2023 October-November Analysis Featured

Betting big on blueberries – Georgian farmers have a new favorite fruit

Georgian wine producers are regulars on the international fair circuit, but a new agricultural sector seems about to join the Georgian frequent flyer crowd – Georgia’s fruit and vegetable growers.

As Europe’s horticulture suffers from climate change’s tumultuous impact on the weather, an opportunity is opening up. Georgia has been able to show its products to advantage at fairs like Fruit Logistica 2023 – a three-day event in Berlin that is attended by trade buyers from 140 countries.

Georgia’s fruit farming is having a good 2023, although there remains a long way to go to build it into an industry of significant size with a strong, sustainable future. However, an indication that it has become investible can be deduced from the fact that both of Georgia’s main investment banks, TBC Capital and Galt & Taggart, have just published reports showing the super-performance of one fruit – blueberries. While light on featuring the blueberry-producing companies, these reports do show that prospects for this fruit seem excellent given global appetites and growing Georgian production.

The acknowledged best information source is recognised as EastFruit – an agriculture platform funded by the Food and Agriculture Organization of the United Nations (FAO), the European Bank for Reconstruction and Development (EBRD), and EU4Business. The platform carries daily updates, prices and advice on fruit and vegetables in Central Asia, the Caucasus, and Eastern Europe. It puts the 2022 figure for investment in Georgia’s perennial gardens last year at $22 million. Almost half of this was funded by the Georgian government’s program Plant the Future. Exports to Europe and the UAE are rising as a result. According to EastFruit, the split of horticultural investment in 2022 was 26% to blueberries, 19% to almonds, 18% to olives, 15% to laurel, and 13% to apples.

There are very serious reasons for the government and Georgia’s backers among international organizations to watch the local fruit business closely and push to change it – currently around 90% of overall production goes to the Russian market. If there were another blockade on Georgian agricultural exports, the household budgets of tens of thousands of farmers and agricultural laborers would be badly hit.

Russia’s share of the blueberry market, at least, should fall from the current 90% to “25% to 30% in the future,” says Head of the Association of Blueberry Producers Tornike Panjavidze. He gave as his reason, according to EastFruit, that “in the long run the Russian market is not profitable for Georgian producers due to fluctuating prices…it offers high prices only during the first two weeks of the season, but prices drop significantly when the harvest is abundant. On the other hand, the European market provides consistent prices through the season.”

To break the export pattern, help for farmers funded or subsidized by international donors and the government is wide-ranging. Modern technology is increasingly used: drones for spraying, weather stations for climate forecasting, solar panels for light and heating – as well as improved irrigation. There is modern EU-standard packaging; anti-hail netting; and a rising volume of cold storage, advice, and sourcing for the best varieties to grow.

“Now 19% to 20% of the population is employed in agriculture, and this is a rather high figure. In the future…fewer people should be employed in agriculture, but many more products should be produced. This is the future for Georgian agriculture,” First Deputy Minister at the Ministry of Environmental Protection and Agriculture George Khanishvili told delegates at April’s HortiTech: Trends and Opportunities in Georgia conference.

The quest for new markets

While Georgian harvests in 2023 for a number of fruits have broken records and demand is strong, the quest to diversify exports away from dominance by the Russian market, to bring in corporate entrants, to create efficiencies of scale to farms, and to attract young people are generally hard-going. All are very difficult to achieve, and farmers prefer to fall back on familiar, traditional, and less fussy markets like Russia. The world’s largest import markets, all bigger than Russia, are Germany, the Netherlands, the UK and Poland – and most pay considerably higher prices.

The Berlin exhibition showed that progress is being made, however, as a long list of fresh food companies are able to meet European Union standards, after years of working with experts from international donors, and were able to exhibit. The Georgian stand represented fourteen companies: Agrolane, Bluebird, Golden Farms, Khoni Plantations, Royal Berry, FCO, Silk Agro Technology, Herbia, West Best Blueberry Plant, Mambofrost, Cider, Blue Gold Georgia, and Green Meadow Products.

