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28 Ge o r g i a Agriculture Finance Bulletin Ministry of Agriculture Spends GEL 900 Million on Agriculture in 2 Years Substandard Apples Receive USD 1.7 million in Subsidies Georgia and Saudi Arabia to Cooperate in Cattle Breeding 757,145 Small Farmers Receive GEL 82.6 Million in Subsidies
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Georgian Agriculture Finance Bulletin Edition #28, December 2014
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)
GEL 10 Million in Agro-Insurance Subsidies Distributed ................................................................. 2 Ministry of Agriculture Spends GEL 900 Million on Agriculture in 2 Years ..................................... 2 Government Yet to Submit Policy on Agricultural Land Ownership ............................................... 2 Substandard Apples Receive USD 1.7 million in Subsidies .............................................................. 2 Foreign Investments “not Directed at Real Economy” .................................................................... 3
Foreign Aid ................................................................................................................. 3 6) 7) 8) 9)
Georgia and Saudi Arabia to Cooperate in Cattle Breeding ............................................................ 3 USAID to Assist “Bank Republic” with Agro-Lending ....................................................................... 3 Ultimate Goal is Zero Subsidies, says Minister of Agriculture ......................................................... 4 LR Group Interested in Investing in Agriculture .............................................................................. 4
Private Sector.............................................................................................................. 4 10) Grape Harvest Totals 126,000 Tons in 2014.................................................................................... 4 11) Price of Georgian Wine Rises on the Russian Market ..................................................................... 4 12) Georgian Journal: Georgian Egg and Poultry Producers Need Protection from Subsidized Imports ......................................................................................................................................................... 5 13) Olive and Olive Oil Price Hikes on the Horizon ................................................................................ 5 14) Wine Exports Total USD 174 Million from January to November, a 33% Increase Year-on-Year ... 6 15) 757,145 Small Farmers Receive GEL 82.6 Million in Subsidies ........................................................ 6 16) 25,241 Loans Worth GEL 670 Million Issued through Preferential Agro-Lending Program ............ 6 17) AYFB: Citrus Packaging Infrastructure needs Improvement ........................................................... 7 18) Russian Ruble Depreciation Leads to Suspension of Export Contracts ........................................... 7
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 #3, January 2013
State Initiatives 1)
GEL 10 Million in Agro-Insurance Subsidies Distributed
December 1st, 2014, http://sarke.com/cgi/search/news.asp?Code=10043076
According to the Minister of Agriculture, Otar Danelia, the government has disbursed GEL 10 million in insurance subsidies through the agro-insurance pilot program. 18,753 policies were issued insuring 13,008 hectares of land, added the Minister. The agro-insurance pilot program was launched on September 1st. Following exhaustion of the initial GEL 5 million budget in November, the program is to be allocated more funds.
2)
Ministry of Agriculture Spends GEL 900 Million on Agriculture in 2 Years
December 2nd, 2014, http://sarke.com/cgi/search/news.asp?Code=10043081
Over the past two years, GEL 900 million was spent on the development of agriculture, reported the Ministry of Agriculture. Minister of Agriculture Otar Danelia said cheap financial resources – such as preferential agro-loans, agro-insurance and other measures supporting spring farming activities – have become readily available. Results should be perceivable throughout 2015, said Danelia.
3)
Government Yet to Submit Policy on Agricultural Land Ownership
December 9th, 2014, http://sarke.com/cgi/search/news.asp?Code=10043142
According to the Parliamentary Agriculture Committee, the government is yet to present its reviewed policy on agricultural land ownership, expected by November 30th. Chairman of the Economics Committee, Zurab Tkemaladze, said that, to his knowledge, the government and ministries have addressed all remaining issues, and hopes the bill will be submitted by the end of the year. In the meantime, privatization of state-owned agricultural land has been suspended.
4)
Substandard Apples Receive USD 1.7 million in Subsidies
December 9th, 2014, http://newsgeorgia.ru/economy/20141209/217198962.html
Since its launch in September , fruit processors purchased 42,114 tons of substandard apples through the Ministry of Agriculture’s subsidization scheme, tolling GEL 3.2 million (USD 1.7 million) in subsidies. Participating processors receive 8 tetri per kilo of substandard apples purchased at 10 tetri per kilo or more. On the 10th of September, the Ministry opened a logistics centre in Gori that manages the distribution.
