georgia, Switzerland and Iraq.

10) Nagorno Karabakh’s Barley Crop will Exceed Domestic Demand June 21st, 2016, http://arka.am/en/news/economy/barley_crop_

At a recent discussion on harvest and procurement, Agriculture Minister Aram Mkhoyan announced that the barley crop in Nagorno Karabakh will exceed all domestic needs. The Minister also cautioned that more attention in the region should be given to the wheat crop as only 500 hectares were dedicated to wheat growth as compared to nearly 12,000 for barley.

11) Proper Nutrition Out of Reach for Many Armenians June 16th, 2016, http://news.az/articles/world/109110

A study conducted by Oxfam as part of the "Raising food security in the South Caucasus through national strategies and small farms" program has found that 15% of the Armenian population survives on mainly bread and potatoes. Meat and fish products are not affordable for roughly one third of the population in the country. 65.4% of the population also has little-to-no access to fruits and vegetables year round, and winter months see as much as 95% of the population having trouble accessing fruits and vegetables.

In addition to the high prices of the products, the study shows that many Armenians do not have proper knowledge or information on proper nutrition. 19% of children are malnourished, and 8% have developmental issues because of it.

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BFC. Agriculture Finance Bulletin.

12) Grape Production Up, Wine Exports Down June 15th, 2016, http://hetq.am/eng/news/68559/armenia-grape-production-up-wine-exports-down.html

While grape production in Armenia is growing, wine exports are decreasing. 311,000 tons of grapes were grown in 2015, the highest amount in four years, and most grapes in the country go towards making wine. Despite the growth in grape production, wine production dropped in the last two years. In 2013, 6.6 million liters of wine was produced in Armenia; this dropped to 6.176 million liters in 2014 and 5.9 million liters in 2015.

Experts tie the drop in exports to the financial crisis in Russia, the largest importer of Armenian wines.

Avag Haroutyunyan, head of the Armenian Winegrowers Union, believes it’s a must for wine exporters to tap other international markets. He further stated that recent efforts to break into the Indian and Chinese wine markets should start bearing fruit in November and December.

13) Armenian Wheat Market Dominated by Two Companies June 14th, 2016, https://pfarmenia.wordpress.com/2016/06/14/monopoly-profits-in-the-wheat-flour-market-in-armenia/

The Armenian wheat market is highly concentrated with two large companies controlling nearly 88% of the market and generating nearly USD 110 million in pre-tax profit. Conservative estimates show that companies introducing and selling wheat in the Armenian market are setting a price double its cost of import, transport, milling and distribution. The net effect of this is a price for bread in Armenia that is 36% higher than the average price of bread in other Commonwealth of Independent State (CIS) countries. Read More Âť

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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.

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