#116 Georgia Agriculture Bulletin, BFC

04/2022

116 GEO R G I A

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AGRICULTURE BULLETIN GEL 5 Million Allocated for Agricultural Development in Highland Areas FAO Grant Competition for Agricultural Investments

Wine Sector Reforms Paying Off Georgian Association of Exporters of Fruits and Vegetables Created

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

Georgian Agriculture Finance Bulletin Edition #116, April 2022

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

GEL 300 per Hectare in Subsidies to Smallholder Farmers ............................................................. 2 Only 198 Agricultural Cooperatives Still Active ............................................................................... 2 GEL 5 Million Allocated for Agricultural Development in Highland Areas ...................................... 2

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

FAO Grant Competition for Agricultural Investments ..................................................................... 2

Private Sector.............................................................................................................. 3 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19)

Sheep Exports Down........................................................................................................................ 3 Russia Remains Georgia’s Main Wheat and Flour Supplier ............................................................ 3 Six Wine Companies Denied Certification in Q1 2022 .................................................................... 3 Aromatic Herb Producers Face Uncertainty as War Continues in Ukraine ..................................... 3 Gastronomy Association Demands Tax Benefits for Agricultural Producers .................................. 3 Wine Sector Reforms Paying Off ..................................................................................................... 3 Volume of Wheat Grown Increased Nearly 33% in 2021 ................................................................ 4 Georgia Exports 3 Tons of Snails to Italy ......................................................................................... 4 Vegetable Production Up 15% in Recent Years ............................................................................... 4 Agricultural Producers Concerned About High Seed Costs ............................................................. 4 Georgia Cannot Be Disconnected from World Events .................................................................... 4 Wine Export Dependency on Russia Drops from 80% to 57% ........................................................ 5 The Changing Landscape of Georgian Agriculture .......................................................................... 5 Pests and Diseases Still a Challenge for Nut Producers .................................................................. 5 Georgian Association of Exporters of Fruits and Vegetables Created ............................................ 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 »

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BFC. Georgian Agriculture Finance Bulletin. Edition #116, April 2022

State Initiatives 1)

GEL 300 per Hectare in Subsidies to Smallholder Farmers

April 18th, 2022, https://agenda.ge/en/news/2022/1328

The government plans on providing agricultural landowners with between 0.25 hectares and 1.25 hectares with a subsidy of GEL 300 per hectare. The subsidies will be added as points to special agricultural accounts, from which goods necessary for agricultural production processes can be purchased. In total, the subsidies are expected to help 300,000 farmers.

2)

Only 198 Agricultural Cooperatives Still Active

April 20th, 2022, https://bizzone.info/agriculture/2022/1650499923.php

While there are numerous agricultural cooperatives registered in Georgia, only a small number of them continue to work, demonstrating that cooperatives are not developing as well as how difficult the situation is related to the country’s agricultural sector. According to Geostat, only 198 of the 5,517 cooperatives registered in the country as of January 1, 2022 were still active. The head of the International Association of Agriculture of Georgia noted that, in order to develop more, cooperative development is hindered mostly by the mentality of rural residents, who tend to think of their own short-term monetary benefits rather than cooperation and long-term development.

3)

GEL 5 Million Allocated for Agricultural Development in Highland Areas

April 20th, 2022, https://www.newsgeorgia.ge/%d0%

The government is allocating GEL 20 million to develop infrastructure and agriculture in the highlands of the country. This includes GEL 5 million specifically designated for agricultural development, which will be leveraged via the state’s Agricultural Insurance and Plant the Future programs as well as other state programs to support the processing and storage of agricultural products.

Foreign Aid 4)

FAO Grant Competition for Agricultural Investments

April 13th, 2022, https://www.fao.org/georgia/news/detail-events/en/c/1505158/

The Food and Agriculture Organization of the United Nations (FAO), under the European Union (EU)funded ENPARD program, has announced a fifth cycle of grant competition to support agricultural initiatives in Georgia. Under the competition, grants will be provided to farms and businesses operating in select municipalities for investments in no-till planters, drip irrigation systems, small tractor packages and anti-hail nets. Under the terms of the competition, the grant can cover up to 60% of the cost of drip irrigation systems and no-till planters and up to 40% of the cost of anti-hail nets.

