#86 Georgia Agriculture Bulletin, BFC

10/2019

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86 Geo r g i a Agriculture Bulletin Changes to State Dairy Farm Support Program EU, AFD launch project to finance agricultural cooperatives and small farms Grant competition to support agricultural development launched Revenue from agricultural production up

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Georgian Agriculture Finance Bulletin Edition #86, October 2019

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

Changes to State Dairy Farm Support Program .............................................................................. 2 Financial and technical assistance for perennial orchards .............................................................. 2 Agreement signed to boost epizootic and phytosanitary reliability ............................................... 2

Foreign Aid ................................................................................................................. 2 4) 5) 6) 7) 8) 9)

EU, AFD launch project to finance agricultural cooperatives and small farms ............................... 2 Animal identification and traceability program to transition to the private sector........................ 3 Grant competition to support agricultural development launched ................................................ 3 FAO, EBRD support unique food product labeling .......................................................................... 3 ENPARD helps establish link between smallholder farmers and major retailer ............................. 4 Livestock Expo 2019 held in Tbilisi ................................................................................................... 4

Private Sector.............................................................................................................. 4 10) 11) 12) 13) 14) 15) 16) 17)

Revenue from agricultural production up ....................................................................................... 4 Public hearing held on Rural and Agricultural Development Strategy 2021-2027 ......................... 4 Georgian nut exports to exceed wine exports ................................................................................ 5 Brown marmorated stink bug reappears in Western Georgia ........................................................ 5 Wine export revenue up 16% .......................................................................................................... 5 Georgian tangerines to reach new EU markets............................................................................... 6 1,400 tons of grapes harvested in Racha highlands ........................................................................ 6 Georgia’s problem with unregulated wine...................................................................................... 6

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 #3, January 2013

State Initiatives 1)

Changes to State Dairy Farm Support Program

October 17th, 2019, https://kalo.ge/news/view?id=7917

Changes have been made to the State Dairy Farm Support Program, which assists dairy farming cooperatives in the purchase of industrial machinery. The changes now mean that co-financing of up to 90% (up to a maximum of GEL 150,000) is available to dairy farms for the purchase of dairy processing machinery, with that percentage rising to 95% (up to a maximum of GEL 150,000) for agricultural cooperatives registered in highland areas of Georgia.

So far, 24 cooperatives have been funded through the program with a total of GEL 2.03 million.

2)

Financial and technical assistance for perennial orchards

October 21st, 2019, https://kalo.ge/news/view?id=7929

The garden component of a project aims to provide financial and technical assistance to beneficiaries for the cultivation of perennial orchards across different regions of Georgia. Financial assistance is available in the form of co-financing for seedlings, modern drip irrigation systems, electricity posts and/or anti-hail nets. The percentage of co-financing depends on the project, the location of the land and the status of the beneficiary. Technical assistance is also made available to beneficiaries in the form of training on the following topics: seedling planting, implementing integrated plant protection systems and garden watering and plant nutrition. Participation in trainings is obligatory for those receiving financial assistance.

3)

Agreement signed to boost epizootic and phytosanitary reliability

October 28th, 2019, https://kalo.ge/news/view?id=7939

The National Food Agency has signed a memorandum of understanding with the Turkish Cooperation and Coordination Agency for cooperation regarding the training of veterinarians and plant defenders.

Cooperation between the two countries is important for risk assessment and monitoring diseases.

Increased cooperation is expected to result in the further strengthening of Georgia’s epizootic and phytosanitary reliability.

Foreign Aid 4)

EU, AFD launch project to finance agricultural cooperatives and small farms

October 3rd, 2019, https://agenda.ge/en/news/2019/2664

The European Union (EU) and the French Development Agency (AFD) are launching a new project to finance agricultural cooperatives and small commercial farms in Georgia. The Financial, Extensional and Cooperative Support for Georgian Farmers project is a four-year project with a budget of EUR 4 million. It aims to promote entrepreneurship, create new jobs and increase exports. Specifically, it will support small- and medium-sized farms in better using export opportunities to new markets, especially those through the Deep and Comprehensive Free Trade Area (DCFTA) agreement between Georgia and the EU. The project will be implemented by the Frankfurt School of Finance & Management, Mercy Corps, Rural Development for Future Georgia (RDFG) and the Chambre d’Agriculture du Loiret. It is being financed by the European Neighborhood Program for Agriculture and Rural Development (ENPARD) and AFD. Page 2

BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

5)

Animal identification and traceability program to transition to the private sector

October 10th, 2019, https://kalo.ge/news/view?id=7901

The Food and Agriculture Organization of the United Nations (FAO), in conjunction with the National Food Agency, has begun the process of delegating the Animal Identification and Traceability Program (NAITS) to the private sector, with Kvareli Nursery becoming the first commercial farm where animal identification and registration will be carried out by farm veterinarians instead of by veterinarians hired by the National Food Agency. This marks an important step toward harmonization with European Union (EU) standards and norms.

