Livestock industry in Georgia - investment opportunities

Preamble

The issues revolving around the ecological impact of food supply are one of the topical problems in the 21^st century world. That is why Affinitas Consulting regularly provides articles about the situation and the opportunities in different directions of agricultural sector in Georgia, one of the countries in the Caucasus that is seeing a revival in agriculture interest. This article is dedicated to the livestock sector and will provide information about:

• The current situation of this business in Georgia;
• The challenges related to the production process;
• Statistical and economic data;
• Specific information about pork, beef and mutton production in Georgia;
•  Existing livestock project implementations and potential opportunities in the Georgian industry.

Current Situation

Livestock was and is one of the major sectors of the agricultural sector in Georgia. Archaeological excavations together with Georgian monuments prove that even in the ancient times this sector was highly developed in the country.

However, nowadays this sector while offering a lot of potential to foreign investors it is suffering from some internal issues.

Problems date back to Soviet Union times when farmers were only asked to grow the animals and the government guaranteed price and guaranteed all other steps of the supply chain. Nowadays free market conditions force small farmers and entrepreneurs to face competition with foreign investors at a disadvantage due to a chronic lack of credit and therefore investments as well as knowledge.

Therefore this sector is currently proceeding by virtue of inertia. In order to accelerate development process almost every government of Georgia initiates some initiatives, however the problems stay the same and is mostly linked with the lack of financial resources.

The table provided by Georgian Statistics Department is great proof of such opinion. According to the department only 8.8% was the share of agriculture in the country’s total GDP in 2011. Such percentage is especially alarming after taking under consideration the fact that 50% of citizens are employed in the agricultural sector.

 The Share of Agriculture in Total Georgian GDP:

But the fact that livestock takes about 50% of the total agriculture share is quite interesting:

Livestock’s Major Sectors

Sheep Breeding

Sheep breeding is one of the most interesting and ancient sectors in Georgian livestock. The legend of Argonauts, according to which sailors (Argonauts) visited Kolkheti (Georgian territory) to get the so called Golden Fleece – Sheep leather is quite a good evidence of that.

There are two types of Georgian sheep: Tushuri and Imeruli.

So called Tushuri sheep is mostly spread in Eastern part of the country. Such breed is very popular, mostly because of its main characteristic: endurance. Tushuri can walk about 600-700 kilometers per season, it has strong leg and can easily be adapted to environmental conditions.

Tushuri doesn’t need high quality food, it can be fed in semi-desert lands and weights about 60-80 kilograms.

Imeruli sheep is mostly spread in Western part of the country, has more rude wool and its uniqueness is in its reproduction functions.

It can be bred any time of the year, it breeds about 2-3 sheep per gestation period and its pregnancy period is shorter, about 137-143 days.

Such variety of sheep weights about 35-45 kilograms and its meat actually doesn’t consists of fat and so is dietary kind of food.

It should be emphasized that during Soviet Union about 2,000,000 sheep was recorded in the country, however nowadays the number came down to 800,000 units.

Such decrease is the result of different factors, however it’s mostly linked with finances. Since the taxes on pastures increased, the farmer that had limited financial abilities had to sell even such sheep that in future should have lambs.

Markets for Georgian sheep realization

It’s noteworthy that mutton consumption in Georgian is quite low, about 70 tonnes per year and is mostly depended on the Azerbaijanis living in the country.

However the interest towards Georgian sheep, namely in Tushuri is quite high in foreign countries, as this breed is very similar to sheep from Middle East Awassi, which is very popular and quite expensive in Arabian countries.

If the price for Australian Merinos sheep in Arabian countries is about $8 USD and for Syrian Awassi is $15, price for Georgian sheep occupies middle position between them.

Nowdays, Tushuri sheep is exported in Libya, Syria, Jordan, Iran, Saudi Arabia, Egypt, Azerbaijan, Qatar, Kuwait, United Arab Emirates, Oman and in Israel.

About 266,244 live sheep were exported in 2009 year from Georgia, in 2012- 178,000, in 2011 – 150,00 and in 2012 about 120,000.

