Kazakhstan Joins Food-Producing Superpowers

By Colin Berlyne

shutterstock_78739945The dream was amazingly ambitious: Kazakhstan was going to become a global food exporting power on a scale comparable to Canada, Australia and Argentina. Even the country’s friends thought it would be a tall order to achieve that by 2020. But it’s already become a reality.

Kazakhstan’s rise to becoming a global food producing power was foreshadowed by its crucial role after World War II for decades as the breadbasket of the Soviet Union. This began with Soviet Premier Nikita Khrushchev’s “virgin lands” program in the late 1950s and early 1960s when millions of hectares of land were ploughed for the first time in history. But the achievements of those years were undermined by ecologically reckless and catastrophic Soviet food production policies and techniques scheme. This created a dust bowl, affecting millions of hectares of potentially fertile land across the heart of Eurasia.

Also, Kazakhstan’s tremendous achievements in food production in those years never received realistic market compensation in the moribund Soviet command economic system.

In the first decade after independence, Kazakhstan’s great agricultural sector collapsed when its traditional, newly independent markets, primarily in Russia, could no longer afford to pay to import large supplies of food. But in recent years, the national strategy of creating a sustainable, balanced national economy whose prosperity will not be solely dependent on fuel extraction and production has had extraordinary success.

In 2010-11, Kazakhstan emerged as a crucial “swing” producer, stepping in to replace Russia as a crucial exporter of grains to such markets as Iran and Egypt when Moscow, because of harvest shortfalls, had to give priority to keeping more of its food production at home.

The rise of 21st world-class agriculture in Kazakhstan is no flash in the pan: It is designed to produce an agricultural and national ecology that will be robust, resilient and self-sustaining.

Kazakhstan’s agricultural planners learned vital lessons from the Soviet failures. They have worked with the world’s leading ecologists and soil experts to minimize erosion through the use of contour planning and to use water resources for growing plants carefully and efficiently through advanced technology drip irrigation. They have worked with cattle experts in the United States and Canada to import Hereford and Angus cattle to upgrade the breeding of native herds.

Crucially, Kazakhstan’s ambitious agricultural

shutterstock_56180707 expansion plans have won the support of China. In addition to its huge and consistent hunger for Caspian Sea oil and natural gas, China is now looming as an enormous market for food exports through the rest of this century. Significant grain exports to China began in 2010 and this year, they have markedly expanded.

The volume of exports to Gulf Arab nations too has already been steadily growing, signaled by the spread of Halal standards for the slaughter of cattle and preparation of meat according to strict Muslim standards. In 2011, Kazakhstan increased its agricultural output by an astonishing 26.8 percent.

Kazakhstan had a record harvest in 2009 producing 25 million tons of grain. This figure fell in 2010 because of a record drought across most of Eurasia. But last year, in 2011, the grain harvest soared to a remarkable 29 million tons. This year, the figure is expected to fall again, possibly to 17-18 million tons, because of another major heat wave, with wheat accounting for 15-16 million tons of it. But Kazakhstan has been able to store so much of the record 2011 harvest that it remains in a strong position to export millions of tons of grain and serve once again as a stabilizing swing producer for the Commonwealth of Independent States and Middle East areas.

Agricultural Emergence

Over the last two years Kazakhstan has emerged as a crucial grain supplier to the Commonwealth of Independent States as well as markets such as Iran and Egypt as a result of Moscow being forced to cut exports to meet its own domestic needs.

Following Russia’s export cuts, the then head of Kazakhstan’s giant KazAgro agricultural conglomerate, Assylzhan Mamytbekov, immediately offered Kazakh grain as a way to fill the gap and Kazakhstan has since stepped in to feed the 12 nations of the Russia-led Commonwealth of Independent States (CIS), including Russia, as droughts have hurt recent harvests. The last two years have also been a breakthrough for Kazakh agriculture beyond the CIS as the country has started to sell grain to China, and through China to South Korea and other Asian nations on the Pacific Rim.

Kazakhstan has been able to do this not only as a result of its record 2009 and 2011 harvests, which produced 25 million tons and 29 million tons of grain respectively, but because of farsighted and significant efforts to increase the nation’s grain storage capacity. So far in 2012, Kazakhstan has exported around 11 million tons of wheat since the last harvest and another 3 million tons planned at press time for dispatch by September 1, said the chairman of the agricultural state inspection commission of the Kazakh Agricultural Ministry, Sektash Khassenov. Yet, approximately 10.8 million tons of grain from 2011 are still preserved in Kazakh grain elevators. And three new storage facilities will be constructed this year alone.

shutterstock_87268651What this means is that Kazakhstan has emerged as a major force for stability in the food trade and politics of Eurasia and the broader region. Speaking at a conference in London in June, Romin Madinov, a member of Majilis, the lower chamber of Kazakhstan’s parliament and the chairman of its Agricultural Committee, said Kazakhstan had already become one of the 10 largest grain exporters and the leading flour seller.

