This article provides a general overview of agricultural industry in Georgia, as well as the specific information about the challenges and opportunities that the country offers in terms of bio farming.
Preamble
The agriculture industry is a key element part of the daunting challenge facing mankind over the next 50 years. Figures show that humans need to produce over the next 25 years 70% more food resources than ever produced in the entire history of mankind.An early perspective on the looming food shortage was presented more than a decade ago by Norman Borlaug, father of the Green Revolution and 1970 Nobel Laureate for Peace (Borlaug, 2000). In an article on world hunger, he wrote that “it took some 10,000 years to expand food production to the current level of about 5 billion tons per year,” and that to meet the needs of the planet’s growing population by 2025, “we will have to nearly double current production again.”
(Above paragraph from: http://www.co2science.org/education/reports/foodsecurity/GlobalFoodProductionEstimates2050.pdf)
As part of this challenge water and food are going to be essential commodities to sustain our development. It is because of this challenge that few strategic areas in the world are becoming the destination of investment in agriculture.
One of such global areas is the Caspian Sea and the countries in its region. The environment, the latitude and water access makes it a perfect candidate for the agriculture revival currently underway. Georgia especially given its very welcoming business environment and unique geography is becoming one of the preferred destinations for agriculture investment.
Below we take a closer look at bio farming, a sector that we expect to present great opportunities for investors.
Agriculture in Georgia
The fact that Georgia is one of the oldest agricultural countries is already proven by the archaeological findings. Such status is first of all determined by the diverse climate, which creates the possibility to grow and later harvest different crops any time of the year. Georgia shares the same latitude with Italy for example.However, despite the farming is one of the oldest professions for Georgians and nowadays more than the half of the population (54%-58%) is involved in agricultural business this sector of the economy is contributing only 11% of the national GDP. The fractioning of the land in small family plots and the lack of an effective pro-agricultural policy post Soviet union break up have both contributed to chronic lack of resources to invest in the industry.
Investment in up-to-date technologies is necessary to reap the benefits of a rich soil and that is in fact where many opportunities for investors lie.
Bio farming in Georgia
During the recent years, the world trend, namely the organic farming also entered the Georgian agriculture business. However this field is nowadays in the initial stage and still the importance of bio farming isn’t well understood in the local market both from the point of healthy nutrition as well as from its economics point of view.We interviewed Georgian bio technologist David Chachanidze who is actively involved in organic farming in Georgia and who tries to develop the bio agriculture sector in the country. He explains how so far the overall lack of information has been the main culprit of the low interest of Georgian farmers towards bio agriculture.
“Unfortunately most of the domestic farmers do not have any information and even minimum education about the bio methodology and its advantages and still use chemical fertilizers in agriculture”, explains Chachanidze.
During our conversation he also emphasized that based upon soil resources that Georgia has the country could satisfy the existing agriculture demand of its own citizens, and also it could export its products and successfully enter international markets, where the importance of ecologically clean products is already mature and where the demand for such products increases from year to year.
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| bio method: putting hay for ground fertilization |
Why to invest in Georgian emerging organic farming
There are several uniquely favorable parameters critical for bio farming development Georgia:- Lands giving plentiful harvest
- Diverse climate zones
- Labor force
- Bio technologies
These four major parameters are already accessible in Georgia and that’s very important from business point of view, they are available for significantly lower prices than in countries where organic agriculture is already embraced and developed.
Currently, two companies already operate in this field in Georgia; the first one is “Bio Organic Georgia”, producing organic fertilizers and the second one, its affiliated company- “Organica”, producing bio pesticides.
Both companies’ products ingredients are taken entirely from nature, multiplied in the laboratory and later the concentrate output is used in the fields.
Mr. Chachanidze declares that these organic products are cheaper than the similar products produced in foreign countries and are competitive as with the price, also from the quality point of view.
It’s noteworthy that these companies have all the necessary documentations and international certificates for all the fertilizers and pesticides, that means that if the farmer/company will use these products in the process of farming, it will be easier to export the final goods to international markets and be able to mark the product as “organic”. These documentation is essential to help exporters to spend less time at each border crossing and therefore reduce costs.
At this moment in time only few farmers are involved in bio farming in Georgia and are exporting to international markets. Most of them became interested in this niche of the agricultural industry after visiting foreign countries where they gathered basic information and witnessed first hand the benefits of an increasing demand for organic products.
As of today though the Georgian government hasn’t yet created essential policy necessary to support and develop organic farming, it is therefore auspicable that renewed attention will be given to this matter soon since all developed countries have already assessed the importance of ecologically clean products and have established the appropriate policies and legislation necessary to ensure the differentiation process between organic and non organic products.
Such policies have increased the motivation and investment behind bio farming by creating rules and traceability processes protecting producers and consumers alike against fraud and falsification of products.
Appropriate legislation favoring organic products helps developing the necessary niche for them, ensures premium pricing against conventional products (premium currently stands at 40-50 percent), and therefore Georgian bio farmers could became increasingly stimulated to export their products to foreign markets.
Below is given comparison between the prices for organic and conventional fresh products in USA market according to www.abcnews.go.com.
