#121 Georgia Agriculture Bulletin, BFC

09/2022

121 GEO R G I A

#

AGRICULTURE BULLETIN Call to Stop Grape Harvest Subsidies Bank of Georgia Invests GEL 1.5 Million in Blueberry Plantation in Georgia Almond Producers Eying Key Export Markets Wine Quality and Authenticity to Be Tracked Using Blockchain Technology

All materials are published “as is” and are the property of their respective owners.

Georgian Agriculture Finance Bulletin Edition #121, September 2022

Contents State Initiatives ........................................................................................................... 2 1) 2) 3)

Call to Stop Grape Harvest Subsidies .............................................................................................. 2 Vintage Grape Subsidies Expected to Amount to GEL 90 Million in 2022 ...................................... 2 State Announces GEL 590 Million for Agricultural Development ................................................... 2

Foreign Aid ................................................................................................................. 2 4) 5) 6) 7)

Bank of Georgia Invests GEL 1.5 Million in Blueberry Plantation in Georgia .................................. 2 Unique Georgian Taste Highlights Georgian Agricultural Products ................................................ 2 EBRD, FAO to Support Sustainable Agritourism in Georgia ............................................................ 3 FAO Holds Regional Training on Locust Management .................................................................... 3

Private Sector.............................................................................................................. 3 8) 9) 10) 11) 12) 13) 14) 15) 16)

Almond Producers Eying Key Export Markets ................................................................................. 3 Year-on-Year Price Increase for Wheat Flour Reached a Maximum in July .................................... 3 Despite Expectations, Bread Prices Will Not Likely Decrease ......................................................... 4 Table Grape Prices Up 10–30% ....................................................................................................... 4 Wine Quality and Authenticity to Be Tracked Using Blockchain Technology ................................. 4 Georgian Wine Exports Remain at Last Year’s Level ....................................................................... 4 Tangerine Producers Ask for State Support to Enter European Markets ....................................... 4 Fish Prices Surge .............................................................................................................................. 5 200,000 Tons of Grapes Already Processed in Kakheti ................................................................... 5

Note: The Georgian Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows to Georgia’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 Georgia. Currently, BFC is implementing the Agricultural Lending Programme for KfW. Read more »

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. Georgian Agriculture Finance Bulletin. Edition #121, September 2022

State Initiatives 1)

Call to Stop Grape Harvest Subsidies

September 12th, 2022, https://commersant.ge/en/post/how-to-stop-subsidizing-the-grape-harvest-tbilvino-founder

Zurab Margvelashvili, co-founder of the Georgian wine company TbilVino, considers the subsidizing of grape harvests unhealthy and hopes that the government will end this practice in the near future. He believes that a healthier practice is to spend more budget funds on international marketing that increases awareness of Georgian wine, and therefore also demand.

2)

Vintage Grape Subsidies Expected to Amount to GEL 90 Million in 2022

September 22nd, 2022, https://bm.ge/en/article/how-much-will-the-govt-increase-the-vintage-subsidy/116996/

The state’s vintage subsidy program, which details that “there should be no unsold grapes in the market”, is expected to cost the state GEL 90 million in 2022. Since 2017, the state, through the subsidy program, has been buying surplus grapes through direct contracts. This year, nearly 280,000 tons of grapes are expected to be harvested. Approximately one third of those grapes are expected to be purchased under the vintage subsidy program.

3)

State Announces GEL 590 Million for Agricultural Development

September 30th, 2022, https://agenda.ge/en/news/2022/3792

Prime Minister Irakli Garibashvili has announced that GEL 900 million (USD 318 million) has been allocated for the continued development of agriculture and small- and medium-sized businesses operating in Georgia. Of this amount, GEL 590 million (USD 208 million) is planned to be spent on agriculture in the coming year, including on measures related to agricultural finance (both credit and insurance), the Plant the Future program and other state initiatives aimed at supporting agricultural enterprises.

Foreign Aid 4)

Bank of Georgia Invests GEL 1.5 Million in Blueberry Plantation in Georgia

September 7th, 2022, https://bm.ge/en/article/gel-15-mln

The Bank of Georgia actively continues to promote agricultural management projects. Most recently, the bank has invested GEL 1.5 million into a project that will allow a local blueberry producer to set up a blueberry plantation on 16.4 hectares in Laituri (Guria region). The investment will be used for agrotechnical measures, the cultivation of the plot and the purchase of modern seedling varieties.

