PLENTY OF BREAD

For Azerbaijan, just like for any other country in the world, the problem of the security of its food supply is a cornerstone of overall national security policy, covering everything from independence of food supply to the combat effectiveness of the army. This factor has in itself become a determinant in the process of the formulation of government policy for the development of sectors of economy which are strategically important to food security.

Naturally, the development of the agro-business sector is a key factor in determining the extent of the country's dependence on foreign food supplies and it plays a leading role here. In discussing the problems of food security, experts rebut the expression, "man shall not live by bread alone," and bring to the fore the question of whether grain reserves in the country are sufficient to last until the next harvest. According to the UN Food and Agriculture Organization (FAO), so-called carryover grain reserves, sufficient for 60 days (about 20% of the total annual national grain consumption) are considered safe. Russian specialists maintain that the country must have grain reserves for three months (90 days). What is the situation in our country? Can Azerbaijan be self-sufficient in basic food products if need be?

All according to plan

Let us begin by saying that, in 2008, Azerbaijan expects record grain crops compared to preceding years, because the land under cultivation has increased by almost 130,000 hectares this year, so the total area growing crops is 601,000 hectares. This gives us reason to expect an increase of 300,000 tons in this year's grain output. If the forecasts prove true and the republic manages to increase grain production this year to 2.5 million tons, 700-800 thousand tons of grain will be imported, because the country's estimated requirement is about 3 million tons (1.411 million tons were imported last year). High import rates were achieved after the government introduced tax benefits for importers.

Incidentally, local agribusiness produced 2 million tons of cereals last years, of which 1.3 million tons was food grain. The annual requirement of food grain is 1.53 million tons, the monthly requirement is 129,640 tons, and the per capita monthly consumption is 180 kilograms.

This means that despite every government measure, for now Azerbaijan is unable to fully meet local demand for cereal grain from local crops. However, this issue will be resolved by 2010, according to government estimates, when the country will cease importing grain. "Already, in 2008, we expect higher grain crops, which will enable us to meet Azerbaijan's domestic demand in full by 2010," said Agriculture Minister Abbasov.

Furthermore, by cabinet decision, proposals aiming to safeguard the country's food security, to establish a Grain Fund and exempt grain imports from VAT for one year have been prepared and sent to the President of Azerbaijan. This issue has become urgent due to the delays in the process of regulating the Nagorno-Karabakh conflict.

There are problems

Despite the clear government efforts to shape a specific food security policy, many experts argue that the country needs a more comprehensive programme of development for the agro-business sector.

"The development of the agricultural industry is considered a priority of the programme to develop the non-oil-related sectors of the economy," said economic expert Oqtay Haqverdiyev. "The agribusiness sector is first and foremost the land. In Azerbaijan, half the cultivated land is highly saline, there needs to be a comprehensive leaching irrigation programme. In the Soviet period, about 200-300 million roubles (about $500 million) were allocated annually to irrigation and land improvement measures; the leaching irrigation of fields, arable lands and farmland was a regular practice. After the dissolution of the Soviet Union, this practice was completely abandoned for 12-13 years. This is why about 600-700 thousand hectares of very good land, especially in the Sirvan and Mugan zones (not to mention Karabakh) became saline. We need to build a land drainage network there to leach the subsoil waters. But this requires huge amounts of money and a lot of time: after all, we are talking about almost half a million hectares."

In addition, Mr. Haqverdiyev outlined a number of problems in this sector: monopolies and networks of middlemen, who have long since achieved higher prices for fruit and vegetables than in Germany, despite the fact that we have better climatic conditions.

The expert said that the agricultural sector is subsidized by states all over the world. "They subsidize produce rather than the farmers, to keep them interested in agribusiness. The farmer must know for certain that if he harvests 100 tons of cotton, he will be able to sell it and receive a guaranteed income for his work - no matter what and regardless of cotton prices in the world market." At the same time, the expert noted the need for benefits and equipment leasing, which are being introduced into the Azerbaijani market.

Ziyad Samadzada, chairman of the Azerbaijan Milli Maclis Standing Commission for Economic Policy, shares this opinion: "In my view, the agriculture sector should develop at an accelerated pace in Azerbaijan, and government subsidies are required to achieve this. Sooner or later we will be able to export greater quantities of agricultural produce."

