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KAZAKHSTAN: Give Them Bread, But Not So Much

Christopher Pala

Athar Parvaiz

ALMATY, Kazakhstan, Jan 2 2012 (IPS) - Kazakhstan, intent on diversifying its economy away from oil and mining, has extended its cereal acreage by a third in the past ten years, doubled the value of its grain harvest. It has eradicated rural poverty in the north, the country’s breadbasket.

Kazakhstan's winter wheat feeds much of Central Asia. Credit: Christopher Pala/IPS.

Kazakhstan's winter wheat feeds much of Central Asia. Credit: Christopher Pala/IPS.

But this year’s record wheat crop highlights its failure to address bottlenecks in export routes that hinder its ambitions of becoming the region’s breadbasket, and underscores the need to replace some wheat acreage with other grain and with fodder for cattle.

According to a study for the World Bank by Germany’s Leibniz Institute of Agricultural Development in Central and Eastern Europe, the government’s subsidies for modern imported agricultural equipment and an expanded use of mineral fertilisers nearly doubled the value of the grain harvest between 2001 and 2009.

“We were amazed to see that farm worker wages rose at almost double the speed of grain prices,” Martin Petrick, senior researcher for the study tells IPS.

Northern Kazakhstan, which at independence in 1991 had a majority of ethnic Russians, Ukrainians and Germans, saw most of them emigrate in the past two decades. The ones who stayed reaped the benefits: the study reports that the decisive factor for the broad increase in rural income was a scarcity of farm workers.

“Farm managers unanimously reported difficulties in getting and maintaining qualified employees who could operate complex machinery,” the report says. This scarcity, combined with the intensification of agricultural production, doubled the expenditures of rural households within six years, while the percentage of households with below-poverty-line incomes dropped from 40 percent ten years ago to five percent in 2010.

This year, Kazakhstan’s wheat crop, usually around 17 million tons, has reached 21 million tons, of which the country’s 16 million people will consume about seven tons – for food, seed and cattle. Usually the rest is exported, but “the higher the production, the tighter the bottlenecks,” says Petrick.

Of its exports, about a third go to its southern neighbours, the four other former Soviet republics of Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan plus Afghanistan. Kazakhstan uses railways to supply nearly all their flour needs.

But increasing exports to those countries is restricted by a lack of increased demand and a shortage of railway wagons.

A slightly larger portion goes by rail to Iran and Azerbaijan, then across the Caspian Sea and to Turkey and Georgia, on the Black Sea.

The rest goes by rail to Russian and Ukrainian ports on the Black Sea, from where ships take it to Europe and Africa. But grain-loading facilities at these ports are limited and this year are largely monopolised by the equally abundant harvests in those countries, so Kazakhstan will actually export less than usual in that direction this year.

There’s plenty of demand across the Caspian Sea in Iran and Azerbaijan, but grain-loading facilities in the main Kazakh port of Aktau are limited to half a million tons a year, says Dauren Oshakbayev, a grain analyst with the Kazakhstan Association of Economists.

Because of these obstacles, he says, “Our exports won’t increase as much as our harvest did.” He predicted that most of this year’s crop will reach market late next year or the one after – as long as next year’s is not as bountiful as this year.

The result is that because of a shortage of grain silos, some of the crop will rot or go to waste. Also, many farmers will get less money for their wheat from grain companies because these will have to pay to store them for a year or more until they can get to market.

“The world market is eventually going to get this extra wheat,” says Oshakbayev. “The ones who were hurt this year were the family farmers who got lower prices.” This is because the grain companies are going to have to pay for the longer storage.

In addition to wheat, they usually grow barley, 12 percent of the total grain crop, as well as much smaller amounts of oats, rapeseed, rye, corn and sunflower. Only about 15 percent of the five million tons a year of non-wheat grain is exported.

“This harvest is a message from the market that’s telling them: diversify,” says Oshakbayev. One major agro-holding, Atameken Agro, has already reduced its wheat acreage to 39 percent from 82 percent in 2005, he said.

Anton van Engelen, a Kazakhstan-based livestock expert who wrote a report on it for the Food and Agriculture Organisation, says the government should curb its dependence on wheat and accelerate its programme to boost meat production by encouraging wheat farms to grow more forage.

“A lot of cattle goes hungry in the winter,” he says. “It would make sense to reduce wheat land 15 percent to 25 percent and grow grass instead.” That fodder, he said, could increase the calving rate of the existing stock by 10 percent and reduce the price of meat in Kazakhstan, which is double the world price.

“We have to shift to more effective agriculture realms like fodder,” President Nursultan Nazarbayev recently told a state news agency during a tour of a northern wheat farm. “Colza brings greater profits than wheat, barley and oats yields are high.” There is a need to produce feed crops for cattle, he said.

By world standards, Kazakhstan’s corporate farms, which are privatised collective farms structured during the Soviet days, are huge – 10,000 hectares is average, 20,000 hectares is not unusual. Meanwhile, a typical owner-manager farm is 700 hectares, says Petrick of the Leibniz Institute.

He explains that prospects for further expansion have been hampered by a lack of transparency in the allocation of land, most of which is still owned by the government. “The government should reward the most productive farmers by giving them more land, but in fact the whole allocation process is very opaque,” he said. “They need to make it fairer and more transparent.”

A spokeswoman from the ministry of agriculture declined to comment.

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