5)

Unique Georgian Taste Highlights Georgian Agricultural Products

September 9th, 2022, https://www.fao.org/georgia/news/detail-events/en/c/1604447/

The third edition of the Unique Georgian Taste event has been held in Kutaisi. During the event, agricultural market participants exhibited and sold locally-produced niche and widely-consumed agricultural goods. Participants also presented and shared insights about their products, which often mix traditional customs of Georgian production with contemporary trends necessary to be in line with international food safety standards. The Unique Georgian Taste event was European Union (EU), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and the Food and Agriculture Organization of the United Nations (FAO).

Page 2

BFC. Georgian Agriculture Finance Bulletin. Edition #121, September 2022

6)

EBRD, FAO to Support Sustainable Agritourism in Georgia

September 27th, 2022, https://www.fao.org/georgia/news/detail-events/en/c/1606732/

The European Bank for Reconstruction and Development (EBRD), the Food and Agriculture Organization of the United Nations (FAO), the Ministry of Environmental Protection and Agriculture of Georgia, the Georgian National Tourism Administration, the Elkana Biological Farming Association and the Georgia’s Farmers Association have teamed up to help Georgia grow its agritourism industry in a responsible, inclusive and eco-friendly way. This includes the development of a strategic investment roadmap and the promulgation of promotional materials as well as the organization of trainings and knowledge exchanges.

All of the aforementioned organizations believe in the agritourism potential of Georgia if done in a way that is economically and socially responsible.

7)

FAO Holds Regional Training on Locust Management

September 30th, 2022, https://www.fao.org/georgia/news/detail-events/en/c/1607050/

The Food and Agriculture Organization of the United Nations (FAO) has conducted a regional training-oftrainers (ToT) on locust management for 23 specialists from Armenia, Azerbaijan and Georgia. The ToT took place in Kakheti and was organized as part of the United States Agency for International Development (USAID) Reducing Risks of Locust Disasters in the Caucasus and Central Asia project. The project aims at reducing risks of locust disasters by improving locust management, including through the use of modern early data collection and warning systems as well as better responses to locust infestations.

The ToT was designed to transfer knowledge and teach skills and tools to those capable of delivering further trainings.

Private Sector 8)

Almond Producers Eying Key Export Markets

September 7th, 2022, https://commersant.ge/en/post/germany-england

Although almond plantations first appeared in the country only six years ago, the Association of Almond and Walnut Growers of Georgia is already exploring promising export markets, including Italy, Germany, Switzerland and the United Kingdom. According to the head of the Association, these countries and Gulf countries have high purchasing powers and an interest in Georgian almond products. This year, Georgia’s almond harvest is expected to reach 2,000 tons.

9)

Year-on-Year Price Increase for Wheat Flour Reached a Maximum in July

September 8th, 2022, https://bm.ge/en/article/the-yoy-price-increase

The year-on-year price increase for wheat flour in Georgia reached a maximum of 36.5% in July 2022. This follows a year-on-year price increase for wheat bread peaking in June 2022 at 36.3%. Much of these spikes in year-on-year prices increases are due to Georgia’s reliance on Russian wheat (due to Georgia’s overall lack of wheat production and its lack of wheat and wheat flour import diversification). Going forward, it is important that Georgia continue to increase its own production as well as identify other major global wheat and wheat flour exporting countries.

Page 3

BFC. Georgian Agriculture Finance Bulletin. Edition #121, September 2022

10) Despite Expectations, Bread Prices Will Not Likely Decrease September 12th, 2022, https://bm.ge/en/article/will-bread-price-decrease---expectation-of-the-sector/116303/

A reduction in export taxes on Russian grain and oil as well as excessive harvest volumes have resulted in the prices of many grain product prices decreasing. While many expect that this will also result in the price of bread also being lower, the head of the union of bread producers has announced that bread producers are not considering price decreases at this stage as prices have remained stagnant since July, even in the face of rising production costs.

