Kazakhstan and Ukraine. Comparison of the agro-industrial complex of the countries

Latifundist.com and Zernotorg.ua keep on the project "Ukrainian Agro it’s not an American one.". This time we studied Kazakhstan. The economy of one of the republics of the former Soviet Union has been actively developing in recent years. And much attention is paid to agriculture as one of the important industries in the Republic of Kazakhstan. The government actively supports farmers through subsidies and a preferential taxation system, allocates considerable funds for the development of the agro-industrial complex. From 2017 to 2021, the republican and local budgets allocated $ 5 billion to the country’s agriculture (not considering international assistance programs, etc.). Starting from 2021 to 2025, $ 11.4 billion will be allocated for the development of the agro-industrial complex of the Republic of Kazakhstan. It is expected that this will double the volume of agricultural production and the export of processed products. No matter how ambitious these plans are, the government seems to be implementing them, despite the coronavirus crisis and other problems. Read more about the agro-industrial complex of the Central Asian state in our issue.

Kazakhstan can be safely called the "new economic tiger" of Central Asia. Yes, the economy of this country has not yet reached the level of the development of other "Asian tigers" such as Singapore or South Korea. Nevertheless, among the countries of this region that were part of the Soviet Union, only Kazakhstan was able to increase the size of GDP by 6.3 times over the past 20 years and become one of the most successful republics of the former USSR.

In the early 2000s, according to the World Bank, the Ukrainian economy was 1.7 times larger than the economy of Kazakhstan. Now the size of the nominal GDP in Kazakhstan is almost $ 30 billion more than Ukrainian. The backbone of Kazakhstan’s economy is hydrocarbon production, and more than 70% of exports are oil and gas. Kazakhstan’s GDP, just like Ukraine’s, collapsed in 2014−2016 due to the fall in commodity markets. In Ukraine, the decline in GDP was also facilitated by the war and the loss of territories. Be that as it may, in Kazakhstan over the past years, reforms have been carried out, while in Ukraine, we only talk about such reforms that are selflessly imitated. This is a fact recognized at the level of the IMF, the World Bank and other international organizations, confirmed by the country’s macro indicators. Over the past 10 years, the average annual GDP growth rate of the republic amounted to 4.9%, which is higher than the growth rate of the world economy. The real sector is also showing positive changes. Since 2010, the share of the hydrocarbon cluster has decreased, and the Government of Kazakhstan is constantly working to reduce the economy’s dependence on oil and gas production. At the same time, over the past decade, the size of the manufacturing industry (mechanical engineering, light industry, food production, etc.), agriculture and transport has grown.

By the way, since 2010, the agro-industrial complex of Kazakhstan has been growing steadily by an average of 3.6% per year. At the same time, according to the Bureau of Statistics of the Republic of Kazakhstan, the number of people employed in agriculture decreased from 2.3 million to 1.2 million people during the mentioned period. That is why labor productivity in the Kazakh agro-industrial complex has grown to $ 6.6 thousand per person, which is 30% higher than the productivity of Ukrainian farmers.

Generally, the structure of the economy in Kazakhstan is very close to the standards of developed countries. Agriculture as a predominantly raw material industry with a short value added chain accounts for only 4.4% of the country’s GDP, compared to 9.9% in Ukraine. For example, in the USA and Canada which are market makers of the global agro-industrial complex, this figure is generally 1.4% and 1.7%, respectively.

Kazakhstan is located in the interior of the mainland, so the climate here is sharply continental with little snowy cold winters and dry hot summers. On the border with Russia, the territory of the Republic of Kazakhstan is occupied by a forest-steppe, the middle zone is the so-called cold steppe. The south of the country is arid steppe, semi-deserts and deserts. The USAID average temperature cartogram gives an idea of where agricultural production is concentrated — it is the north of the country and the middle lane. It was here in the 50−60s that labor detachments from all over the USSR were sent to "raise virgin lands". It was raised, however, as in most megaprojects of the Soviet era, the efficiency was low. It turned out that the productivity of traditional crops grown in this region is low, and powerful wind erosion destroyed the top fertile soil layer.