Domestic sheep is also interesting from wool point of view. If one sheep can give about 2-2.5 kilograms of wool and a lamb about 1-1.5, it comes out that Georgia has capacity to produce about 1,700,000 kilograms of wool per year. While domestic price per kilo of the product is about $6 USD.

Sheep is also attractive in terms of milk production, especially for cheese production. It gives less milk than a cow, about 1-2 liters, however its milk is full of fat and is beneficial for health.

Important to note is the fact that the export can be much more, as the interest towards Georgian sheep is large and considering the current World food trends it will only increase.

Pork and Beef Production

Pork and beef production is more relevant in Georgia, as the demand for them is higher on domestic market also.

Nowadays the retail price for beef in Georgia varies between 9-11 USD, while for pork between 8-11 USD.

Cows average weight is between 350-459 kilograms and price for a cow is 500-718 USD. Pigs weight is about 80-180 kilograms with a price of 270-500 USD.

Despite the high demand on local market, farmers and small entrepreneurs are not able to satisfy the market and this shortage is filled with imported goods.

As for example, about 7,700 tones of frozen beef and 7,500 tone of pork was imported in Georgia in 2009 year, with the total price of 12 million and 16,6 million USD respectively.

According to the experts, the most of this shortage space can be supplied by locally produced meat, that nowadays can not be reached because of existing challenges.

However the Department of the Georgian Ministry of Economy and Sustainable Development released quite optimistic data:

In the first quarter of 2012 the share of agricultural products increased comparing with 2011 year.

Structure of exports according to sectors in the first quarter of 2011-2012 years:

For example, the export of cattle was 9,8 mill USD, that is 112% raise comparing the previous year. And it’s noteworthy that 99.6% of this goes to Azerbaijan and 0.4% to Iraq.

According to this department the share of agricultural products is reduced in the total import in the first quarter of 2012year. From 19% it came down to 16%.

Structure of imports according to sectors in the first quater of 2011-2012 years:

However, the import of beef was increased by 60.3% and was about 6.1 mill USD. And 92% from the total import was from India and the rest from Germany, Turkey and Brazil.

Pork import increased by 80% and consisted of 7.2 mill USD, from which 60% was from Brazil and 40% from Canada, Netherlands, United States and other countries.

Despite of meat, cow gives also milk, about 12-13 liters during Summer and 8 liters during Winter.

Along with the seasons the amount of milk given from cow depends on the quality and amount of food it gets. Considering the financial abilities of domestic farmers, it can be assumed that in case of better quality and more amount of food Georgian cow can be milked better.

The process of milk realization is better organized by domestic dairy producing companies. The company representatives regularly visit the village inhabitants and buy milk from them. Or the peasants go to the special places and sell the product.

The price per liter of milk in case of first option varies between 40-50 cents, while in the second case it’s higher.

Conclusion

Existing local demand is able to support the development of a stronger livestock industry in Georgia provided that private investment likely from foreign countries will be focused in the industry.

Considering the above data, it can be easily seen that if livestock business will be developed in Georgia, the existing and growing demand in the Georgian market can easily be satisfied by locally produced goods.

The reasons that caused the delay of the sector’s development are also clear. Similarly to the agriculture sector in general, also in livestock mostly little farmers and peasants contribute to the industry and all of them are unable to expand the business because chronic lack of financial resources (credit) that prevents them to modernize their technology and create economies of scale.

Direct foreign investments can easily accelerate the development process of this sector, that turns out to be attractive and full of opportunities in terms of both directions like export and of supplying domestic market.

We at Affinitas remain available to help any investor interested in starting up agricultural business in Georgia. For further information please visit our web site at: www.affinitasconsulting.ae. Please direct any query to info@affinitasconsulting.ae or join our Facebook page to keep updated on the latest news: www.facebook.com/Affinitas 

Article by: Kate Lekishvili & edited by Luca Gorlero. All rights are reserved. Total reproduction or partial reproduction of the information above is forbidden unless authorized in writing by Affinitas Consulting.