March 15, 2016 FPI | Is Georgian Milk Way too Expensive?
15 March 2016

Retail food prices show a 2.5% decrease y-o-y and a 2.3% decrease from the previous month. Compared to February, onions, coffee, and potatoes experienced the biggest drops showing 8.3%, 7.1%, and 7.0% decreases in prices, respectively.

While the majority of foods lost value, the price of tangerines increased by 8.2%; the pork price increased by 4.6% and fresh chicken meat became 4.1% more expensive. The price of domestically produced milk also increased by 4.2%, whereas imported brands became 5.2% cheaper on average (in March compared to February).

The increasing prices of local milk can be explained by low production volumes, which in turn might be caused by relatively low prices paid directly to farmers. While milk is sold for 3 GEL on average at supermarkets, farmers are usually paid a maximum of 1 GEL during winter and early spring. Collectors pay farmers even less during summer.

Such a significant difference between the farm gate and supermarket/market prices signals the low bargaining power of farmers who lack the motivation to invest in the dairy sector when they are paid so little. At the same time, given the low productivity of cows in Georgia and the unstable supply of milk from farmers to collectors, it is hard to convince collectors and processors to pay farmers more. Currently, the yearly milk yield of cows in Georgia is more than three times lower than abroad, signaling the need for genetic improvement and better nutrition of livestock.

In order to improve the situation and support investments in the dairy sector, on 10 March Tbilisi hosted the first national dairy conference, which was organized by the UN’s Food and Agriculture Organization (FAO) and the European Bank for Reconstruction and Development (EBRD). The main goal of the conference was to discuss food safety standards and farmers’ lack of access to modern technologies that would allow them to increase productivity and be more competitive.