The food security of every country depends on its ability of self-supplying with food. The major food is considered to be the volume of grains, preserved until the harvest of the next year crop. According to the International Food and Agriculture Organization (FAO), grain reserves for 60 days (around 20% of annual grain consumption in the country) is considered to be secure, while Russian specialists guess the country should have 3-mnth grain reserves (90 day).
Unfortunately, it should be noted that there is no state grains reserves in the country. So, food crisis die to either domestic or foreign reasons, the country will hardly ever able to over grains supply of the country even one day despite annual rise harvesting and it occurs in the state of conflict with Armenia. Unfortunately, with respect ensure food security we the country is obliged to purchase around 1 million tons of grains from foreign countries, including Kazakhstan, Russia, Turkey. Azerbaijan imports its food security spending tremendous funds out of the public budget for food.
Within a long period the government had discussed in different levels the establishment of the Grain Funds in the country with the governmental status. However, the annual rise of domestic production of grain Azerbaijan, a need of importing 1 million tons of grains and difficulties with the sale of agriculture products in the foreign market served as a major argument of inexpediency of the establishment of a Reserve Grain Fund зернового С"РѕРЅРґР°. The establishment of the grain fund was stated in Law on Grains, adopted in the parliament in 2000. The interests towards establishment of a Grain Fund disappeared upon commencement of the construction of a Grain Terminal in Azerbaijan.
The decision regarding construction of a grain terminal for the reception and transfer of Kazakh grain was made during meeting of Azerbaijani-Kazakh Intergovernmental Commission held in Baku in May 2005.
After long debates on the necessity and non-necessity of a grain terminal in Azerbaijan Kazakhstan succeeded to persuade Azerbaijani Government to agree upon the construction of the terminal Hovsani. Insufficient level of harvesting in the country along with unexpected climatic factors or natural calamities, that terminate all reserves, necessitates re-insurance.
Certainly, the terminal is in no condition to replace the functions of the Grains Fund, while its existence would play considerable role for Azerbaijan. Firstly, the Grain terminal will consolidate Azerbaijan's food security. Thus, the country is keen to process its own grain production along with products of other countries. If to judge on the growth pace of agriculture products, Azerbaijan will be shortly able to cover itself the demand for grains. Until that period the terminal will serve as storage and reserve for crisis cases. Secondly, under the project in 2007 it is planned to complete the construction of mills, bread-baking plant and infrastructure, which could be necessary for Azerbaijan.
The construction of a Grain Terminal is profitable for Azerbaijan from the material aspect. It is financed by Azerbaijan and Kazakhstan on equal basis and it requires approximately $10-20m to complete.
According to the calculations of the Agriculture Ministry, Azerbaijan's annual demand in grains over 3 million tons, of which 2-2.5 million is covered at the expense of import. Rise in domestic production is a priority of the government and the Agriculture Ministry puts every effort to maintain the stability in the domestic grain market. Ismat Abbasov, the Azerbaijani Agriculture Minister, said that the Grain Council has been founded in this respect. At the resolution of the Council, Azerbaijan has ceased purchase of grains fm Russia and Kazakhstan with respect to protect the domestic market. Import of Russian and Kazakh grain resulted in rise of market price of local goods to 300-400 old manats per kg and excited Azerbaijan farmers' dissatisfaction. After the cessation of import the prices of local grain product rose to 700-800 old manats per kg. In case of necessity import will be restored.
A total of 2,076 million tons of spring and autumn grains (including corns) have been harvested in Azerbaijan. Earlier the volume of grains production Azerbaijan was forecasted to 2.2 million tons. At present Azerbaijan's demand in grains is 3.4 million tons. Fall in the harvesting is explained with unfavorable whether conditions during grains sowing.
However, unfavorable weather conditions negatively affected on the production of grains in Azerbaijan. The same hit many world countries, which promises the import grain to be expensive. Thus, the volume of grains production worldwide in 2006 will be the lowest over the past 3 years, the experts of the International Grains Council forecasts. This year the grain harvesting will for the first time since 2003 exceed 600 million toms, the experts suppose. The review of the forecast on drop is caused by complication conditions in Southern hemisphere for the growth of grains. Thus, drought in Australia and lack of rainfall in Argentine caused partial loss of future grain harvesting.