Armenia - Agricultural Sector Armenia - Agricultural Sector
Overview
Table: Agriculture produce; unit: Thousand U.S. Dollars
|
|
2015 |
2016 |
2017 |
2018 (Estimated) |
|
Total Local Production |
2,096,732 |
1,945,747 |
1,937,483 |
1,950,000 |
|
Total Exports |
409,460 |
519,024 |
644,418 |
650,500 |
|
Total Imports |
663,400 |
630,169 |
755,765 |
760,500 |
|
Imports from the US |
21,818 |
11,358 |
18,180 |
19,500 |
|
Total Market Size |
2,350,672 |
2,056,892 |
2,048,830 |
2,250,000 |
|
Exchange Rates |
478 |
480 |
483 |
485 |
Data Sources: National Statistic Committee: Yearbook 2017, Social Economic Situation in Armenia 2017 December-January, and the Ministry of Agriculture.
Agriculture is one of the most important sectors of the Armenian economy. Armenia was one of the first countries to privatize land after the collapse of the Soviet Union. Investments by both private sector and international organizations have improved the situation in the agro-processing industry. The industry is still adapting to a market economy, and efforts are focused on improving efficiency, competitiveness of products, and diversification of production. Some local companies are competing both in domestic, as well as in international food markets and are making investments to scale up production. Increased demand for Armenian agricultural products for export provided local farmers with an incentive to improve the efficiency of their operations and increase production.
In 2017, agriculture contracted by about 4% because of unfavorable weather and the continuing effects of poor infrastucture in the sector (e.g., irrigation). The sector accounted for about 15% of the country’s gross domestic income. When the agro-processing industry is included, the sector’s share of the economy increases to up to 21%. Agriculture is expected to be the back to growth in 2018. If the weather remains favorable, agriculture would grow over the next few years. The continued support from the government and measures to promote access to subsidized credit, the development of value chains and the enhancement of the productivity and efficiency of farming, such as establishing cooperatives, should spur expansion. Also greater interest from the private sector in agriculture using greenhouses could contribute to growth.
According to the data from the National Statisical Committee:, the gross value of agricultural products in 2017 was $1,937 million including $969.7 million from plant products and $907.6 million from livestock breeding as well as $60.1 million from fisheries. in 2016, it was $1,945 million, registering 5.2% decline. However in 2015 it registrted record 11.2% growth. In 2014, it was $2,393 million exceeding the 2013 indicator by 7.2%.
Livestock breeding is a central component of the Armenian agricultural sector. Over the last few years almost 40% of the country’s gross agricultural product has come from livestock breeding: 95% of milk and almost 55% of meat in Armenia are produced locally; 93% of the cattle raised in Armenia are milk and beef category Brown Caucasians which are well adapted to the local climate conditions. Holstein, Brown Swiss, Simmental, and Black species are also bred in Armenia. Annually about 18 tons of mutton is produced in Armenia. Armenia has the capacity to export annually 180-200 thousand head of sheep.
Swine breeding is one of the major branches of animal husbandry in Armenia and is more developed in Armavir and Ararat marzes. In the northern part of the country, in Tavush and Lori marzes free stall mountain and forest housing system is used. Commercial pig breeding farms mostly raise Landras, Petren, and Duroc breeds, which are used also for commercial interbreeding. Annually 17-18 thousand tons of pork is produced in the country (live weight).
Armenia has favorable climatic conditions for year-round commercial fish farming, particularly salmonidae and acipenseridae. At present annually 13-14 tons of commercial fish are raised in the country, the greater part of which is trout. Due to its high quality, the trout is in high demand in the Russian Federation, as well as in other countries and as a result about 20% of fish products are exported. The main fish species produced in Armenia for commercial purposes are carp, silver carp, white and black amur, Sevan summer trout, Gegarkuni, golden trout, red-finned-fish (karmrakhayt) and acipenseridae. At present there are 250 fish farms in the country out of which 83% are located in the Armavir and Ararat marzes. Total water surface of fish farms in the country is 3,542 ha out of which 2,479.4 ha or almost 70% is located in Ararat marz and 956 ha or about 27% in Armavir marz. According to water basin surface the 4 biggest fish ponds together occupy 2,000 ha water surface or 56.5% of total water surface. The total surface of fish farms is 1,542 ha or average surface of each farm is almost 3,0 ha.
