By Melissa Alexander
Kazakhstan’s favorable natural climate and vast arable land areas, especially in the northern and central regions, provide beneficial agricultural conditions. Wheat is the major grain crop, with barley also predominant.
During the Soviet era and immediately following independence, agriculture was the second largest sector of the economy, contributing about 36% to gross domestic product. But economic problems related to the transition away from a command system pummeled agriculture, slashing productivity and the sector’s economic contribution.
The first signs of growth since independence were seen in 1999, when the value of agricultural production increased by about 29% from the previous year. Agriculture’s health has continued to improve each year, but the sector no longer plays as large a role in the overall economy.
After independence, large state farms were dismantled, but many farmers, realizing they could not make it on their own, banded together to create big farms operated for profit. The resulting enterprises took several forms.
One type, the joint stock company, was formed as people deeded farm rights to the company as an investment. These companies operate on up to 30,000 hectares and generally realize profits, which are distributed to shareholders.
A second type of enterprise is the farmers’ cooperative, where workers are not true shareholders. Larger centers often control a number of these cooperatives, and workers are paid mostly in the form of products and services.
A third type of agricultural enterprise is the "small" farm, perhaps 500 to 1,000 ha, managed by a single farmer with the help of hired hands.
Despite its recovery from the mid-1990s, Kazakh agriculture still faces problems, including a lack of equipment and inputs, that hamper productivity and grain quality. In 2000, the situation began to improve slightly when the government established a state equipment leasing company and a few of the largest grain producing companies obtained loans from commercial banks to purchase new equipment.
At the end of 2002, the government adopted a new agricultural development program for 2003-2005. Under this plan, the government will allocate 40.8 billion KZT (about U.S.$260 million) in 2003, 49.5 billion KZT in 2004 and 55.2 billion KZT in 2005 for leasing equipment and machinery to farmers, creating a new grain procurement program and subsidizing seeds and chemicals.
Kazakhstan agriculture generally operates under a market system, although the government maintains some involvement through the state Food Contract Corporation (FCC).
The FCC each year has purchased about 500,000 tonnes of wheat from farmers to rotate into state reserves and when necessary has stepped in to buy more to support prices. In 2002-03, the FCC purchased an additional 1.0 million tonnes at U.S.$65 to U.S.$75 per tonne to stabilize prices. To support as many farmers as possible, the FCC limits purchases to a maximum of 15,000 tonnes from any one seller.
Under this program, all grain rotated from state reserves — as well as any additional grain purchased — has been exported under government-to-government agreements to the Middle East, North Africa and Europe.
WHEAT AND FLOUR MILLING
Kazakhstan’s food processing sector has developed rapidly over the past five years based on rising consumption and production of foods previously imported. Per capita bread consumption is relatively stable, at 150 kg annually.
Food processing represents a significant part of Kazakhstan’s total industrial output, reaching 14% of the total in 2001. Of the food industry share, flour milling and baking account for 29%.
Food industry privatization began in 1995 and is virtually complete, with about 3,700 private enterprises registered as food processors. Of that total, only 2.4% have more than 100 employees, but these large companies produce more than 50% of all food products by volume.
Many large enterprises use outdated equipment installed 30 to 40 years ago, and most plants need to be modernized. Many companies are seeking private investment capital, as the average interest rate for a bank loan is about 20%.
Currently, Kazakhstan has 980 flour mills with total grinding capacity of about 3.6 million tonnes per year. Because of the large number of mills, capacity utilization is only about 40%, but the overcapacity has prompted competition and new investment to improve quality.
In 2001, flour production was 1.5 million tonnes. Flour exports declined to about 170,000 tonnes in 2001 from 350,000 in 2000 as wheat output increased in neighboring countries.
Kazakhstan has 1,440 registered bakeries, and about 90% have fewer than six employees. The 16 largest companies are located in major cities and account for 65% of total bread production.
Bread production declined from 569,283 tonnes in 2000 to 512,700 tonnes in 2001 because of decreased consumption. But pasta and macaroni production increased to 37,760 in 2001 from 35,600 tonnes in 2000.
Analysts expect that local production of pasta and macaroni will stabilize at 40,000 tonnes annually based on the small domestic market and poor quality of products for export.
COARSE GRAINS AND FEED
Barley is a major feed grain, with 2002-03 production estimated at 2.2 million tonnes. Feed use has been on the rise, based on a recovering livestock industry; for example, 2002-03 poultry production rose by 13% and swine production by 7%.
