REVIEW

The Endless Fields

After a record-breaking wheat harvest in 2011, Kazakhstan is now looking to fill in more areas of the agriculture value chain and rebuild its traditional strength in animal husbandry.

Agriculture is Kazakhstan’s leading non-extractive and export-oriented industry, the full potential of which remains to be realized. To seize the natural resource opportunity of the country, the authorities have defined three main objectives that define the overall national agriculture strategy: improving productivity, ensuring food security, and increasing the export potential of the sector. The Ministry of Agriculture has designed a program for the development of the sector between 2010 and 2014, which involves rehabilitating unused arable land, increasing output, diversifying crops and livestock, and modernizing and enhancing state support. In addition to Kazakhstan’s traditional produce such as grain, the program also focuses on achieving full self-sufficiency for every type of agricultural product. “Priority has been given to the industrial-innovative development of potentially competitive sectors such as the export and deep processing of grain production, meat and related products, poultry, the cultivation and processing of oil seeds, dairy, sugar, fresh fruits and vegetables, and aquaculture,” Asylzhan Mamytbekov, Minister of Agriculture, told TBY in an interview.

GRAIN EXPECTATIONS

Kazakhstan produces high-quality hard grain, its major non-extractive export, which makes up 2% of the country’s total exports. The country is among the 10 largest wheat producers worldwide, and sixth largest exporter of the crop. Its large land area, low production costs,
and freight advantage provide an opportunity for moving up the value chain with more processed wheat products.

In 2011, grain production in Kazakhstan totaled 26.9 million tons, while exports stood at 15 million tons. According to 1Q2012 results, in FY2011-2012 Kazakhstan exported 5.6 million tons of grain and 2.8 million tons of flour. The Grain Union of Kazakhstan estimates that this amount will reach a total of 13 million tons—9 million tons of grain and 4 million tons of flour—by the end of the coming year. The Ministry of Agriculture has noted that the sowing campaign in 2012 will cover 21.5 million hectares, 16.2 million of which will be grain crops.

The country’s traditional export markets are Uzbekistan, Tajikistan, Afghanistan, Azerbaijan, and Kyrgyzstan. However, Kazakhstan is seeking to expand the number of export destinations. During President Nazarbayev’s first official visit to Indonesia, Kazakhstan’s Bereke Grain Company signed a memorandum with Indofood regarding grain supplies. With an annual consumption of 3.5 million-5 million tons of grain, Indonesia is seeking to diversify its suppliers; the Kazakhstani side now expects to export up to 300,000 tons to Indonesia initially.

However, logistics remains a pressing issue not only for distant markets like Indonesia, but also for closer and larger export destinations such as Russia. “[Kazakhstan] is the furthest country from the sea worldwide. Without a seacoast, the most serious issue Kazakhstan faces is the transportation of commodities,” Michele Trincia, President of CANAM, told TBY. As Kazakhstan’s grain producers are located in the north, the available grain-carrying cars are allocated for the domestic transportation of the crop. Therefore, one of Kazakhstan’s priorities concerning grain exports is to expand its railway fleet to supply to its most important Customs Union partner, Russia.

LIVESTOCK UPDATE

According to the Organization for Economic Cooperation and Development (OECD), demand for meat and related products has been growing steadily around the world, particularly in developing countries, for the past three decades. While the majority of global meat exports come from developed countries, emerging economies are increasing their share of exports. In this regard, Kazakhstan has natural strengths,
including abundant land resources, low production and processing costs, and affordable labor. With about 182.2 million hectares of natural pastures, of which only 42%-43% are currently in use, Kazakhstan could tap into this potential by leveraging its regional presence in markets such as Russia and China. For 2012, Russia alone set its chilled and frozen beef import quotas at 30,000 and 530,000 tons, respectively.

Since independence, the number of cattle in Kazakhstan has fallen from 9.7 million to 6 million heads, according to the Kazakhstan Statistics Agency. Annual production decreased to 396,090 tons in 2010, 45% down on 1990 values. Meat imports, on the other hand, grew to 20,000 tons in 2011, more than three-fold compared to the 1990 figures.

Kazakhstan has set its sights on becoming a meat export power by 2020. This objective aims to increase export-oriented beef production to 60,000 tons in the next five years, and to 180,000 tons by 2020. In February 2012, an initiative to increase the country’s beef export potential within the framework of the State Program for Livestock Development was launched. To this end, about KZT130 billion ($875 million) will be allocated to the project during the next five years.

Despite many natural advantages, there are also a number of challenges in the agriculture sector. Approximately 82% of the country’s cattle are concentrated on small-scale individual farms, while only 18% of the country’s cattle are found on larger-scale, internationally competitive farms. Furthermore, Kazakhstan has just 2% pedigree livestock—a low figure, compared to about 80%, 75%, and 72% in the meat export powers of the US, Brazil, and Argentina, respectively. Among other challenges are low meat yield, which is attributed to poor veterinary care, outdated breeding methods, and low-quality feed.

Kazakhstan will import 72,000 head of the world’s best beef cattle to enhance the gene pool of its cattle livestock. “We imported 400 head of Aberdeen Angus breed calves from Australia,” Nurlan Smagulov, President of Astana Group, told TBY in an interview. “We will participate in another auction in Australia to purchase 2,000 more calves from Adelaide, one of the largest auctions in the livestock industry. We have plans to develop the livestock breeding business into a full-fledged operation and become a source of quality beef in the region.” By expanding on its strengths and attending to its weaknesses, Kazakhstan is bound to trigger rapid growth in the agriculture sector. Meanwhile, a continued focus on exports is expected to propel the country into the role of a production base and source of quality products.