Poultry breeding is one of the most automated segments of animal husbandry in Armenia, and utilizes modern technologies. At present there are more than 10 medium-size and large poultry enterprises in the country producing eggs and poultry meat. The largest egg producing companies are “Araks Poultry” OJSC, “Lusakert Pedigree Poultry” OJSC and “Arzni Pedigree Farm” OJSC producing about 40% of eggs produced in the country: “Araks Poultry” OJSC is the country’s leading poultry meat producing enterprise. Due to selection works carried out by the Armenian scholars, the Yerevan breed of hens was developed with its black and white types. This breed is well adapted to the local climatic conditions and is mostly raised in residential backyards. Around 650-700 million eggs and 7-8 tons of poultry meat is produced in the country per annum.
According to the Ministry of Agriculturethe croplands occupied 332.76 hectares. In recent years, there has been a steady growth in the amount of land under cultivation, which is likely to continue for the foreseeable future. Many vegetable, nut, fruit, and berry varieties are found in Armenia, including green pea, caper, black and red pepper, carrot, pumpkin, hornbeam, daylily and other wild plants, almost all the berry varieties as well as pomegranate, quince, plums, crab cherry, cherry, green walnut, dog rose, mulberry, apricot, peach, apple, pear, walnut, pistachio, hazelnut, current, raspberry, blackberry, strawberry etc. Since 2011, production of almost all crops has increased.
According to data from the Ministry of Agriculture there are currently approximately 1,600 food-producing companies in Armenia out of which:
-
35 are fruit and vegetable processing companies- of which 8 are comparatively large companies. Total production capacity of processed fruits and vegetables per annum is about 250 tons. Average number of employed people according to the staff list is 1413.
-
350 produce dried fruits and spices- of which 6 are medium-sized. Annual total production capacity of processed fruits and spices is 15.0 tons. Average number of employed people according to the staff list is 880.
-
50 are grape processing companies –of which 12 are comparatively large. Annual total production capacity of processed grapes is about 265 thousand tons. Average number of employed people according to the staff list is 2200.
-
65 are milk processing companies –of which 12 are comparatively large. Annual total production capacity of processed milk is about 490 tons. Average number of employed people according to the staff list is 1720.
-
68 are meat processing companies –of which 15 are comparatively large. Annual total production capacity of processed meat is about 50 thousand tons. Average number of employed people according to the staff list is 2177.
-
Slaughteries- about 20 small slaughteries. In addition, 5 slaughteries built within the frame of UN Food and Agriculture Organization in Vayots Dzor, Lori and Kotayk marzes will be soon commissioned with total capacity of 109 heads of big cattle and 384 heads of small cattle per shift. Average number of employed people according to the staff list is 90.
-
8 are fish production companies – out of which 5 are comparatively large. Total annual production capacity of fish products is about 5 thousand tons. Average number of employed people according to the staff list is 79.
-
Bread baking- more than 500 companies out of which 25 medium-size companies. In total 500 tons of bread is produced per annum. Average number of employed people according to the staff list is 4,328.
-
Confectionary and pasta production –about 135 enterprises out of which 12 are of medium size. Total annual production capacity is about 40 thousand tons of confectionary and pasta. Average number of employed people according to the staff list is about 4200.
-
50 are mineral, drinking water and nonalcoholic beverage production companies – of which 12 are medium- size. Total bottling capacity per annum is 300,000 thousand liters of mineral, drinking and nonalcoholic beverages. Average number of employed people according to the staff list is about 1,700.
-
7 beer production companies – out of which 3 are comparatively large. Total annual production capacity is about 150,000 thousand liters of beer. Average number of employed people according to the staff list is about 930.
-
30 are coffee and tea processing and packaging companies – of which 5 are medium sized while the remainder are small companies. Total annual production capacity of processing and packaging is about 25 tons of coffee and tea. Average number of employed people according to the staff list is about 359.
Large disparities remain in the rural poverty levels between Armenia’s regions. In the mountain communities, rural poverty incidence grows with altitude: 34.7 percent above 1,700 meters, as opposed to 27.1 percent below 1,300 meters or 29.5 percent in the 1,300–1,700 meter range. Access to sufficient land resources is a key factor.