NAITS was launched in 2016 by the Swiss and Austrian Development Agencies, the National Food Agency and FAO. Now, FAO and the National Food Agency believe that the private sector is already ready to take on this responsibility, which will ultimately free up more funds for the state to use on stimulating private sector growth.

6)

Grant competition to support agricultural development launched

October 15th, 2019, http://www.fao.org/georgia/news/detail-events/en/c/1238511/

The Food and Agriculture Organization of the United Nations (FAO), under the European Union (EU)funded European Neighborhood Program for Agriculture and Rural Development (ENPARD), has announced a grant competition to support agricultural initiatives in Georgia, with the ultimate aim of improving access to finance, services, equipment and inputs for farmers, rural households, cooperatives and other small- and medium-sized enterprises (SMEs) in rural areas. Such improvements are expected to contribute to increased competitiveness of the agricultural sector and better the livelihoods of people living in rural areas. There are two grant categories, one to support capital investments in machinery and equipment and another to specifically support beef, dairy, vegetable, wheat and potato value chains.

Selected beneficiaries are required to co-invest a minimum of 60% of the total investment requested, with the grant covering the remaining up to 40%. Investment projects deemed to have a high economic, social and environmental impact are eligible to have grant funds cover up to 60% of the total investment requested.

7)

FAO, EBRD support unique food product labeling

October 16th, 2019, https://www.ebrd.com/news/video/georgias-dairy-delights.html

Renowned as a biodiversity hotspot, Georgia boasts a wealth of traditional food products not found elsewhere in the world, including Sulguni cheese, Tushetian Guda and churchkhela. These products have qualities that stem from their place of origin that give them a distinctive taste, texture and appearance.

For this reason, the Food and Agriculture Organization of the United Nations (FAO) and the European Bank for Reconstruction and Development (EBRD) are supporting the development of origin-linked labels and geographical indications for unique Georgian food products. It is hoped that such labeling will bring new life into rural economies and keep Georgian food traditions alive.

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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

8)

ENPARD helps establish link between smallholder farmers and major retailer

October 17th, 2019, http://www.fao.org/georgia/news/detail-events/en/c/1239064/

Smallholder farmers in the Lagodekhi municipality who received assistance under the European Neighborhood Program for Agriculture and Rural Development (ENPARD) to establish a demonstration sweetcorn plot that uses modern European standards and practices have established relationships with the largescale retailer Carrefour for the regular purchase of high-quality sweetcorn. This is the first example of successful contract farming aimed at gaining higher income for smallholder farmers and for promoting products produced in Georgia; it is expected to pave the way for larger collaborations between smallholder farmers and retailers as well as promote premium ‘Made in Georgia’ products to endconsumers.

9)

Livestock Expo 2019 held in Tbilisi

October 29th, 2019, https://agroface.ge/news/d5811868-280d-4b81-acd0-d674d1846a86

The Livestock Expo 2019 was held in Tbilisi this month as part of an effort to promote Georgia’s livestock sector as well as increase livestock farmers’ skills and knowledge. The event was organized by the Georgian Livestock Breeding Association and the Georgian Hellenic Association. It was supported by the Investing in Safe and Quality Property project of the US Department of Agriculture and the Georgian Farmers' Association.

Private Sector 10) Revenue from agricultural production up October 4th, 2019, https://bm.ge/en/article/iset---revenue-from

The share of the rural population in the total population decreased slightly, from 42.6% in 2015 to 41.3% at the beginning of 2019. The share of agriculture in total GDP has also declined, from 9.1% in 2015 to 7.7% in 2018. At the same time, there has been a 6.4% increase in agricultural production from 2017 to 2018. Specifically, production in the plant-growing sector increased by 10.9%, and production in the livestock sector experienced an increase of 2.1%. Revenue from the sales of agricultural products in 2018 also increased compared to the 2014‐2017 period, both in percentage and absolute terms.

Month-to-month prices for food and non-alcoholic beverages increased 1.2%, contributing 0.37 percentage points to the change in total CPI. The main drivers were price fluctuations in the following subgroups: vegetables (+8.1%), fruit and grapes (+7.1%) and milk, cheese and eggs (-5.7%). Year-to-year prices (May 2018 vs. May 2019) for food and non-alcoholic beverages increased7.9%, contributing 2.43 percentage points to the change in total CPI. The main drivers were rice fluctuations in the following subgroups: vegetables (+33.7%), fish (+13.5%) and fruit and grapes (-19.9%).

