A REFRIGERATOR FOR EVERY DISTRICT!

The threat of a recurrence of the world food crisis and the global financial and economic problems which commenced last autumn, have highlighted the need to ensure the country's food security. Thus, a state food programme to step up domestic agricultural production was adopted in August of last year. Infrastructure projects to establish a network of refrigeration bases to store horticultural and beef-and-dairy products, as well as the construction of grain stores, were selected as the most important components of agricultural development. 

Grain market to be adjusted

"Last year the grain production forecast was over-fulfilled. Moreover, excessive supply of grain was observed in several districts, leading to a fall in prices. As a result, some farmers had difficulty marketing their grain," said Agriculture Minister, Ismat Abbasov. The minister added that, in order to regulate market demand, the state must buy a portion of the grain produced at the most competitive price, thus encouraging farmers to increase production. Acting as a major wholesale buyer, the state will not only secure its own reserves, but will also be able to regulate prices in the domestic market. With this aim, a reserve fund of grain is being established within the Ministry of Emergency Situations. It is expected that 260,000 tons of grain will be bought from local producers. However, state regulation of the grain market requires access to large grain stores, or elevators. The biggest problem in creating grain reserves is that elevators built in the Soviet era have become ramshackle and need either to be restored or replaced. The only large facility of this nature was a joint production by Azerbaijan and Kazakhstan - the Baku grain terminal opened two years ago and was designed for the trans-loading and storage of imported grain. Another major grain store has been built recently in the Naxcivan Autonomous Republic. It is fitted with US equipment; its reservoirs for the short-term storage of grain can hold 20,000 tons, while long-term storage capacity is 18,000 tons. The long-term storage elevator consists of six bunkers, each with a capacity of 3,000 tons. The facility is also equipped with 60-ton electrical scales and lifts with a capacity of 100 tons. A special automated laboratory has been built on the premises to check the level of humidity and purity of the grain. 

The construction of grain elevators is a very capital intensive business and farmers or small agricultural firms can barely do it by themselves. The government, therefore, made the decision to build the facilities via mixed financing. The national fund of support for entrepreneurship under the Ministry of Economic Development has opened an investment competition for the establishment of warehousing facilities in six districts. The warehouses are intended to ensure the storage and processing of grain. Each elevator will have a capacity of 10,000 tons. "The stores are to be built in such economic districts of Azerbaijan as Aran, Highland Sirvan, Saki-Zaqatala, Ganca-Qazax, Lankaran and Upper Qarabag - last year these districts accounted for 89.5 per cent of grain production," said the head of the fund's watchdog council, Niyazi Safarov. According to him, this work is being carried out in parallel with the setting up of the reserve fund of grain, while financing of the projects will be provided by business entities, low-interest loans from the fund, the Azerbaijan Investment Company and its affiliate companies. Bids for participation in the project will be accepted until 31 August, while the results of the tender will be announced on 17 September 2009.

Awaiting the refrigeration boom

The establishment of a network of refrigeration warehouses for the storage of horticultural and beef-and-dairy products will be another significant infrastructure measure. The setting up of such facilities in the country's leading agricultural districts has long been a talking point in different departments and government institutions. As usual, the main stumbling block was finance: the initial plan was to engage private investors, e.g. from the USA and Germany, as well as international donors. However, foreign companies did not show any great interest in our agriculture, while international financial organizations went no further than pilot projects. One of these was implemented in the Goytapa settlement of the Calilabad District three years ago, with financial support from the US Agency for International Development. Two stores capable of the long-term storage of potatoes, with capacities of 10,000 and 40,000 tons, were built there. Unfortunately, these stores cannot fully meet the needs of the district. The situation may change after another 200-ton storage facility is built in Calilabad - its construction is being financed by local farms.   

As a result, in 2007 a decision was taken to build the much-needed stores at the state's expense. The facilities will function as state enterprises, while the warehouses will be let out and managed by commercial entities. The Ministry of Agriculture has engaged the Agroleasing joint stock company into the implementation of the project and allocated 10 million manats from the state budget. Seven of the planned 55 refrigeration warehouses have already been built with this money. Specifically, major eight-section refrigeration warehouses with capacities of 5,000 tons each have been commissioned in the Quba and Salyan Districts. Another 2,500-ton warehouse has been commissioned in the Naxcivan Autonomous Republic.    

From this year the project for the development of regional refrigeration and warehousing infrastructure has been entrusted to the national fund to support entrepreneurship, which recently conducted an investment tender. The fund has received a total of 33 bids from businessmen in the Aran, Quba-Xacmaz, Ganca-Qazax and Lankaran economic districts. According to the terms of the tender, every refrigeration store should be designed to store a minimum of 2,000 tons of products. Businessmen are to finance at least 30 per cent of projects, while the remaining funds will be contributed in the form of loans by the fund and by the Azerbaijan Investment Company. 

Preference will be given to bids envisaging construction with state-of-the-art technology.

So far the fund has opened bidding for four economic districts which include 40 administrative units. In the future, the government is ready to provide active financial support for the construction of refrigeration warehouses in all economic districts.

Helping the farmer

How will the country's agricultural sector benefit from the construction of refrigeration warehouses? Marketing research carried out by the Ministry of Economic Development has shown that the Aran, Quba-Xacmaz, Ganca-Qazax and Lankaran economic districts possess tremendous potential for the production and export of agricultural products. However, in a number of cases, e.g. if supply exceeds demand or if prices on external markets drop, seasonal prices of horticultural products become unprofitable for farmers.

With refrigeration warehouses, farmers can withhold perishable products and sell them at more competitive prices later. Refrigeration warehouses will be multifunctional, because the facilities will provide sorting, packaging, processing and other services. This will lend the products an important appearance on the market. The availability of a diverse warehousing infrastructure in the country will reduce dependence on imports while, in the autumn-spring period, Azerbaijan will be self-sufficient in local fruit and vegetables.

It is worthy of note that the construction of refrigeration warehouses is being undertaken by private businessmen. For instance, Palmali intends to establish such a facility in the Masalli District. Another commercial project is on the agenda of the Asnaf Industrial Company and the Azerbaijan Investment Company, which signed a letter-of-intent in June 2007 for the construction of a compound of dry cargo warehousing facilities near Baku. According to preliminary estimates, this will cover an area of 3,000 square metres and will be valued at $20 million. The project has drawn interest from Islamic investment companies, the Caspian International Investment Company, the Kuwait financial house and the International Finance Corporation. 

Another direction in the development of the agricultural warehousing infrastructure envisages the construction of mineral fertilizer stores. Last year Agroleasing announced a tender for the establishment of a regional logistical base for the storage and distribution of mineral fertilizer in the Saki and Sabirabad districts.

The availability of an effective warehousing and logistical infrastructure will also enable our farmers to access foreign markets. Such opportunities do exist, as confirmed by the recent visit to Baku by a delegation from Belarus, led by vice-governor of the Minsk Region, Valeriy Skakun. The talks focused on ways to provide wholesale marketing of fruit and vegetables from Azerbaijan in Belarus. Similar talks have long been under way with Kazakhstan - refrigeration warehouses are to be established in the Mangustau District for the trans-loading of fruit and vegetables from Azerbaijan. Meanwhile, Azerbaijan and Russia are considering the opening of logistical centres for agricultural products in nine districts of Azerbaijan. These would facilitate the storage, packaging and organization of supplies of products to the Russian market. In parallel, the countries are discussing the opportunities for setting up Azerbaijani logistical centres in several Russian districts, in Tambov for example, to systematize and facilitate the export of agricultural products.