ISET

While gradually increasing since June, in line with its seasonal trend (driven by a gradual decline in the production of fresh milk), the Khachapuri Index remains almost 10% below its level exactly one year ago. Constructed as a weighted average of the prices of various khachapuri ingredients, the Index is particularly sensitive to changes in the price of Imeretian cheese, its most expensive ingredient. The recent spell of annual deflation in the Khachapuri Index is thus a reflection of a peculiar sagging in the price of cheese (see table). For example, in August 2016, one kilogram of Imeretian cheese fetched only 6.4GEL, 18% less than in August of last year (7.8GEL).

Month Price (GEL) Change, 2015 to 2016
  2015 2016 GEL %
July 6.3 5.8 ↓ -0.5 ↓ -8%
August 7.8 6.4 ↓ -1.4 ↓-18%
September 7.7 7.5 ↓ -0.2 ↓ -3%

Considering that in August 2016 Georgia saw an all-time record number of (hungry) tourists and visitors, the low cheese prices can only be explained by supply side factors, such as higher supply of raw materials (milk) and expansion in Georgian cheese production capacities (new factories).

Better weather conditions (lower temperatures and greater precipitation) in July and August may be one factor behind a slower-than-last-year decline in milk production. Yet another factor to consider is the sharp increase in the import of milk powder since December 2015. It is safe to assume that at least some of this milk powder is being combined with (cheap) vegetable fats to produce milk and dairy products such as cheese, increasing supply and reducing prices. This may sounds like technological progress, except that it is achieved behind the back, and the expense of, Georgian consumers.

 

More Khachapuri Index Articles

  • June 19, 2017 Kh-Index | Why do cheese prices fluctuate more in Kutaisi?

    In May 2017, the average cost of cooking one standard Imeretian khachapuri declined to 3.14 GEL – a 5.4% decrease month-on-month (compared to April 2017). In annual terms (compared to May 2016), however, the Index gained 8.5%. Deflation of the index was caused by the sharp seasonal decline in price of Imeretian cheese, which went down last month by 10.1%. The Khachapuri Index reached its lowest value (2.86 GEL) in Kutaisi. The magnitude of the Read More
  • June 5, 2017 Kh-Index | Continuing High Cheese Prices This Year

    In May 2017, the price of cooking one standard Imeretian khachapuri continued its normal seasonal decreasing trend and reached 3.14 GEL, which is 5.4% lower month-on-month (compared to April 2017), but 8.5% higher year-on-year (compared to May 2016). The main contributor to the price change was a seasonal decrease in the price of cheese, which fell by -10.1%, compared to the previous month (April 2017). As shown on the graph, from July to December 2016, Read More
  • Off-Season in Batumi and Kutaisi?

    In April 2017, the average cost of cooking one standard Imeretian khachapuri decreased to 3.32 GEL, which is 2.5% lower month-on-month (m/m, that is, compared to March 2017), but 4.9% higher year-on-year (y/y, compared to April 2016). The monthly decline in the price of khachapuri is driven by the seasonal adjustment in the price of milk and cheese. The price of cheese (6.93 GEL) has declined by -5.2% compared to the previous month (March). The Read More
  • Any Export Potential for Georgian Milk Products?

    ISET’s Khachapuri Index kept declining in April, which is in line with seasonal trends. The average cost of cooking one standard Imeretian khachapuri currently stands at 3.32 GEL, which is 2.5% lower month-on-month (compared to March 2017), and 4.9% above year-on-year (compared to April 2016). The current underdeveloped structure of Georgian dairy sector makes milk prices high and noncompetitive. According to FAO-EBRD data, the farm gate prices of milk differ between commercial farms and smallholders, Read More
  • Great Lent Pushed Prices Down

    In March 2017, the national average price of cooking Imeretian khachapuri declined to 3.41 GEL, which is 6.9% lower compared to the previous month (February 2017), and 4.1% above its value a year ago (March 2016). Such a noticeable monthly decline in the price of khachapuri is driven by the seasonal adjustment in the price of cheese, which stood at 7.31 GEL in March 2017, and is 12.2% below last month’s value (February 2017). As Read More
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