As employees of the Kazakhstan office of Amazone informed us, very few winter crops are sown in the country. This is due to the fact that in winter the snow cover is too thin, and temperature minimums can reach -20 ° C. For example, according to the Bureau of Statistics, in 2019 the harvested area of winter wheat was only 0.5 million hectares, and spring wheat - 10.8 million hectares. At the same time, in Ukraine the picture is mirrored: 6.6 million hectares - the harvested area of winter wheat and 0.2 million hectares - spring wheat.

The south of the country is a zone of extreme agriculture. The average annual rainfall in the country is 260 mm. The lowest level of precipitation is in the southern regions, about 150 mm, the highest — in the northern regions, 330 mm. To understand how little this is, it is worth taking a look at our country. In Ukraine, the average annual rainfall is 500−600 mm, in 2019−2020 dry years in the south of the country there was 280−320 mm of precipitation. In order to resolve the issue of moisture supply for the republics, in Soviet times, they tried to implement another megaproject: irrigated agriculture in the southern part of Kazakhstan, as well as on the territory of Uzbekistan and Turkmenistan. This led to the drying up of the Aral Sea and a regional ecological disaster. By the way, Kazakhstan still uses part of this infrastructure. Today, 1.4 million hectares are under irrigation in Kazakhstan against 0.51 million hectares in Ukraine. At the same time, according to the strategy of the Government of Kazakhstan "Development of irrigated agriculture until 2030", it is planned to restore and overhaul the infrastructure for irrigation of 0.6 million hectares and commission up to 1.5 million hectares of new irrigated land.

In the Amazone office, they say that due to climatic conditions, agricultural producers in Kazakhstan are trying to cultivate the soil to a minimum when growing grains and oilseeds. These are not the classic No-till or Mini-till we are used to. Basically, soil cultivation is carried out with disc headers or moldboardsless cultivators. For sowing crops, "paws" are used. Kazakhstani farmers still widely use seeders of the SZS type, which provide the very minimum tillage, while simultaneously cutting stubble and rolling the soil during sowing. In terms of the Amazone product line, the popularity of the Condor seeders has been growing recently, which allows the use of extensive cultivation technologies in arid regions with a continental climate.

In crop rotation, black fallow is widely used to increase yields.

At the same time, after harvesting, the fields are practically not cultivated for the winter, leaving high stubble to retain moisture and retain snow cover, since there is a factor of strong winds. Mineral fertilizers are applied very little due to the low amount of precipitation or their complete absence, which again affects the yield.

According to statistics in Kazakhstan, 85% of the tractor fleet and 68% of combines have a service life of more than 10 years, and the average wear and tear of the entire fleet of agricultural machinery is 76%. Therefore, the issue of saturation of the agricultural sector with high-quality equipment is acute. Amazone representatives told us that manufacturers from Russia and Belarus occupy a large share in the Kazakh market of agricultural machinery. For example, the production of the Kirovets and MTZ tractors is localized in the Republic of Kazakhstan. Among world brands, preference is given to John Deere, Buhler, and others.

Given the climatic features, Kazakhstan holds a leading position in the cultivation of drought-resistant crops and melons that tolerate heat well.

Cereals, traditional for Ukraine, are also present in the crop rotation of Kazakhstani agricultural enterprises, but their yield is significantly lower than ours, therefore, significant gross harvests are provided due to large areas. For example, the area under wheat in 2019/20 MY in Kazakhstan amounted to 11.3 million hectares, and in our country — 6.8 million hectares, while Ukrainian farmers harvested 2.5 times more grain.

Experts note that Kazakhstani farmers, like Ukrainian ones, are open to new things: technologies, research, etc. The founder of the Agrotest laboratory, Ekaterina Gubina, for example, said that at the last international conference ISSPA (International Source Suppliers and Producers Association; "soil congress"), besides Ukrainians, representatives of the post-Soviet space were only from Ukraine and specialists from Kazakhstan.

In Kazakhstan, the cultivation of grain and oilseeds is concentrated in the north of the country in the forest-steppe zone, as well as in the east in the flat territories located in the foothills of Altai and the Tien Shan mountain system. The concentration of crop production in these regions is explained by a higher level of annual precipitation than the national average. The north and east of the country account for more than 80% of the gross harvest of grain and oilseeds.

