Greenhouse Market – Prospective But Problematic
17 November, 2011
Greenhouse Market – Prospective But Problematic

Two key hurdles that include unreasonable heating costs and sluggish customs control hampers Georgian greenhouse sector to be available to ordinary farmers to enable them to utilize full potential of Georgian greenhouse market that will allow to cover the local market demands and enhance export. Some say that the way out is a cold culture production. 

Georgian greenhouse market has excellent prospects and potential to meet local demand completely and go to export, David Dumaresq, Greenhouse/Vegetables Consultant with the USAID-supported Economic

Prosperity Initiative (EPI), came to this conclusion after his two-week audit of Georgian greenhouse sector.

“I think the prospects are excellent, there is high potential for growth and profit,” he said in the interview with Georgian Journal.

The volume of imported product in Georgia that makes up roughly 80% of the market and high prices on the product, as well as number of diverse heating sources [including geothermal waters, gas, electricity, coal and hazelnut chaff] available in Georgia, makes Dumaresq think that the greenhouse sector can be profitable in Georgia and there will be still a lot of room for growth till the market becomes saturated and prices might start coming down.

He expects to reach this point of price-slump in 2 years that is a good news for consumer but somewhat regrettable for entrepreneurs who may get less profit. But within these two years producers are supposed to get more efficient and lower their cost of production by growing better and having higher yield. Export markets can bring more profit.

According to Dumaresq, Russian market is a big lure this end rather than EU that already has a lot of greenhouse producers in Netherland and Spain and needs higher transportation costs.

He believes Georgian greenhouse producers had better aim on local market first, and once it gets saturated to hit Russian and Ukrainian markets and only then think of the EU.

Russia accounted for more than 73% and 21% of Georgian vegetable and fruit export respectively before it imposed a ban on Georgian product in 2006 under alleged quality reasons. However now when Russia is supposed to join the World Trade Organization (WTO) by end-year it seems quite possible for Georgian product [Georgia is already the WTO state] to reappear at Russian market as the WTO removes trade problems between its member-states.

However to achieve realization of Georgian greenhouse sector’s potential it needs to be competitive with the infesting Turkish import that almost completely covers Georgian vegetables market starting November to March and enjoys higher profit as prices are the highest at this time of the year.

Two key reasons – high fuel prices and sluggish customs control undermines competitiveness of Georgian greenhouse business, Davit Chachanidze, Director Executive of Ltd of BioOrganic Georgia, producing Organic – the first certified liquid bio fertilizer in Caucasus, presumes. He had run greenhouse business in east Georgia for four years but quit it ultimately and undertook bio-fertilizers production.

According to him, the problem is that greenhouse activity is almost prestigious and not affordable to ordinary Georgian farmers as it demands huge investments: USD 1 million per hectare – this is the size that can be competitive with the Turkish product as it can give profit in spite of high heating prices and any other producing costs.

Although Georgia is blessed with heating sources tariffs on gas and electricity, geothermal waters are still unreasonable; thermal energy of Tkibuli coal, deposited in west Georgia,  is far from Ukrainian coal to make greenhouses competitive at smaller than 2 thousand square meter space. Hazelnut is also profitable on large areas.

“The more or less affordable size that can also be profitable starts from 2 thousand square meters scarcely affordable to peasants, however transportation costs are so high that producers in west Georgia where the climate is much milder and competitive with east Georgia prefer to export their product to Ukraine rather than take it to Tbilisi, the capital in eastern part of the country, that is the key consumer of greenhouse product,” Chachanidze said adding that Turkish import covers Georgian market because it is much cheaper.

Turkey exports cheaper non-bio product to Georgia that cannot be exported to the EU through almost damping prices and Georgian higher quality product including bio cannot compete it.

Georgian greenhouse industry counting 300 greenhouses with few bio-farmers can scarcely win over Turkey where all farmers have their own greenhouses, only bio-producing includes 20 thousand certified bio-farmers and 100 thousand hectare lands, and over the top of this Turkish government subsidizes the sector, makes number of preferences and has strong customs control demanding to tag each tomato exported to Turkey while Georgian customs allows all imported product in without much ado.

The only way out is to focus on cold product like salads and potatoes that require no heating and can be easily produced in open tunnel-furrows, Chachanidze suggests.

“Let’s forget tomatoes and cucumbers in winter, it is not healthy, and eat only seasonal food. Producing cold vegetables is quite possible and competitive, and American experts also do advise this,” he said.


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