The Farms and Villages of Armenia
The Farms and Villages of Armenia

Armenia's Agriculture Industry

Twenty Years After Independence, Living Off the Land Starting to Get Deserved Attention

One out of every three Armenians lives somewhere other than Yerevan, Gyumri, Vanadzor, Kapan and Goris; somewhere that makes a small dot on a map, if at all.

More than one million Armenians (using official census numbers) make a living or eke out an existence in rural settlements, often having turned to farming for sustenance that was no longer assured once Soviet-era factories were shut down.

Most don’t have “jobs”—at least not in the common definition—but more than 95 percent are defined as “employed” by the country’s legislation. The government assumes that if a villager has land, he is employed by the earth, from which he is paid in produce or on which his cattle graze.

“There are 340,000 small rural farm holdings (about 1.06 million acres) of arable land, meaning a little over 1 hectare (2.4 acres) per each holding, which ensures their occupation and enables them to take care of basic social needs,” Prime Minister Tigran Sarkisian said in spring 2011 when speaking about agricultural issues.

Over the past two decades, however, agricultural performance in the country has eroded, due to many of the same factors that caused the collapse of other industries, including the shock of “independence” and the lack of infrastructure. Primarily as it concerns farming, development suffers the effect of the deep-rooted habit in villagers to totally rely on the state—a faulty reliance that still ignores the shift from socialism, to free-market-based survival. Simply, the majority of villagers are unable to make their living solely by working their land or breeding livestock.

The three successive governments of Armenia have certainly made efforts over the past years to improve conditions; however, the global economic crisis revealed the unproductiveness of state attempts. For more than a decade, two thirds of Armenia’s Gross Domestic Product (GDP) have relied on construction and on remittances from Diaspora. When those two cash pipelines were ruptured during the world economic crisis, it revealed the weakness of what should have been Armenia’s most reliable industry—agriculture—to provide stability.

The population of Armenia has grown poorer by more than 20 percent since 2008, according to the National Statistics Service. By definition, “poor” are considered to be those adult family members whose monthly consumption (goods and utilities) has been less than the upper general poverty line—33,517 drams (about $89). “Very poor” are those whose monthly consumption has been less than the lower general poverty line of about $73. “Extremely poor” are those adults whose monthly consumption has been less than the foodstuff line (the minimum for only food expenses)—about $51.

The current government named agriculture an economic priority, however the efforts of the executive body did not yield tangible results, and it was not until 2010 when farming production dropped 15 percent, due to bad weather and bad planning, that alarms were sounded. The Minister of Agriculture was fired, and new strategies were announced.

In the spring of 2011 during parliamentary hearings, (new) Minister of Agriculture Sergo Karapetian stated that the government had lost the villagers’ trust.

More aggressive and comprehensive measures were undertaken to reform the sphere and rectify the situation; and even though these steps have not improved every villager’s living standard, the efforts nonetheless secured a 14 percent turn around—which is to say that, in a year, recovery fell only one percent short of a rebound, and current efforts can focus on growth.

Prime Minister Sarkisian made a number of promises last spring to regulate agriculture, in particular to provide villagers with fertilizers at affordable prices, provide border and/or highland communities with farm equipment, and to distribute high-quality seeds and seedlings to landowners. These measures are expected to yield positive results in 2012 year-end reports.

Affordable fertilizer

In early 2011, Minister Karapetian, speaking about current agricultural challenges, stated that the prices for fertilizers in Armenia “are unreasonably high.”

At the end of the year, when summing up the departing 2011, the minister said: “The legislative changes carried out in the field enable import of fertilizers, seeds and pesticides as well as their realization in the local market at VAT-free prices, which makes these resources affordable to agricultural households for purchase, and allows for increase in volumes of their import and utilization.”

The minister promised better prospects for 2012: “The government allotted a $2.6 million subsidy to the Ministry of Agriculture to purchase nitrogen fertilizers. This means that, in 2012, villagers will pay only around $15 for one sack (50 kilograms) of fertilizer,” he said.

But despite promises and programs, in 2011 villagers bought fertilizers for $20-25 per sack—because most take it on credit and end up paying interest.

Hrach Berberian, president of Armenia’s Agrarian-Rural Union NGO (Non Governmental Organization), says that in the spring of 2011 the retail price for fertilizer was around $18.

“In summer, some of our state officials declared that the VAT-free fertilizers were going to be exempt from VAT. How they were going to exempt it twice is a mystery, but anyway they stated that we were going to have a 20-percent drop in fertilizer prices (after the government subsidy). Instead, we now have a 30-percent price hike. Some of the state officials tried to take over that business and the importers who had stabilized the situation in the market refused to import,” he says.

