President opens Kutaisi International Airport

A major hindrance to the development of high-value horticulture exports from western Georgia is the limited availabity of air freight capacity from Batumi Airport. Most flights from Batumi are oriented towards Ukraine; only one service to the Persian Gulf is available, to Kuwait City. Hopefully Kutaisi will offer airfreight routes to Dubai and Qatar, which will provide new markets for high value cut flowers, citrus and fresh herbs.

27.09.12 11:25

Kutaisi International Airport has been officially opened today -a Hungarian air company Wizz Air will make first flight Kiev-Kutaisi to Davit Aghmashenebeli International Airport.

Low-budget flight will be made twice a week, but it is expected to grow the number of flights soon.

Georgian president Mikheil Saakashvili opened the renovated airport and viewed it together with Prime Minister of Hungary, who pays official visit to Georgia.

The first apssenger of the Kiev-Kutaisi flight was the Minister of Sustainable Development and Economics, Vera Kobalia, who was in Ukraine on an official visit. She talked with foreign tourists on board.

Kutaisi-Kiev flight took the Free Theatre troupe to Kiev on tour.

via President opens Kutaisi International Airport.

via President opens Kutaisi International Airport.

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Tests clear Aussie sheep – National Rural News – Livestock – Sheep – Queensland Country Life

Periodically, importers of livestock face political resistance from domestic operators and corruption within the Quarantine Bureau of the importing country.  Australian sheep have the lowest rate of infectious disease available, safer than EU.

ALLEGATIONS that Australian sheep are riddled with disease and unfit for human consumption have been slapped down again by independent tests in Pakistan.

Over the weekend allegations were levelled that the Australian sheep in a Karachi feedlot were infected with Anthrax and that a culling program had to continue.

The livestock have already been accused of having disease, including salmonella, by local authorities despite the Australian and Pakistan government’s giving the animals a clean bill of health.

The importer has sought an injunction in the local court which was upheld again after independent testing found no traces of anthrax.

The injunction has not stopped sporadic culling, with some estimates saying up to 7000, of the 21,000 strong consignment had already been killed.

The court was hearing further evidence last night , with a reprieve for culling upheld since Saturday.

The sheep were unloaded earlier this month after being rejected from Bahrain for having the common disease scabby mouth.

After being declared healthy by both Pakistan and Australian officials last week the local authorities ordered that they be culled, as they were diseased and unfit for human consumption.

Local politics, competition from other importers and Bahrain-influence is speculated be the source of the allegations, which has also stymied efforts from Australian government and industry to gather accurate information.

There are serious concerns over the treatment of animals for slaughter.

“We have always insisted the sheep are healthy, disease-free and would pass any proper testing program,” Wellard executive director Steve Meerwald, who is in Karachi, said yesterday.

“We will continue to seek to overturn the cull order permanently and to resume normal processing in PK Livestock’s modern, accredited and World Animal Health Organization compliant abattoir.”

The Australian Agriculture department officials say they are working closely with Pakistani authorities, including holding a “positive meeting” with the Pakistan High Commissioner in Canberra.

The news come as the approval for three companies to export 190,000 sheep and 400 cattle to the Middle East, which has been plagued recently by Bahrain rejecting some animals for import as well as general concerns over animal welfare.

Strict new animal welfare rules were only applied to many Middle East countries at the start of the month.

“Recent experiences with live animal exports to the Middle East has required DAFF and exporters to work together to minimise the risk of consignment being refused permission to unload,” a spokesman said.

Exporters, including Wellard which will ship 65,000 sheep to Qatar, are now required to provide more detail about what they would do if a shipment is delayed or refused unloading. They must carry extra feed and water and employ more stock handlers.

via Tests clear Aussie sheep – National Rural News – Livestock – Sheep – Queensland Country Life.

Wheat prices climb as Russia comes closer to curbing exports — MercoPress

Here we go again. Grain prices are already up almost half in the past six months, and this will accelerate the trend. Great news if you are a graingrower, painful if producing pigs or poultry.

Global wheat prices climbed on Friday as Russia’s economy minister raised the possibility of grain export curbs from one of the largest global suppliers in what appeared to be a policy u-turn.

“The issue of a grain exports ban is the issue of domestic grain prices dynamics”, said Minister Belousov “The issue of a grain exports ban is the issue of domestic grain prices dynamics”, said Minister Belousov

Soybeans rose late, but posted their biggest weekly loss in a year. Corn edged higher, but ended with its largest weekly loss in more than three months.

