Last week passed with lack of grain in Azerbaijan and price increase for breadstuffs. Nothing frightens people of facing hunger. Of course, hunger death has not come yet, but the prices for bread in Azerbaijan, especially in the regions have the tendency of increase.
Thus, the regions in Azerbaijan experienced bread price hike after Kazakhstan put export of grain under a ban in April till September harvest in order to protect the domestic market from rising world grain prices. The bread prices in Azerbaijan's Ganja city rose by 33%. A loaf of bread weighting 400gm cost AZN 0.30, but the price rose to AZN 0.40. Fatioqlu, Turkish-Azerbaijani JV engaged in flour manufacturing in Azerbaijan and supplying flour to almost all western regions in the country, said that the price rose due to grain shortage. The company purchases grain mainly from Kazakhstan. Fatioqlu reported that at the beginning of the year, 50kg-sack of grain cost AZN 18, but today it costs AZN 25.
Feeling the necessity to be re-insured, last week the Embassy of Azerbaijan in Kazakhstan made an appeal to the Government of this country for not stopping formerly concluded and pre-paid contracts on grain purchase for Azerbaijan. In addition, during the regular meeting of Azerbaijan-Kazakhstan Inter-Government Commission on Economic Cooperation in Astana last week, the government delegation headed by Heydar Babayev, the minister of economic development of Azerbaijan met with Sauat Minbayev, the minister of energy and mineral resources of Kazakhstan to discuss the problems with grain supplies to Azerbaijan.
Kazakhstan, the largest grain producer in Central Asia, tried to protect its internal market due to rise in grain prices worldwide. Earlier Kazakhstan planned to limit the export of grain from 1 March 2008, but the Government decided to wait a little with the measure.
Lack of grain in the market leads to significant growth of its prices. It happens due to the issue that large number of the grain exporters applies specials tariffs or impose a ban on grain export. Despite the situation, the Ministry of Economic Development believes that there are enough wheat reserves - 573,000 tons which can meet the demands for five months if necessary The yearly grain demand comprises of about 3mln tons, out of which 1mln is exported in Azerbaijan. The demand will be met by the home -produced wheat, in case the current wheat reserves in Azerbaijan gets exhausted. The harvest of grain-crops in the country will begin in June and the forecast for harvest for 2008 is placed at 2.3-2.4mln tons. If there is a need, the government can begin the talks on purchase of wheat with other countries - Ukraine and Canada.
Azerbaijan government is obliged to increase the volume of subsides for agriculture to secure food security. The new mechanism of financing will be more effective than the current one. It can be carried out by means of additional tax breaks. From 2009, the moratoriums on the tax payments carried by the agricultural products producers are planed to be prolonged by exempting them from all the taxes (excluding land tax). The extension of exemption from VAT on wheat import is also the issue of the day (VAT was canceled for a year). In addition, there can be other tax breaks on the production of cereals.