Berberian’s calculations and frustration are grounded in a reality that may have been overlooked when subsidies were debated. That is: Many, if not most, villagers necessarily buy fertilizer on credit—promising payment when (if) crops come in, but in the planting season agreeing to take on credit a sack of fertilizer for as much as $38, which was intended by the government to be sold for about $23.

Aghvan Arakelian, a resident of Yeraskhavan village, Armavir province, grows watermelons, melons and peppers. In season when he has to fertilize crops, he is often short of cash so buys fertilizer on credit.

“Fertilizer has never been sold to us for a low price; that’s the most costly thing, along with cellophane, water, tractor rental… When you start calculating, you can see that ‘we get to eat only broth from the soup we make.’ The officials keep saying that they are doing their best, but how come we don’t see that? There is no progress. If two-three years ago fertilizer cost $10-12 and today it costs around $23, what kind of progress is that?” says Arakelian.

While charging that “some state officials” had tried to profit from the situation, Berberian would not name names. In late January, however, the State Commission for the Protection of Economic Competition of Armenia (SCPEC) fined the Catherine Group Company $30,000 for abusing its dominant position in Armenia’s fertilizer market. It is believed that the de facto owner of the Catherine Group Company is Mihran Poghosian, head of the Ministry of Justice’s Compulsory Enforcement Service of Judicial Acts.

According to the study conducted by the SCPEC since March 2011, three companies have a dominant position in the fertilizer market—Catherine Group, Agrimatco Ltd, and Masis Fertility, which have 30, 24 and 22 percent shares, respectively.

Berberian says that due to the high cost of fertilizer, soil is sparingly treated, if at all.

“Last year, many of the arable lands were not nourished; the soil should have been fertilized with a 150 kilogram/1hectare ratio, which was not done or wasn’t done sufficiently,” he says.

Seeds of reform

Berberian says that reforms planned in 2011 are still awaiting implementation a year later. mmm|mm

“Revolution doesn’t start from the top; it has to be done on site,” says the NGO head. “The money that was allotted to agriculture is still in bureaucratic red tape.”

Officials disagree with this claim. Minister Karapetian, when summarizing 2011, said a number of reforms and projects had been carried out and innovations introduced.

“The projects implemented in 2011 to develop barley production and spring-planted barley seed production are highly important, and, according to the initiative, more than 2,000 tons of high-reproduction seeds of spring-planted barley have been imported to Armenia. This enabled more than 10,000 beneficiaries to sow around 27,000 acres,” said the minister.

Berberian praises government steps to import high-quality cereal grain seeds, but believes that some prior sample experiments of grain varieties would have been proper.

“These grain varieties might give a good yield this year, but prove unable to adjust to our climatic conditions. It would make sense to select the best for our climate among the imported 1,000 grain seed species,” says Berberian, adding that wheat crops will be rich in the coming years due to renewal of seeds.

Among the achievements of 2011, Minister Karapetian also points out agricultural produce fairs organized every weekend in Yerevan since late August, during which villagers were able to sell their produce first-hand, without middlemen and extra expenses.

According to the Ministry of Agriculture, 36 weekend “farmers markets” were set up, drawing an average of 8-9,000 visitors each and were supplied by 1,417 farms representing 242 villages, selling 40-45 tons of produce.

Still, complaints surface, as the new initiative was afflicted by old methods of opportunism. Villagers say the weekend markets were “infiltrated” by middlemen who found a way to jack up prices at the special markets to the point that consumers paid higher prices consistent with what was offered in commercial produce shops.

The result for some is to take full control of their labor: till the ground, plant the seed, fertilize, weed the crops, harvest, haul, then sell door to door.

Edik Naghdalian and his wife Sveta, from Ararat province’s Khachpar village, prefer to personally take their produce to communities on the outskirts of Yerevan. Twice a week, Naghdalian and his wife take their dairy products and fruit and vegetables to Shengavit district—only about 3 miles from their village—and sell in courtyards of residential buildings.

“Now we have our regular customers. This method suits both me and my customers: I have my profit; they pay less and save,” Naghdalian says.

With this direct-sell method, a liter of yogurt (matsun), for example, is sold by the Naghdalians for 300 drams (about 77 cents)—nearly half the cost (and perceived to be of higher quality) of commercially processed yogurt in the shops.

“I am happy and my customers are happy,” says Naghdalian.

Not all villagers, though, have private vehicles and have no other way but to sell their products to middlemen for a lower price right off their farm.

