As with other economic sectors, agriculture is in the midst of a transition to a private, market-orientated system. But farm privatization is expected to take time, based on psychological as well as economic adjustments.
Agricultural policy. As of early 1994, more than 16,000 private farms had been formed, containing about 6.5 million hectares. Of that total, about 5.3 million ha are devoted to pasture, while grain is produced on only 700,000 ha, or about 3% of the country's total grain area. Grain production on private farms also accounts for only about 3% of the total grain harvest.
Kazakhstan's grain producing farms are quite large compared with those in other F.S.U. countries. Their sheer size has tended to slow the formation of private operations. Kazakhstan's state farms often exceed 30,000 ha, compared with 4,000 in Russia. Meanwhile, privatized farms in Kazakhstan average about 300 to 400 ha, compared with only 40 ha for private farms in Russia.
Farm privatization in Kazakhstan does not include land ownership; farmers receive a 99-year lease with inheritance rights. But ownership of property, such as equipment and livestock, is permitted.
Further farm privatization is expected to proceed slowly for several reasons. As of late 1994, interest rates had skyrocketed to 300%. In addition, most private farms have no grain storage facilities and must sell grain immediately after harvest or pay high storage fees to state elevators.
Lack of access to appropriate equipment also discourages the formation of private farms. The agricultural equipment currently in use was designed for the huge state farms and is inefficient for smaller operations.
Between 1990 and 1993, the state encouraged farm privatization by offering financial support, but was forced to withdraw that support in the past two years because of the country's sagging economy. With high market interest rates and a shortage of government assistance, newly formed private farms find it difficult to compete economically with the state-owned operations. Workers on state-owned farms also have tended to prefer the security of the old state system to the inherent risk and uncertainty of the private sector.
Still, some private farms are surviving, including those established in the first wave of privatization, when interest rates were low and government support was available. Kazakh-stan's successful private farmers also have developed good contacts with nearby state farms to obtain supplies and have access to good roads, a local elevator and a convenient local market.
Grain marketing. After independence in 1991, Kazakhstan continued to implement a government grain procurement system. But with economic liberalization, the amount of grain procured gradually declined to about 58% of total production in 1993.
In the same period, a private grain market was developing, consisting of a free-market exchange in Almaty where some 1.5 million tonnes of grain was traded in 1993. In addition, about 1,700 grain brokers and agents as well as commercial companies operate throughout the country.
The private market offers producers another outlet to sell. Although free-market prices generally are lower than government prices, the private commercial trade has ready money to pay for the grain; a shortage of government funds means producers often must wait for cash payment. But the government can provide as payment fuel and other inputs, which the private trade does not offer.
In 1994, the government announced it would abandon the procurement system beginning with the 1995 crop in favor of free-market auctions at various regional centers; the announcement coincided with a decision to remove price controls on bread. Under the auction system, the government will continue to procure grain, but its agents will bid on equal terms with the private trade.
Trade. Kazakhstan's primary trade partners are other F.S.U. countries, and in the past two years, wheat trade has moved toward commercial terms.
Under the Soviet regime, Kazakhstan was required to deliver specified quantities at set prices to the central state; as of July 1993, Kazakhstan continued to sell bread wheat to other F.S.U. countries at about U.S.$55 a tonne, or about 42% of the comparable U.S. export price at that time.
But in September 1993, Kazakhstan reportedly decided to raise its wheat prices closer to world market levels, or about U.S.$110 to $125 a tonne, f.o.b. The country also began to require a portion of the proceeds in hard currency and a 50% payment up front.
Nonetheless, some barter trade has been retained, primarily with Russia, which supplies energy and machinery. Even though Kazakhstan is rich in energy resources, its distribution infrastructure is connected to Russia.