Enjoying the Harvest

All of this agriculture success has not happened by accident. Kazakhstan has been actively building its agriculture program over the last five years and plans to invest nearly $1 billion additional dollars over the next few years. “From the beginning of 2007 to January 6, 2012, the amount of funding in the agricultural sector of KazAgro amounted to 983.1 billion tenge ($6.5 billion USD),” Tulegen Izdibaev, a spokesman for KazAgro Holding, the nation’s government agricultural entity, told EdgeKz. “In 2012, it is planned to implement a total of 65 investment projects worth 49.56 billion ($327 million).”

And under the government’s Kazakhstan 2030 development strategy, the country is investing at least $20 billion in the agricultural sector to become a global food-growing and exporting power comparable to Argentina, Canada and Australia. This has opened markets near and far. “One of the major markets for exports of grain is the countries of Central Asia (Uzbekistan, Turkmenistan, Tajikistan), Afghanistan and Iran,” he said. “This is due to long-standing economic ties, geographical location and low transportation costs. Every year, these countries are markets for about two million tons of grain.”

Izdibaev also noted the importance of the large Russian market next door and the effect of a recent unified economic space agreed upon between the two countries and Belarus. “For Kazakhstan, there is a special significance to be located near the capacious Russian market,” Izdibaev said. “That is especially the case since the Customs Union eliminated tariff barriers, simplified licensing procedures and standardized veterinary standards. Thus, all the conditions for increasing the volume of exports now exist,” Izdibaev said, also noting Georgia, Turkey, Egypt, Afghanistan and the United Arab Emirates potential as significant export partners.
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Few countries have the privilege to feed the world through their capacity to produce huge surpluses of food on a regular basis. In a surprisingly short period of time, Kazakhstan has joined their ranks.

Crouching Tiger Hungry Dragon
Feeding Asia’s Largest Population

China is now looming as an enormous market for food exports through the rest of this century. Significant grain exports to China began in 2010, and this year they have markedly expanded.
“China, with an average annual consumption of 100 million tonnes of wheat, is one of the most promising and untapped markets,” Tulegen Izdibaev, a spokesman for Kazakhstan’s national KazAgro Holding, told EdgeKz.

Only two years ago, in June 2010, Kazakh Prime Minister Karim Massimov and his agricultural planners unveiled Kazakhstan’s ambitious agricultural expansion plans to an audience of world leaders and global executives at the Fourth Kazakhstan Investment Conference in Almaty.

Lou Jiwei, the chairman and chief executive officer of the giant China Investment Company (CIC), recognized the significance of their vision immediately. “The China Investment Company is ready to bring our capital and more advanced agricultural technology to develop Kazakhstan’s agriculture,” Lou told the conference. “Most important, we can bring access to China’s domestic market. There is huge demand,” he said.

Lou recognized that the enormous agricultural potential of Kazakhstan that the Soviets had misused could be of enormous benefit as a partner of China. “Kazakhstan used to be the barn, the agricultural base, of the former Soviet Union but now many of the good lands there have been idle for a long time,” he said. “The CIC is willing to commit its efforts to work with the government and businesses in Kazakhstan to face the challenge together.”

“It looks like you have found a powerful partner in your plans,” Stephen Dunbar-Johnson, publisher of the Paris-based International Herald Tribune told Massimov, who was sitting on the same closing panel to the conference.

The significance of CIC Chairman and Chief Executive Officer Lou’s pledge was recognized by Massimov. “Kazakhstan and China are very close neighbors. So why not do this?” he asked. With incredible speed, the vision of Kazakhstan’s leaders and their Chinese partners is coming to pass. Starting in 2011, Kazakhstan’s Food Contract Corporation launched a three-year program in constructing a new grain export infrastructure to supply China on a regular and large-scale basis with grain. The project is called, “Building the Grain Railway Terminal on the Border of China.”

Izdibaev told EdgeKz he is optimistic about prospects for making Kazakhstan a reliable long-term grain exporter to China. “We have a good opportunity for the successful promotion of grain on the Chinese market,” he said. “In the first place, we enjoy geographic proximity to the Chinese market. In the second place, we already share close political and economic relations. In addition, China’s partial dependence on the energy resources of Kazakhstan suggests that Beijing is willing to make concessions to resolve the issue of grain exports to China through trade and economic relations.”

KazAgro is also taking steps to sell major agricultural exports to South Korea and Japan, Izdibaev said. The holding company has already signed a Memorandum of Understanding with South Korea’s giant Samsung C & T Corporation and has concluded a protocol of intentions on cooperation with Japan’s Toyota Tsusho Corporation, he added.

Learning the Lessons of Yusuf
Agro Sector Stockpiles for Future

shutterstock_93899728Like Joseph or Yusuf, the heroes in the Bible and Quran, Kazakhstan is proving successful in preserving the grain from its record harvests to sustain itself and other countries in the region through years of poorer harvests. And these efforts may prove to be very timely given the not so rosy prospects for harvests for this year, as Kazakhstan and other countries in Eurasia have again been hit by drought.