Some 335,000 farms operate in the sector, with an average landholding of around 1.4 hectares per household. This does not allow for an efficient and diversified production system, involving both crops and livestock. The agro-processing subsector is the main employer in rural areas. The livestock sector is facing serious challenges, such as unsustainable pasture management and underutilization, persistent livestock diseases, processing and marketing constraints, and reduced productivity. Additionally, there are huge fluctuations in the supply of dairy products, with most milk produced in the summer months and almost none produced in winter and spring. These challenges limit Armenia’s capacity to exploit opportunities arising from increasing domestic demand. Imported meat now accounts for half of meat consumption nationally, due to low productivity in the livestock sector and the unreliable supply of meat and milk. The dairy and meat sectors are competitive in the domestic markets, however, and there is scope for strengthening their competitive position by addressing productivity and supply constraints.
The Armenian government implements programs to adopt modern technologies on model farms, and is promoting high value livestock and technologically advanced breeding programs. Sheep exports to the Middle East increased in recent years and the U.S. Department of Agriculture continues assistance to veterinary training programs.
In 2011, Armenia adopted a strategy and action plan to bring its food safety system into line with EU standards. Armenian food legislation includes the Law “On Food Safety,” the Law “On Veterinary Medicine,” the Law “On Animal Feeding,” the Law “On Phytosanitary Measures,” the Law “On Trade and Services,” the Law “On Ensuring Sanitary and Epidemiological Safety of the Population,” the Law “On Ensuring Uniformity of Measurements,” the Law “On the Protection of Consumer Rights,” the Law “On Standardization,” and the Law “On Conformity Assessment.”
Three institutions are mainly responsible for food control in Armenia:
-
The Ministry of Agriculture, with its State Service for Food Safety (SSFS), is the state authority for food control. SSFS has three inspectorates: the Veterinary Inspectorate, the Phytosanitary Inspectorate, and the Food Safety and Quality Control Inspectorate
-
The Ministry of Health, with its State Health Inspectorate; and,
-
The Ministry of Economy, with its National Institute of Standards.
The main public agencies involved in organic agriculture are the Ministry of Agriculture. The Law “On Organic Agriculture”, adopted in 2008, is based on the Codex Alimentarius organic guidelines and EU organic regulations. The law dictates the process of organic production and the main provisions on labelling requirements for organic products. The certification body ECOGLOBE is one of two certification bodies in the whole EECCA region that has achieved international recognition (acceptance in both EU and U.S. markets). ECOGLOBE is accredited by DAkkS1 according to EN45011 and EU regulations 834/2007 and 889/2008. ECOGLOBE is also an Accredited Certifying Agent of the U.S. National Organic Program. In addition, there are several non-governmental organizations (NGO) in Armenia that promote and support organic agriculture.
Since January 1, 2015, Armenia has been a signatory to the Eurasian Economic Union (EEU), which along with an expected improvement in export opportunities has also brought some changes and uncertainty into export processes. As an example, businesses are often unaware of expected changes in procedures affecting the actual export flow to Russia or other EEU markets. Since 2018, the EEU export procedures and agricultural production requirements have tightened after a transition period. In particular:
-
Provision of certifications (at present, certificates are required for each batch of imported and exported products);
-
In addition to phytosanitary certification, additional mandatory sanitary requirements for vegetables and flowers were introduced (which implies corresponding documentation requirements as well);
-
Stricter food safety requirements were introduced for exported products, and particularly, a new mandatory requirement to introduce the HACCP (Hazard Analysis and Critical Control Points) system in production.
While improved access to the Russian market is positive, exporting firms inArmenia incur additional costs and expenditures of time due to EEU export procedures, which ultimately decreases their competitiveness in external markets. In particular:
-
Border crossing and customs formality procedures at the Georgian-Russian Lars border crossing point are complicated and unpredictable (which also include informal facilitation fees);
-
Some problematic procedures pertaining to applying the VAT on exported goods.
