Program will subsidize more small farmers, reduce funding for wheat production and increase subsidies for oilseeds.
The key point of this new program is to enroll 670,000 small agricultural farmers into cooperatives with further engagement into subsidizing programs. From 2013-2016, nearly 1% of market participants accounted for 70% of state support, meaning only 68,000 large holdings received government aid during this time. The newly proposed schemes set the main target to ensure reasonable distribution of these funds, so they would be available for small producers as well.
The new program involves significant funding, as the government eyes to pump KZT 423 billion (U.S.$1.25 billion) in the segment of crop farming. In addition, KZT 1.5 billion (U.S.$4.5 million) should be spent on research activities to study land fertility and KZT 131 billion (U.S.$38 million) will be spent on phytosanitary activities in the fields. Additionally, the government intends to enter updated insurance programs, which should cover 100% of grain producers, although the amount of funding for this has yet to be determined.
Perhaps the most important financial point of the new program is that starting next year Kazakhstan will drastically cut funding of wheat production from KZT 7,100 (U.S.$21) per hectare to KZT 600 (U.S.$ 1.78) per hectare. Subsidies for corn also have been reduced from KZT 2,472 (U.S.$7.3) per hectare to KZT 1,600 per hectare (U.S.$4.7), while subsidies for soybeans, rapeseed and other oilseeds have been raised from KZT 7,460 (U.S.$22.1) to KZT 11,918 (U.S.$35.3) per hectare.
By 2021, Kazakhstan’s Agricultural Ministry plans to increase irrigated land area, expanding continuous-flow irrigated land 45%, or 610,000 hectares, to almost 2 million hectares, and flood-irrigated land from 368,000 hectares to 597,000 hectares. This measure should contribute to improvement of average yield, as productivity on irrigated land in Kazakhstan at the moment is nearly 30 times higher compared to non-irrigated land, according to the Ministry.
At the same time, the program has not specified any new targets in terms of production and yield, even though the old program, adopted back in 2013 and named Agribusiness 2020, envisaged a gradual increase in performance up to 21 million tonnes of grain production and 9.1 million tonnes of exports by 2020. In 2016, the country produced 23.7 million tonnes of grain, while exports are expected to be close to 9.5 million tonnes.
These figures are the country’s highest in nearly 25 years, but the plans stated by Kazakhstan President Nursultan Nazarbaev are even more ambitious, as he previously set the task for the government to make Kazakhstan one of the world’s top five grain exporters, primarily focusing on organic grain production.
In the Soviet era, North Kazakhstan production went primarily for domestic use, but now, with nearly 40 million hectares of agricultural land and more becoming available, the country has the ability to feed other parts of the world, Nazarbaev said in a Dec. 1, 2016, press conference.
||| Next page: Focus on resource efficiency|||
Focus on resource efficiency
TNS Export's inland terminal in Petropavlovsk, Kazakhstan.
Photo courtesy of SCAFCO.
Photo courtesy of SCAFCO.
Every year Kazakhstan is oversupplied with wheat by at least 2 million tonnes, while also experiencing a shortage in forage crops of 1.2 million tonnes.
“As a result, we decided to cut area under cultivation of wheat from 12.4 million hectares in 2016 to 10.1 million hectares in 2021,” Myrzakhmetov said. “This land should be used for production of barley and oats in the first place. However, the new program doesn’t involve a decrease in the volume of production and export of wheat.”
Myrzakhmetov promised that the reduction of land under cultivation for wheat would not mean a reduction of wheat production. On the contrary, by 2021 the Ministry expects a slight increase in wheat production, compared to the current level, he said, while not disclosing any specific forecasts.
Meanwhile, the Agricultural Ministry expects an upsurge in other types of grain output. For instance, production of barley through 2021 will increase by 1.2 million tonnes, oilseeds will rise by 1 million and corn will increase by 257,000, Myrzakhmetov said.
At the moment, any growth in grain production is limited with a lack of an export market, as domestic demand is only 10 million tonnes per year. To cope with this problem, Kazakhstan is establishing a new Export Center. The main task of this organization will be promoting the country’s agricultural products in new markets and looking for new sales opportunities.
In addition, the profitability of grain producers could be enhanced with the development of a domestic agricultural machinery industry. As the Minister explained, Kazakhstan already is seeing improvements in machinery such as combine harvesters and tractors, and the government is planning to support this trend, but so far it is not clear how.
“Today, large agricultural holdings are opting for expensive foreign equipment,” Myrzakhmetov said. “This resulted in slowing the process of agricultural machines fleet modernization in Kazakhstan. However, nobody talks now about the restrictions on imports of foreign equipment. We just need to move forward developing our own production capacities.”
The new program also envisages the adoption of organic standards for agricultural production, including grain. Prior to 2016, Kazakhstan had no legal framework on any type of organic products, but last January Nazarbaev signed a bill introducing basic principles of this segment operation.
In 2016, the issue of organic production was discussed several times by the country’s top officials. The government plans to adopt the first certificates for production of organic grain in 2017. At that point grain producers would be able to apply to register their production in accordance to organic standards. However, certain details on this system are not yet available.
||| Next page: Some dislike the program |||
Some dislike the program
Farmers have expressed concern that by bringing additional pressure on the wheat industry, Kazakhstan could, in the future, be left without any export supplies.
Photo courtesy of Adobe stock.
Photo courtesy of Adobe stock.
“We believe that such a decision may be too hasty,” said Turemurat Utepov, CEO of the Kostanai-based grain production company LLP Kairat, at the Conference of Farmers and Entrepreneurs on Dec. 11, 2016. “Kazakhstan wheat is a globally well-known brand. By discouraging its cultivation, we chop off the branch we sit on. I traveled halfway around the world and I can say that we have one of the smallest rates of state support (of wheat production). We are not asking for 500 euros per hectare, like in Finland, but complete refusal from wheat subsidizing is wrong.”
Speaking at the government meeting on Nov. 29, 2016, Sergei Kulagin, governor of the Akmola region, said the main reason for oversupply is the lack of a sales market. He said wheat production is the only industry in North Kazakhstan that remains profitable and export-oriented, and the government’s main task should be to promote export development.
“In this situation, it seems surprising how Russia several years ago was producing 75 million tonnes of grain, and is now targeting 150 million tonnes, while we are talking about some oversupply,” Kulagin said. “In neighboring China the situation is the same, while a third of the world is starving, so I suggest the government have a different view on the grain industry.”
Zuylbek Akashev, CEO of Kostanai-based Baragandy Co., told World Grain that most market participants welcome the new program, but it still fails to address several important points.
“First, there are nearly 15 million hectares of agricultural land in the country left abandoned or subjected to improper use,” Akashev said. “Since the beginning of the diversification campaign, government reduced area for wheat cultivation from 14.7 million hectares in 2012 to 12.4 million in 2016. Some market participants believe that was senseless, as engagement of abandoned fields could be more reasonable.”
In addition, there is a serious grain quality problem, as from 2013-2015 the country’s percentage of lowest grade quality wheat has been consistently high, Akashev said, adding that the government has not addressed the problem of agricultural land degradation and also still has no idea how to develop a comprehensive climate challenges management system.