Lending help

A major step by the current government has been to introduce low-interest loans for small farms.mmmmmBanks are now offering 14-percent loans, with a four-percent government subsidy, meaning that villagers can borrow money at 10 percent interest. Further, loans issued to the 225 poorest villages have been subsidized by six percent, leaving an eight-percent interest loan available for those applicants.

Through the end of 2011, more than 23,000 (subsidized) loans were issued, representing about $39 million.

Yet again, however, some villagers say they haven’t seen the benefit of the low-interest lending program, and even the proposed assistance has come to illustrate the perennial distrust of citizenry toward its government—regardless of who heads it.

For years, David Baghdasarian, of Armavir province’s Nalbandian village, has grown cucumbers, onions and other vegetables to earn his family’s living. Last year he was happy that he was able to take a 10-percent-interest loan from ACBA-Credit Agricole Bank. At the end of the year, however, when he was making a payment, he was told that he had to pay also the four-percent government subsidy. 

“At the bank I was told that the four percent will be returned to me as soon as the government makes the payment, but I have a feeling that the government will leave it on the bank, and the bank on us, so we will end up not getting that four percent back,” Baghdasarian says.

Arsen Petrosian, deputy director of ACBA, says to the contrary that the subsidies were returned in two ways—to groups of villagers who had paid their interest rates, and individually, within five days after a villager paid off his loan.

In 2011, 95 percent of farm loans subsidized by the state were administered by ACBA. “If it were an easy process, other banks would have been eager to participate as well,” says Petrosian. “A loan is like medicine. It has to be given at the right time and in the right amount. If you give too little, it won’t help; if you give too much, it will cause harm.”

ACBA gave more than 100,000 farm loans (about 20,000 of which were state subsidized) and Petrosian says 99 percent have been paid, “which is not a bad indicator.”

Ex-Chairman of the Central Bank of Armenia Bagrat Asatrian, currently in charge of Garni Invest Universal Credit Organization (and a strong voice in oppositional politics), says that as compared to other sectors, the level of agricultural lending in Armenia is rather low.

“Some 30,000 households are using agricultural loans, whereas in the first republic founded in the early 20th century, a few dozen financial-credit organizations founded in the republic were granting steady loans to around 37,000 households,” says Asatrian.

President of Union of Armenia Bank Ashot Osipian counters that agriculture lending is not an easy process and is complicated by a number of issues.

“For example, it is impossible to use farm equipment as collateral, as the majority of the machinery is not registered anywhere. Or, say, animals do not have documentation, which would tangibly lower the risk. Nonetheless banks are interested in agricultural lending because of the high level of competition among banks, and they keep looking for new areas for crediting. One such area is agriculture,” says Osipian.

Economist Artsvik Minasian believes that no fundamental issue will be solved by lowering loan interest rates.

“Seventy percent of agro-loans are short-term and small—ranging between $2,000-3,000 and for up to one year. In such circumstances no investment project can be implemented in agriculture. And, besides, the majority of loans are granted in foreign currency, which poses additional risks for villagers,” he says.

In other words, the economist is saying that the current lending assistance only addresses survival, not development. A villager takes a loan at the beginning of the season, pays it off at the end, and needs to repeat the cycle the next spring.

Further, the unpredictable shift of dollar-dram relations creates certain risks. For example: If a villager took a $1,000 loan on January 15, 2011, the dollar value was 364 drams. If he paid the loan off a year later, on January 15, 2012, the dollar value was 388. The pre-interest value of the loan increased by $61—perhaps an insignificant sum, but not if considered the cost of two or three sacks of fertilizer or a month’s income, especially when revenue is heavily influenced by the whims of nature.

Republican lawmaker Hakob Hakobian, chairing the National Assembly Standing Committee on Social Affairs, says that in 2007-2011 both the size of agro-loans and the number of loan takers increased.

“Critics say that villagers are selling their houses and lands (to pay off debts). I say it’s not true. In 2010, for example, some 970 had difficulties in paying off their loans, which makes only 0.3 percent of loan takers,” he says.      

Alternative farming

Unlike farming, the fish industry is one part of agriculture where operating on credit is a more predictable proposition. Banks can confidently look at the steady growth of aquaculture over the past several years in Armenia.

Last year, gross production of fish reached 6,400 tons, exceeding the 2010 mark by 1,000 tons, with export volumes hitting 1,200 tons—triple the amount of just a few years ago.

Head of the Ministry of Agriculture’s Department of Livestock Breeding Ashot Hovhannisian says that there are 240 companies operating in the fish industry. Among the species bred in Armenia, salmon prevails (some 50 percent), along with rainbow trout, golden trout, river trout, and sturgeon (15 percent) as well as others.

