The agriculture sector got back on track in 2013, growing in the double digits thanks to an improved harvest. The future, however, lies in processing.

The Asian Development Bank (ADB) reports that the agriculture sector grew by 10.8% in 2013, a major turnaround following a decline of 18.5% in 2012, a result of unfavorable weather conditions damaging the harvest. The ADB also predicts growth in the sector of 4% in 2014 and 4.4% in 2015 on the back of the Agribusiness 2020 program, a plan aimed at diversifying the sector beyond grain production, and thus reducing the impact of adverse weather patterns. Crops currently account for 80% of all agricultural exports from Kazakhstan, according to KazAgro, a state holding tasked with developing the agro-industrial matrix, which also plays a large role in financing the plan, including through the issuance of a Eurobond, the first by Kazakhstan since 2007.

And with a landmass that exceeds that of Western Europe, there is certainly room for the sector to expand into. According to the latest census, carried out in 2006, Kazakhstan has 76.5 million hectares of agricultural land, 61% of which is composed of permanent pastures and 32% of which is arable. The country's wheat production varies, but reached approximately 15 million tons in 2013, up from 9.8 million tons in 2012, but still off the 22.7 million tons reaped in 2011. The country also produces barley, oats, corn, and rice, and is home to a large numbers of cattle, which yielded 934,100 tons of meat production in 2012.


Wheat production is expected to have come in at around 15 million tons in 2013, up from just 9.8 million tons in 2012 following drought conditions, according to the USDA Foreign Agricultural Service. The weather was kinder to Kazakhstan over 2013, with more autumnal rains and snow cover boosting soil moisture levels, with exports also predicted to rise over the 2013/2014 financial year to 7.5 million tons from 6.5 million tons in 2012/2013. Toward the end of 2013, the Ministry of Agriculture forecast a decline in the wheat planted area by 2% to 13.1 million hectares. This is a direct result of government plans to diversify the sector's exports away from wheat, as the crop is difficult to transport to distant markets. According to the USDA Foreign Agricultural Service, wheat planted areas currently account for 64% of all planted areas in the country. Following drought conditions in 2012, however, the government certainly didn't leave the wheat sector to its fate, issuing a $400 million budgetary loan to KazAgro to boost lending to farmers and enhance the rate of harvest in 2013. As well as extending loans in order to further alleviate the effects of the 2012 drought, KazAgro was mandated to carry out forward purchasing with a budget of $86 million. A growth in wheat exports is also on the books for 2013/2014, although a fall in demand from Russia, as well as growing competition from Russian exporters, mean Kazakhstan missed out on any major gains. Indeed, Kazakhstan has struggled to diversify its export partners in the wheat area, with only 20% headed to non-former Soviet Union countries compared to over 40% just a couple of years ago. The government is now looking to China as a potential growth market, and an agricultural program looking at the 2013-2020 period calls for a grain export terminal to be built on the border.


According to figures released by the Statistics Agency, there were 5.8 million head of cattle in the country on January 1, 2014, up 1.2% compared with the same date in 2013. Horses, which readers should remember are common on menus in Kazakhstan, increased in count to 1.7 million, up 1% on the previous year. The number of sheep dipped slightly by 0.1% to 15.1 million head, goats by 3.8% to 2.4 million head, and pigs by 10.5% to 924,000 head. The number of birds at farms, according to the Statistics Agency, hit 34.4 million, up 2.8%, and were responsible for the production of 3.67 million tons of eggs in 2012. According to a statement made by the Ministry of Agriculture, Kazakhstan exported 4,500 tons of meat and meat products in 2013, a figure that will grow to 10,000 tons in 2014, including 5,000 tons of beef. The sector is also set to gain strength as it becomes more organized. According to the Ministry, organized farms account for 31% of the country's cattle, with the rest accounted for by small farms.


Kazakhstan is currently operating under the Agribusiness 2020 program, a plan that aims to boost financial recovery, increase the affordability of products, ramp up the number of services on offer to agro-industrial enterprises, shore up the state system of support for producers, and improve the state's agro-industrial complex management system. Approved in early 2013, it is hoped the program will help to produce a new breed of agribusinesses that will help to spread the risks that the agriculture sector currently faces by upping domestic demand and widening the export basket. KZT3.12 trillion ($19.9 billion at end-2013 prices) has been earmarked for the seven-year program, including KZT622 billion from the budget, KZT300 billion from bond loans, and the rest from KazAgro. The plan also envisages the attraction of KZT10 trillion in direct investment to the sector through smoothing out the taxation system and improving technical regulations, all of which will contribute to the plan's targets of increasing the volume of agricultural production 1.5 fold, growing productivity per head three fold, and expanding export earnings by 20%. It is also hoped that increased domestic production will boost self-sufficiency in basic food groups to 80%.


In May 2014, KazAgro made a return to the international bond market on the back of its already-registered $2 billion debt issuance program, with its maiden €600 million Eurobond offering at a five-year tenor and coupon rate of 3.255%. The deal did much to raise international investor awareness on the opportunities on offer in Kazakhstan, with KazAgro also having benefited from the long-term absence of Russian issuers. The funds raised, which have significantly diversified the holding's currency debt portfolio, are now set to be directed toward the Agribusiness 2020 plan. And Kazakhstan is also getting help from the World Bank, recently in the form of a $102.9 million loan agreement from the International bank for Reconstruction and Development (IBRD). The loan is aimed at supporting the efficient use of water and the modernization of irrigation systems across the vast countryside, in a project that is worth $343 million in total. The project should see 100,000 hectares benefit from improved irrigation, saving 300 million cubic meters of incremental irrigation water per year, according to the World Bank. Arguably one of the economy's most significant sectors, the government is not resting on its laurels when it comes to its development. The significant Agribusiness 2020 program will see the industry flooded with liquidity and paraded down the investment catwalk. It's likely a robust agribusiness sector will emerge on the far side of 2020, both contributing to exports and also acting as a consumer for local raw goods. Boosting crop diversity will help to diminish the risk associated with the sector's focus on wheat and set the country on the path to success.