Kazakh farming flourishes as economy sinks

Kazakh farming flourishes as economy sinks
President Nursultan Nazarbayev inspects the crop.
By Naubet Bisenov in Almaty September 2, 2016

Kazakhstan’s oil-powered economy has been slowing or stagnant since oil prices started tanking in June 2014, resulting in turmoil for the national currency, the tenge. However, a nearly 40% depreciation of the tenge since August 2015 when authorities decided to allow it to float freely, combined with good weather conditions, has been a blessing for the country’s farming sector.

While overall economic growth slowed down to 1.2% y/y in 2015 from 4.3% y/y in 2014 and further to 0.1% y/y in the first half of 2016, the country’s agriculture grew by 1.3% y/y in 2014 and 3.5% y/y in 2015. Growth stood at 2.7% in the first half of 2016.

Experts say that Kazakh agriculture has been boosted by bumper grain harvests in the past three years as a result of good weather conditions – wet springs and dry autumns. The country increased grain and legume production from nearly 13mn tonnes in 2013 to 18.7mn tonnes in 2015, including wheat in clean weight, the main agricultural export item, from 9.8mn tonnes to 13.8mn tonnes respectively.

Wheat output increased despite reduction in acreage allocated for it from 13.5mn hectares in 2012 to 11.8mn hectares in 2015. The reduction in the wheat acreage is a result of a government programme to diversify away from Soviet-era monoculture in favour of oleiferous and feed cultures.

Under Moscow’s Virgin Lands programme over 25mn hectares of Kazakh steppes had been turned into grain fields in 1955-1960 and in order to cultivate these lands Moscow is believed to have moved millions of people from Ukraine and European parts of Russia to Kazakhstan, resulting in ethnic Kazakhs accounting for only 29% in Kazakhstan in 1959.

Kazakhstan’s average wheat exports fluctuate between 6mn tonnes and 7mn tonnes a year, but in the past marketing year between July 1, 2015 and June 30, 2016, the country managed to increase wheat exports to 8.37mn tonnes from 6.44mn tonnes in the 2014-2015, according to agriculture ministry figures. Out of total grain exports in 2015-2016, flour accounted for 35.2% or 2.95mn tonnes.

Despite the better harvest the domestic grain market remained volatile as the limited amount of high-quality wheat pushed domestic prices up, explain analysts at the Kyiv-based APK Inform analytical and news agency, which tracks grain trends in the region. “In addition, the devaluation of the national currency has had a significant impact on the development of the grain market and prompted many farmers to withhold the sales of wheat and gradually increase prices,” Yuliya Krekhovich, an analyst at APK Inform, explained to bne IntelliNews.

The volatility on the Kazakh foreign exchange market – when the tenge fell to nearly KZT385 dollar in January 2016 from about KZT185 in August 2015 but since then recovered to KZT340 against the dollar – benefited Kazakh wheat exporters as a weakened tenge made local wheat competitive in foreign markets. “Exporters were, without doubt, in more favourable conditions and, as a result of the devaluation, could offer their grain at competitive prices on the global markets,” Krekhovich added.

The agriculture ministry didn’t specify where Kazakh grain had been supplied but the country exports grain mainly to neighbouring Central Asia states, Afghanistan, Iran, Turkey, China and the Caucasus. According to APK Inform, the main buyers of Kazakh wheat were Uzbekistan (41% of total Kazakh exports) and Tajikistan (26%) in the 2015-2016 marketing year, whereas Afghanistan bought over half of Kazakh flour and a further 40% of Kazakh flour exports went to Uzbekistan.

Despite a further reduction in the wheat acreage, estimated by the US Department of Agriculture at 5% or nearly 0.6mn hectares, Kazakhstan is expected to reap a good harvest of grain this year thanks to good rainfall in spring and early summer and dry weather in summer and autumn. According to government predictions, this year’s grain harvest should match that of last year.

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