Kazakhstan 2017 | AGRICULTURE | REVIEW

Kazakhstan's vast steppe has long been a fertile area, and the government has grand plans to utilize it fully.

Investment in Kazakhstan's agriculture sector increased 50% in 2016, amounting to an approximate USD700 million, compared to just under USD450 million in 2015. Renewed government dedication to the sector showcases a strong commitment to capitalizing on the country's natural bounty and plentiful resources, all while supporting a key segment of the local economy.

Farming has long been a national tradition, and with diversifying the economy hot on the agenda, agriculture has the potential to become the country's next largest source of income.

The State Program of Agrarian and Industrial Complex Development for 2015–2017 has outlined an ambitious goal to increase livestock production by 40% and crop production by 30%, all while ensuring that farmers receive enough financial incentive to improve efficiency. Under the guidance of this program, the number of farmers receiving state financial support will grow from 67,000 to 500,000.

While Kazakhstan has been on a consistent growth trajectory for over two and a half decades, government support has played a vital role in boosting overall agricultural output. Recently overcoming a series of challenging reforms, progress in the sector is newly unobstructed and expected to continue on the up. Experts estimate that by 2021, the gross output and value of agricultural products will grow by USD3 billion to reach USD12.9 billion.

In September 2016, the president instructed the government to allocate nearly USD300 million of additional funding to the sector in order to stimulate even faster growth. In 2016, local farmers harvested a total of 3.6 million tons of vegetables and 2.2 million tons of fruit, a combined 511,000 tons more than in 2015. Meanwhile, the gross harvest of oilseeds came in at 2 million tons, and the gross grain harvest was marked at 23.7 million tons, almost 4 million tons more than in 2015. Approximately 8 million tons of grain were exported in 2016, posting a significant 12% increase YoY. In addition, local farmers broke the records for rice, apples, and cotton harvests. At the same time, farmers grew and harvested sugar beet in northern Kazakhstan for the first time in two decades. Total production of sugar beet amounted to 14,000 tons, with an average yield of 350kg per hectare, 15% higher than the average national indicator.

Overall, food production in 2016 grew by 3.8%, exceeding USD3.6 billion in value. Agricultural production grew by 4.5% during the first 11 months of 2016, primarily due to increased crop and livestock production. The livestock industry in particular saw an increase in herd size of about 1.3% on average, while meat and milk production grew by 3.5% and 3.1%, respectively. Dairy horse breeding in Kazakhstan also continues to occupy an important part of local livestock production. The fermented kumys drink remains popular not only as a dairy beverage, but also as an important raw material in the production of creams, ointments, tonics, and anti-aging serums, which are witnessing increased demand in Europe and the US. In addition, kumys can be used as an equally beneficial breast milk alternative.


By providing preferential loans and offering leased machinery to support local farmers, KazAgroFinance, the sector's financial backer, is also aiming to encourage farmers to modernize their operations. KazAgroFinance has already issued grants and loans to several producers around the country. To be eligible for financial support, Kazakhstan's agricultural operators are requested to present projects that incorporate innovative technology and can be replicated sector wide.

The entity is open to projects in a variety of segments within the agriculture sector, including but not limited to meat production and the dairy industry. KazAgroFinance inspects the technical requirements of each project and also ensures that the minimum local content in each joint project crosses the necessary 51% threshold.
Due to the large amount of funding necessary for some of the more advanced projects, KazAgroFinance carefully assesses and plans the entire process. The lender has recently backed the launch of a project for the production of freeze-dried powder for horse milk in the Karaganda region. That project weighed in at USD2.5 million and is being headed by Eurasia Invest Limited, also implemented with KazAgroFinance funding. The enterprise was expected to begin exporting products to Russia in February 2017, while local manufacturers work to establish the delivery of horse milk products to China and Europe.


