Publication: Eurasia Daily Monitor Volume: 4 Issue: 170

Harvest yields below projected levels combined with rising prices have analysts watching events in Central Asia, wondering if increased food prices might trigger civic protests.

Poor weather has combined with the U.S. demand for ethanol bio-fuel to affect global grain prices. Because the United States exports most of the world’s maize, its price has doubled in the past 10 months, while wheat prices have risen about 50%. As Central Asia slowly integrates into the global market, its economies are increasingly less immune to such factors; in June U.S. and European wheat prices reached their highest levels in more than a decade.

Kazakhstan, however, again differs from its neighbors, projecting its autumn harvest to possibly reach a record-setting 20 million tons, according to Minister of Agriculture Akhmedzhan Yessimov. These estimates top the Ministry of Agriculture’s previous forecasts of 17.8 million tons, of which domestic use consumes approximately 10 million tons (AgriMarket.info, September 10). Yessimov noted that the bumper harvest would allow Kazakhstan to export up to nine million tons of grain when harvesting ends later this month (Kazinform, September 10).

Despite such optimistic projections, however, the Kazakh economy has not been immune to the global increase in grain prices. Consequently, the Kazakh parliament has been tasked with producing legislation by October 1 to protect the most vulnerable parts of the population from an increase in bread prices.

Deputy Minister of Agriculture Akylbek Kurishbaev told the legislative assembly that, as Kazakh grains prices are now set by the market, an unexpected drop in global grain reserves failed to match rising consumption, producing market unrest, which specialists estimate will produce price increases for one ton of grain of between $90-160. On September 10 Kurishbaev’s ministry announced that bread prices would rise an average of 5-7 tenge (about five cents) later in the month. Kurishbaev hastened to assure legislators that, despite the increases, the price of a loaf of bread remained relatively low in Kazakhstan, compared with its post-Soviet neighbors, averaging 30 cents versus 51 cents in Georgia, 52 cents in Russia, and 57 cents in Belarus, and that one benefit of rising prices was that agrarian workers would receive better wages.

Kazakhstan is the world’s sixth-largest grain exporter, selling primarily to its Central Asian neighbors Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. Most ominously for its neighbors, Kazakhstan has announced that it will shortly begin to charge market rates for grain exports, ending a subsidized program that dates back to the Soviet era.

Kazakh inflation has produced a more stressful situation in Tajikistan, which has seen prices for a 50-kilogram sack of flour soar from $25 a week ago to $32, an amount nearly equivalent to the average monthly wage (RFE/RL, September 11). Since the beginning of July prices for wheat, flour, and bread in Tajikistan have risen 50%.

In Uzbekistan swift food price increases have reportedly led to civil unrest in the Ferghana Valley, where authorities initially attempted to restrain prices, causing merchants to complain (RFE/RL, September 3).

As is so often the case, however, difficulties in Central Asia present an opportunity for Russia to supplement indigenous grain production, as farming is still heavily subsidized by the state. The subsidies to Russia’s agricultural producers continue to be the country’s main obstacle to World Trade Organization membership, but the Kremlin’s goal to join the global organization may be delayed by the political advantages achieved by shoring up a friendly state. According to Andrei Grozin, director of the Central Asia and Kazakhstan Department of the CIS Countries Instituted, “If the food crisis spins out of control, there is a high probability that Russia will provide aid to Uzbekistan” (Nezavisimaya gazeta, September 12).

Further east, in an effort to quell potential unrest, on September 11 Kyrgyz Prime Minister Almazbek Atambaev signed a government decree abolishing the value-added tax on grain importers, flour producers, bakers, and traders whose annual income is less than $132,000, a decree that exempts nearly all involved in the grain trade even as it contributes to the treasury’s income shortfall.

The long-term social implications of the food price increases are ominous, and not only for Central Asia. The United Nations World Food Program estimates that about 850 million people of the world’s estimated six billion inhabitants are already undernourished, a situation that will be exacerbated by the fact that the price of food aid has increased 20% in just a year. On September 13 Italian consumer groups staged a one-day boycott of pasta sales over price increases.

Unless the regional governments swiftly intervene, the consequences of rising food prices in Central Asia are likely to be more profound than a one-day boycott. Dosym Satpayev, director of the Risk Appraisal Group, said, “Whether it wants to or not, Kazakhstan may become the detonator for increased social tension in the region” (Nezavisimaya gazeta, September 12). Empires have fallen for less.