Azerbaijan opts for import substitution as a solid guarantor against dangerous food crises Analysis by Caliber.Az

The recent report of the UN Food and Agriculture Organisation (FAO) announced a record grain harvest this year. Nevertheless, the risks in this agricultural sector remain quite high: due to unfavourable weather conditions, wheat production in Canada, the European Union, and China have been reduced, the grain deal on Ukraine grain has been disrupted, the export duty on grain in Russia has been raised, which creates serious problems for neighbouring countries. Given the trends of recent years, it can be assumed that in the long term, fluctuations in the global food market may lead to dangerous crises many more times. Only import substitution can be a reliable guarantee against such risks, and Israel's recently signed grain agreement with Azerbaijan and Uzbekistan will be a serious step in this direction.

"No progress has been made on the grain deal between Russia, Türkiye, the UN, and Ukraine on the export of agricultural products from Black Sea ports," Russian presidential spokesman Dmitry Peskov said the previous day, emphasising that there's no movement on this issue whatsoever.

In other words, the Kremlin once again expressed its position that prolongation of the "grain deal" makes no sense because the West is not fulfilling its part of the agreement. In particular, we are talking about the fact that the G7 countries have strengthened sanctions on exports of goods to Russia while restricting the import of food, fertilisers, and other Russian products to foreign markets.

Earlier, Turkish President Erdogan announced his intention to discuss with the Russian side in the near future the possibility of increasing food supplies to poor countries in Africa and to continue searching for solutions for the resumption of the grain corridor. But in light of Moscow's statement, the probability of finding any compromises on the grain corridor in the Black Sea this year is extremely low.

It should be noted that in July 2022 in Istanbul, representatives of the Russian Federation, Ukraine, and Türkiye signed an agreement on the safe transportation of grain from Ukrainian ports (Chernomorsk, Odesa, and Yuzhny) in order to overcome the global food crisis. As a result, from August 1, 2022, to June 20, 2023, a total of about 32 million tonnes of agricultural products were exported through the sea corridor from the three Ukrainian ports, in particular barley, wheat, corn, soybeans, wheat bran, sunflower meal, peas, sunflower seeds, etc. However, as the representative of the UN Secretary-General Farhan Haq noted recently, since June 26 (even before the expiration of the "grain deal" on July 17) the Joint Coordination Centre (JCC) in Istanbul has not issued permission for any new dry cargo ship to join the Black Sea grain initiative, while 29 new applications have been submitted to the JCC and millions of tonnes of foodstuffs are stuck in the ports.

The threat of acute shortages in the world food market for wheat and other grains is noticeably lower this year. "Global grain production in 2023 could be a record year, reaching 2.815 billion tonnes, up 0.9 per cent from last year and essentially matching the 2021 record. However, the final wheat forecast has been lowered by 2.2 million tonnes to 781.1 million tonnes, an adjustment driven by deteriorating forecasts for the wheat crop in the world's leading grain-growing countries. In particular, due to drought in the EU and Canada and rainfall in China, wheat harvest estimates were lowered by 2.6 per cent," FAO said in its September survey. This decline was partly offset by higher forecasts in the US, India, and Ukraine, but there are still major tensions with the export of Ukraine's wheat and other food crops.

The situation in the grain and food market in the post-Soviet region was also aggravated by the Russian government's recent decision to increase export duties on wheat and meslin (a mixture of wheat and rye) by almost a quarter to 4,269.9 rubles per tonne from August 23. Another decision increased the export duty on fertilisers by 7 per cent from September 1 to December 31, 2024, while these products largely meet the demand in CIS countries.

"Azerbaijan annually imports about 1.2 million tonnes of grain from abroad and is one of the largest buyers of Russia's wheat, and raising the export duty on Russian grain means paying significant additional funds," said Tahir Rzayev, chairman of the Milli Majlis Committee on Agrarian Policy.

In this connection, the head of the Parliamentary Committee recalled the warning of President Ilham Aliyev, who repeatedly spoke about the need to implement additional measures to overcome the country's dependence on imported food wheat, in particular, to expand grain areas and increase yields. "Measures taken in the territories liberated from occupation, the inclusion of demined lands into crop rotation gives hope that in future we will be able to meet the demand for food wheat," Rzayev stressed.

FAO representative in Azerbaijan Muhammad Nasar Hayat expressed a similar opinion the other day. Azerbaijan, he believes, is still tangibly dependent on food imports, especially wheat and meat, and the growing world prices will inevitably lead to problems with availability and hike in prices of these products. Noting that Azerbaijan is a resource-rich country and the available potential is enough to feed the population, the FAO representative emphasised that the country's food balance still needs to be improved and for this purpose, it is necessary to stop relying on imports.

The position of FAO specialists is fully shared by the country's government, and measures are already being taken in Azerbaijan to expand specialised grain farms with marketable wheat production using modern technology. Such high-tech agroparks are also planned to be developed in Garabagh and East Zangezur economic regions, where 1 million hectares of land are suitable for agrarian production, including 128,000 hectares of irrigated land.

To realise these initiatives, it is envisaged to use the knowledge, experience, and agricultural technologies of Turkish and Israeli partners: it is planned to cooperate with Israeli companies in the production of highly productive seeds of vegetable and fruit crops, breeding work, creation of "smart" greenhouse farms, and highly productive livestock breeding. Israel is ready to provide Azerbaijan with unique technologies to multiply the yield of wheat up to volumes allowing its export.

To this end, Israel recently signed a grain agreement with Azerbaijan and Uzbekistan, in fact, starting the formation of the first regional alliance with Muslim countries on wheat supplies. According to the Israeli media, this agreement will guarantee all the needs of Israel in wheat (the country annually imports more than 90 per cent of the feed wheat needed by the country), and in exchange Azerbaijan and Uzbekistan will receive from Israeli agricultural companies advanced technologies in the cultivation of cereals. It should be noted that Israeli agriculture was initially developed in very harsh conditions of desert arid lands. The country has bred drought-resistant varieties of wheat, economical irrigation systems have been created, and fertiliser application schemes have been developed for obtaining abundant yields. At the same time, the Israeli agricultural sector is a world leader in restoring the fertility of saline and eroded soils.