2020 December-January Analysis

Georgian hazelnuts strike back – the near demise and rebirth of Georgia’s second favorite crop

Next to wine, hazelnuts are one of Georgia’s most important crops. But besieged by the stink bug and other plant diseases, the prized nut has had a hard time of late, until this year’s harvest

For a while during the mid-2010s, hazelnuts were Georgia’s star agricultural product, on track to outstrip even wine—the country’s calling card—in exports, generating $183 million in revenue in 2014 and bringing the two export categories neck and neck in value.

Georgia was also occasionally among the top five largest global hazelnut exporters. But in 2015-16, reports began creeping in that the Asian brown marmorated stink bug was beginning to wreak havoc in the country’s western, hazelnut-growing regions, and that it might chew through the harvest of the precious nut, a crop that supports some 50,000 growers and processors in the country. By 2018, the hazelnut harvest had reached a historic low.

But this year, many are already breathing a sigh of relief. The August-late November harvest data show that nearly 11,000 tonnes of hazelnuts were exported, up a whopping 37% over the same period in 2019, generating $59.3 million in revenue (+47% y/y), compared to last year’s paltry $38.8 million. Hazelnut growers predict this year’s total exports will exceed 50,000 tonnes, and given that despite the pandemic, prices for nuts are up 7% as well, the final year-end data are likely to reflect a bumper year.

A group effort

The Georgian Hazelnut Growers Association, which has more than 25,000 hazelnut-farmer members and covers at least half of all hazelnut production in the country, did much of the heavy lifting in recent years, in partnership with USAID and the Georgian Ministry of Agriculture, to put the industry back on its feet.

The Executive Director of the Georgian Hazelnut Growers Association, Giorgi Todua, told Investor.ge that work on combating both the stink bug and fungal diseases began back in 2017, when the group had just several hundred farmers.

By joining, hazelnut farmers are given access to the association’s agronomists, who consult with farmers on a daily basis throughout the season, giving recommendations and monitoring work in hazelnut orchards. In addition to agronomist services, members of the association enjoy other benefits, including soil research, provision of pest-control equipment, crop sorting/drying/storage services, and others. The association also provides members with access to financing to facilitate the purchase of the necessary fertilizers, pesticides and inventory.

Most importantly, the association has taught its farmers proper techniques to administer pesticides and to work out timetables for spraying, important because pest control is carried out six times a year, both against the stink bug and other plant diseases.

“Membership comes with responsibility, however,” Todua notes. “If a farmer is slacking and not keeping up their end of the bargain, [the farmer is] refused further services and assistance. This is in line with the association’s ‘group-work’ method, which allows members to share their practical experience and find ways to solve problems together. Each group has a lead farmer.”

In 2019, the Association launched the Hazelnut Crop Survival Program, which is funded by the state, the United States Agency for International Development (USAID/Georgia), Ferrero, and the CNFA Georgian Nut Sector Development Project (G-HIP).

“It’s at this point that we expanded to the 25,000 [members] we are now, with our partners helping the association purchase the technical equipment and pesticides it needed,” Todua explains.

With the program, 14,000 farmers joined the association and were given 1,450 spraying machines free of charge. The successful implementation of the program has led to both a qualitative improvement of the hazelnut crop, Todua says, as well as an increase in hectare yields and, consequently, an increase in farmers’ incomes.

The program continued into 2020, during which the association was joined by an additional 10,000 hazelnut-producing farmers who were given 910 pest control units, which had a significant impact on the quality and quantity of hazelnuts produced in the country. The volume of the harvest exceeded the projected 50,000 tons, thus Georgia regained its position on the world market prior to the stink bug epidemic.

Future Fruit

And while the future of hazelnuts is now looking rosier than it did a year ago, the Association still has quite a bit of work cut out for it.

One problem to be tackled is low yields.

“Currently, hazelnuts are cultivated in Georgia on a total area of 72,000 hectares, of which about 40,000 hectares are orchards with an area of 0.5 to 1 hectare. The yield of these types of orchards is below 450-500 kg. Our goal is to increase the average yield of these small orchards to 1,500 kg over the next 3 years,” Todua says, noting that “if this goal is achieved, the Georgian hazelnut sector will be able to double the volume of exported hazelnuts and significantly improve the [crop’s] average quality, which will bring additional annual income of 1 billion GEL to Georgian farmers and the country’s economy.”

Another issue the Association wants to address is waste and damaged crops. The Association says the share of crop damaged due to the use of primitive technologies in the post-processing stages of the hazelnut harvest and the improper storage reaches 25% of the total crop volume, accounting for tens of millions of GEL losses every year.

Improving the image of Georgian hazelnuts abroad is another goal on the to-do list. Due to the current processing and sales cycle, there is no proper traceability, meaning batch problems cannot be identified and contained in a timely manner, which affects the entire sector. This leads to distrust toward Georgian hazelnuts, causing low competitiveness and lower market prices.

To solve this issue, the Georgian Hazelnut Growers Association has developed a hazelnut traceability mechanism, which involves standardizing crop processing and sales with the help of drying and warehousing centers. Each center provides for the drying of 1,000 tons of hazelnuts and storing 500 tons of hazelnuts. The quality management is done by modern quality management laboratories located in the centers. In these centers, each batch of hazelnuts is registered and given quality and origin certificates.

Move over, Italy

First Deputy Minister of Environmental Protection and Agriculture Giorgi Khanishvili also weighed in on this year’s harvest and the positive trends in the industry.

Khanishvili highlighted that the main problem has not been the stink bug invasion itself, but that the sector was slow to react to it.

“Since the state began developing programs in 2017, farmers have now realized that previous measures to fight the stink bug are not enough. Fortunately, the government has gained the trust of the farmers, and has developed a policy and strategy that has withstood the test of years.”

Khanishvili says that Georgia also has serious prospects in the hazelnut processing industry.

“We have the potential to create a processing environment here in Georgia that would match world standards. With the exception of pest-control chemicals, all other parts of the production depend on local resources.

Thus, the added value that will be created is macroeconomically significant. The 14-million-dollar increase in hazelnut exports has benefited the country’s economy and attracted large foreign exchange resources. The increase is very important for residents of western Georgian after years of low income due to poor harvest of hazelnuts.”

Georgia already ranks high on the list of hazelnut producing nations, ranking within the top five in recent years, with Turkey as the undisputed leader, followed by Italy and Azerbaijan. But the government has more ambitious plans for Georgia: “In the coming years, we have the prospect of being the second largest producer of hazelnuts in the world after Turkey. This is a three-to-four-year plan. We have two state programs: one aims to increase hazelnut yields on the farms, the other targets cultivation of high-quality and efficient hazelnut varieties,” says Khanishvili, a sentiment supported by the Georgian Hazelnut Growers Association’s Todua: “if farmers do their best to compete with Italy, we could be harvesting up to 100,000 tons by 2023!”

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