Food
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Organic Price
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Conventional
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Asparagus
|
$4.99
|
$2.99
|
Avocado
|
$2.99
|
$1.99
|
Sweet Peas
|
$1.59
|
$1.59
|
Grapefruit
|
$2.49
|
$0.89
|
Onions (Y)
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$1.29
|
$0.99
|
Sweet Corn
|
$2.89
|
$1.69
|
Pineapple
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$5.99
|
$3.99
|
Fuji Apple x4
|
$4.89
|
$3.89
|
Bell Pepper
|
$4.99/lb.
|
$1.99
|
Carrots
|
$1.99/bag
|
$0.89
|
Celery
|
$3.99
|
$3.49
|
Lettuce
|
$2.99
|
$1.99
|
Potato
|
$1.49/lb.
|
0.99
|
Strawberries
|
5.99
|
4.99
|
However another way also exists, which is linked with secondary production, like: canning or drying the products.
Also the way to freeze the fresh products exists. The 21st century offers technologies makes available to use shock-freezing method. Fresh foods frozen in such way maintain the initial visual appeal, as well as the original taste after defrost and it’s almost impossible to feel the difference between the real fresh food and the defrosted one.
The potential markets where Georgia based organic products can be exported
Demand for bio products increase almost on everyday basis, as developed countries’ population have already realized the importance of healthy food and understood that despite the relatively high price, in the long term they save money, that could be spent in the future due of health or weight related problems.For example the table below displays the yearly sales figures in the USA, prepared according to the Industry Snapshot performed by the Center for Economic Vitality, Western Washington University.
These data clearly shows how in the USA that total organic food sales increased about 307% (during 2000-2009 year), while during the same period of time the “traditional” food industry as a whole experienced only 34% growth.
Almost the relatively same situation is present in Europe and also in other developed countries. There are also the numbers of agricultural countries such as: Romania, Poland, Turkey and etc. which proclaimed organic farming as a national priority and there also exists the other countries, which have poor amount of land, from which absolute majority is already used and where the labor force is very expensive and so the prime cost for organic products are high.
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| Bio peach plant |
Georgia’s competitive advantages
On the other hand such country as Georgia exists, where labor force is much cheaper, as for example the salary for a person to hire varies from 500-700 Gels, It’s also very important that bio farming business is on its initial stage and so there’re still lots of opportunities.
Climate zones are also very diverse, and more than half of the agricultural lands (52%) remains still raw and unprocessed. And according to the general parameters if the soil is unprocessed for several years, it’s richer than already used one.
Bio technologies are also much more cheaper in Georgia, than in countries with developed organic production. We can say that in case of general, farming one hectar of land using the traditional method requires at least 500 GEL ($302 USD) pesticides and necessary inputs for initial stage, while in case of bio farming it varies from 200-250 GEL ($120 USD).
In many cases in Georgia agricultural soil hasn’t been harvested for many years in Georgia due to political and social reasons. Agriculture related investors are bound to invest in soil which is rich in minerals and can yield, with proper preparation and know-how, above average crops.
Water availability factor also turns out to be very important factor in farming process; According to Georgian National Investment Agency, the Georgia ranks as a “Top Country” globally in Water Resources per Capital. There are 26,000 rivers on the territory of the country, and their total length is approximately 60, 000 km.
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| Cucumber greenhouse |
Fresh water supply of Georgia, which is made up of ice, lakes and water reservoirs and so that is very crucial for farming, Georgian water turns out to be rich with different minerals.
Last but not least: logistics favor Georgia as it represents the natural gateway of goods into Europe and Central Asia alike. Georgia’s location combined with its simplified custom procedures makes this country a future player both in terms of export and re-export.
Due to the above reasons many businessmen have already realized Georgia’s potential and foreign direct investment in agriculture has started to rise. Given Georgia’s overall size and relative land availability we expect bio farming to be a significant part of the Georgian agricultural mix.
“We know already that foreign investors have bought large amounts of land in Georgia, in order to start bio farming business”, declared David Chachanidze, who due to his business is greatly involved in almost every project linked with organic farming, since his companies (“Bio Organic Georgia” and “Bio Agro”) turns out to be one of the very few service providers so far in this field.
Since the cost of bio production in Georgia is lower than in countries where this direction of agriculture is already developed, the companies and farmers operating in Georgia have possibility to carry out the production of competitive organic products.
Georgia is at this point in time just an emerging market in the bio farming industry although if foreign direct investment in this area will persist at this rate we expect Georgia to be an important player in the region in just a few years; a player able to produce high quality appealing products that will find their lucrative niches in Europe and the Middle East and neighboring developing countries where a more affluent segment of the population demands for organic products.
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| Organic mushroom |
Bio technologies, already well developed in Georgia and the climate conditions ensuring the quality (delicious, flavored, full of vitamins) of the products, together with lower costs, will guarantee that Georgia based organic products will honorably compete with its rivals on the international market in just a few years.
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| Organic mushroom green house |
We at Affinitas remain available to provide additional details with regards to bio-farming in the Caucasus and in Georgia especially. Please direct any further query to info@affinitasconsulting.ae or join our Facebook page to keep updated on the latest news: www.facebook.com/Affinitas
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| bio salad in greenhouse |
Article by: Kate Lekishvili & Luca Gorlero. All rights are reserved. Total reproduction or partial reproduction of the information above is forbidden unless authorized in writing by Affinitas Consulting.
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