The queen of the fields — corn, never became popular in Kazakhstan due to the arid climate. Therefore, the grain cluster is mainly represented by wheat and barley, which provide 92% of the gross harvest.

The production of industrial crops in Kazakhstan is more diversified in comparison with Ukraine. The country grows mainly drought and high temperature resistant oilseeds. In the structure of production, there are also typical for Ukraine sunflower and sugar beet, although the yield of these crops in Kazakhstan is significantly lower than in Ukraine.

Vegetable growing and horticulture are concentrated in the southern regions of Kazakhstan. Kazakhstan is in the world Top-10 in terms of the volume of melons and watermelons cultivation, the yield of which is 3.5 and 2.6 times higher than in our country, respectively. In the total volume of vegetable production in Kazakhstan, the largest share is taken by potatoes. In 2019, the country’s farmers harvested 3.9 million tons of potatoes. In general, in 2019 the gross harvest of vegetables in Kazakhstan amounted to 8.4 million tons against 30.5 million tons in Ukraine. During the same period, 0.4 million tons of fruit was harvested in Kazakhstan, and 2.5 million tons in Ukraine. Kazakhstani farmers prefer the cultivation of apples, apricots and grapes.

In Kazakhstan, out of 216 million hectares of agricultural land, 186 million hectares fall on pastures, which are mostly of natural origin. In terms of pasture areas, this country is one of the world’s five, while in the ranking of meat producers of the Republic of Kazakhstan it is only 27th in the world. That is, the country has a large unrealized potential in animal husbandry. Moreover, Kazakhstanis consider this very industry to be the driver of further growth of the agro-industrial complex. In 2020, the World Bank approved a $ 500 million loan to Kazakhstan for the implementation of the Sustainable Livestock Development Program in 2021−2025. The program will focus on lending to family farms to provide employment in the countryside, as well as to increase the production of livestock products. In the meantime, in the total volume of agricultural production, a large share (55%) falls on crop production.

In the northern regions of the Republic of Kazakhstan, pig breeding and dairy cattle breeding are developed, in the southern regions — beef cattle breeding, sheep breeding, horse breeding and camel breeding. In the western and eastern parts of the country, farmers are mainly engaged in beef cattle and horse breeding. There are poultry farms in different regions of the country. For desert and semi-desert zones, the main types of agricultural production are sheep breeding, horse breeding and camel breeding. This is quite exotic for Ukraine, but in Kazakhstan, horses and camels are grown on an industrial scale to obtain meat and related products, in particular milk. Surely, many have heard of the traditional for the Turkic peoples mahan (dry-cured horse meat sausage) and kumis (fermented milk drink made from mare’s milk).

Forestry in the Republic of Kazakhstan occupies an insignificant share in the structure of the agro-industrial complex. Forests cover only 1% of the country’s territory, so this industry takes 0.3% ($ 394 million) in the gross agricultural output.

Fish industry. Despite the fact that Kazakhstan is located in the interior of the mainland and does not have direct access to the waters of the world ocean, the country in 2019 extracted 45.6 thousand tons of aquatic biological resources, Ukraine — 92.7 thousand tons. A rather high indicator of fish catch due to the presence of a large number of reservoirs (40 thousand rivers and lakes) and access to the inland seas — the Caspian and Aral. Experts say that the country can grow up to 600 thousand tons of fish per year.

In 2019, the consumption of grain products in Kazakhstan amounted to 58.3% of the gross harvest. This is twice higher corresponding to Ukraine. The large volume of domestic consumption of grain is explained by the fact that Kazakhstan is one of the largest producers and exporters of wheat flour in the world (2nd place in terms of exports). In 2019, Kazakh millers exported 1.4 million tons, Ukrainian — 0.37 million tons.

The processing of oilseeds in Ukraine and Kazakhstan is at the same high level — 77−78% in 2019. Despite the small gross harvest of oilseeds, Kazakhstani producers have significantly increased domestic production and export of vegetable oils over the past five years. RK is a net exporter of these products.

Kazakhstan is a predominantly Muslim country (70% of the population is Muslim), so consumers prefer beef and chicken. The country is provided with red meat due to domestic production, at the same time, the poultry industry at this stage is not able to cover domestic demand, therefore, 225−250 thousand tons of chicken are imported annually, mainly from the USA and neighboring Russia.

