Kazakhstan’s agricultural development strategy:

Capital subsidies vs. institution building

Martin Petrick, Dauren Oshakbaev, Jürgen Wandel

Regional Research Conference: Agricultural Transformation and Food Security in Central Asia - Bishkek, April 8-9, 2014

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Agriculture in Kazakhstan

Considered a strategic sector for economic diversification due to vast land resources & demand prospects, visible recent recovery

Significant public funding to be infused into the sector

Supposed constraints: Barely functioning market relations & widely corrupt management

(quote “Kazakhstan 2030” document)

Access to capital

Land tenure restrictions

Deficient transport & storage infrastructure

Atomised livestock herds

Fodder supply

Truncated supply chains

…

3

4

5

My presentation

1. Analysing the empirical relevance of constraints to

agricultural development (farm survey data)

2. Assessing the government’s agricultural strategy

3. Conclusions

Acknowledgements:

6

Survey regions

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Overview of sample characteristics

Households Individual

farms

Agricultural

enterprises

Agro-

holdings

No. of units

in survey

300 245 47 8

Median land

endowment

(ha)

0.04 75 12,800 24,000

Farms with

cattle herd

55% 37% 36% 13%

Source: IAMO farm survey 2012.

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Credit market outcomes

Households Individual

farms

Agricultural

enterprises

Agroholdings

Took a loan in 2011

(%)7 11 26 50

Reasons for not taking a loan (only non-borrowers, multiple answers possible):

No demand at going

interest rate (%)90 82 70 38

Bank rejected

application (%)1 3 0 0

Returns in ag.

too unstable (%)76 69 43 25

Transaction cost

too high (%)48 24 15 0

Source: IAMO farm survey 2012.

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Obstacles to land access in northern grain region

Source: World Bank & IAMO farm surveys.

0.0 0.2 0.4 0.6 0.8 1.0Obstacles to renting more land: Frequency

2012

2003

Agroholdings

Ag enterprises

Individ farms

Ag enterprises

Individ farms

Price determination Legal procedure

Lack of supply Funding

No obstacles

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Regional prices of 3rd class wheat August 2013

Source: Authors based on Kazakh-zerno.kz.

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Cattle number by farm types (thousand heads)

Source: Statistical Agency of Kazakhstan.

0

1000

2000

3000

4000

5000

6000

7000

8000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Agricultural enterprises Individual farms Household economies

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Problems with communal grazing land

Source: IAMO 2012 farm survey.

Commercial users Households

No problems Mismatch of yields & stocking

Intermixing of livestock Spread of livestock diseases

Lack of herdsmen Other problems

Multiple answers possible.

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Main source of hay & silage supply

Source: World Bank & IAMO farm surveys.

020

40

60

80

10

0

HouseholdsIndivid farms

Ag enterprises HouseholdsIndivid farms

Ag enterprises

2003 2011

Barter deal ag enterprise

Cash deal ag enterprise

Commercial supplier

From own production

From processor / other

No hay or silage used

%

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Main marketing channels for fresh milk

Source: IAMO 2012 farm survey.

69

3

12

16

8

23

56

13

0

67

17

17

020

40

60

80

10

0%

Households Individ farms Ag enterprises

Directly to consumer

Milk collector

Dairy processor

Only self consumption

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Value chains of beef & dairy production

Source: Authors.

Imports

e.g. frozen meat, milk powder

Ag. enterprises & larger indiv. farms

cattle herds > 10 heads

Households & small indiv. farms

cattle herds 2-3 heads

Sources

Industrial processors

Local slaughterhouses

& dairies

Traders & middlemen

Processors

Exports

Urban consumers

Local rural consumers

Consumers

existing to be developed

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Farm-level insights on relevant constraints

Farmers say: returns to agriculture too uncertain to justify credit funding

Land does not move to most productive users

High transaction costs & risks in grain storage & marketing

Deficient fodder management, poor livestock performance

Marketing & processing infrastructure not geared to farm structures

Availability of funding often not the most pressing constraint

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Budget priorities of “Agribusiness 2020”

Source: Budget table “Agribusiness 2020”.

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Conclusions

Modernisation of Kaz agriculture requires more than cheap credit:

Know-how improvement of farmers, applied R&D

Land market liberalisation

Trading infrastructure, roads, competition in storage & transport

Management of public grazing land

Public services that are competent & truly impartial wrt. farm size

Transparency & monitoring of government subsidies

Enable credit funding via commercial banks, not KazAgro

Focus on an agenda of local institution building!