Lower-quality wheat also is used for feed, with wheat feed use in the past two seasons averaging 1.7 million tonnes, compared with the previous five-year average of about 1.1 million. Wheat feed consumption should increase to about 2 million tonnes in 2003-04 based on further livestock industry growth and large surpluses of low-quality wheat from the 2002-03 crop.
In 2001, total meat output in Kazakhstan was 628,800 tonnes, of which 150,000 were processed. Most of the meat is sold at farmers’ markets and is consumed directly.
Kazakhstan has 11 large meat packers, 21 medium-sized plants, and about 120 small processing lines. Small quantities of meat are imported from Australia, Brazil and Mongolia, but imports generally are limited by high freight costs and customs duties.
Most large meat processors operate at 10% to 15% of total capacity because of outdated technologies and the questionable quality of raw materials.
Despite a second consecutive bumper crop, Kazakhstan’s 2002-03 wheat exports will be limited to 5 million tonnes based on poor quality and reduced demand from neighbors, particularly Iran and Uzbekistan. The cut in wheat exports to traditional importers forced Kazakhstan’s grain traders to develop alternative markets, especially the Middle East, North Africa and Europe.
Kazakhstan is landlocked, and wheat exports are limited by a weak transportation infrastructure. Most 2002-03 shipments were made through Ukrainian and Russian sea ports on the Black Sea and via the Estonian Baltic Sea port of Muuga.
Lack of rail cars and high transport tariffs via Russia generally limit Kazakhstan’s wheat exports, but the government is adding more infrastructure at the Caspian Sea port of Aktau to facilitate grain exports to Iran.
In 2004, a new grain terminal will be completed in Aktau, expanding throughput capacity to 1 million tonnes a year from 300,000 and storage capacity to 22,500 tonnes from 13,500. Also, in 2004, the government plans to complete a rail line to connect northern wheat areas to the port.
Kazakhstan also is considering construction of another grain terminal at the Kuryk port, 76 km south of Aktau. And in May, Kazakh officials met with Iranian officials to discuss transit of Kazakh commodities through Iran’s Gilan Province, on the south shore of the Caspian Sea. Iran is considered the shortest and most economical route for Kazakh wheat shipments.
Capital: Astana (moved from Almaty in 1998).
Demography: Population 16.7 million, 0.1% growth rate (2002 estimates); Russian (official), Kazakh languages; Muslim (47%), Russian Orthodox (44%) religions.
Geography: Central Asia; landlocked, small borders along the Aral and Caspian seas; continental climate, with plains, mountains and desert areas.
Government: Republic. Chief of state is President Nursultan Nazarbayev; head of government is Prime Minister Imangali Tasmagambetov.
Official agricultural agencies: Ministry of Agriculture under Minister Akhmetzhan Yesimov.
Economy: Kazakhstan has large fossil fuel reserves and plentiful supplies of other minerals and metals, and its industrial sector relies on resource extraction and processing. The Soviet Union’s collapse led to contraction until 1994, but economic reforms and privatization moved quickly thereafter, leading to a strong recovery by 2000-01. The government also is implementing an industrial policy to diversify the economy by developing light industry. Agriculture accounts for 20% of the labor force and 10% of gross domestic product.
G.D.P. per capita: U.S.$5,900 (purchasing power parity), 12.2% growth rate, 8.5% inflation, 10% unemployment, (2001 estimates).
Currency: Kazakh tenge (KZT). May 13, 2003 exchange rate, 150.260 KZT = 1 U.S. dollar.
Exports: U.S.$10.5 billion (f.o.b., 2001), oil and products, metals, grain.
Imports: U.S.$8.2 billion (f.o.b., 2001), machinery, electrical equipment, vehicles.
Major crops/agricultural products: Wheat, barley, cotton.
Wheat: Production in the past five years averaged 11.42 million tonnes, with exports averaging 4.99 million. Total domestic use averaged 5.2 million tonnes annually, with 1.5 of that in feed use.
Barley: Production averaged 1.9 million tonnes, with total use at 1.3 million and feed use at 1.22 million.
Transportation: Highways, 189,000 km, 108,100 paved; railroads, 13,601 km, all 1.520-m gauge; Aktau currently the only major port.
Internet: Country code, *.kz; 10 service providers (2000); 100,000 users (2002).