Export statistics of the agro-industrial complex of Kazakhstan in terms of their indicators are close to those of developed countries. In the total volume of exports, the share of external supplies of agricultural products is only 6%, which is even lower than, for example, in the same USA and Canada, which were considered in the special project earlier. But still, the export of the Republic of Kazakhstan is predominantly raw materials. The main commodities are hydrocarbons, ferrous, non-ferrous and precious metals, and uranium ore.

In the total export of Kazakhstan, the most top agricultural position is wheat — in 2019 it rose to 6th place.

Kazakhstan borders at once with two powerful geopolitical players — Russia and China, which are large sales markets. These two countries, as well as the EU, are the largest foreign trade partners of Kazakhstan. At the same time, the export of agricultural products of the Republic of Kazakhstan is focused mainly on neighboring countries. In the first place is Uzbekistan, which is the largest importer of Kazakh wheat, as well as the second most important importer of wheat flour, in the second and third places are the RF and the PRC.

According to the Kazakh State Register of Grain Receipts, the country’s capacity of elevators and warehouses is 21.8 million tons of one-time storage (12.6 million tons — licensed and 9.2 million tons — unlicensed warehouses). In Ukraine, according to Elevatorist.com, elevator capacities in 2019 amounted to 52.7 million tons of one-time storage.

The largest warehouse facilities are located in the north of Kazakhstan. At the same time, there is a shortage of storage tanks, especially in the south of the country. Grain market participants say that the Kazakh agro-industrial complex will face an acute shortage of storage capacity in the near future. Over the past 10 years, the volume of gross harvests in Kazakhstan has been approximately at the same level — in the range of 16−19 million tons of grain. By the way, during this time Ukraine has increased its grain production by 92.4%.

While the grain market of the country is moving, as they say, on a knurled one. But according to the government program for the development of the agro-industrial complex, Kazakhstan will increase the production of food and fodder crops. In addition, now the average grain yield in the Republic of Kazakhstan is 1.4 t / ha. But if it is possible to at least double the yield, then the production of grain will grow to 35−40 million tons. And the elevators will be one of the bottlenecks in the grain logistics of Kazakhstan. By the way, you can learn about how events can develop with a shortage of elevator capacities using the example of Canadian farmers from the previous article of our issue.

Like the Ukrainian State Statistics Service, the Bureau of National Statistics of Kazakhstan stubbornly "does not notice" and does not record the volume of agricultural products exported from the field. Therefore, the official data includes an indicator of 0.6 million tons of grain cargo transported by road. To make the statistics more believable, it is worth at least adding the amount of gross harvests of the main crops, which can only be removed from the field by cars. Then the traffic structure will turn out, which will be very similar to the indicators in Ukraine and the United States.

It is worth noting that despite the presence of several large rivers, as well as access to the Caspian and the Aral Sea, water freight transport in the Republic of Kazakhstan is rather poorly developed. The total volume of cargo transportation by water transport is only 2.2 million tons, of which 0.2 million tons are grain.

The largest port in Kazakhstan, which handles agricultural cargo, is the port of Aktau on the Caspian coast. Through this port, agricultural products are exported to the CIS countries with access to the sea, as well as to Iran, which is the 4th largest trading partner of Kazakhstan in terms of export volume and the largest importer of Kazakh barley.

By the way, from 1964 to 1991 the city of Aktau was called Shevchenko in honor of Taras Shevchenko, who was serving his exile in Kazakhstan.

The main logistics channel for the export of agricultural products is the railway. Which is quite logical, given the large area of the country. (Kazakhstan stretches for 2.7 million km² and ranks 9th in the world in terms of area). In Ukraine, the length of railways is 19.8 thousand km versus 16.6 thousand km in Kazakhstan. Taking into account the fact that the Republic of Kazakhstan occupies an area 4.5 times larger than our country, this is clearly not enough for high-quality coverage of all regions by the logistics system.

