Flatter “Khachapuri Index” as Georgia’s dairy sector modernises

Flatter “Khachapuri Index” as Georgia’s dairy sector modernises
By bne IntelliNews May 21, 2018

Lower fluctuations have recently been observed in the “Khachapuri Index” that measures the cost of cooking one standard Imeretian khachapuri. The ISEP Policy Institute which produces the index speculates that they could be connected to efforts to modernise Georgia’s dairy sector. 

The Tbilisi-based research centre compiles the index, considered the Georgian equivalent to the international Big Mac index, based on the prices of the ingredients of the traditional cheese filled bread, namely Imeretian cheese, flour, yeast, milk, eggs, and butter. 

Each year there are strong seasonal fluctuations in the price of the cheese, which in turn depends on the availability and price of milk, which rises sharply in the winter. Typically, the index peaks in January and reaches its lowest level in July; last month — in line with usual seasonal trends — the index declined to GEL3.28 (€1.14), down 7.4% m/m. This was largely driven by a 13.5% m/m fall in the price of Imeretian cheese. 

“Georgian milk prices exhibit high seasonal volatility, mainly related to structural inefficiencies in the country’s dairy production. Poorly planned calving periods (for most cows, in the winter months) limits the milk supply in winter, which in turn sharply increases milk prices during the winter months,” explained ISET experts. 

However, they added in a May 14 blog post, “somewhat lower fluctuations in the Khachapuri Index were observed in 2017.”

“More time is needed to observe if this change is actually happening in Georgian dairy sector. However, a first look at the graph, as well as some recent developments in the Georgian dairy sector, give some hope for the increased modernisation of this sector,” ISET experts said. 

They also note recent FAO data indicating that dairy farming in Georgia is becoming more “productive and profitable”, while another factor bringing down cheese prices — they were down 0.9% y/y) in April 2018 — is the wider use of imported milk powder in winter.