Russia, which accounted for 14% of the world’s wheat trade in 2011/12, may curb grain exports if domestic prices continue to rise, Economy Minister Andrei Belousov said.

“The issue of a grain exports ban is the issue of domestic grain prices dynamics. We are witnessing such a trend at the moment… With such a trend, it’s quite possible, that the government will decide to restrict grain exports,” he told reporters on the sidelines of a conference at the Russian Black Sea resort of Sochi.

Russia barred grain exports for almost a year in August 2010 after a severe drought which led to a wheat crop of just 41.5 million tons. This year’s wheat crop is forecast to be even lower at around 38 million tons following another widespread drought.

Traders said the pace of early season exports from Russia had been unsustainable following the sharp fall in production. Russia was the world’s third-largest wheat exporter in 2011-12.

“We know that with the export pace they have currently they won’t be able to export for the whole season. We know they’ll be doing something (to limit exports) one way or another,” a French grain futures dealer said.

Any restriction on Russian exports would open the door to increased sales of European Union wheat and November milling wheat futures in Paris rose 1.75 Euros or 0.7% to 263.00 Euros a ton.

Soybean prices were higher but remained on track for steep losses on the week.

“Harvest is progressing well in the US, and there have been localised reports of better-than-expected yields and some farmer selling followed,” said Jonathan Lane, trading manager at UK merchant Gleadell.

“There has also been speculation that the harvested acres figure will be revised upward by the USDA in October. But, in our opinion, the biggest factor has been a lack of new momentum and news to maintain what are historically high levels.”

The market is also watching corn and soybean planting conditions in South America, where production is expected to replenish global supplies in early 2013. Any production issues in Brazil and Argentina could provide a fresh bullish momentum to the markets.

Argentina’s 2012/13 corn season, which many analysts think could yield a record harvest, has got off to a good start as moist fields spur seeding, the Buenos Aires Grains Exchange said. Argentina is the world’s second-biggest supplier of corn after the United States and ideal sowing conditions and high global prices have revived farmer interest in growing the grain.

via Wheat prices climb as Russia comes closer to curbing exports — MercoPress.

“Georgian Dream” Coalition Agriculture Policy Briefing

Today, the International Chamber of Commerce of Georgia held a Round-Table discussion for members of Bidzina Ivanishvili’sGeorgian Dream” coalition to present their economic policies for the impending parliamentary elections, and to answer questions from the business community.

Mr Ivanishvili unfortunately did not attend as scheduled, but a presentation from the coalition’s candidate for the Kaspi electorate, economist David Onoprishvili was given.

Billion-Dollar Agriculture Fund

Pertinent to Georgian agribusiness,  the policy of developing a US$1 billion fund to provide cheap loans to small farmers was announced. It was stated that local currency loans would be provided at around 3 % p.a., which is a great deal lower than the 12-25% most farmers pay.

If managed very prudently so that default rates were very low, and if loans were packaged with mandatory crop failure insurance and mandatory extension services, then this fund could potentially benefit many small farmers starved of capital to improve their operations. It will still be a very costly exercise, as the loans are to be charged a rate of interest lower than the government can source funds on the wholesale market. It will not cover its costs and would need constant replenishment over time.

However, in a country with a USD$11 billion per year GDP, a new facility of a billion dollars would be hard to raise from zero. When queried from the floor about the source of such funds, Mr Onoprishvili admitted that only part would come from the State budget, some would come from international donors, and the balance would be provided by “private donors”.

It begs the question, do the international donor agencies know they are on the hook to finance this campaign promise? More to the point, are the private “donations” to be voluntary or involuntary, or will the Coalition Chairman just tip in his own funds to make up the shortfall? This was not clarified.

Foreign Ownership of Land

The second issue of great interest was the author’s question regarding ownership of farmland by foreign-invested Georgian companies. The current policy is that foreign-invested entities may hold freehold title to farmland on the same basis as local investors.

Mr Onoprishvili announced that there would be no immediate repeal of this policy, but that future acquisitions of farmland by foreigners were likely to be under a long-term leasehold arrangement, for example a 50-year right-of-use lease.

This would be a significant change to current policy and have a serious effect upon investment in agriculture. Georgia’s agribusiness sector is comparatively unattractive to huge multinational agribusinesses, as the population is too small, the farmland area too small, and land plots too small for serious large scale corporate farming, as practiced in southern Russia and Ukraine by foreign investors on estates from 10,000-200,000 Ha. There are many weaknesses and threats associated with foreign agribusiness investment in Georgia, but one of the outstanding strengths is the ability to own land freehold. Georgia is the only post-Soviet country to permit it.