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BFC. Georgian Agriculture Finance Bulletin. Edition #116, April 2022

Private Sector 5)

Sheep Exports Down

April 4th, 2022, https://commersant.ge/en/post/georgias-sheep-exports-down

The export of live goats and sheep from Georgia declined in the first two months of 2022, decreasing from 893 tons (worth USD 2.4 million) in the first two months of 2021 to 741 tons (worth USD 1.7 million) in the first two months of this year.

6)

Russia Remains Georgia’s Main Wheat and Flour Supplier

April 5th, 2022, https://www.newsgeorgia.ge/%d1%80

Despite the current global atmosphere, Russia remains Georgia’s main supplier of wheat and flour, exposing the country to possible shortages and increased prices as sanctions against Russia tighten. To mitigate this risk, authorities are exploring other options for importing wheat and flour, including from Kazakhstan, and expect no major disruptions to supply.

7)

Six Wine Companies Denied Certification in Q1 2022

April 8th, 2022, https://agenda.ge/en/news/2022/1181

Following state inspections at 25 wine producing companies in the first quarter of 2022, six were refused certification. Additionally, the National Wine Agency also reported that one wine company had its certificate revoked by international auditing companies Bureau Veritas and SGS.

8)

Aromatic Herb Producers Face Uncertainty as War Continues in Ukraine

April 11th, 2022, https://commersant.ge/en/post/there

Earlier, Georgian aromatic herb producers struggled with low prices and increased competition with other suppliers in their main market of Russia. As international sanctions take effect however, the situation looks even more drastic than could have been imagined. There remains much uncertainty with demand from the Russian market as well as how payments can be made given the depreciation of the Russian ruble and Russia’s disconnection from the SWIFT system. Further worrying aromatic herb producers is that Ukraine, the second-largest market for Georgian aromatic herbs, is now closed due to the ongoing war with Russia.

9)

Gastronomy Association Demands Tax Benefits for Agricultural Producers

April 11th, 2022, https://bizzone.info/agriculture/2022/1649709764.php

The Gastronomy Association has demanded the introduction of tax incentives for producers of agricultural products that are used in the restaurant business. This includes exempting agricultural producers from VAT as it has become an unbearable burden for the hotel and restaurant business. Such measures, they argue will allow agricultural and restaurant businesses to expand and create new jobs.

10) Wine Sector Reforms Paying Off April 14th, 2022, https://wine.gov.ge/En/News/34889

Addressing Parliament, Agriculture Minister Otar Shamugia stated that significant legislative changes and reforms to improve the quality of Georgian wine have resulted in the enhanced competitiveness of and demand for Georgian wine in both domestic and international markets. As evidence, he noted that 2021 Page 3

BFC. Georgian Agriculture Finance Bulletin. Edition #116, April 2022

represented a historical year for wine production and exports, with more than 107 million bottles of Georgian wine reaching shelves in 62 countries.

11) Volume of Wheat Grown Increased Nearly 33% in 2021 April 15th, 2022, https://bizzone.info/agriculture/2022/1650071247.php

In 2021, 427,400 tons of barley, corn and wheat were grown in Georgia, a 6.1% year-on-year increase.

This also represents a 32.9% year-on-year increase in the volume of wheat grown, a 28.4% year-on-year increase in the volume of barley grown and an 8.6% year-on-year increase in the volume of corn grown.

The total area planted with these crops in 2021 increased 1.0% year-on-year.

12) Georgia Exports 3 Tons of Snails to Italy April 15th, 2022, https://agenda.ge/en/news/2022/1311

Three tons of Georgian snails have been exported to Italy, the first such batch to reach a European Union (EU) market following Georgia’s addition to a list of countries allowed to import snails into the EU. This the result of an extensive effort to increase Georgia’s market diversification, with a particular focus on EU markets.

