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Bağla

Butter is sold to Azerbaijanis at unreasonably high prices
Markets Review 


2017 October 03 ( Tuesday )  11:34:14
Print version
Русский Azərbaycan
Kamal Ali

The head of state left an optimistic record on Twitter

Since the summer of this year the price for oil has increased considerably in Azerbaijan. In September, prices in stores rose by 1-4 manat, depending on the product range. For example, the price of Ankor butter in retail increased from 14.8 manat to 15.2 kg per kilogram. "The butter that cost 10 manats a week ago is now sold for 14. The population prefers to buy cheaper butterl," Khazarheber reported on September 3. It is characteristic that the cost of home butter markets does not change.

https://youtu.be/dF7Q-g5tu70

There is no shortage

There is no butter deficit in the Azeri trade network, the counters are littered with Azerbaijani, Lithuanian, Turkish, Russian, Belarusian, New Zealand vegetable oil and butter. Consequently, the rise in prices is caused not by excess of demand over supply.

Surveys of the markets conducted by the agency Turan, confirm: since August, the cost of butter has increased, although even in May-July various types of butter were cheaper by 7-9%.

Easy earnings

Economist Vugar Bayramov in a television interview explained the rise in price for oil in Azerbaijan by the desire of sellers to easily earn, as there is no economic justification for the rise in prices. He said that since the dollar has not become more expensive in Azerbaijan since February, remaining at 1.7 manat for USD, and butter has risen in price by 8%, then the price change is artificial, and should be stopped by the Ministry of Economic Development. Bayramov urged the MED to intervene and administrative ways to force sellers to stop the artificial increase in prices.

https://youtu.be/4P55KmSHsSo

The world price increase is questionable

Another version is based on the growth of world prices for this product and the dependence of the Azerbaijani market on butter imports. Turan reported that the self-sufficiency ratio of vegetable oils and margarine in Azerbaijan is 67%, while production is 80% dependent on imports, as raw materials and packaging are supplied from abroad. And abroad, butter is becoming more expensive. As a result of the GDT (Global Dairy Trade) trading on September 5, 2017, the price index for dairy products increased by 0.3%. The weighted average price for dairy products was 3,323 USD / kg, which is 13.6% higher than the price of the beginning of September 2016.

Over the past 12 months, butter from New Zealand at wholesale prices abroad has risen in price by 113%.

How to bring prices down?

How can the Azerbaijani government reduce the butter price in order not to provoke popular discontent? It is impossible to force sellers to offer goods at a price lower than what is purchased on the wholesale market. And the manufacturer can no longer comply with the instructions of the government, which requires restraining food prices. Last October, the chairman of the Supervisory Board of Azersun Holding, the largest producer and food merchant, Abdolbari Gezal explained that as a result of two devaluations, manat depreciated by 110%, and the prices for their products increased by only 30%. The company imports oil from abroad, sugar production by 15% is associated with local raw materials and 85% - with imports. And in order to bring the share of local raw materials up to 40%, an investment of at least $ 100 million is needed. The holding finds the solution to the problem in the reduction of staff. Only in December (2016) and only at the Imishli plant of the holding, 200 employees were laid off, - reports Eurasianet.

The President set the task

The task is to reduce the volume of imported food. President Ilham Aliyev even wrote in his Twitter about reducing dependence on imports in the country's economy. "Azerbaijan successfully implements programs aimed at reducing dependence on imports and expanding its export potential. The social policy conducted in Azerbaijan serves to improve the well-being of the population," I.Aliyev left a note on Twitter. The government is working on the construction of large agro-complexes, such as the construction of a milk complex in the village of Vandam, Gabala District (Gilan Holding), for which 620 cows were brought from Germany. The National Entrepreneurship Support Fund of the Ministry of Economic Development has allocated "Gilan" a soft loan of 14 million manats.

However, it is clear that the population will not feel the effect of the agrarian complexes being built on market prices in the near future, which is due to the low dynamics of the processes in the agricultural sector of the economy. This year, the Azerbaijani government will not be able to curb the rise in oil prices, and the import of agricultural products from abroad will continue.

Note to the competent authorities

The above circumstances can be considered objective and non-alternative, but there are some circumstances to which Turan draws attention of competent state agencies. The fact is that according to the State Customs Committee for the first six months of this year, the country imported 7.767 thousand tons of butter. Of course, this product was bought at world, growing prices ($ 32.688 million). That is, for one ton of butter was paid in the world market 4208.5 dollars, or 7.7 manats per kilogram, at a wholesale price. After several dealers, transport and packaging costs in the store, the price of oil reaches 14 manats.

But in the world there is no such price - more than 4000 dollars per ton of butter, without packaging, in bulk! Offers from various world exporters can be seen in specialized websites (alibaba.com/trade). The price of a ton of butter from New Zealand, South Africa, Britain, France and other countries there ranges from 500-600 to 2500 dollars. For example, unsalted New Zealand Anchor oil on the virtual site of alibaba.com is exhibited at a cost of $ 500-1200 per ton (in Baku stores this oil is sold at a price of 14.8 manat to 15.2 kg per kilogram in packaged form). For 600 dollars per ton sell the British. The South African company offers for $ 500 per ton.

If Azerbaijani suppliers buy $ 1,000 per ton, then a kilogram of butter will be on the wholesale market in Baku, even if you double its price to cover transport, customs expenses and make profit, it will be sold for $ 2, or 3.4 manat. If we double again with consideration the costs of packaging, transportation within the country, profits and some unforeseen illegal expenses, a kilogram of oil on the counter will be put up for 7.4 manats. But not for 11-14 manat as now in the Baku stores.

Is it right that because of the monopolism and uncontrolled actions of Azerbaijani exporters, buyers should pay from 3 to 7 manat per kilogram of butter?

One of the main reasons for the price increase

As you know, the economic crisis forced the government to take measures to legalize the commodity market in order to increase the revenues of taxes to the budget. In this regard, as it became known to Turan, some companies moved their offices abroad. From there, deliveries are made on the basis of so-called orders. The supplier immediately imposes a profit on the price of the goods, which must be received in the region of sales. Thus, the proceeds from sales legally enter the supplier's foreign office after the sale of the goods. For example, if a kilogram of butter is purchased from a producer for $ 1, then the supplier pays $ 2 and the supply is made at $ 3 each. After sales, three dollars are returned to the supplier, of which $ 1 is sent to the manufacturer, and the net profit is $ 2. If the supplier would work in Azerbaijan in a more transparent economy, he would not be able to receive this profit. Hence the inflated prices for goods crossing the border.