11) Public hearing held on Rural and Agricultural Development Strategy 20212027 October 7th, 2019, http://georgiatoday.ge/news/17631/October-2019

On 30 August 2019, a public hearing to discuss Georgia’s Rural and Agricultural Development Strategy 2021-2027 was conducted at the Ministry of Agriculture. The new strategy document represents a roadmap for Georgia’s rural and agricultural development over the next decade. The strategy outlines three major goals to be achieved by 2027: (1) increase the competitiveness of agricultural and nonagricultural sectors, (2) ensure the sustainable management of natural resources, preservation of Page 4

BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

ecosystems and adaption to climate change and (3) ensure food safety as well as the development of efficient veterinary and plant protection systems.

It should be noted that the strategy does not sufficiently cover such important topics as agricultural land registration, consolidation and market development nor youth involvement in agriculture. These issues are extremely important for the sustainable development of the sector.

12) Georgian nut exports to exceed wine exports October 7th, 2019, https://agenda.ge/en/news/2019/2692

According to an expert from the Food and Agriculture Organization of the United Nations (FAO), Georgian nut exports are expected to exceed wine exports in the near future. The expert noted that walnuts, almonds and pistachios have the greatest potential. While Georgia is known mostly for hazelnut production, the expert pointed out that Georgia’s natural climate is better suited for walnuts, although both do well. Georgia also has an appropriate climate for almonds, which is a very profitable crop.

13) Brown marmorated stink bug reappears in Western Georgia October 7th, 2019, http://bizzone.info/agriculture/2019/1570499487.php

Residents of villages in the Khobsky district claim that, despite eradication efforts, brown marmorated stink bugs have returned to Western Georgia and are invading residents’ homes. This is especially concerning for residents of the area as the pests are known to decimate persimmon and nut orchards.

The National Food Agency, on the other hand, believes that 90% of the pests have been destroyed and notes that spraying work is ongoing within the territory. They remind residents that this time of year is when the pest tends to go into homes to winter and that families should take appropriate measures to protect their homes and lands.

Brown marmorated stink bugs first appeared in Georgia in 2015, spreading, presumably, from Abkhazia.

Since then, Georgia, especially Western Georgia, has been fighting the pest that destroys hazelnut and citrus crops. In response, the Georgian government developed a special pest control project that is now recognized as one of the best in the world. The government has also been aided in the fight by the United States Agency for International Development (USAID).

14) Wine export revenue up 16% October 8th, 2019, https://agenda.ge/en/news/2019/2700

Through the first nine months of 2019, revenue from Georgian wine exports amounts to USD 164 million, a 16% year-on-year increase. The top five countries to import Georgia wine so far this year are: Russia (41.11 million bottles), Ukraine (6.77 million bottles), China (5.33 million bottles), Poland (2.91 million bottles) and Kazakhstan (2.48 million bottles).

During the same period, Georgia has also exported 19.5 million bottles of brandy (up 44% year-on-year) and 473,200 bottles of chacha (up 65% year-on-year). Export revenue from chacha reached USD 1.3 million, 54% higher year-on-year.

In total, Georgia has exported USD 236 million worth of alcoholic beverages in the first nine months of 2019.

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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

15) Georgian tangerines to reach new EU markets October 16th, 2019, https://agenda.ge/en/news/2019/2778

Tangerines are expected to be exported to new markets in several European Union (EU) member states this year. To facilitate access to new markets, an office has been set up to improve coordination between farmers and the factories that will export the tangerines. This office will work until February 1, 2020.

This year’s tangerine harvest is projected to be between 50,000 55,000 tons. Up to 30 different factories are expected to receive the harvest for processing and export.

16) 1,400 tons of grapes harvested in Racha highlands October 17th, 2019, https://sputnik-georgia.ru/economy/20191017/246771760/

So far, more than 1,400 tons (of the expected 1,500 tons) of Mujuretuli and Alexandrouli grapes have been harvested from the Racha highlands. These grape varieties are used to make Khvanchkara wine, and there are ten wine producing companies located in the region. To help grape harvests reach wineries in the region, a coordination headquarters was set up in the city of Ambrolauri.

17) Georgia’s problem with unregulated wine October 18th, 2019, https://commersant.ge/en/post/winemakers-say-the-sale-of-draft-wine-should-be-regulated

According to the director of the Telavi Wine Cellar, Zurab Ramazashvili, Georgia has a serious problem with unregulated wine. To combat this, he argues, the state needs to tighten its control, including through implementing measures to ensure that all wine that is sold in the country meets certain standards. Mr. Ramazashvili also believes that the state needs to protect the quality of draft wine, although he admits that this problem is not yet widespread.

Currently, the government does not have the resources nor sufficient control mechanisms to control and check the domestic wine produced by thousands of families.

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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.

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