Greenhouse farming in Georgia

Preamble

As a continuation of the series of articles about agricultural opportunities in Georgia, we at Affinitas Consulting provide another article about greenhouse farming sub sector in Georgia.

The following article will provide information about:
- Existing types of greenhouses;
- Inform about current situation in the sub sector held in Georgia and tell about appropriate regions to construct greenhouses;
- Will give information about related costs of building up greenhouses in Georgia and provide with comparison with international costs;
- Inform about typical crops cultivated in domestic greenhouses;
- Analyze of the possible yield for a specific crop cultivated in and out of greenhouse.

Typical greenhouse close to Tbilisi (currently for sale)

Types of greenhouses

Climate change and problems linked with it have become more and more of a topical issue in recent decades. All geographical areas have been affected, therefore making it more and more difficult for the agricultural sector to forecast patterns and crops yield.
So several decades ago, when faced with such problems, farmers invented such technology that would give more independence, guarantees and stability.
Since then, greenhouses have passed several development stages and now we can find all types of greenhouses with a variety of shapes, heights, widthsand roofing technologies.
But in general they are divided in two major categories:

Low greenhouses are directly adjusted to the part of the land where crops are planted for about 3-4 weeks. Most often they are used when the plants need protection from the wind and when they are in the first stage of their growth.
But if the crops need seasonal protection high greenhouses should be used. It has various shapes and heights. Such constructions provide entrepreneurs with the advantage to use it throughout the year as additional lighting, heating, irrigating and other essential systems can be attached to it.

High greenhouses also provide farmers with the wide range of roofing technologies, such as glass, special greenhouse tape, plastic, polycarbonate, etc.
From the above mentioned materials glass and plastic were mostly used in the past. Nowadays special greenhouse tape and polycarbonate are the most popular materials in the world, as well as in Georgia.
However in order to make decision concerning with the type and materials of the building, it’s necessary to determine the kind of plants that a farmer plans to cultivate.

Current situation in greenhouse farming and appropriate regions in Georgia to construct greenhouses
Greenhouse farming is mostly spread in the Western part of Georgia, specifically in Imereti and Adjara regions. Naturally available and extracted hot thermal waters were one of the cause of the popularity of greenhouses in West Georgia and in part of the Samegrelo region as well.
Thermal waters are a great advantage for greenhouse owners as it allows great economic savings on heating costs.
Despite the fact that large and small greenhouse entrepreneurs are satisfied with the income derived from their activities, the current situation of the industry sees opportunities for large margins of improvement.
Western part of the country is loaded with old glass greenhouses, built during the Soviet Union time. Their natural life span is long expired. Roofing must be changed (due to light translucency issues), irrigation systems often require repairing.
However, despite of these factors Georgian small entrepreneurs manage to lead quite good business and are actively involved in the industry and greenhouse farming still turns out to be their major source of income.
Very good example is the herbs sector, which we have discussed in the previous article (Link!), and where detailed information is provided.
The herbs producers are mostly accumulated in Imereti region and supply domestic market throughout the Summer. And since the demand and prices for such products rise during Winter and other cold periods of year, they increase production and begin to export.

Old green house in Georgia (currently for sale)

Related costs of building up greenhouses in Georgia

Several companies provide services of greenhouse construction in Georgia and types of construction (wood/steel) and roofing materials determines the prices.
These companies do not lag behind the foreign competitors and are able to provide the latest materials in the industry. So they mostly produce two types of greenhouses roofed by special greenhouse tap and polycarbonate.
Special tap is relatively cheap technology. The average cost of one hectare greenhouse, with the height of 6 meters varies between $150,000 - $750,000. And the guarantee for such construction starts from 3 years.
Such variation of price is reasoned by the quality of construction (single or double roofing) and by the installation of additional equipment like ventilation, heating, irrigation and other systems.
Polycarbonate greenhouse is more expensive, but in turn it has about 25 years of guarantee.
The average cost for such building varies between $1,000,000 - $1,200,000 and the price includes almost all the necessary technologies for beginning and leading the farming.
Almost the same prices are suggested by the foreign companies; however the costs of transportation and customs taxes should be taken under consideration. As well as the probable need of future services on site.