The greater security of land tenure that freehold title confers dramatically alters the risk perceptions of foreign investors and facilitates inbound investment in rural businesses. These businesses employ many people, pay taxes, develop local supply chains amongst small-scale neighbouring farms, and train a new generation of Georgians in farm management, food safety, quality assurance, biotechnology and food marketing. Excluding foreign investors from freehold land title will cause the present modest levels of foreign investment in agriculture to decline to a very low level, as foreign investors can lease land on the same basis in much larger and more appealing markets such as China, Indonesia, Ukraine or Russia.

It also must be considered that domestic entrepreneurs often have the aim of building up their businesses to the stage that a multinational will acquire them at a handsome valuation. If they are unable to transfer land assets to a foreign buyer, a large discount to the asset’s valuation will be applied, to their detriment.

Conclusion

The round-table discussion provided more questions than answers, and details on new policy are still scant. Many thanks to ICC and Fady Asly for arranging the event.

President opened construction of new factory in Kulevi

Excellent to see local manufacture of urea fertiliser in Georgia, to compete with ammonium nitrate made at Rustavi Azot. Hopefully it will bring down the price of nitrogen fertilisers in the market. A fertiliser blending plant would be a nice touch too.

President opened construction of new factory in Kulevi

President Saakashvili arrived in the Kulevi industrial zone today, where he opened the beginning of a new urea refining factory.
The new manufacture will be located on 24 hectares of territory and it will be constructed by Socar Georgia Investment from Azerbaijan. 1500 people are employed on construction and 300 will be employed in the factory after it begins to operate.

Socar Georgia Investment Company plans to invest 100 million dollar in the project. President Saakashvili attended the presentation of the project and the beginning of the construction today. At the same ceremony, Georgian Minister of
Sustainable Development and Economics signed a cooperation agreement with the company authorities.

via President opened construction of new factory in Kulevi.

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A neat summary of the issue. Doing away with biofuel mandates and eradicating taxes on CO2 produced by agriculture will allow us to get on with feeding the world. We need to increase food production by 50% in the next 18 years; it can be done if we don’t have one hand tied behind our backs by junk science and pseudo-religious ideology.

Watts Up With That?

Billions of taxpayer dollars are disrupting our politics, science, energy policies and economy

Guest post by Paul Driessen

Pick up any 40-year-old science textbook – on chemistry, biology, geology, physics, astronomy or medicine – and you’ll find a slew of “facts” and theories that have been proven wrong or are no longer the “consensus” view. Climatology is no exception.

Back in the 1970s, many scientists warned of global cooling – and fretted that a new ice age brought on by fossil fuel use would cause glaciers to expand, wreaking havoc. They predicted every conceivable disaster, short of roving herds of wooly mammoths stampeding through ice-covered streets. (The possibility of cloning a well-preserved mammoth could buttress the next scary ice age scenario.)

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USAID Review of Georgian Agriculture Sector

USAID have released their 2011 review of Georgia’s agriculture sector. You can find it here

To a large extent, it repeats and validates many reviews performed by USAID, World Bank, UNDP and various EU agencies over the past decade. Most of its findings are already well known by anyone who works in the farming sector here.  There are no new discoveries in this report.

It is however quite well written and a good introduction for somebody with no Caucasus experience.

Two criticisms I would make:

(1) Co-Operatives

The report once again reiterates the call for the promotion of farmers’ co-operatives, so beloved of the EU and various socialist jurisdictions. This of course will demand subvention, both from the state budget and foreign donors. The justification is for improved farmer margins through direct marketing to larger wholesalers, bypassing small local traders.

“Hey Friend, come with us into The Collective!!!” Ukraine, 1930

The demonisation of small traders in the farm sector is as old as time. Often traders are of a different ethnic group to their suppliers and so resentment has a sharper edge. In the case of Indonesia in the post-Independence era (1947-1966), forming of cooperatives under state supervision was accompanied by the ethnic cleansing of Chinese people from Indonesian villages. Chinese-Indonesian traders in villagers were typically the seed and equipment vendors, commodity buyers and bankers to village communities, so expelling them resulted in their roles being forcibly reallocated to the co-operatives. The result was two decades of crushing poverty and lack of economic growth, as well as the very unjust expropriation of private businesses. Both the Soviet and Nazi regimes in Eastern Europe took delight in expropriating Jewish food traders in villages, denouncing them as “parasites” and seeking to establish communal structures more easily controlled by government.