Hovhannisian stresses that low prices for fish bred in Armenia have spurred export to Europe and Russia. In 2009, 170 tons were exported; in 2010 the number more than doubled to 380 tons, and nearly tripled again to 1,100 tons in 2011.

“The Ministry of Agriculture has assisted fish export by collaboration with Russia’s Food Safety Authority; as a result, 22 fisheries of Armenia were granted permission to export fish to Russia. For the sake of comparison, it is noteworthy that there are two fisheries from Georgia and three from Azerbaijan exporting to the Russian Federation,” says Hovhannisian.

While other sectors of agriculture do not have favorable conditions for development in Armenia, the primary issue for the fish industry is to secure consumption. According to some calculations, if demand can be generated, within four years the annual production volume can be increased to 28,000 tons.

“This indicator can be achieved without additional efforts; and if modern technologies are applied, water circulation systems are used, over the course of time we’ll have a capacity of producing up to 70,000 tons per year,” says Hovhannisian.

Fish breeding, nonetheless, has its negative effects, as, environmentalists say, the industry is exhausting water resources in the Ararat valley. Hovhannisian says that some fisheries are now trying to use a water-circulating system to avoid water abuse. 

“The problem with such a system is that the quality of fish meat drops, and for that reason only caviar-producing companies use it. There certainly is a risk that careless, uncontrolled use of water can lead to depletion and drying out of fresh water.

No doubt, water must be used wisely, with caution, but not by a closed water circulation system, rather by using the same water for breeding the same species, say, by building reservoirs of different levels: in the first—upper-level reservoir water can be used for salmon, the second—midlevel—for sturgeon, then for carp, then for crucian carp, and so on.”

The next most active sector of agriculture is poultry farming, which presently has a lower capacity than in Soviet times. In the 1980s Soviet Armenia had 30 small and medium poultry farms producing 700 million eggs and 32,000 tons of poultry per year. “While egg production volumes have been preserved unchanged, unfortunately, poultry production volumes have dropped drastically and today we produce only 8,500-9,000 tons of poultry (meat product) per year,” says Hovhannisian.

“We have the capacity of producing 25, 000 tons per year, but there is no demand, and today from a poultry exporting country of the Soviet era we have become a poultry importing country. We are now producing 9,000 tons of poultry per year, and are importing more than 30,000 tons,” he says.

As opposed to fish breeding and poultry farming, apiculture (beekeeping) in Armenia does not have much room for growth, although honey produced here holds high esteem internationally by quality and taste criteria.

According to various sources, there were around 600,000 beehives in Armenia during Soviet times, the number of which decreased drastically in the 1990s, dropping to only 80,000. Over the recent years, apiculture in Armenia started growing rapidly again, and as of 2011 the number of hives had reached 500,000.

Over the past three years, beehives in all of Armenia’s provinces have increased honey production volumes.  While in 2009 they produced 2,000 tons of honey, in 2010 it was 3,500 tons and in 2011 the number reached 4,000 tons. The price for honey has remained at $8 per kilo. (The steady price reflects the fact that, when volumes were low, the retail was expensive. Now that volume has increased, the price has adjusted to a more moderate level, considering the general increase in cost of living.)

Although by qualitative and taste criteria honey produced in Armenia satisfies European standards, it is not competitive price-wise, because the price for honey from Turkey and China ranges around 2 euros (about $2.60), whereas the average price of Armenian honey is 6 euros (about $7.80) per kilo.  

“As opposed to these countries [Turkey and China], where honey is produced from the nectar of one herb variety, in Armenia honey is made from various flowers and herbs, especially mountain flora, which raises the net price,” says Hovhannisian.

New challenges, new professions

Government-initiated steps aimed at improving and developing agriculture have generated a need for new professions. For this reason, new faculties and departments open periodically at the Armenian State Agrarian University, which started in 1994 offering training/education for 17 professions and with 2,000 students. Today the university has expanded to 37 professions and 10,000 students.

The newly added professional training in a number of professions and specializations, such as agrarian policy, agro-business and market studies, fish and fish product technologies, land development, and others, is meant to spur specialized fields as well as development of the general agro-industry.

Rector of the Agrarian University Arshaluys Tarverdian is convinced that the state-adopted strategy and the projects as part of that strategy aimed at developing agriculture in Armenia can be successfully implemented only through a qualified workforce.

“The qualified personnel we train always find employment. However, we set high criteria for ourselves and can state with certainty that we still have a lot more to do in training competent professionals.”. . .

Originally published in the May 2012 ​issue of AGBU Magazine. Archived content may appear distorted on your screen. end character

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