Crops usually cultivated in greenhouses in Georgia

As well as in the rest of the world, vegetables and greens like cucumber, tomato, herbs, onion, pepper, tarragon, salad, carrots and etc are the cultures mostly cultivated in greenhouses.
This fact is of course primarily determined by market demand. When the weather becomes cold in the local and export markets, simultaneously “greenhouse farmers” become active and meet their requirements.
Mushrooms and other experimental options are also produced in Georgian greenhouses, but they are the exception rather than the norm.

Specific yield for a crop cultivated in and out of the greenhouse
Nobody argues that greenhouse is a tool that can be used to facilitate the growing of plants. However it’s impossible to determine the harvest comparison between the specific crops cultivated in and out of the greenhouse.
Various numbers are indicated on different internet pages, but none of them are reasonable and most often they are used as incentives to make someone build greenhouse.
As protecting plants from cold and wind are not enough to affect its harvest. Lots of factors such as amount of water supplied, fertilizer and other technologies have the influence on the final outcome.
First of all greenhouses provides a certain portion of independence to farmers and don’t give guarantees of harvest.


Summary

So, when the decision of building up a greenhouse is made, it’s necessary to determine which crops are planned to be cultivated. Choosing the right place is also very important.
It’s necessary to find out the expert, who will provide consultations concerning with the layout of the building, the material of roofing as well as the other details directly link with the greenhouse.
Most often such consultants are included in the prices of constructing the greenhouses.
It’s also necessary to consider that first of all the greenhouse is a luxury allowing farmers to cultivate warmth-loving crops during the cold seasons that in turn provides a good business opportunity.
Especially in Georgia, which is surrounded by such countries as Russia and Ukraine, which have stricter natural conditions.
Exactly the export of such seasonal products turns out to be the major source of income for small and medium “greenhouse farmers” and still stays an open market for bigger players.

At Affinitas we remain available to help any investor interested in the acquisition of land or in setting up a business activitiy 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.

Georgia agriculture: herbs culture, existing investment opportunities

One more article about the investment opportunities currently existing in Georgia’s agricultural sector.

Preamble    

Affinitas has already provided an article about Bio Farming investment opportunities in Georgia, giving general, comparative and precise information about the economics of the segment.

Given the interest received and the numerous requests for additional information, we decided to offer a series of articles about the Georgian agricultural sub-sectors.

Since herbs production turns out to be one of the leading and growing segments of Georgian agricultural industry, we decided to devote the first article exactly to this topic.

The article will allow you:

• To obtain general information about the current environment;
• Make you familiar to the production process;
• Give you information about the existing export markets;
• Show you the prospects.

Production process 

Western Georgia’s humid, subtropical climate offers ideal climatic conditions for the herbs cultivation. Therefore, most of the Western regions residents are actively involved in farming herbs, which is one of the major sources of their income.

Dill, Coriander, Parsley, Green Onion, and Watercress are the goods produced in the region and throughout the year they supply both the local markets and a thriving export market.

Herbs cultivation takes advantage of quite a simple process, and when herbs are grown using greenhouses technology farmers can enjoy a yield of as many as 10 crops a year.

About 500-600 kilograms of crop can be taken from one hectare of green houses. Farmers sell the harvest to the special regional aggregation centers, or to private companies directly.

The prices for the peasants for the concrete season are known in advance. As for example the wholesale price per a kilo of Dill, which is the most actively cultivated herb in the region varies between 3 and 4 Gels, ($2-$3 per Kg).

However, the supply chain required to deliver the goods from the farmer to the market is still in need of development and requires investment. We see this as an opportunity for some specialized operators to enter the market. Therefore since the supply chain remains underdeveloped so far only a handful of local companies and processors organize the collection of raw material for the export market.

Value Chain Actors

1. Collectors   -- 2. Village Collection Centers -- 3. Small processors -- 4. Large processors

1. Collectors most often are the residents of the villages, having small land where they grow up the herbs and later deliver it to the local processors.
2. Village Collection Centers are the middlemen between the collectors and the large processors. Collection centers buy the products from the residents and re-sell to large processors.
3. Small processors do almost the same as collection centers and distribute the products in domestic market.
4. Large processors collect herbs from almost every actor in the sector, make the packaging and export them. 

