October 15, 2016 Retail FPI | Fall is a Time of Harvest

In the second week of October, food prices kept going down: ISET’s Retail Food Price index lost 0.8% m/m (compared to the last week of September) and 15% y/y (compared to October 2015). The largest bi-weekly price changes were recorded for seasonal food products such as fresh fruit and vegetables. Prices moved down the most for coriander (-23%), onion (-8%), and cabbage (-6%). The biggest price increases were recorded for the following items: tomatoes (33%), eggplant (27%), and garlic (25%).

ALL ABOUT HARVEST

According to the October data, prices moved up for grapes by 44%, compared to the same period in 2015. As discussed in our last FPI article, one explanation of the movement in the price of grapes might be the so-called “base-year effect”. However, the Minister of Agriculture provided a better picture of the 2016 harvest in Georgia. Compared to the previous year, wine export volume from Georgia has increased by 35%. Along with the bad weather conditions, it is no longer surprising that grapes are significantly more expensive this year.

Table 1: Changes in Sugar and Grape Prices

Product	Bi-weekly Change	Annual Change
Sugar	↑ 8%	↑ +25%
Grapes	↑ 16%	↑ +44%

SUGAR? YES, PLEASE!

Despite an overall downward trend in food prices, some products are becoming more expensive. One interesting case is sugar. Compared to the end of September, the price of sugar gained 8%. While people connect the price increase on sugar to the post-election environment (on October 8 parliamentary elections were held in Georgia), we need a better explanation for the significant 25% annual sugar price rise.

This price rise may be a result of higher domestic demand during the harvest season. On the one hand, autumn is all about preserving fruits and vegetables for winter, and sugar is “a must” in this process. On the other hand, sugar is still widely used in wine production in Georgia (in general, sugar is used for fermentation even in Bordeaux and Burgundy). This might be the case, particularly this year, because the harvest is not as high as normal, and Georgian farmers might want to increase their wine volume by adding water and extra sugar. In addition to this, the FAO sugar price index has also increased in September (by 6.7%). Bad news spreads fast: an increase in global prices transmits into higher domestic prices for sugar.

Food Price Index Recent Publications

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MARCH 2021 | AGRI REVIEW
On 29 December 2020, the parliament of Georgia approved the state budget for 2021, which includes allocations of around 18.3 billion GEL. From which the Ministry of Environmental Protection and Agriculture (MEPA) will receive 451.6 million (2.5% of the total budget allocation). MEPA will direct 10 mln. GEL towards the Environmental Protection and Agriculture Development Program (2.2% of MEPA’s total budget), with around 389.6 mln. (86.3% of MEPA’s total budget) to be allocated to agricultural… Read More
DECEMBER 2020 | AGRI REVIEW
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OCTOBER 2020 | AGRI REVIEW
The National Statistics Office of Georgia (GeoStat) recently published its economic review for Quarter II 2020. The publication highlights that agricultural production increased by 4.7% in the second quarter of the year compared to the same period in 2019. Furthermore, agriculture contributed to 10.2% of the country’s total GDP during the same period. In the second quarter of 2020, Foreign Direct Investments (FDI) in agriculture also increased and were almost six times higher than the… Read More
JUNE 2020 | AGRI REVIEW
On 15 June 2020, the National Statistics Office of Georgia published its annual publication for the agricultural sector - Agriculture of Georgia 2019. The publication shows that agriculture, forestry, and fishing comprised 7.2% of the nominal GDP in 2019, slightly lower than the 7.8% share in 2018, but in line with the general trend over the last five years (on average 7-8% of GDP). In nominal terms, the output of agriculture increased by 4% in 2019… Read More
DECEMBER 2019 | AGRI REVIEW
On December 10, the parliament of Georgia approved the state budget for 2020. The budget includes allocations of around 14.4 billion GEL. Out of which, the Ministry of Environmental Protection and Agriculture (MEPA) will receive 353 mln. GEL (2.4% of the total budget allocation). MEPA will direct approximately 293 mln. GEL (2.0% of the total budget allocation) towards agricultural development and 60 mln. GEL (0.4%) will be spent on environmental protection. Compared to 2019, the… Read More
OCTOBER 2019 | AGRI REVIEW
On 30 August 2019, a public hearing to discuss Georgia’s Rural and Agricultural Development Strategy for 2021-2027 was conducted at the Ministry of Environmental Protection and Agriculture (MEPA). The new strategy document represents a roadmap for Georgia’s rural and agricultural development for the next decade. The strategy outlines three major goals to be achieved by 2027: 1. Increasing the competitiveness of agricultural and non-agricultural sectors; 2. Sustainable management of natural resources, preservation of ecosystems, and… Read More