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 This section contains several articles: Sector Snapshot: Agribusiness, 2001 Michael A. Lally and Elmira Ragimova U.S. Embassy Commercial Service, Baku, Azerbaijan To obtain the following article, please contact USACC The agribusiness sector in Azerbaijan holds considerable opportunities for U.S. business development, however, lack of financing will continue to hinder large-scale U.S. agribusiness exports to Azerbaijan into 2003.
Azerbaijan has at least six climactic zones varying from temperate to sub-tropical conditions, which can support the production of various crops. Azerbaijan has largely completed land privatization, however lack of access to working capital has prevented Azerbaijani farmers from capitalizing on their newly found land rights. Farms vary from one or two hectares to several hundred hectares. The major source of domestic food products, including nuts, fruits, vegetables, dairy products, meat, and some poultry, is produced by small scale, private producers. Food imports, primarily from Turkey, Russia, and Iran, have flooded the Azerbaijani market since 1995, and the domestic industry has found it difficult to compete. Imports of meat, edible oils, milk, and sugar vary from thirty to almost one hundred percent of domestic consumption. As the second most important sector after the hydrocarbon industry, agribusiness will play an important role in the near term development and modernization of Azerbaijan's economy. The modern food processing industry in Azerbaijan remains in its infancy. A wide variety of crops are grown in Azerbaijan, such as fruits (apples, cherries, grapes, olives, lemons, persimmons, melons, raspberries, strawberries, currants, plums, peaches, pears, and pomegranates), vegetables (tomatoes, potatoes, carrots, beets, cabbage, cucumbers, and onions), grains (wheat, maize, and barley), tea, and various types of high-quality, exportable nuts. However, due to the lack of a functioning processing and storage industry in Azerbaijan, a large amount of fruits and vegetables simply rot. With U.S. packaging technology, Azerbaijani agribusiness has the potential to become a supplier of packaged food products to Russia and Europe. Currently, there are 43 canning factories in Azerbaijan producing primarily tomato paste, natural fruit juices, and apple concentrates. Practically all are idle, technologically outdated, and in urgent need of working capital and investment. Many Azerbaijani food processors still use glass jars and bottles instead of plastic containers or tetra-packs that are less susceptible to damage in transit, have longer shelf life, and store better. This industry has been targeted for privatization and represents an opportunity for U.S. investors a strong local partnership, with strong experience in emerging markets, preference for operational and management control, and a healthy amount of patience for this challenging market.
There are two major food-processing areas in Azerbaijan: Quba for fruits and Lankaran for citrus fruit and vegetables. As crops are seasonal, many of the canneries process more than one type of crop. Milking equipment and the machinery used to process and package milk are also in urgent need of modernization and upgrade. Given low labor costs and a traditional place in Russia and CIS markets, Azerbaijani agribusiness can rebound to the strong market share it held in the 1980's and early 1990's.
Current domestic production meets only a fraction of Azerbaijani market demand. Azerbaijan imports wheat and flour from Kazakhstan, Russia, Ukraine, Romania, and Iran. The U.S. Embassy Commercial Service in Baku has been approached by a number of local trading companies for assistance in contacting U.S. firms supplying various wheat and grain to international markets. The February 2001 announcement of a USD5 million Commodity Credit Corporation GSM-102 credit line, via eligible Turkish banks, could provide a key financing element for large-scale purchases of U.S. grains and other agricultural commodities. The U.S. Department of Agriculture's Credit Commodity Corporation is currently analyzing several Azeri Lanks for GSM-102 accreditation. Further direct purchase leads will be published via BISNIS Fall 2001-Winter 2002. Storage and transportation of harvested crops also present opportunities for the U.S. There is also a lack of adequate facilities, such as covered, protected, and refrigerated storage areas, as well as aerators, and pest/vermin control. Transportation equipment is old and not well maintained, resulting in bruising and other damage to produce enroute to food processing centers or markets. There is also a shortage of refrigerated vehicles and storage areas, the latter of which can be cheaply refurbished. Absence of competitive domestic industry for basic agricultural inputs, machinery, and food processing equipment, with the realization of need for high quality Western equipment; Azerbaijani fruits and vegetables are well-known for their quality throughout Russian and CIS markets;
Low operating costs, including labor, rent, etc. keep overhead costs down. Weak purchasing power of Azerbaijani enterprises as Azerbaijani firms are constrained by expensive credit terms and commercial banks' hesitation to finance investments in the agricultural sector;
Partial loss of CIS export markets following collapse of former Soviet Union; Legislative, customs and tax environments make doing business in Azerbaijan difficult.
Lack of value added processing Great demand in fruit/vegetable/milk processing, fruit dehydrating equipment;
Strong export potential of value added goods to Turkey and Europe.
Customs clearances for exportable products with cash markets can be problematic. U.S. exporters should consider the following factors when doing a price construct for the Azerbaijani market: food processing and packaging equipment is currently VAT and duty free; wheat imports have a five percent customs duty plus 18% VAT; and FOB costs from Baltimore to Poti, Georgia are about $4,000 for a twenty foot container. Transit time to Baku is approximately 35-40 days via Poti, Georgia.
Activity: import of foodstuffs
meat and poultry processing (sausage, ham)
dairy products (butter, sour cream, yogurt)
confectioneries (candies, sweets, cakes)
Activity: producer of fruit & nut preserves, jams, compotes, canned vegetables,
and tomato products, and fruit and vegetable
To learn more about business development in Azerbaijan, including U.S. Embassy Commercial Service products marketed exclusively to American companies, please contact:  
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