FOR US AND FOR OTHERS

Azerbaijan is developing its own agricultural concept, despite the global food crisis and market closures in post-Soviet countries.

The food crisis is going through its second year and has intensified significantly with the start of the sanctions confrontation between the West and Russia. This has considerably changed the balance of the post-Soviet agriculture market. In Russia and a number of other countries of the Eurasian Economic Union (EAEU), the trend towards food regionalisation has intensified. Now the food security measures urge the closure of domestic markets. These changes in trading partners inevitably affect Azerbaijan, which has also imposed certain restrictions on food exports. However, the key objective for Baku is not customs restrictions, but the involvement of lands in Karabakh in agriculture, the introduction of advanced agro-technologies and the digitalisation of agriculture.

Attempted control

Even before the coronavirus pandemic and escalation of the Russian-Ukrainian conflict in October 2019, during the ANUGA 2019 food fair in Cologne, Russian Deputy Prime Minister Alexei Gordeev voiced the idea of creating a dedicated organisation of the world's leading grain-producing countries and joint market regulation. This international organisation was supposed to become something similar to OPEC in everything grain, hence ensuring the stability of the global grain market. In addition to Russia, it was proposed to include the largest grain producers (Kazakhstan, Ukraine, a number of EU countries, the US, Canada, Argentina and Australia), to coordinate the grain price policy and to solve export quotas and other disputes in this vitally important area.

However, the European Union categorically rejected the initiative, as they saw the idea of creating a grain cartel as an attempt by Moscow to take control of international food markets. The position of the UN, FAO and WTO towards the initiative to create a ‘grain OPEC’ was also lukewarm, and in general the idea did not find support in the world.

Meanwhile, there has been a steady upward trend in food prices around the world since last spring. Since the beginning of 2022, the factor of imported inflation has spread almost around the entire planet, turning into a real threat of famine in the world's poorest countries. All these negative aspects have increased since the outbreak of the Ukrainian war and the adoption of harsh anti-Russian sanctions. First and foremost, it affected some 50 economically disadvantaged countries mainly located in Africa, Asia and the Middle East: the share of Russian and Ukrainian grain in their food balance exceeds 30%. Moreover, many countries in Eastern Europe, Asia and Africa are likely to face serious difficulties in growing crops. Approximately 50% of their demand for mineral fertilizers was met by Russian and Belarusian supplies, restrictions on which may persist also in 2023 and beyond. By the way, global prices for nitrogen fertilizers have more than tripled due to the gas crisis, which started last year.

However, the Russian initiatives to manage the grain market have transformed into something different aimed at protecting the Russian domestic food market regardless of the interests of the neighbouring countries and trading partners. A year ago, Russia doubled the export duties and imposed restrictions on global exports of grain, meslin and flour, with the exception of the EAEU member states. After the military escalation in Ukraine, Russia banned the export of sunflower and rapeseed from April 1 to August 31, 2022. Moreover, the Russian government banned grain exports to EAEU countries (except Belarus) from March 15 to June 30. It is also prohibited to export sugar from Russia in March 15-August 31, while export to the EAEU countries is possible, but only under special permits issued by the Ministry of Agriculture. Belarus followed a similar path, with restrictions on exports of buckwheat, flour, sugar and salt.

Russian side explains these restrictions claiming that duty-free trade rules allow the EAEU member states to buy strategically important food products in bulk, creating a deficit on the Russian market, and then re-export them to foreign markets, but at a much higher cost due to the price difference.

Recoil effect

All these steps caused quite a controversial reaction from the member states of the economic union. Kazakhstan and Kyrgyzstan regarded these decisions as a violation of the EAEU treaty. Kazakhstan imposed temporary export restrictions (April 15-June 15) on grain and flour to protect its own market. Wheat export quotas have been set at one million tonnes, while flour exports have been limited to 300,000 tonnes. "We introduced these restrictions because the Kazakh exporters do not want to sell grain to local milling companies, they wait for the export price go up," Kazakh Agriculture Minister Yerbol Karashukeyev said.

In other words, there is a trend towards regionalisation in the EAEU on the issue of food security. The multiplier effect of these decisions now affects the entire post-Soviet space. For example, a number of Central Asian countries have restricted exports of strategically important foodstuffs and, on the contrary, removed customs duties and VAT on their imports. Ukraine imposed export licensing restrictions on wheat, corn, cattle meat, eggs and sunflower oil to prevent shortages. Recently buckwheat, rice and oats have been added to this list. Additionally, Kiev imposed quotas on the export of salt, sugar, rye, millet and edible meat by-products.

In this situation, FAO experts recommend that the member states, especially developing countries, which are at greater risk due to their dependence on imports, make every effort in the medium term to support local producers and processors. It is necessary to focus their activities on import substitution and meeting domestic demand for food, as well as to diversify agriculture through the reclamation and development of idle lands.

