Food consumption and market development under the transition in Armenia

The major uncertainties about the eventual success of macroeconomic stabilization measures, the eventual ownership and control of privatized enterprises, the viability of certain enterprises and sectors can have significant influence on the market economy of Armenia during the transition period. In the face of these uncertainties, inadequate transport and access to markets remain major obstacles to economic development and employment. After liberalization in 1991, consumer subsidies were eliminated and consequently food prices rose. Local price increases combined with the decline in real income and out migration led to a fall in domestic demand for food products as well as significant changes in food consumption patterns. Possibly the chief obstacle to increasing farm income and the most difficult problem for food processing companies to overcome are the marketing constraints. There is no appropriate scale marketing and transport infrastructure for small farmers. The lack of market information system is another problem, resulting in many farmers producing the same crops which were previously profitable, causing a glut. The break-up of collective agriculture in Armenia resulted in over 300,000 small diversified farms which grow five or more crops and have two or more animal species. With limited export markets, the country lacks adequate markets for much of its agricultural production, as well as the economies of scale for the investments in agri-processing and manufacturing industry which are necessary to stimulate employment and farm income. Armenia is in a prime position to take advantage of the organic market opportunities. If the developed world is going to subsidize organic food production, Armenia may have competitive advantage with low cost production and very little use of fertilizers, pesticides and other restricted materials for the last ten years.