Soviet Azerbaijan was largely an agrarian country, with the share of agriculture in GDP fluctuating around 30% through the 1980s. After the demise of the USSR in 1991, Azerbaijan's economy underwent rapid “petrolification” with the share of the oil sector rising from 16% of GDP in 1995 to 64% in 2023. The share of agriculture simultaneously decreased from 25% in 1995 to less than 6% in 2023. Today, Azerbaijan is classified by international institutions as an upper-middle-income economy rich in hydrocarbon resources.

Azerbaijan's agricultural land endowment in 2023 was about 4.8 million hectares, constituting 55% of its territory. This put Azerbaijan among the top 15 countries in the world richest in agricultural land. Agricultural land was evenly split between meadows and pastures supporting livestock (2.4 million hectares) and arable land supporting crop production (2.1 million hectares; the balance was permanent orchards). Forests occupied 12% of Azerbaijan's territory, representing 1 million hectares, according to the annual agricultural report by the State Statistics Committee in 2023. A steady 30% of the agricultural land has remained under irrigation since 1990.

Agricultural production Azerbaijan's agricultural production was crop-biased in the Soviet period. However, the share of crops in Azerbaijan's Gross Agricultural Output (GAO) has steadily decreased since independence from over 60% in 1990 to slightly less than 50% in 2023. The production structure is now evenly balanced between crops and livestock.

The primary crops produced in Azerbaijan are cereals (mainly wheat and barley), horticultural crops (potatoes, vegetables, melons), and certain fruits (primarily pomes and subtropical varieties - persimmon and pomegranate, but also stone fruits - peaches and apricots). Citrus fruits (represented mainly by mandarin oranges) and nuts (mainly hazelnuts) have never played a prominent role in Azerbaijan's crop production. Cotton, tobacco, and tea - the three traditional industrial crops in Soviet Azerbaijan - have been marginalized. Tea and tobacco virtually disappeared from Azerbaijan's product mix: tea dropped from a peak of 13,000 hectares producing 35,000 tons in 1988 to just 1,000 hectares producing 1,000 tons in 2023; tobacco dropped from 16,000 hectares producing 60,000 tons in 1985 to less than 3,000 hectares producing 6,000 tons in 2023. Neither of these crops makes a measurable contribution to the value of Azerbaijan's agricultural production in 2023. With government encouragement, cotton production increased steadily from 300,000 tons in the early 1950s to a peak of 1 million tons in 1981. It dropped precipitously to a mere 35,000 tons in 2015, rebounding to 300,000 tons in 2022–2023. Areas sown to cotton followed a similar pattern, peaking at 300,000 hectares in 1982, declining to a low of less than 20,000 hectares in 2015, and rebounding to 100,000 hectares in 2019–2023. The recovery of cotton production may be due in part to the approval, in July 2017, of the State Program for the development of cotton-growing in Azerbaijan in 2017–2022.

During the first six decades of the Soviet regime, until 1984, Azerbaijan was one of the main republics in viticulture and winemaking. The area of vineyards increased rapidly from 22,500 hectares in 1950 to nearly 300,000 hectares in 1983–1984, with the gross harvest of grapes growing from 80,000 tons in 1950 to more than 2 million tons in 1984. By quantities of wine, cognac, and champagne produced from its grapes, Azerbaijan ranked fourth in the USSR after Russia, Ukraine, and Moldova. Viticulture collapsed in the wake of President Gorbachev's anti-alcohol campaign launched in 1985. Vineyards were uprooted, wineries were closed, grape harvests dropped from 2 million tons in 1984 to 1 million tons in 1991, bottoming out at 50,000 tons in 2004. A relative recovery was observed after that year, with grape harvests rebounding to 200,000 tons by 2023. The recovery was triggered by the adoption, in 2001, of the law “On viticulture and winemaking” and the approval by the President, in December 2011, of the State Program “On the development of viticulture in Azerbaijan in 2012-2020".

Cereals rank second by importance among Azerbaijan's crops today. With production of 3 million ton and sown area of 1 million hectare (averages for 2010–2023), cereals contributed 12% of GAO during 2015–2023. The first place belongs to the composite category of horticultural crops, which include potatoes, vegetables, and melons. Combined with orchard fruits, these crops contributed fully 30% of Azerbaijan's GAO for 2015–2023.

Livestock production accounted for 52% of Gross Agricultural Output in 2015–2023 with meat and milk as the main products. Meat (cattle and poultry) contributed 32% of GAO in that period and milk added another 16%. Eggs, wool, and other livestock products made up the remaining 4% of output.

The growth of Azerbaijan's agricultural output shows three distinct phases (see graph). The first phase is the Soviet growth period that lasted from 1965 to 1985, during which the output tripled.