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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013
In Shida Kartli, five processors participated in the program: Geofruit, Straight 7, Biodzhus, Samegobro and Dzheokontsentrat. The program was introduced in Racha in mid-October. Currently, Geo-Flower is the sole participant. The program received GEL 3 million (more than 1.72 million US dollars). In addition to subsidies, processors receive access to credit through the sixth component of the preferential agro-lending program.
5)
Foreign Investments “not Directed at Real Economy”
December 15th, 2014, http://www.commersant.ge/index.php?m=5&news_id=17309&cat_id=5
The focus of foreign investment in Georgia is cause for concern, said Sandro Tvalchrelidze , economist for the Academy of Natural Sciences , According to the Georgian Statistics Service, in the 3rd quarter of 2014, total foreign investment amounted to USD 508 million – of which China accounted for 29%, the Netherlands 18%, Azerbaijan 16%, the USA 5%, the UAE 5%, Turkey 4% and Russia 3%. Tvalchrelidze points out that, of total foreign investment, USD 181 million was allocated to construction; USD 109 million to communications; USD 48 million to industry and USD 8 million to agriculture. The breakdown is worrying, as it demonstrates that little is being spent on the real economy (i.e. industry and agriculture), said Tvalchrelidze, adding that such an investment structure will not translate into noticeable long-term economic growth.
Foreign Aid 6)
Georgia and Saudi Arabia to Cooperate in Cattle Breeding
December 3rd, 2014, http://sarke.com/cgi/search/news.asp?Code=10043102
The Deputy Minister of Agriculture, Nodar Kereselidze, held talks with representatives of the Saudi Ministry of Agriculture regarding further cooperation in agriculture. In particular, both parties expressed interest in deepening cooperation in cattle breeding.
7)
USAID to Assist “Bank Republic” with Agro-Lending
December 4th, 2014, http://www.georgiatoday.ge/article_details.php?id=12974
Through its Restoring Efficiency to Agriculture Production (REAP) program, USAID is to assist Bank Republic in increasing agro-lending volumes, including the development of a new agro-lending strategy aligned with the bank’s general vision. Further assistance with marketing and staffing will be provided.
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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013
8)
Ultimate Goal is Zero Subsidies, says Minister of Agriculture
December 9th, 2014, http://sarke.com/cgi/search/news.asp?Code=10043141
Minister of Agriculture Otar Danelia said interest in Georgian agriculture is high, with Dutch, Israeli, Turkish and Chinese businesses investing in several projects worth tens of millions of dollars by the end of 2014 – including rehabilitation of tea plantations and rice cultivation. The ultimate goal is to make agriculture one of Georgia’s most competitive sectors, gradually reducing subsidies until they are no longer required.
9)
LR Group Interested in Investing in Agriculture
December 15th, 2014, http://sarke.com/cgi/search/news.asp?Code=10043211
According to the Minister of Agriculture, Otar Danelia, LR Group, an Israeli company, is interested in investing in cattle-breeding, fishery and greenhouse farming in Georgia. According to Sakstat, in the 3rd quarter, direct investments from Israel amounted to USD 2.72 million – a near 10 fold increase year-on-year.