11) Table Grape Prices Up 10–30% September 16th, 2022, https://commersant.ge/en/post/georgian-table-grapes-are-being-sold-at-record-high-prices

The average wholesale price of red and white table grapes has increased 10–30% year-on-year. The reason for the increased sales price is due to increased demand (due to an increase in the number of foreigners staying in Georgia), increased production and maintenance costs and a large volume of table grapes damaged by rainy weather and disease.

12) Wine Quality and Authenticity to Be Tracked Using Blockchain Technology September 16th, 2022, https://www.newsgeorgia.ge/kachestvo-i-podlinnost-gruzinskih

Blockchain platform Cardano, the National Wine Agency and the Bolnisi Vintners Association are joining forces to create an app to track the quality and authenticity of Georgian wines. This is expected to result in a cost-effective and flexible certification and traceability system that provides transparency and credibility for wineries and customers from harvest to consumption. Once implemented, wine consumers can scan a QR code located on their bottle of wine that will bring up all the information about the origin of the product and its supply chain, including exactly where the wine was made, who made it and what production techniques were used.

13) Georgian Wine Exports Remain at Last Year’s Level September 22nd, 2022, https://bm.ge/en/article/85-90-of-exports-accounts-for-red-wine---levan-mekhuzla/116981/

Despite the ongoing war in Ukraine and its disruption of markets in the region and in the world, Georgian wine exports have maintained the same levels as last year. Although Georgian wine producers had hoped for double-digit export growth going into this year, they understand that maintaining last year’s levels in the current context is considered a strong result. It should be noted that, wine exports to Russia have increased 8.8%, while wine exports to Ukraine have decreased 58.6%. In total, 85–90% of Georgian wine exports are red wine varieties, which is expected to impact grape production in Georgia going forward.

14) Tangerine Producers Ask for State Support to Enter European Markets September 26th, 2022, https://bm.ge/en/article/we-cant-enter-the-european-market---tangerine-exporter/117176/

Tangerine producers are calling for increased state support to enter European markets. At the moment, Georgian tangerine producers face a number of factors hindering their ability to enter European markets, the most notable of which is the European acceptance of phytosanitary documents issues in Georgia.

Without a way of resolving this issue, it is not possible for Georgian tangerines to reach European markets before spoiling. Georgian tangerine producers hope that, with state support, this and other bureaucratic issues can be resolved so that new, fruitful markets can be established for Georgian tangerines.

Page 4

BFC. Georgian Agriculture Finance Bulletin. Edition #121, September 2022

15) Fish Prices Surge September 27th, 2022, https://commersant.ge/en/post/demand-and-price

The price of fish has been surging drastically recently in Georgia. This is due to a combination of circumstances. First, Georgian fish production is only enough to satisfy 3.5% of demand, although many experts believe that, with proper investments, Georgian production could meet 40% of local demand within 5–6 years. Second, the cost of fish feed (all of which has to be imported) has risen. For example, the price of one container of imported fish feed used to cost EUR 20,000 but now costs EUR 32,000. Finally, demand for fish products has increased greatly, especially with the influx of Russian and Ukrainian refugees and asylum seekers.

16) 200,000 Tons of Grapes Already Processed in Kakheti September 29th, 2022, https://wine.gov.ge/En/News/34949

Most of the grape harvest in the Kakheti region (approximately 200,000 tons) has already been processed, resulting in income of GEL 192 million for nearly 17,000 grape producers in the region. Of the processed grapes, 102,000 were of the Rkatsiteli variety; 75,500 tons were of the Saperavi; and 4,500 tons were of the Kakhuri Mtsvane variety. The largest volume of grapes was processed in Kvareli (47,700 tons), followed by Gurjaani (45,000 tons), Telavi (31,400 tons) and Sighnaghi (20,300 tons).

Page 5

Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com Articles are taken directly from local sources without any fact-checking; they are provided as a convenience and for informational purposes only. Business & Finance Consulting (BFC)’s editing is limited to providing a short summary in English of the texts, highlighting the main points of the original articles.

All rights reserved by the authors.

BFC takes no responsibility and does not make any representation or warranty, express or implied, or assume any responsibility whatsoever for the content, accuracy, and reliability, or completeness of any of the articles.