Food Security for Georgia 2011

The FAO recently collated figures, based on Geostat data, on the food security situation in Georgia in 2011. I have picked a few figures of interest.

GDP Growth: 7%

Population Growth: 0.7%

Consumer Price Index (2010 = 100): 108

Food Price Index (2010=100): 115

Share of Plant Production/Animal Production in Agricultural GDP (%/%): 40/57

Increase in domestic fertiliser price: 9%

Increase in imported fertiliser price: 12%

Increase in beef price: 38%

Cereal grain imports: 565 000 tonnes

Decrease in cereal grain imports: 23%

Decrease in cereal grain import value: 9%

Some comments:

Population increase is gratifying to see, as many former Soviet countries have population decline.

A CPI of 8% and food price increase of 15% is disconcerting, as the value of the Lari to the US Dollar has changed very little over 2010-11. World food prices are relatively high, driven by multiple factors; as a rule, financial sector insecurity results in investors overweighting commodities, including food commodities. Fertiliser prices tend to track hydrocarbon prices quite closely, as natural gas is the usual material used for production of ammonia and urea.

It is interesting to see over half the agricultural GDP accounted for by livestock production. I believe that as poultry, pork, dairy and beef breeding expand and become more professionalised, that livestock production will account for more than 2/3 of agricultural GDP.

The increase in beef price last year caused a great deal of public outcry, with various accusations regarding government policy driving cattle slaughtering out of the backyard and into commercial abattoirs. That said, it should be remembered that beef price in Georgia is only half that of Azerbaijan and lower than Turkey, so there is still scope for prices to rise as Azeri importers absorb more of the young bull production and domestic supply tightens.

Georgia now is more or less self-sufficient for corn, although it will need to increase production to satisfy demand by the growing poultry and pig industries, at a rate of roughly 5 tonnes corn to each tonne of bone-in pork or chicken. Georgia’s reliance on wheat imports for bread is a hot political issue; poorer city dwellers want flour to be subsidised or price-controlled, wheat farmers want prices to remain high, and the government does not want to be caught short of wheat should a conflict with Russia break out again and Georgia’s ports be blockaded.

Georgia has no competitive strengths in wheat production; land plots are small and so production is much less efficient than large operations on tens of thousands of hectares on the plains of Ukraine, Kazakhstan, southern Russia and Siberia. A rough farmer’s rule of thumb is that one must have 3000 Ha under crop to justify the investment in modern farm machinery that will drive efficiency to international norms. High land taxes and operating costs mean Georgia will never be internationally cost-competitive in this crop. Conversion of cereal cropping land to irrigated vegetable production is an inevitable trend. Hence, a state-run strategic wheat reserve, such as is run by the Chinese government, will be a necessary aspect of national defense.

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