Private Sector 10) Grape Harvest Totals 126,000 Tons in 2014 December 2nd, 2014, http://newsgeorgia.ru/economy/20141202/217180058.html
In Kakheti and Racha 73,610 tons of the Rkatsiteli variety was harvested, as well as 43,677 tons of Saperavi, 2274 tons of Kakhuri Mtsvane, 873 tons of Mujuretuli and Aleksandrouli and 5783 tons of other varieties. This year’s “Rtveli” harvesting festival in Kakheti registered 87 participating companies, while in Racha, 14 were registered. In both areas, grapes were sold at record prices. In 2014, the subsidy for 1 kg of Rkatsiteli and Kakhuri Mtsvane was 35 tetri, and 10 tetri for 1 kg of Saperavi. This amounted to a 5 tetri reduction in the Rkatsiteli and Kakhuri Mtsvane subsidy and a 10 tetri reduction in the Saperavi subsidy. As in 2013, wineries were eligible to partake in the preferential agro-lending program. Read More »
11) Price of Georgian Wine Rises on the Russian Market December 3rd, 2014, http://en.bpi.ge/index.php?option=com_content&view=article&id=19194:georgian-wine-to-rise-in-pricein-the-russian-market&catid=49:2011-11-06-16-56-03
The price of Georgian wine is rising on the Russian market. This is due to record prices for Saperavi grapes, reported Georgian wineries, reaching GEL 2.5 per kg in 2014, a 50% increase year-on-year. The Russian ruble’s devaluation is yet to affect prices, according to the Association of Sommeliers. However, it sees future price hikes and export volume adjustments as a result of the ruble’s fall. Russia
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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013
accounts for over 60% of total wine exports; should the ruble fail to recover, wineries will need to make considerable adjustments to their export strategies. However, the government is actively working on tapping alternative markets, said the National Wine Agency, adding that wine exports to China, Poland and the USA have grown dramatically. Read More »
12) Georgian Journal: Georgian Egg and Poultry Producers Need Protection from Subsidized Imports December 4th, 2014, http://www.georgianjournal.ge/business/28907-georgian-egg-production-suffers-unevencompetition.html
Since the removal of strict sanitary laws, implemented in 2007 as a protective measure against Bird Flu, Georgian egg and poultry producers have struggled. All egg and poultry imports required certified documentation and were submitted to thorough inspection by the Georgian National Food Agency (GNFA) and the FAO. This restricted import competiveness and allowed domestic production to flourish. Sizeable farms increased from 2 to 23. Domestic demand for eggs and poultry was met by 100% and 70% respectively, even providing for exports to Syria and Iraq. However, in 2012, citing incompatibility with the WHO’s harmonization effort, the government lifted sanitary controls. Combined with a flat import duty of 12%, domestic egg and poultry producers have struggled. Other producers such as Turkey, the Ukraine and the EU vary their import duties according to the level of subsidies applied in the product’s country of origin, charging as much in duties as was applied in subsidies. This protects local producers against “unfair” competition. Chairman of Association of Georgian Poultry Enterprises, Zurab Uchumbegashvili, said Turkey slaps a 108% import duty on Georgia eggs, while Turkish producers face only 12% customs duties in Georgia. Georgian egg and poultry producers have supported a draft bill reviewing current policies, yet the government is to submit the bill to parliament for final approval. Read More »
13) Olive and Olive Oil Price Hikes on the Horizon December 4th, 2014, http://en.bpi.ge/index.php?option=com_content&view=article&id=19203:olives-and-olive-oil-to-rise-inprice-in-the-georgian-market&catid=28:2011-11-06-17-04-50
Due to Georgia’s near total reliance on imports, the price of olives and olive oil is rise substantially. The price increase is a knock-on effect of a poor harvest in Europe. Italy, Greece, France and Portugal account for 70% of global olive and olive-oil produce. The price of olive-oil in Georgia has already risen by 33%. GeoCop, which accounts for 85% and 90% of the domestic olive and olive oil market respectively, expects the brunt of the price-hike to arrive by January 1st. GEO-Live, which has planted 250,000 olive saplings in Georgia this year, will also raise prices. According to the company’s founder, global supply of olives and olive-oil do not meet demand, which will be reflected in prices.
