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(Last updated: 11 Nov 2011)
Trends and opportunities
The market
Land and climate
Agriculture is an important pillar of the Kazakhstan economy. Kazakhstan is a traditional exporter of high-quality food grain and ranks among the 10 largest grain producers. The total area of agricultural land in Kazakhstan is 222 million hectares, including 24 million hectares of arable land – 188 million hectares of pastures, five million hectares of hayfields and approximately 4.5 million hectares of fallow land.
The country covers several different agro-ecological systems:
- The north, where most grains are produced, is suitable for rain-fed agriculture
- The centre-south is desert and semi-desert, with mountains in the south and east of the country
- In the south, agriculture is mostly dependent on irrigation (1.2 million hectares)
- The east is traditionally planted with oil-seed crops (mostly sunflower)
- At the same time, harsh climatic conditions (cold winters, hot summers, strong winds) and comparatively low land quality make the potential of the arable land is significantly lower than in North America and Western and Central Europe.
Economic indicators and challenges
According to official statistics gross agricultural output was over US$9.5 billion in 2010. This represented a doubling of output since 2005. According to the Statistics Agency of Kazakhstan, crops represent 46 per cent of output, mainly cereals, vegetables, potatoes, cotton. Livestock products represent 54 per cent of output.
Despite abundant land resources and increasing agricultural production, the share of agriculture in Kazakhstan’s GDP has fallen to only 4.4 per cent as of 2010 (versus 13 per cent in 1996). This is explained with faster growth in oil and resources industries as well as poor productivity in the agricultural sector (currently, US$3,000 per employee in agriculture).
Agriculture was a key sector during the Soviet period. In the 1950s and 1960s, almost 35 million hectares of Kazakhstan were cultivated under the ‘Virgin Lands Program’, while irrigation was developed in the south. After independence, during 1991-1998 agricultural output contracted by half due to the transition from planned to market economy and restructuring of collective farms. Since 1998, recovery has been rapid in the agricultural sector, particularly in crops. Kazakhstan has increased its main grain export commodity, grain, which is now sold to over 70 countries in volumes of about 5-8 million tonnes annually. (In the 1980s, Kazakhstan was supplying up to 10 million of grains for exports). Kazakhstan is also a leading flour exporter with international sales of 2-3 million tonnes.
Market structure
As a result of the farm restructuring process, small holdings and households have become the main agricultural producers, accounting for more 56 per cent of total agricultural output. Large agricultural enterprises account for 20 per cent of output and collective farms 24 per cent. Households are particularly dominant in livestock production producing about 86 per cent of livestock output. This has represented a constraint on the potential for large-scale increase of headcount.
Nevertheless, agriculture in Kazakhstan has significant potential for development and has shown signs of progress in recent years. Crop yields can be increased further, although Kazakhstan has reached a good yield of 1.85 tonnes per hectare in 2011, up from one tonne per hectare in 2003. In livestock, Kazakhstan has the largest amount of permanent pasture per animal in the world, which can serve for year-round feeding. Currently, Kazakhstan has 6.1 million head of cattle, more than 18.7 million sheep and nearly 32.9 million of poultry. The cattle herd has decreased from 10 million to six million during past 20 years. However, the government is providing financial support to reverse this decline. In 2011, Kazakhstan announced a plan to import over 7,000 pedigree cattle, with the United States and Canada as the main suppliers. The first shipments of Australian pedigree cattle arrived in November 2011.
Although landlocked, fish are an important part of the country's agricultural sector. Kazakhstan’s reservoirs, rivers and the Caspian Sea are rich in valuable fish species such as sturgeon (beluga, stellate sturgeon), pike perch and trout.
Food processing ranks among the most promising areas for investment. Because of insufficient food-processing capacity, Kazakhstan has to import many of its food supplies. In 2010 only 23 per cent of meat was processed in domestic facilities, 30 per cent of milk, 55 per cent of wheat and barely 2.4 per cent of fruit and vegetables. (Source: Ministry of Agriculture of Kazakhstan). Overall, food processing accounted for only seven per cent of total national industrial output.
However, the sector must tackle a number of problems, including high transportation costs, logistics and infrastructure limitations, access to technology and markets (especially China) as well as availability of credit.
Industry support
Positive factors supporting the competitiveness of Kazakhstan’s agricultural sector are stable macro-economic environment and increasing state support. The Kazakhstan Government is seeking to play a key role in agricultural development by providing tax incentives, credits and subsidies.
In 2002, the Kazakhstan Government launched a large-scale agriculture program including when US$7 billion in financial support over seven years. Public funds were allocated both for direct support of agricultural producers and investment in infrastructure in rural areas. The program was extended for 2010-2014 with an additional US$7 billion. The program includes support for boosting exports of high-quality meat to 180,000 tonnes by 2020, acting as a significant incentive for the development of the local cattle industry.
The government is also supporting the development of transport infrastructure by investing in railroads and expansion of grain terminals on the Caspian Sea.
In 2003 Kazakhstan adopted a land code that stipulated private ownership for agricultural lands. In addition, a single operator – a state-owned holding KazAgro – was established to support agricultural development and oversees public spending in the sector. The holding includes several entities such as Agrarian Credit Corporation (which channels public funds into the agricultural sector by providing credits and subsidies), KazAgroFinance (provides government-subsidised leasing for agricultural equipment and breeding livestock), KazAgroMarketing (information and technical advice for rural producers) and others.
Opportunities
Major areas of opportunity for Australian exporters and investors include:
- Supply of pedigree animals and genetic material (the main breeds of interest are Angus and Hereford), artificial insemination and embryo transplant technologies
- Supply of seeds, feed premix and vaccines
- Grain, infrastructure and services
- Agricultural machinery and software
- Farm management technologies and services
- Agricultural consulting services (eg. pasture development)
- Cooperation between scientific research institutions for adaptation of animals on the basis of Australian genetics
The Government of Kazakhstan welcomes foreign investment in:
- Meat and milk production
- Food production with high value-added
- Oil-seed crops, soy beans
- Wool and skin production and processing
- Investment in developing regions, including foreign direct investment in agricultural businesses
Issues/challenges
Some of the issues for potential exporters and investors to consider:
- State-owned firms are key players in the market
- Under-development of large-scale animal farming: most of livestock producers are household plots which lack financial resources
- Landlocked country: no access to open-sea ports, high transportation tariffs in neighbouring countries (particularly, Russia)
- Infrastructure remains underdeveloped, particularly for perishable goods
- To qualify as pedigree, a breeding animal must have a pedigree certificate containing information on three generations on both father’s and mother’s lines
- Low level of development of agricultural technologies, large depletion of equipment
- Weak vertical integration/coordination between production and processing facilitiesUnderdeveloped marketing strategies, particularly for export markets
- Generally high risk of agriculture because of harsh climate
Since 1 January 2011, Kazakhstan is part of a Customs Union with Russia and Belarus. The Union has uniform tariffs (average weighted tariff for agricultural products is about 15.6 per cent). However, there are no tariffs for exports within the Customs Union. Kazakhstan expects to join World Trade Organization (WTO) in coordination with Russia which is scheduled to enter WTO in 2012.
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