13) Vegetable Production Up 15% in Recent Years April 15th, 2022, https://agenda.ge/en/news/2022/1291

According to Agriculture Minister Otar Shamugia, vegetable production in Georgia has increased 15% in recent years and now amounts to 176.1 tons annually. At the same time, the country still imports vegetables in bulk in the offseason due to a lack of infrastructure for storing seasonal vegetables. To help resolve this, the government has launched a program to co-finance vegetable storage enterprises in collaboration with agricultural cooperatives. New facilitates constructed under the program will meet all international standards.

14) Agricultural Producers Concerned About High Seed Costs April 18th, 2022, https://bizzone.info/agriculture/2022/1650342303.php

The high cost of seeds has many Georgian producers concerned, especially after the Minister of Agriculture called for the country to significantly (by 15–50%) increase its production of basic food stuff.

This can lead to a problem where lower-quality seeds are used, which hinders maximum yield amounts.

Producers also point to issues in obtaining adequate supplies of fertilizer and fuel as well as issues with a general lack of irrigation water in the country. To resolve these issues and maximize the country’s capacity to produce the products required, state intervention measures will be required.

15) Georgia Cannot Be Disconnected from World Events April 18th, 2022, https://georgiatoday.ge/minister

Agriculture Minister Otar Shamugia has explained that Georgia cannot be disconnected from world events impacting international markets and the import of products. To that effect, he has called on Georgia to increase its own production of grain, wheat and other basic food stuff in order to bolster the country’s food security.

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BFC. Georgian Agriculture Finance Bulletin. Edition #116, April 2022

16) Wine Export Dependency on Russia Drops from 80% to 57% April 18th, 2022, https://agenda.ge/en/news/2022/1335

According to Georgian Agriculture Minister Otar Shamugia, the dependency of Georgia’s wine exports on the Russian market has dropped from 80% to 57%. This has been accomplished through a series of projects aimed at diversifying Georgia’s wine export markets, including government funding for worldwide promotions.

17) The Changing Landscape of Georgian Agriculture April 19th, 2022, https://www.investor.ge/2022/04/18/the-changing-landscape-of-georgian-agriculture/

Georgia’s agricultural sector continues to become more diverse in terms of both type of production and technologies uses in production. Although agriculture in Georgia is hindered by a lack of mega-scale farmers (which cut costs and increase outputs), the limited availability of fertile land and no direct foreign investments being allowed, the sector is developing through key partnerships to enhance the quality of products, develop better packaging and increase distribution and export networks. These partnerships are largely driven by joint efforts between international donor organizations and the government. In particular, they are often focused on education and giving small- and medium-sized farmers mentors and role models. At the same time, many producers are calling for more assistance, especially in accessing financing, improving agricultural-related infrastructure and gaining more knowledge about modern techniques.

18) Pests and Diseases Still a Challenge for Nut Producers April 21st, 2022, https://commersant.ge/en/post/lack-of-knowledge-in-nut-production-remains-a-big-challenge

With the chemical treatment of walnut plantations underway in Western Georgia, the head of the Association of Nut Producers warned producers that pests and diseases still represent a serious challenge for Georgian nut producers, hindering crop growth and quality. In particular, he noted that there is a general lack of knowledge and skills regarding proper technologies and methods for pest and disease control, especially among small-sized farmers.

19) Georgian Association of Exporters of Fruits and Vegetables Created April 26th, 2022, https://bizzone.info/agriculture/2022/1651018513.php

Georgian fruit and vegetable exporters are looking to diversify their markets in order to reduce their dependency on the Russian market. To this end, they have created the Association of Exporters of Fruits and Vegetables. The association, which currently numbers 20 members, will work to increase the recognition of Georgian fruit and vegetable products in international markets, increase fruit and vegetable qualities (bringing them as close as possible to international standards) and introduce new knowledge and skills to Georgian farmers.

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