Struggling with change

by Meyer Sosland
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Transition to a privatized economy has not gone smoothly for Kyrgyzstan’s grain industry

by Laurence Walker

Grain farmers in Kyrgyzstan — a small, mountainous republic located on the southeast edge of the former Soviet Union — have had their fair share of problems in recent years.

The collapse of the Soviet Union in 1991 brought independence and opportunities to Kyrgyzstan in the form of privatization. But the pitfalls, such as a lack of financial security and the reduction of the country’s grain export market, seem to outweigh the benefits.

U.S. tobacco company Dimon, which has interests in the southern part of Kyrgyzstan, recently conducted a survey of seven different crops cultivated in that country. The survey showed that wheat came in last in terms of annual earnings per hectare. It found that, on average, a hectare of wheat will bring in a yearly income of just over U.S.$400 for a Kyrgyz farmer, compared with U.S.$2,694 for potatoes or U.S.$6,976 for onions.

Nevertheless, according to Kyrgyz government data and local producers, wheat and barley are still being grown in significant amounts, although the U.S. Department of Agriculture (USDA) has reported a slight decrease in wheat production in recent years. "In the past, the north and south of the country specialized in several particular crops," Alexander Barko, chairman of the First-of-May cooperative, in northern Kyrgyzstan’s Chui province said. "In the south, they specialized in tobacco and cotton, but now demand for such crops has eased. It is proving too expensive, so they are switching to other crops. However, in the north we grow cereal crops — wheat and barley — and this is not changing."

Reflecting on the current state of the grain industry in Kyrgyzstan, Barko said the changes that have taken place since perestroika (the restructuring of the Soviet economy) have been mostly negative.

"In Soviet times, people used to earn enough money from farming to live comfortably. Also, most importantly, pensioners were looked after. There was always help and money for them — they were well taken care of. Now, when you can’t work the land anymore, you suffer. Pensions are very small."

Kyrgyzstan has always imported Kazakh wheat. This is a somewhat controversial subject, with farmers angry at what they see as oversaturation of the market. Ministry officials in Kyrgyzstan see the wheat imports as a necessary evil.

In 2005, 1,000 tonnes of wheat were reported to have been sent by Kazakhstan to Kyrgyzstan in order to help with supply in the wake of a revolution in March of that year, which resulted in the country’s president, Askar Akiev, having to flee to Russia and a new leader, Kurmanbek Bakiev, taking the helm. Political instability ensued, but government data reported almost no drop in output following the change in power. The revolution appeared to have little impact on the average farmer, which has many producers wondering why so much wheat was imported.

"Last year, due to the political situation, some farmers didn’t pay as much attention to their crops as perhaps they would usually," said Ulan Tungatarov, deputy head of the department for purchasing, processing and marketing at the ministry of agriculture, water resources and processing industries. "This did have some minimal impact on grain cultivation, but on the whole there was no notable drop in output."

Tungatarov explained that Kazakhstan has always exported wheat to Kyrgyzstan.

"It’s a better quality than our wheat – better for making pasta and bread," he said. "Kyrgyz wheat is soft, so we always mix it with Kazakh wheat. We do not grow enough wheat or barley to export. Also, since we cannot grow wheat of the quality grown in Kazakhstan, we will have to import Kazakh wheat in order to mix it with our local produce to make flour.

"In the past, the various Central Asian countries had their specializations. Uzbekistan grew only cotton, and so it imported grains from Kazakhstan and Kyrgyzstan. Kazakhstan never imported grains from us – but we imported Kazakh grains. Due to the Kyrgyz climate, we can never grow the same quality of grains as Kazakhstan. Uzbekistan has begun growing grains in recent years, but it has similar climatic problems to Kyrgyzstan and also has to import higher quality produce from Kazakhstan."

Despite this reasoning, Barko said the high volumes of Kazakh imports were taking their toll on the local farmers.

"Kazakhstan exported wheat to Kyrgyzstan last year, and it was sold at a very low price here," Barko said. "As a result, Kyrgyz farmers who planted wheat last year basically went bankrupt." Presently there are no government plans to support the Kyrgyz wheat farmers.

"It is possible to develop some sort of program to improve wheat quality in Kyrgyzstan, but why do this when it can be imported cheaply from Kazakhstan? There’s no reason for it," Tungatarov said. "For the amount it would cost, it would be more worthwhile to invest in other areas of agriculture, in other crops."

In regard to the current crop, Barko said there had been some problems but they were relatively minor. "Winter crops suffered from the cold weather this year. A lot of winter wheat and barley, especially in our region, was lost."

He explained that farmers had planted their crops in dry soil and the seeds had simply dried up due to the lack of moisture.

Barko’s First-of-May cooperative is one of the few remaining cooperatives in northern Kyrgyzstan. It owns 1,653 hectares (ha) of land, which this year includes 437 ha of grass and clover for feed, 1,003 ha of cereal crops, 15 ha of maize for seeds, 53 ha of sugar beet, 65 ha of soybeans and 41 ha of sugar beet for seeds.

"Sometimes we change what we plant," Barko said. "This year, for example, we planted 100 hectares of jubilee maize, more than usual as we had more seeds. This is also the second year for us growing soybeans."

Kyrgyzstan is not expecting great changes in its grain sector in the foreseeable future, with barley being a possible exception.

"There were plans to use barley for malt production," Tungatarov said. "There are two regions in Kyrgyzstan which produce barley of a very high quality. However, there are currently no malt producers so it’s just used for feed.

"In 10 year’s time, we will still be importing wheat from Kazakhstan, because we’re never going to be able to produce the necessary quality of wheat. As for barley, there is the possibility that we could be producing malt for beer production; there are definitely opportunities for this."

Other trends that could occur are increases in planted area for maize and soybeans, he said.

"It would also be possible for us to build new flour mills, but we have no particular plans to do this at the moment," Tungatarov said. "We have a lot of small mills, especially in the southern regions."

A new minister of agriculture, water resources and processing industry, Azim Izabekov, was appointed by Kyrgyz president Kurmanbek Bakiev in May, and it is generally expected that he will make some changes in agricultural policy.

"He will have a fresh and young perspective of Kyrgyzstan’s agricultural situation," Tungatarov noted. "The problems faced by the last minister will stay the same. However, he may have different ways of dealing with these problems."

On Aug. 4, the government released a progress report on the current crop. It showed that 269,300 ha of grains had been harvested in Kyrgyzstan — almost half of the country’s 633,800 ha — with an average yield of 25.7 quintals (2.57 tonnes) per ha and an output of 692,800 tonnes.

Government crop estimates for 2006 forecast total wheat output at 1.07 million tonnes and barley at 245,000 tonnes, up from 972,000 tonnes and 234,100 tonnes, respectively, in 2005. The Chui province is by far the largest wheat and barley producer, with 148,000 ha and 57,000 ha, respectively, planted in the current crop year. This compares with the second-largest producing region, Issyk-Kul province, which planted 85,000 ha of wheat and 24,500 ha of barley this year, according to government sources.

Data released by Kyrgyzstan’s deputy minister of agriculture, Temirbek Kulov, at the end of June showed that flour milling made up 15% of the country’s food production volume. The government plans to increase daily flour production from the current level of 700 tonnes to 900 tonnes by 2010, with the possible help of foreign investors.

Laurence Walker is a British freelance journalist. He can be reached at