Kazakhstan Set To Increase Grain Exports

Publication: Eurasia Daily Monitor Volume: 1 Issue: 73

With its vast arable land, Kazakhstan sees grain production as more than a matter of food security. It is also increasingly becoming an effective tool in shaping its economic and political relations with the outside world. Over the last three years Kazakhstan has taken steps to increase its production of high-quality durum (hard) wheat to levels in line with world demand. However, last year’s harvest was rather miserable. Heavy rains did not allow crops to ripen, and farmers had to sell much of the yield at great loss or as cattle fodder. Many farmers in the major grain-producing regions of Kustanay, northern Kazakhstan, and Akmola went bankrupt under the strain of heavy debts. The overall cultivation area in Kazakhstan dropped from 23.3 million hectares in 1990 to 13.7 million hectares in 2003.

Agricultural experts are alarmed by the dwindling fertility of the soil due to the depletion of humus layers and soil erosion. Kazakhstan’s Minister of Agriculture Akhmetzhan Yesimov, told participants at the annual agricultural meeting that in 2003, grain producers reaped a profit of 100 billion tenge, but at the same time agricultural losses amounted to 20 billion tenge (Khabar TV, August 10,). Still, Kazakhstan is the fifth-largest wheat-producing country in the world, and it has solid potential to boost its international prestige in the agriculture sector. The Ministry of Agriculture expects this year’s harvest to reach 12 million tons of grain, about the same as last year’s volume. Earlier, Ministry experts had reduced their forecast to 11.8 million tons, taking into account the unusually hot and dry summer that has stunted crops in northern parts of the country. But increased rainfall totals in late July revived their hopes for better crop. The Ministry also announced that 5.5 billion tenge has been earmarked from the national budget for this year’s harvest, mainly to provide farmers with diesel fuel.

At first glance, there are good reasons to be optimistic. In four southern regions, where harvesting has already begun, the crop yield is 40% higher than last year’s levels. But in the North, the situation is not as encouraging. According to the deputy head of the agricultural services for northern Kazakhstan, Serik Tazhenov, “At best we expect to get 9 or 10 quintals of crop per hectare, but many farmers are not likely to reach even that target. The rain came too late for us. Throughout the vegetation period the soil remained dry. Nevertheless we will meet our obligations to export 350,000 tons of wheat to Moscow. Additionally we have been shipping our grain from last year’s stock to the Altay, Omsk, and Novokuznetsk regions of Russia and to Afghanistan since February. As far as we know, there is a considerable demand for fodder grain in China this year, and we don’t want to miss that opportunity.”

State grain purchases for 2004 look promising. The state grain company, Prodkorporatsya, will offer farmers $98 per ton of soft wheat. Last year the purchasing price for wheat was less than $80 a ton. As a result many grain producers chose to sell their produce to outside buyers, ignoring Prodkorporatsya. This year Prodkorporatsya plans to buy up 1 million tons of grain from farmers. The Ministry of Agriculture expects Kazakhstan to export grain to about 40 countries, including Iran, Turkey, Azerbaijan, and Georgia (Khabar TV, August 10).

In recent years Kazakhstan has remarkably improved its infrastructure to facilitate grain shipments to world markets. In particular, a new seaport was built in Aktau, and it has been operational since May 2001. In early July, the first shipment of 3,000 tons of grain to Iran ushered in a new phase of transport links between the two countries. The bilateral contract states that Kazakhstan will export 2 million tons of grain to Iran through the Aktau seaport. Negotiations are also underway to use Aktau to ship Kazakh grain to Azerbaijan. The deal with Azerbaijan has yet to be finalized, as grain pricing is still in dispute (Panorama, July 16,). Grain producers believe that export volumes to Iran will further increase after the construction of a railway link between Altynsarino and Khromtau, which will shorten the existing export route by half. The new railway route should be completed in October 2005.