Yusuf became a hero by wisely preserving the record harvests of seven years of plenty to feed the people of Egypt and the surrounding nations in the ancient world through seven years of terrible harvests that followed. The modern nation of Kazakhstan is following in his footsteps with success for itself and other nations in the Eurasian heartland and the Middle East.
Starting in 2011, Kazakhstan’s Food Contract Corporation launched a three-year program to construct a new grain export infrastructure. The program is already paying dividends. “We have 221 licensed grain reception centers. They have to perform all the necessary works to be ready to accept the new harvest,” the chairman of the Agricultural State Inspection Commission of the Kazakh Agricultural Ministry, Sektash Khassenov, said in June.

Kazakh regional authorities say a whopping 10.8 million tons of grain from 2011 are still preserved in the grain elevators: 10.2 million tons of bread grain and 500,000 tons of feeder grain. All this will be moved to grain storage facilities in other regions to make room for the coming harvest. The government is optimistic that even bigger harvests and surpluses will have to be stored in the near future. And it has approved plans and funding to expand the existing ones and construct new grain storage facilities to add 1.5 million tons to the current capacity. Three new elevators will be erected this year alone.

Thus, Kazakhstan is now in a strong position to meet its domestic needs and continue its aggressive export plans. The spirit of Yusuf is alive and well in the Central Asian nation.

Separating from the Herd
Country Stakes Future on Cattle Program

A new program to improve Kazakhstan’s cattle herds has brought the country halfway to regaining the nine-million-strong herds that once grazed the steppe and provided meat for the people of the Soviet Union a quarter of a century ago. Only this time, Kazakhstan hopes to provide beef far beyond its northern neighbor.

“The government of Kazakhstan has a goal of turning the country into a major beef exporter by 2020, and has directed large amounts of financing to the sector,” noted U.S. Department of Agriculture analyst Levin Flake, a leading expert on the agriculture of Central Asia, in a recent report.

The program is being carried out in two parts. The first part of the plan from 2011-2015 is underway and focuses on expanding the number of high-yielding breeding cattle imported into the country. The second phase will run from 2016 to 2020, and will focus on expanding beef exports. It aims to export 60,000 metric tons of beef by 2016 and 180,000 metric tons by 2020.
In terms of the breeding import program, the country has imported just over 7,000 Angus and Hereford cattle from the United States and Canada. Angus cattle “are famous for their fast maturation, fatness, and good quality mass,” Tulegen Izdibaev, a spokesman for KazAgro Holding, told EdgeKz. “Because of its fine fiber, not stringy meat, they may remain outdoors, even in the most severe frosts.”

This makes them ideal for Kazakhstan’s harsh winter climate. The current cattle improvement program also includes the establishment of about 54 breeding farms with 72,000 young cows. At press time, the company had purchased in 2012 42,000 cattle that will be brought to Kazakhstan to increase and improve the country’s existing herds.shutterstock_48384775
The program is a massive undertaking, but the government will and dollars are there. KazAgro is prepared to provide $900 million through 2015 for the development of the sector. “These government support programs have already begun to have a significant impact as live cattle imports have surged, and a number of large commercial cattle production facilities have recently been established,” Flake noted in his report.

The U.S. Department of Agriculture has also noted a built-in advantage Kazakhstan possesses in its effort to become a major beef producer and exporter. The agency’s report notes that there is a “very large availability of unused pasture in the northern, central, western, and eastern regions of Kazakhstan for the grazing of cattle” and the “strong competitiveness of Kazakh beef on the Russian market.” However, the USDA also cautions that Kazakhstan’s cattle herds are still “concentrated in small households” far too much and the country still only produces a “small amount of feed grain planted area in Kazakhstan.” Most serious, the USDA points out the “poor genetic make-up of Kazakh cattle and low levels of breeding stock.”

The program so far, however, is successfully moving Kazakhstan’s herds toward the significant numbers they enjoyed for generations. Kazakhstan’s beef production and exports collapsed after the disintegration of the Soviet Union. The newly independent Kazakhstan didn’t have the resources to supply big government subsidies to the agricultural sector. As a result, the old system of government-owned farms (sovkhozes and kolkhozes) collapsed. According to the Kazakhstan Statistics Agency, in 1992 Kazakhstan had 9.5 million cattle. This number declined to below 4 million head by 1999. Today, there are close to 6.5 million cattle in the country and, should all go well, Kazakhstan will resume its export role.

“Population growth will lead to higher meat consumption and the creation of the Customs Union with Russia will enhance the competiveness of Kazakh beef in Russia,” the USDA noted in its report. It also noted the prospects for the rapid expansion of Kazakhstan’s meat exports to the Middle East and the wider Muslim world. “The establishment of Halal standards will increase the potential of exports to Arab countries and the Middle East,” it concluded. And in just a few years, Kazakhstan plans to meet that potential.

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