The Khachapuri Index kept declining in April 2018, very much in line with the seasonal trend we observe every year. The average cost of cooking one standard Imeretian khachapuri currently stands at 3.28 GEL, which is 7.4% lower month-on-month (that is, compared to March 2018), and 1% lower year-on-year (that is, compared to April 2017). The main driver of the Index is Imeretian cheese, consequently, the monthly and yearly decrease is associated with the price of cheese, which declined by 13.5 %( m/m) and 0.9 %( y/y) in April 2018.

The price of cheese directly depends on the amount of milk produced and its price. Georgian milk prices exhibit high seasonal volatility, mainly related to structural inefficiencies in the country’s dairy production. Poorly planned calving periods (for most cows, in the winter months) limit the milk supply in winter, which in turn sharply increases milk prices during the winter months.

These fluctuations in milk prices are reflected in the Khachapuri Index. In general, the Index reaches its highest value in January and is lowest in July. However, we can observe that somewhat lower fluctuations in the Khachapuri Index were observed in 2017. Are the price differences in the Khachapuri Index for summer and winter getting closer?

More time is needed to observe if this change is actually happening in the Georgian dairy sector. However, a first look at the graph, as well as some recent developments in the Georgian dairy sector, give some hope for the increased modernization of this sector. According to FAO, dairy farming in Georgia is becoming more productive and profitable. Technological and structural upgrading of the sector will lead to less fluctuation in dairy prices.

Further, this pattern of slightly reduced price fluctuations might also be related to the fact that there was an increasing trend in the use of imported milk powder in Georgia in 2017. As discussed in one of the Khachapuri Index publications, the use of milk powder pushed cheese prices down in wintertime (compared to previous years).