Existing market

In 2011, the Customs Department of the Georgia’s Revenue Service has registered 5,349 tons of herbs exported. The most traded product is the Dill, which is mainly exported in the countries like Ukraine, Belarus, Azerbaijan, Lithuania, Latvia and Estonia. Given the current trade restrictions between Russia and Georgia, some of the Georgian entrepreneurs no longer export directly to Russia but rather set up the trade via a third country

Ukraine turns out to be the major importer of Georgia produced herbs, as its companies have the necessary certificates and trade relations to access markets not available to Georgian processors.

Ukrainian processors purchases product from Georgia, complete the processing of the herbs, package, and label the product for sale in the retail market in Russia and EU countries.

However, there are some precedents whereby Georgian herbs farmers made use of a special standard for primary products (Global GAP – Good Agricultural Practice) and received the related international certification, simplifying goods access to EU markets directly. 

Market Opportunities

In order to export just raw material to processors, the exporters need to have a special lab to test the goods, before the export can take place.

Usually the importers conduct this process in the country they work, but since European countries require higher quality standards and traceability of organically produced products, Georgian exporters/processors will need to go through GLOBAL GAP process.

However the effort and investment is worth the investment, just because the wholesale prices are as much as about 50% higher and demand is substantial higher.

According to Georgian National Investment Agency (GNIA), there are 5 basic rules and regulations governing access to the EU markets:

1. Hygiene Regulations- possibly the most difficult requirement for processors to satisfy at this point in time, since current operators typically do not have adequate facilities, equipment or systems to ensure proper hygiene standards.
2. Labeling Rules- to ensure that the product label meets all the specific requirements (product treatment, perishable dates, place of origin, etc.), is accurate and does not mislead the consumer.
3. Marketing Standards- a certificate of conformity to various EU market standards governing: quality (moisture, free from pests, cleanliness and classification), sizing, presentation and marketing.
4.  Plant Health Control- this regulation protects against the spread of plant pests. A certificate must accompany imports of plants and plant products.
5. Import License- a license allowing the import agricultural products into the EU markets.

Government Incentives

On the other hand, Georgia has already implemented following incentives in order to stimulate growth and investments in agricultural sector:

• 0% of property tax on small plots of land (less than 5 hectares);
• 0% of property tax on property transaction;
• 0% of VAT on primary supply of agricultural products;
• 0% of import duty on agricultural and other equipment;
• Opportunity to privatize agricultural land.

Conclusions

The study of the herbs sector showed that entrepreneurs do not encounter any problems linked with natural resources or with the quality of the product. Since Ukrainian companies importing Georgian herbs managed to pass all the necessary examinations and obtain the certificates, this means that products cultivated in Georgia meet ALL the required quality standards.

Considering Georgian economy, local farmers and foreign investors require a relatively low investment in the certification process to get access to EU markets. Further, we see good investment opportunities in the logistics portion of the supply chain whereby a reduction of small inefficient steps could maximize profits for all parties.

Given the steps taken by the Georgian government to attract foreign investment we expect the interest in herbs crop to dramatically increase over the next year. Since about 75% of agricultural land is now state owned we see great opportunities deriving from the process of privatization currently underway.

At Affinitas we remain available to help any investor interested in the acquisition of land or in setting up a business activitiy 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 & Luca Gorlero. All rights are reserved. Total reproduction or partial reproduction of the information above is forbidden unless authorized in writing by Affinitas Consulting.

Bio farming opportunities in Georgia

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.

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:

1. Lands giving plentiful harvest
2. Diverse climate zones
3. Labor force
4. 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	Organic Price	Conventional
Asparagus	$4.99	$2.99
Avocado	$2.99	$1.99
Sweet Peas	$1.59	$1.59
Grapefruit	$2.49	$0.89
Onions (Y)	$1.29	$0.99
Sweet Corn	$2.89	$1.69
Pineapple	$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

In case of exporting organic products out of Georgia, it will be more profitable in case of such products as: Georgian Bio wheat, potato, carrot, cabbage, herbs, spices, wine, dried fruit and other goods, which are easy to keep and transport.

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.

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. 

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.

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. 

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 

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.