The FINANCIAL -- 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, and the difference between the two prices is mostly stable throughout the year (except for the winter period when smallholders have almost no milk to sell). In March 2017, the price of one liter of milk was 0.8 GEL and 1 GEL for smallholders and commercial farms, respectively. The milk prices for smallholders are lower for several reasons. One driving force behind the price point is that farmers rarely use artificial insemination to plan the milking period or to improve the breed of cattle, and therefore the majority of Georgian cows calve at roughly the same time, in the winter months. Accordingly, in the winter there is a shortage of milk. Only the small number of farmers who use artificial insemination or import high-yielding cattle are able to provide a regular milk supply throughout the year. They can therefore make better deals with buyers, and charge higher milk prices than smallholders.
Not surprisingly, the joint study of the FAO-EBRD reveals that the supply of raw milk is very low in Georgia and cannot satisfy the country’s demand. A deficit of raw milk pushes prices up, and higher prices make Georgian milk processors noncompetitive, because high milk prices translate into expensive milk products.
In order to make Georgian milk products more competitive in terms of price, low producing cows should be replaced with high producing ones, either through artificial insemination or the purchase of better dairy cattle breeds by Georgian farmers. In addition to this, cattle feeding practices should be improved in order to ensure an increased milk supply. Once this is achieved and more work is done on sanitary and phytosanitary (SPS) measures, Georgia can start thinking about export opportunities for its milk products.