Leading Sub-Sectors
Armenia has a fast growing food processing sector with excellent export potential based on ecologically friendly “green” agro-products. As one of the country’s most developed sectors, and the second in terms of export volumes (14% of the total), food processing plays an important role in the economy. The most important products are canned food production, and alcoholic beverage production, especially wine and brandy made from locally grown grapes. Armenia’s principal food processing exports are alcoholic beverages, fish, cheese, canned fruits, jams, coffee, and mineral water. Some exporters also ship frozen fruits and vegetables. Armenia’s soil and climate conditions, high altitude, and limited use of chemical fertilizers account for flavorful produce. This produce can be successfully introduced to international markets with modern processing and packaging technologies that are currently used to export such Armenian products as soft drinks, mineral water, alcohol, canned fruits and vegetables, milk and dairy products, meat, and meat products.
Greenhouse crop production in Armenia is an economic sector with both high production and export growth potential and is, therefore, attractive for investors. It has demonstrated and continues to demonstrate a high growth rate and profitability. The subsector development has gathered great momentum especially over the last four to five years. According to expert estimation, establishment of a high-tech glass greenhouse installed on metal frame requires 150–200 USD investment per square meter — so establishment of 1 hectare of sophisticated greenhouse farm requires an investment amount of $1.5–2M. There are also technologically equipped plastic greenhouse farms in the market; the amount of investments required for establishment of a square meter of greenhouse is $80–100 (or $0.8–1 million per ha).
The introduction of advanced irrigation systems, particularly drip irrigation systems, is becoming widespread in agriculture. Drip irrigation systems are imported from different countries, such as Korea, EU countries, Israel, and China.
A large portion of vegetable seeds used for agricultural production in Armenia is imported. The country produces less than 10 percent of about 24 tons of total vegetable seeds used annually. The geographic scope of vegetable seed imports is wide and diversified, including EU countries, Russia, the United States, and Turkey. The main local producer of seeds is the Scientific Center of Vegetable, Melon and Industrial Crops (SCVIC), a state non-commercial organization (SNCO), which produces 500–800 kg of seeds annually (tomato, cucumber, beans, and pepper). The SCVIC also produces 3 million seeds in open fields and 200,000 seedlings
in greenhouses annually.
Armenian farmers use mostly imported fertilizers and pesticides. In general, the assortment of imported fertilizers is wide, and the geography of imports is broad, including the EU countries, USA, China, and Russia. Nearly a dozen importers offer their services in the Armenian market. Armenia allows import of state registered fertilizers and pesticides only. To obtain state registration, substances undergo documentary analysis, chemical and other types of testing and other procedures, to attest their safety and effectiveness.
Opportunities
Though not large in terms of population and buying power, Armenia could be an interesting market for American agricultural product exporters in specific fields. Some producers are experimenting with organic crops. There are opportunities for manufacturing high-value and organic products, processed and unprocessed fruits and vegetables with modern packaging and which comply with international food safety standards.
Armenia is a net food importer of wheat, vegetable oil, and other key foodstuffs. Domestic agriculture cannot entirely satisfy demand for a range of items such as meat and poultry, sugar, flour, soft drinks, wine, rice, vegetable oils, and high-value grocery products. Current import tariffs are generally low (up to 10%). Following Armenia’s accession to the Russian-led Eurasian Economic Union Armenia has successfully negotiated temporary customs tariffs exemptions for a number of key imported goods, including foodstuffs, to minimize inflation risks and social discontent for the next five years. Product safety and quality certification processes and import procedures are based on new EAEU standards.
Greenhouses are expanding and there is increasing demand for greenhouse technologies especially for the small and medium sized ones. Exemptions for the import of greenhouse complexes from VAT since the beginning of 2015 is a positive development that will contribute to steering investments into the greenhouse sector.
Expansion and modernization of irrigation systems is another important area which can be of interest to U.S. manufacturers by selling appropriate technologies like drip irrigation and the application of GPS apps to agricultural planning. Technologies and equipment to build cold storage facilities for collection, handling, and storing of fresh products may also be in demand in the Armenian agrictulture sector.
Web Resources
Ministry of Agriculture of the Republic of Armenia
State Service for Food Safety
Center for Agribusiness and Rural Development Foundation
Fund for Rural Economic Development of Armenia
Ecoglobe
National Institute of Standards
AgroCredit
Invest in Armenia
Development Foundation of Armenia
AmeriaGroup, “Industrial Agriculture in Armenia: Development Trends” 2014
Greenhouses: Construction, Utilization and Crop Cultivation Principles” BSC Business Support Center, 2015
Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Surveillance of the Russian Federation):
Business Armenia