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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013
14) Wine Exports Total USD 174 Million from January to November, a 33% Increase Year-on-Year December 4th, 2014, http://agenda.ge/news/25747/eng
From January 1st to November 30th, Georgia exported 55.2 million bottles of wine, valued at USD 174 million USD, to 46 countries, reported the National Wine Agency. Of this, 35.2 million bottles were exported to Russia, amounting to 63% of exports. Ukraine was the second highest importer, followed by Kazakhstan, Belarus, Poland, China, Latvia, Lithuania, Estonia and Germany. Wine exports increased 33% by volume and 36% by value compared to the same period in 2013. During the same period, Georgian brandy exports totalled 12.2 million bottles worth USD 39 million, representing an increase of 33% in volume and a 34% in value compared to the same period in 2013. Read More »
15) 757,145 Small Farmers Receive GEL 82.6 Million in Subsidies December 7th, 2014, http://newsgeorgia.ru/economy/20141207/217191234.html
According to the Ministry of Agriculture, subsidies worth GEL 82.6 million (USD 45 million) were distributed to 757,145 small farmers for spring farming activities, of which 627,000 purchased agriculture related equipment and goods worth GEL 51.9 million (USD 28.2 million) through the agriculture bank card scheme. With a budget of GEL 90 million (USD 49 million), funded by the state and the Foundation for Rural Development and Agriculture, the project promoting spring farming activities for small farms was launched in February and completed in August. However, the government extend the program for plowing, allowing small farms to harvest in the summer and plow through September-October. Farmers owning land up to 1.25 ha were eligible. The level of assistance varied depending on whether participants owned more or less than 0.25 hectares. Two types of agro cards were issued: one for plowing and the other for the purchase of goods and equipment for agricultural activities. In the spring of 2014, small farmers plowed 58,496 hectares of land, a 60% increase year-on-year. Last year, 710,385 beneficiaries received GEL 195.5 million (USD 106.3 million) in subsidies. Read More »
16) 25,241 Loans Worth GEL 670 Million Issued through Preferential AgroLending Program December 11th, 2014, http://sarke.com/cgi/search/news.asp?Code=10043179
The Ministry of Agriculture’s Project Management Agency reported that 105 new agro-businesses were established and a further 580 developed through the preferential agro-lending program, co-funding of agricultural product processors and the “Produce in Georgia” program. From January to November, the Ministry issued 25,241 loans worth GEL 670 million through the preferential agro-lending program. Credits were issued for winemaking, poultry and cattle farming, fish farming, horticulture, greenhouse farming, hazelnut production, milk processing, storage facilities and grain dryers, amongst others. Page 6
BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013
Processing support was allocated to 16 projects of which 11 are currently being implemented. Subsidies are expected to exceed GEL 22 million. The Produce in Georgia program saw 8 loans issued to 8 enterprises, including 5 start-ups. Participating agro-businesses are involved in cattle-breeding and poultry farming, seafood processing, and greenhouse farming. In total, more than 10,000 people are employed in agro-businesses that receive funding through the programs, said the Ministry.
17) AYFB: Citrus Packaging Infrastructure needs Improvement December 15th, 2014, http://sarke.com/cgi/search/news.asp?Code=10043210
The Association of Young Financiers and Businessmen (AYFB) said there is scope for further increasing citrus fruit exports. In 2013, the citrus harvest totalled a record 110,400 tons – a 43% increase year-on-year. According to the AYFB, large fruit processors have access to credit through the preferential agro-lending program, and received subsidies worth GEL 2 million for the purchase of tangerines. Three processors are currently participating: GIAM Group, TCF Georgia and Kobuleti Tea. A major issue continues to be a lack of appropriate packaging equipment and infrastructure. While such facilities exist in Kobuleti, Tbilisi and Kutaisi, they are currently insufficient, said the AYFB, adding that the Ministry of Agriculture’s support programs need to be maintained going forward.
18) Russian Ruble Depreciation Leads to Suspension of Export Contracts December 18th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10043248
Due to the collapse of the ruble, wine exports to Russia have been suspended. The Director of Tbilgvino, Giorgi Margvelashvili, said that its Russian partners had postponed December orders. Russian supermarkets have reported problems selling Georgian wine. Most Russian chains will accept price increases of 7-10%, however the ruble has depreciated at a greater rate, he said. This year, Russia accounted for 25% of Tbilgvino’s export. The company plans to review its export strategy in 2015. Director of Schuchmann Wines, Nutsa Abramishvili, reiterated that sales to Russia have declined and contracts have been suspended, adding that this is further evidence that export markets should be diversified. Neither company hinted at a loss for 2014. According to National Wine Agency, Russia accounted for 64% of total wine exports, while Russian customs figures showed Georgian wine accounted for 14% of total Georgian imports and 6.4% of the Russian wine market.
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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.