Countermeasures

All these recommendations are fully implemented in Azerbaijan, which similar to its CIS neighbours is taking steps to protect the domestic market. Azerbaijan has facilitated the export of strategically important food wheat as much as possible, and has extended the abolition of VAT and duties for grain importers since last year. The State Reserves Agency was established; a food reserve structure is under development. Part of the food imported and produced in the country is reserved in the agency’s warehouses both in case of force majeure and in order to regulate prices in the domestic market. To preserve the stability of the domestic food market, the Cabinet of Ministers adopted in March a resolution on measures to regulate the export from Azerbaijan of a number of basic food products that make up the minimum consumer basket, and goods used in their production. The document restricted exports of basic food products and raw materials, including flour and cereals, malt, starches, inulin, wheat gluten, oil seeds and fruits, some medicinal plants, fodder grasses and feed grain.

However, considering the global food crisis and inflation, customs preferences, quotas and export restrictions cannot be a remedy for all problems. Therefore, the government sees the main task of stabilising the domestic market through increasing the production and processing of agricultural products. It is planned to achieve these goals by developing the agricultural potential of the Karabakh and East Zangezur economic regions, introducing the most modern agricultural technologies and economical irrigation systems, as well as the full digitalisation of the sector.

Digital farming

Participants of the conference Looking into the Future: Transition to Digital Agriculture recently held in Baku have discussed the issues of introducing IT technologies in domestic agricultural production, digitalization of management and control procedures in this area, as well as the development of liberated territories. "We need to ensure the digitalization of the entire agricultural sector, as this will make it possible to adapt the sector to future. Azerbaijan has come a long way in the field of digitalization of agriculture, and this work is carried out in all regions of the country. Today advanced IT technologies will also be introduced in the liberated territories," Inam Kerimov, Minister of Agriculture of Azerbaijan, said.

In recent years, Azerbaijan has made visible progress in introducing modern information technologies into the management and control of agricultural production. The majority of farms, as well as specialized processing enterprises and service structures, have been connected to this system. In particular, it is worth mentioning the automated information system Electronic Agriculture (EKTIS) set up by the Ministry of Agriculture. The system's electronic database (BigData) provides a clear picture of the volume and structure of crops grown and crop forecasts, making it possible to inform farmers about current demand and supply, helping them to choose the most promising and profitable crops in a given season. EKTIS has also played an instrumental role in subsidising over 450,000 farmers, increasing control and transparency in the process. Farmers also receive a yield forecast on their plot and a lot of other useful information. The transparent and informative EKTIS database is used as a basis for concessional lending mechanism for farmers and an insurance system, the efficiency of which has increased considerably over the last three years.

"In 2015-2020, Azerbaijan has increased agricultural production by 22.3% mainly thanks to digitalisation and innovative approaches," Minister Kerimov said. In particular, the development of e-Agriculture system contributed to the use of previously unused lands in farming, helped to improve fertility of these lands through more efficient provision of farmers with subsidies for the purchase of fertilizers and fuel, as well as optimised water consumption in the regions. As part of the practical introduction of IT technologies into farming, GPS sensors have been installed on Agroleasing's harvesting equipment for optimised control and acceleration of farming works. Pilot projects with the introduction of more efficient irrigation systems have been launched in a number of agricultural parks, including the automation of artesian wells – all thanks to the use of IoT systems (Internet of Things), telemetry mechanisms, etc.

Priority is export    

"Digital agriculture tools and green energy-saving technologies are designed to become a basis for the development of the farming sector in Karabakh," Mr. Kerimov noted, mentioning the pilot projects for the development of 'smart' villages in the districts of Zangilan and Fuzuli. It is planned to actively use renewable energy sources, data and analysis centres, smart irrigation management system, gas system, automated farms and processing plants. In addition, drones will be actively used to control crops and pollination. Digital systems will also be introduced for aquaculture and poultry farms.

The Ministry of Agriculture expects that over time, with the progress of demining works, Karabakh's fertile and abundant lands will help Azerbaijan solve its main food security problem - self-sufficiency in grains. Experts estimate that in the medium term Azerbaijan can meet more than 80% of its food wheat needs from domestic resources. This includes increasing the number of specialized grain agro-parks with economical irrigation systems and planting of elite high-yielding wheat varieties. Karabakh and East Zangezur have a total of about 1 million hectares suitable for agricultural production, including 128,000 hectares of irrigated lands. Some of this work has already begun, with about 100,000 hectares of wheat and barley being sown this year.

In medium-term, it is planned to grow cotton, grapes, sugar beets, corn, vegetables, melons and fodder crops as well as to establish large fruit gardens in Aghdam, Fuzuli and Jabrayil districts. There are plans to establish livestock farms in the mountainous regions of Kalbajar, Lachin and Gubadli.

Azerbaijan does not intend to build a food security system by closing or restricting the market. On the contrary, export-oriented agriculture is identified as a priority. "Our main goal is to diversify the economy and develop a national food security system. It is based on the application of digital and green technologies, other innovations and know-how to adapt the agricultural sector to new challenges," Mr. Kerimov said to summarise the key objectives of the sectoral transformation of agriculture in the country.