The goal of bringing more of Kazakhstan's agricultural offering to the global market has come into focus as local operators recognize the lack of consistent infrastructure and affordable logistics. There is much room for improvement, which bodes well for the country as it races to become competitive in the region and beyond.
Currently, Kazakhstan is working to develop better roads and establish key railways that will be able to cover the long distances necessary to move agriculture products across the country. One company in particular is taking strides to smooth out the transportation aspect of agricultural production, while developing complementary logistics facilities at major hubs. “Eurasia Holding creates logistical process and distribution channels for the whole country. We want to cooperate with small and medium farmers and give them access to our logistics and processing channels,” Almat Berdenov, Managing Director of Eurasia Agro Holding, explained to TBY. “We want to create big infrastructure where every small and medium farmer will feel comfortable doing their farming locally.” In this way, local farmers would no longer need to travel abroad to market their goods, but instead have the ability to sell their products through Eurasia Agro Holding infrastructure. The company also prides itself on a heavy focus on R&D, having invested USD2 million in research toward the improvement of Kazakhstan's agriculture infrastructure thus far. One recent initiative studies how to increase the efficiency of exports through more advanced technology at local plants. To that end, the company has plans to build a meat processing plant that canproduce up to 40 tons per day, preparing output to be ready for export with maximum efficiency.

International operator Danone also notes the size of the country as a challenge when considering transportation to and from the global market. Since entering the local market in Almaty in 2010, Danone has commissioned its own plant to produce dairy products. Production at the plant has increased from its original amount to fivefold, or 11,000 tons per year. Danone produces 50 different products in Kazakhstan under several brands and employs over 300 people. In 2017, Danone is seeking to establish a better method for delivering perishable items to every corner of the country, emphasizing the need for refrigerated trucks and warehouses that can accommodate the distances involved. In an interview with TBY, Renaud Chamonal, General Manager of Danone Kazakhstan, explained, “Having a local factory is an advantage as it gives us some autonomy and most of our costs are local. For example, our employees are paid locally and our milk comes from local farmers. This cuts down on our foreign currency exposure.” Committed to supporting local investors, Danone works to use as many local suppliers as possible, thus encouraging local suppliers to “reinvest in their businesses, improve their quality standards, and grow their product ranges to meet our requirements,” Charmonal added. Looking ahead, the company will continue to expand its local portfolio, focus on R&D, and seek ways to connect better with its customers through personalized surveys. “It is crucial to understand our Kazakhstani consumers,” he concluded.


Kazakhstan's potential as an agricultural products exporter is predicted to grow even further as the country's logistics improve. However, forming key partnerships abroad is also set to facilitate the process of putting Kazakhstani products on the export map.

Kazakhstan's export of agricultural products to the UAE has been an area of particular interest for investors. Increasingly, Kazakhstan's agriculture sector is positioning itself as a stepping stone toward other bilateral, mutually beneficial ties with the UAE. It was with Emirati support that President Nazarbayev established the Islamic Organization for Food Security (IOFS), headquartered in Astana. The inaugural session of the IOFS took place in April 2016. The entity, which was incorporated under the umbrella of the Organisation of Islamic Cooperation (OIC), will “work to coordinate efforts of member states of the organization in the field of agriculture and food security, develop strategies and programs on agriculture development, and provide technical assistance to the states in need, as well as take practical measures to combat hunger,” according to local press. The establishment of the entity is a critical step toward stronger collaboration between OIC states when it comes to food security, and solidifies Kazakhstan's role as an important actor in the region.

Kazakhstan is also collaborating with the US to strengthen the local sector while simultaneously reaching out to a new market. In 2016, the US began cooperating with the Kazakhstani Ministry of Agriculture, as well as a number of large grain producers, to increase the production of nutritionally fortified wheat. Through the partnership, the US seeks to provide new investment geared to improved technology that could enhance Kazakhstani crops, improving the nutrition local food provides, and, through exports from Kazakhstan, contributing to the health of people throughout Central Asia. Additionally, thriving US-Kazakhstan relations are contributing to the improvement of the local animal husbandry sector. In recent years, over 8,000 cows and bulls were imported into Kazakhstan from the US to improve the quality of local livestock. With strong bilateral relations across diverse regions, Kazakhstan's agriculture sector is bound to see not only dramatic and positive changes, but also new directives as the country's local producers look outward toward innovative logistics channels and new markets.