1. Underlying Causes of Poverty in Agriculture CARE Poverty Workshop 16th June 2010 Dr George Welton

2. The Problem Low input Farms = Low output
Low inputs and low outputs are often seen as the cause of agricultural problems in Georgia, but they are in fact a symptom.

3. 4 Main Causes
Structural – irrigation, size of land-plots, credit, government policy and funding
Education – in production, markets, finance
Social – Collective and social action
Markets – imports, closed or hard to access export markets
There are many ways to organise the problems with agricultural productivity in Georgia. In this presentation I have broken down the problem into four main categories

4. Structure Land-plots Irrigation Less than 1 hectare of cropped land
Split between 3-4 different plots
Land as a source of security
2 million hectares of undermanaged land
Irrigation
WB project repaired physical structures
Needs local management – Amelioration Associations
Most of these concerns are fairly familiar to anyone working in the field. However, a couple of issues stand out. First, the failure to produce a land market has a lot to do with security. People hold land, even if it is not currently producing, because it provides a guarantee that whatever happens the family should be able to feed itself. Also, an issue that is almost never discussed is the fact that about 2/3 of Georgia’s arable land is controlled by villages but is very undermanaged and is extremely unproductive. In irrigation, what is interesting is that local management seems to be crucial. The WB 10 year program on irrigation achieved far less than it could have done because the government discouraged their work with local amelioration associations.

5. Structure Credit Government High cost
Banks unprepared to use land as guarantee
Fear of debt – for reasons of security
Government
MoAg about 1% of government spending
Unclear policy on agricultural priorities
Centralisation of decision making
Little local government capacity

6. Education
908 people trained in agricultural in VET Centers in 2009/2010 across the country
No national system for training small farmers
Little infrastructure for community-based education of farmers
Few community based associations
Little information on new markets and prices
Little information on business planning

7. Social Capital and Local Communities
Inability to work collectively
Failing amelioration associations and low payment for irrigation
Little collective management of farm machinery
Higher input prices and lower use of inputs
Lower sales prices
Few Community Based Organisations
Little knowledge transfer
No input into management of shared resources or protection against disease
Little interaction with central/local government
No input on management of shared resources like land
Little information or input on management for disease risk

8. Community Organisations can help…
Farm Associations….
Can utilise and manage assets…
Can buy cheaper inputs
Can collectively sell outputs
Can share knowledge
On goods
On markets and prices

9. Other Community Organisations
The crucial issue with community organisations is that they can provide a range of public goods, but in order to work they need support while they build trust and local ownership. This does not mean they are unsustainable - quite the contrary – it is exactly their local connections that can make them sustainable in the long term
Amelioration Associations
Needed to…
Build trust in the system and local ownership
Collect fees from small farmers for irrigation
Maintain small infrastructure
Agricultural Service Center
Needed to:
Access to reliable inputs
Source of expertise and advice
Even small machinery

10. CLOSED West: Cheaper products Supply Issues Similar products Growing
The local markets are a considerable challenges as they are either closed or produce similar products more cheaply than Georgia. Sales to the West are largely limited by supply issues. Even where access is possible Georgia finds it hard to produce on the scale, with the quality and forward pricing that large Western suppliers demand. There are exceptions in niche markets.
The biggest export markets for agricultural products at the current time are Ukraine, Belarus and Azerbaijan.
Cheaper
products
Similar products
Growing
exports

11. Exports doing better slowly…
Official Exports
Registered exports have been gradually increasing though it is slow and sporadic. In addition these figures almost certainly do not include most of the exports to Russia which stopped in 2006 as many, if not most of these, were ‘grey’ exports going through South Ossetia.

12. $15.7 Citrus – mostly manderins $54 million Spirits (mostly Cognac)
2009 Exports
$15.7 Citrus – mostly manderins
$70 million nuts
The biggest problem with relying on exports for pro-poor agricultural development is that they are concentrated in a number of specific fields that are heavily dominated by big producers. In particular, increases in sales of wine and cognac have almost certainly taken place through Georgias big industrial producers. Small farmers may benefit from this in the future if they can sell their grapes to the big producers, but are unlikely to produce and sell for export markets.
$54 million Spirits (mostly Cognac)
$32 million wine

13. 2009 Exports surprises Cattle Sheep Azerbaijan 16.5 2.1 Egypt 0.4
Exports (Million USD)
Cattle
Sheep
Azerbaijan
16.5
2.1
Egypt
0.4
Lebanon
3.8
Saudi Arabia
9.3
Armenia
0.8
Jordan
1.1
Total
16.9
17.1
One great surprise has been the sudden increase in exports of live animals. This could have huge potential, but the speed with which it has emerged should also make one nervous about its dependence on particular global market conditions
Live animal exports
$42,000
$34 million

14. Food Imports and Exports (Million USD)
The simple scale of imports and import growth seems to suggest that there is opportunity there for substitution

15. Imports….still space to substitute
And as we can see, in simple agricultural categories (so, not including secondary processing) Georgia still imports in large volumes many goods that it should be able to produce locally.

16. Meat Imports 2009 $37 million mostly from USA
$12 million mostly from Brazil and Canada
$10 million mostly from India

17. Most milk is powdered and VERY cheap
Vegetables
Milk, dairy and honey
$24 million.
Most milk is powdered and VERY cheap
Onions and garlic $3.8 million
$2.6 million
$3.5 million
$3.7 million

18. Conclusions
Even infrastructure is social and needs community ‘buy-in’ if it is to be beneficial to poor communities
Widening participation and ensuring security is essential for strengthening markets
Import substitution in food appears to offer the greatest opportunity for pro-poor growth in the medium term

19. Thank you