The function of a trader is to develop sales channels for a product and market those products, maintain the customers’ desired commodity quality by grading goods, and to derive profit from the trade. If farmers can perform these functions on their own, then the need for traders naturally decreases. Forming cooperatives may provide the scale to perform pre-sale grading and QA, and to develop relationships with larger buyers, which are traditional services that small traders provide. It is however very destructive to subsidise the formation of structures that displace small traders; traders usually have invested substantial money and time in developing supply chains, storage facilities, QA methodologies and in many cases are selling to large wholesalers on open-account terms rather than spot basis. They have risk capital in play. If the the market share of small traders declines as a result of normal market forces, village trading entrepreneurs will accept this as part of life or diversify to cope with the new situation. If they are squeezed out as a result of government subsidy for the formation of co-ops, this amounts to forcible expropriation of property without compensation.

If traders added no value to the system  in an open market, they would not exist. The concept that intermediaries are inherently parasitic is popular amongst the NGO sector but needs to be reviewed rationally. An good example of small trader turned to major driver of peasant prosperity is the stockfeeed, shrimp and poultry giant,  Thailand’s Charoen Pokphand or ,CP.

Having started as a small scale seed trading venture in a village in Thailand, they have grown to be the largest contractor of poultry and shrimp in Asia and have financed the development of tens of millions of profitable smallholder-owned poultry farms and fish farms in poor areas of Asia. By contrast, the clove  “co-operative” established by Suharto’s youngest son in the 1990’s, to provide “protection of growers from price volatility” and to “avoid exploitation of poor farmers by unscrupulous traders” resulted in clove growers in Indonesia receiving prices 70% below farmgate prices elsewhere.

As a general rule, co-operatives fail at a higher rate than ordinary limited liability companies, even in developed countries. A creeping tendency to pay higher and higher prices to producers tends to result in bankruptcy. Corruption within co-operatives is a huge problem in Indonesia and China, resulting in most small farmers withdrawing from such collectives. A fundamental failing of human nature is that once more than two people are engaged in a mutual enterprise, conflict escalates and productivity drops; the Chinese aphorism is “One monk draws the water, two monks carry the water, three monks- no more water!”. For those interested in an animation of this concept, the authoritative version can be found here

If co-operatives are to form in Georgia, it should be an organic and voluntary process without state subsidy or foreign-aid support. Concurrently, government and aid agencies should look at how to co-operate with existing small-scale traders for mutual benefit, be it as sales agents for rural insurance, extending small harvest loans to farmers who are well-known the the trader, or providing basic  training in post-harvest management to their suppliers.

(2) Extension Services

The report reiterates the findings that extension services are an important driver of productivity increases amongst farmers, particularly among small farmers who can’t afford private services or who have difficulty accessing written materials in a language they understand.

While the finding is unremarkable, the recommendation is that a State Extension Service is the suitable model. This is contentious; many other countries have realised huge gains in productivity without the use of government-owned extension services.

In the Australian colonies of the 19th century, and the Commonwealth of Australia in the first half of the 20th century, dairymen were generally impoverished and owned only a handful of cows. The dairy factories which bought their milk employed their own company veterinarians and production experts, who provided free extension advice to the factory’s suppliers. Inputs suich as vaccines and drugs were provided at low cost and often on account, paid for out of monthly milk checques. Dramatic increases in productivity, profitability and herd size were achieved in this manner.

Government extension services to this industry in Australia did not become a feature until after politically powerful soldier-settlers on new irrigated dairy estates in the 1940’s and 50’s lobbied for free government extension and research in parallel with the dairy company extension activities. In short, the greatest gains in productivity and prosperity were achieved with an old-fashioned paternalistic commercial approach by the large dairy factories, with State extension services being provided for political reasons rather than compelling need and becoming available after farmers had risen to a moderate level of prosperity.

In Indonesia and China today, state extension services achieve a great deal of air time on State TV channels and in government propaganda, but the lion’s share of extension service is provided by commercial processors of milk, beef, fruit, vegetable and fish. It is not uncommon for finance, insurance and extension, as well as crop care and veterinary care on request,  to be provided as one bundle by such processors. It works tremendously well in general despite the paternalistic concept that some aid agencies find distasteful.

There are many ways that government policy can drive such nucleus-plasma commercial extension models, using tax incentives or import quota penalties to drive processors in the right direction, without taxpayers’ money or donor funds being required.

Overall, a creditable report and a good basic resource.