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Livestock sector plays significant role in Georgian agriculture

Business Materials 30 November 2019 15:06
Livestock sector plays significant role in Georgian agriculture

BAKU, Azerbaijan, November 30

By Tamilla Mammadova – Trend:

The livestock sector plays a significant role in Georgian agriculture, accounting for more than half of total output, Trend reports via the ISET-PI, a think-tank based at International School of Economics of Tbilisi State University.

As reported, although livestock farming is spread throughout the country, agriculture is dominated by livestock in the mountains, which cover over 50 percent of Georgian territory.

The livestock sector contributed to around 4 percent of the country’s overall GDP in 2018, and dairy production remains one of the most traditional Georgian agricultural sub-sectors.

Though the demand for milk and dairy products has maintained an increasing trend in Georgia, compared to the domestic production of milk, which has been decreasing over the last decade, the increasing shortage is often satisfied by imported milk powder, milk cream (e.g. butter), and other dairy products.

As a result, the milk and dairy self-sufficiency ratio has been constantly decreasing over the past decade; it amounted to 81 percent in 2018 compared to 92 percent in 2009.

Moreover, an increased demand for live animals on export markets has stimulated a decrease in the number of cows and has, thus, reduced the country’s milk production.

Currently, the VAT exemption only applies to primary production of raw milk, raw milk which is bottled in volumes over two liters and to cheese that is produced from domestic raw milk.

According to the estimation results, the demand elasticity for dairy products is -0.30, while supply elasticity is 0.69. Thus, both demand and supply are inelastic as the elasticity coefficients are less than one in absolute value.

Within the raw milk market, the elasticity of demand for raw milk is -0.06, while the elasticity of supply is 0.16. As both elasticity coefficients are low, thus indicating an inelastic supply and demand for raw milk.

As reported, VAT exemption is projected to increase raw milk price by 6.7 percent, leading to a 1 percent increase of demand and supply of domestic raw milk.

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