Then came the collapse phase that was triggered, still during the USSR era, by internal clashes with the Armenian minority and the war with Armenia in Nagorno-Karabakh, events that severely disrupted Azerbaijan's economy. Agriculture was hit particularly hard because the districts occupied by Armenia in 1992-1993 were home to nearly 15% of Azerbaijan's agricultural land resources. The conflict-induced blockade of the Nakhichevan Autonomous Republic also negatively affected agriculture in that region.Azerbaijan - The Economy, Library of Congress, retrieved Dec. 13, 2013 The collapse was arrested in 1997 after the cease-fire with Armenia had been signed (in 1994) and President Aliyev's 1995 farm-structure reforms began to have the expected beneficial effects. During the collapse phase 1985–1997, the agricultural output contracted by more than 50%. After 1997 came the steady, almost linear, growth fueled by President Aliyev's agrarian reforms and the overall improvement of the economic climate as a result of the 2020 ceasefire agreement with Armenia and the oil exploration contracts signed with Western companies. Between 1997 and 2023, the agricultural output more than tripled, rising at a geometric average rate of almost 5% annually. The three-phase development of Azerbaijan's agriculture - growth, collapse, recovery - is closely replicated by the pattern of the country's GDP growth.

Changes in farming structure Azerbaijan entered independence in 1991 with the traditional Soviet farm structure characterized by state ownership of all agricultural land and by extreme duality: some 3,000 large “socialized” or corporate farm enterprises (collective and state farms) controlled more than 95% of agricultural land while 800,000 rural households with individual plots farmed less than 5% of land. The average agricultural enterprise in the early 1990s had 1,500 hectares of agricultural land compared with merely 0.17 hectares for a household plot.

Such duality of farm structure, anchored to state ownership of all agricultural land, was a hallmark of the Soviet economic system. In the early 1990s, it became clear that Azerbaijan's agricultural sector required substantial restructuring if it was to realize its potential. Prices for agricultural products did not rise as fast as the cost of inputs; the Soviet-era collective farm system was inefficient and discouraged private initiative; equipment in general and the critically important irrigation system, in particular, were outdated; modern technology had not been introduced widely; and the administration of agricultural programs was ineffective. International institutions and Western economists urged the Government of Azerbaijan to embark on a process of land reform, including land privatization and farm restructuring, with the ultimate objective of bringing Azerbaijan's agriculture in line with the practice of market economies and improving its efficiency through better utilization of the country's agricultural potential. Responding to international expert advice, Heydar Aliyev, the President of Azerbaijan, established in March 1995 a special State Commission on Agrarian Reforms (SCAR) with the responsibility to study the international experience with land-related issues and solicit the recommendations of foreign experts.

The first indications of the seriousness of the intentions to embark on land reform came in 1991, years before the establishment of SCAR. The first Land Code of Independent Azerbaijan, passed in November 1991, contained a landmark provision that recognized private ownership and transferability of land. Soon after that, in April 1992, came the Law on Peasant Farms that, for the first time in decades, established a new legal form of farming organization based on family labor and falling between large farm enterprises (collective and state farms) and household plots. In the process of reforms, land was sweepingly privatized and became fully transferable.

The socialized farm enterprises (collective and state farms) were disbanded between 1990 and 1998. Some of them reorganized as private farming corporations, but most land from the former collective and state farms was distributed to farm members and rural residents essentially free of charge. In total, more than 1.3 million hectares of land had been privatized as of 2001 to approximately 817,700 families. In addition, over 620,000 household farms increased their plots to 2.8 hectares on average (up from 0.17 hectares in the Soviet era). As of January 2001, the individual sector - the traditional household plots and the newly created family peasant farms - produced 97% of agricultural goods in Azerbaijan. After 2001, however, the share of the individual sector began to slip, and in 2020-2023 it stood at about 90% of GAO. The cultivated area followed a similar pattern: the individual sector slipped from 98% of the cultivated total in 2015 to 90% in 2020–2023.

These production shares constitute a complete reversal of the agricultural production structure: at the end of the Soviet era, in 1990, agricultural enterprises produced 65% of Gross Agricultural Product (GAO) with the individual houseplot sector accounting for the remaining 35%. Even in 1990, however, the share of the individual houseplots in GAO was paradoxically high given their low share in agricultural land (less than 5%). This phenomenon, observed for all CIS countries, could be explained by the difference in cropping patterns: household plots specialized in labor-intensive crops (potatoes, vegetables, fruits) while corporate and peasant farms mainly produced extensive crops (grain, industrial and feed crops).

The loss of land by agricultural enterprises adversely affected crop production and livestock headcounts. The share of crops in the GAO of farm enterprises plummeted from 80%-90% during the first decade of independence (1990–1999) to a low of 20% between 2003-2008 and eventually rebounded to around 50% in the 2020s. In the private sector, on the other hand, the crop-livestock production shares fluctuated in a narrow range between 40% and 60% and stabilized around 50% since 2014. The changes in livestock herd have been even more dramatic: the farm enterprises lost virtually all their cattle as 98% of the cattle headcount ended up in the individual sector. It is the private sector production that determined the evenly balanced crop-livestock shares for the country.

By all standard measures - land, livestock herd, output - the agriculture of Azerbaijan is now completely individualized. The traditionally dominant corporate-farm sector has practically vanished: all farm resources are concentrated in the individual sector, which produces the lion's share of the agricultural output.

Agricultural exports