The aim, says Georgia’s Rural Development Agency Director General Giorgi Jibladze, was to make contacts with the many companies and trade networks attending the exhibition “which, in the future, will contribute to the process of the diversification of markets for Georgian agricultural products and the growth of exports.” Attendance at the Berlin exhibition follows on from recent appearances at fairs and exhibitions in Paris, Dubai, and London.

Betting big on blueberries

Outstanding success in one section of the horticultural market is being enjoyed by Georgian blueberry growers. Georgia has begun to export the fruits to Poland, the Netherlands, and Germany and is processing jam, jellies, juices, and dried and frozen berries to help manage fluctuations in prices and increase productivity.

Farmers are tearing out blackberry and raspberry canes and pulling up tomatoes and cucumbers from polytunnels to replace them with blueberries – and giving more space to them as demand soars. Galt & Taggart’s August report – which also covers a number of other fruits – notes: “Georgia increased production by 8.5x between 2019-23,” against the background global demand of 19.6% CAGR in 2017-2021.

Forecast growth for Georgia as new plant species are introduced is a rise from current production of 4 million kilograms to “25 million by 2027.” Exports doubled this year, Galt & Taggart says, reaching 3 million kilograms and valued at $18.5 million. However, its analysts add that the “anticipated surge in production over the next 5-10 years requires a focus on diversifying export markets.”

Georgia’s blueberry yields are already healthy, at 14.5 ton/ha in 2021 against the world average of 9.6 ton/ha, the United States’ 7.7 ton/ha, and Western and Central Europe’s 6.9 ton/ha. In the first seven months of this year, Georgian export revenues were 2.1x higher than in 2022. Samegrelo is the leading region with half the total acreage.

Overall, the average investment cost, says Galt & Taggart, was an average of GEL 30.9k per hectare over the years 2017-22, but figures from the Agency of Rural Development for last year showed that the figure had increased to GEL 33.3k per hectare.

While, TBC Capital notes, around 71% of cultivated orchards were growing blueberries this year, that figure is growing, but strawberry, raspberry and blackberry production has been declining “due to a combination of production challenges and lower-than-anticipated prices.” In January to May of 2023, only $300,000 worth of strawberries were exported and raspberry and blackberry exports fell in value from over $40 million in 2021 to around $12 million.

Exports of Kiwi have been growing, but the fastest growing business in them is importing, with 1,700 tons being produced against imports of 2,800 tons in the 2022-2023 season, a pattern that has become familiar in recent years, says EastFruit. And for tomatoes, fresh and frozen, more were imported than exported – at 18,968 tons as opposed to 2,235 tons in the first half of 2023. Peach and nectarine exports have doubled in 2023 to date, at 1,411 tons, and fig exports have also risen.

Attempts to grow another highly popular fruit, avocados, have been abandoned, and instead a trading system – the Avocado Hub – has been established bringing in the fruit from African countries and re-exporting to destinations such as Uzbekistan.

The problem of producing any fruit for Europe or the Middle East on the scale and quality needed for efficient exporting is shown by the small number in Georgian agriculture as a whole of businesses as opposed to individual farmers. As much as 92% of fruit is being produced by family holdings, according to the GeoStat publication “Agriculture of Georgia.” As EastFruit comments, as a result “Georgian agriculture is segmented into very small parts. The small sizes of production mean there are no scale effects, which translates into low productivity.”

Most Georgian produce grown is for families’ own consumption. Overall in farming, according to GeoStat, only 5% of holdings produce to sell and this is down from 8% in 2021. Another problem is the looming retirement of farmers: 59% of the land is operated by farmers who are over 60 years old, with the numbers increasing every year.

But because of climate change, compared to the European picture, Georgia’s horticulture’s prospects seem highly favorable. It is impossible, with so many small farmers operating, to give a true individual figure on profitability. However, the good news for those operating within government programs established in the last six years, say EastFruit’s analysts, is that “revenues are expected to grow for all produce groups.”