Assessing USDA’s aid to Armenia

URBANA—Since 1996 the U.S. State Department, through the USDA, has had a program designed to help revitalize the rural economy of Armenia by assisting local agribusiness and food processors in evaluating the export market potential for the various food products that they produce as well as providing the necessary technical and financial assistance required to meet the export market’s requirements. Researchers at the University of Illinois have been asked to assess the program’s apparent success.

“U of I was chosen because we can provide an objective impact assessment and evaluation as we are one of the few major land grant universities that have never been involved with the project,” said Hamish Gow, economist in the College of Agricultural, Consumer and Environmental Sciences (ACES) at the U of I.

A team will be sent to Armenia this fall to conduct interviews and talk with farmers and companies to assess the program’s impact and determine whether or not the USDA model has worked.

Hamish Gow and Steve Pueppke, an associate dean in the College of ACES, will head the team. Pueppke will primarily be heading the local impact assessment of the program created by USDA, while Gow will be looking to determine the applicability of the program’s model for application in other Central Asian countries. “The State Department has already initiated a pilot of this model in the neighboring country of Georgia and U.S. Embassy in Moscow has expressed an interest in following suit,” Gow said.

Gow and Pueppke recently returned from an initial planning and evaluation trip to Armenia, where they visited a range of local food processors, agribusinesses, and rural producers to gauge who should conduct the assessment of the USDA’s involvement and its impact in Armenia.

“In the late ’80s the country suffered a massive earthquake that was followed in the early ’90s by a war and a period of several years when they didn’t have any electricity in the country,” said Gow. “By 1995 the country was in a shambles. Currently, over a third of its population of around 3 million people lives below the international poverty level of $2 per day, and I hate to think how many were below that level back then.

“Prior to ’96, the U.S. was trying to help Armenia from the ground up using the traditional U.S. land grant extension model,” said Gow. “They assisted farmers, showing them ways to improve yield, control pests, etc. But the problems came when the product needed to be marketed, as this model failed in assisting producers and processors develop sustainable and profitable markets. It was a traditional supply-driven approach to technical assistance that had assumed incorrectly that once someone produced a product, a suitable market would magically appear. This did not happen.

“So in ’96 the USDA changed its tactics to a demand-driven model, and seven years later, it appears that their new market-driven approach seems to be working well. The new strategy is to assist and encourage the food processors and manufacturers to produce what the market wants, what Armenia is good at producing and can produce well, and can consistently deliver to their customers at specification.”

This new strategy to help Armenian companies and entrepreneurs rather than farmers, ultimately helps farmers because there is a demand for their product.

Gow gave an example of how the USDA helped the Armenian tomato paste industry. “In 1996, an Armenian company was producing tomato paste in an inappropriate package and selling only to Russia,” Gow said. USDA teams helped them research markets in other North American and European countries.” They assisted the company, identifying the client’s requirements in a tomato paste, with respect to pricing, packaging, appropriate product formulations and recipes, labeling, and regulatory requirements and helped them solve these problems. They provided the company financial assistance to purchase or lease the necessary new equipment, Gow said.

“Once sufficient demand developed for the higher quality product, the USDA assisted the company in developing mutually beneficial contractual relationships with nearby tomato farmers,” Gow said. The contractual terms were so beneficial, in fact, that farmers began shipping their tomatoes to the processing plant from over 100 km away, when there was an alternative competing processor less than 10 miles from their fields.”

The USDA has helped restructure several Armenian commodities in addition to the tomato industry. On their trip, Gow and Pueppke toured several sites in the dairy chain. “We visited cheese plants, farms, and collection centers where small farmers take the milk from their cows.”

Pueppke and Gow also toured a number of fruit and vegetable processing plants that produce a variety of fruit jams, including cherry, strawberry, watermelon, and blackberry, as well as frozen products. One problem they were having was designing labels that would appeal to English audiences. Gow is planning to use the jam plant as the focus for a project in one of his undergraduate courses in international food marketing.

“Teams of three students will develop a complete marketing plan for the company,” said Gow. “They’ll do sensory testing on the product, study the legal regulations for exporting the product to the United States, brand it, label it and develop a suitable niche market for the product in the U.S. And, Associate Dean Pueppke and ACE Global Connect will support the winning team of students to travel to Armenia to present their plan to the company in person.”

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