Competitive quality

But will Azerbaijani produce be able to rival its foreign competitors in just a couple of years?

In the opinion of experts, the only way to compete with imports is with higher quality and lower prices for local produce. In order to achieve this, crop yields need to be increased, agronomists and livestock experts should work more efficiently, and scientists should engage in good breeding work. We need domestic fertilizer factories, modern agricultural equipment, highly efficient technology in the processing industries and so on. All this requires huge amounts of credit and fixed purchasing prices for farmers, so that they can withstand competition from the imported goods which flood the country (and which, incidentally, are not always of high-quality, nor sold to customers for acceptable prices).

It seems that the very important issue of protecting domestic manufacturers after joining the WTO will soon be on the agenda. Some sectors of agribusiness and manufacturing should be protected by the state in the most decisive manner from the influence of similar foreign products, including cereals. In other words, at least 50% of cereals should be produced in the country, to meet the demands of food security, and imports should be limited. For example, neighbouring Russia introduced barriers against grain imports in December 2007 and they remain in force as we go to press.

In other words, the government should continue to buy grain from its own farmers to replenish strategic reserves and maintain existing grain production capacity or even increase it. Otherwise domestic production will gradually begin to shrink and will be replaced by imports. This might lead to a situation in which the prices of the most important food products escape government controls because they depend to a greater extent on international prices.

But, judging by government plans, no such problems await Azerbaijan. In the near future, the country will be able to become one of the most efficient food exporters and a situation might arise in which we need to create obstacles against food exports. For now, however, the government does not intend to limit grain imports, adhering to the principle of "a little more will do no harm."

Priorities are set

To use the potential of the agricultural sector effectively and to start producing competitive products, a draft "Strategy for the development of the Azerbaijani agribusiness sector for 2008-2015" has been elaborated. The guideline document determines the main objectives to be: creating conditions for increasing the production of competitive products by the efficient use of land, water, land improvement and irrigation; increasing the productive capacities of crop growing and livestock farms, using modern technology and best practice; building new processing facilities and making the veterinary and phytosanitary sectors more competitive.

The Agriculture Ministry maintains that areas like viticulture and fruit growing have the greatest potential for growth. In the 1970s and 1980s, vineyards occupied 267,000 hectares, and fruit orchards 152,000 hectares. The technical infrastructure in these areas and the highly effective processing facilities in the regions were built in the same period. By upgrading the facilities and introducing modern technology, Azerbaijan will be able to produce high-quality goods to international standards.

Poultry farming also has great potential for growth. As recently as 10 years ago, there was no poultry farming in the country, but today there are 28 poultry farms which produced 19,000 poultry in 2007. Given the sector's development potential, it will be possible to increase the number of farms to 40, and their annual produce to 45,000 tons. A target has been set to supply the nation with poultry and eggs entirely from domestic sources.

In the light of market demand and the potential for processing and export, crop yields of potatoes, vegetables, fruit and grapes are expected to increase in 2008. Calculations prove that milk production in 2008 could increase by 3%, beef by 5%, poultry by 7% and eggs by 9%.

As of 1 March 2008, Azerbaijan produced agricultural produce worth AZN 189,016,300, which is 3.8% more than in January and February 2007. The crop farming sector grew by 4.3% and the livestock farming sector by 3.8%, adjusted for inflation. According to the State Committee for Statistics, the spring sowing season was completed by 1 March 2008 on 29,900 hectares of arable land, which is 2.9% less than in the same period last year. 1,159 hectares are under cereals (41.8% less than in 2007), 208 hectares are under sunflowers (3.5% more), 8,279 hectares are under potatoes (14.4% more), 5,650 hectares are under vegetables (10.5% less), 29 hectares are under annual plants (14.7% less) and 14,557 hectares are under perennial crops (15.8% more).

Growth was also observed in the livestock farming sector. As of 1 March this year, the country produced 47,700 tons of beef (live weight; 3.2% more than in the corresponding period of 2007), 198,800 litres of milk (2.1% rise) and 157,673 eggs (14.5% rise). The forestry sector output reached AZN 133,500, the fishery sector - AZN 22,600, and game husbandry - AZN 200.

It is clear that, despite the growth of the agribusiness sector in Azerbaijan, there is a need for additional measures to safeguard the country's food security. And new programmes and projects will soon be launched, aimed at resolving most of the current problems.