In Kazakhstan and Ukraine, the functioning models of the agro-industrial complex and the land market have much in common. In the Republic of Kazakhstan, after gaining independence, they also went through the division of land and assets of collective farms. Farms and agricultural holdings have sprung up on the ruins of collective property, just like ours. According to the Bureau of National Statistics of the Republic of Kazakhstan, at the end of 2019, there were 278.7 thousand farms in the agricultural sector in the country.

As in Ukraine, Kazakhstani households are a major player in the agrarian market, especially in livestock farming. However, the share of the population in the gross output of the agro-industrial complex is gradually decreasing, in 2015 households accounted for 52.1%, then in 2019 - 44.2%. The decline in the share of households is a consequence of government measures aimed at improving the efficiency of the industry in general and labor productivity in particular.

Despite the positive transformations in the industry, namely the growth of gross output, a decrease in the number of farms with its simultaneous consolidation, there are still reserves for increasing efficiency. In 2016-2017, several largest agricultural holdings in Kazakhstan were on the brink of bankruptcy, among them: «Ivolga-Holding», «KazExportAstyk» and «Alibi». Considering that the total land bank of these companies was 3.5 million hectares, the Government of the republic intervened. The holdings' assets and liabilities were bought out through the state Problem Loans Fund in order to preserve property, jobs and find investors to buy these companies.

According to representatives of the Kazakhstan office of Amazone, the «economic death» of large agricultural holdings was caused by a number of reasons. Firstly, the lack of a clear organizational structure - the subsidiaries had a "partnership" relationship with the head office and mainly acted autonomously. Secondly, low yields greatly impair the economy in crop production. Thirdly, difficulties in operational control of a large land bank (for example, «Ivolga-Holding» had 1.5 million hectares). In addition, there are huge financial obligations to the state under preferential credit programs.

What unites Ukrainian and Kazakhstani farmers. A farmer’s car is considered an important indicator of well-being, which is why the Toyota Land Cruiser is loved in Ukraine. We asked the employees of the Amazone office in Kazakhstan what kind of machines do Kazakhstani farmers drive:

As already mentioned, in terms of the territory size, Kazakhstan is in 9th place in the world ranking. Agricultural land accounts for 80% of the state’s area. 86.1% of agricultural land consists of pastures, according to this indicator, the country ranks 5th in the world.

In Kazakhstan, the structure of farms in terms of the size of the land bank is similar to the Ukrainian one. The largest group is small enterprises with a land bank of 50−100 hectares.

At the same time, 58% of the land is concentrated in farms with 1−10 thousand hectares.

As in most post-Soviet countries, there is no land market in Kazakhstan. More precisely, there is a semblance of a civilized agricultural land market, as in Ukraine, but in fact, it is still the same gray market with shadow schemes. At the start of the reform (1993−1995), agricultural land was provided to citizens and legal entities for a long-term lease for 49 years and a short-term lease for up to 5 years. They began to provide land for private ownership only in 2003, while the sale to foreigners is prohibited. As a result, a full-fledged land market in Kazakhstan has not been created: only 1.2% of the land is privately owned, and 98.8% is in a long-term lease. Most of the land still remains in the hands of the state, and it is known from the example of Ukraine how "effective" it can be. Due to ineffective reforms, the cost of renting and selling land in the country remains low. In 2019, the cost of renting state land averaged 150−400 $/ha. In Ukraine, according to the State Geocadastre, in 2018−2019, the average cost of renting state land was 126.2 $/ha.

Now in Kazakhstan there is a state program for supporting agriculture for 2017−2021. More than $ 1 billion is allocated annually to finance this program from state and local budgets.

Considering the significant amount of state support, the Government also set ambitious goals for the five-year period:
● growth of labor productivity by 267% compared to 2015;
● growth of gross output of agricultural products by 190.2% compared to 2015;
● growth of investments in agriculture by 516% compared to 2015.

In addition, the program provides for stimulating the development of national production and reducing the import of food products, as well as reducing the volume of water consumption in the agro-industrial complex.

To finance the support programs, Kazakhstan has chosen the Western model, namely, the creation of state corporations through which funds go to farmers. There is a similar model in the USA and Canada. In Kazakhstan, the distribution of funds is carried out by the National Holding KazAgro and KazAgroInnovatsiya, as well as the Agrarian Credit Corporation (ACC). The latter acts as a state financial institution and is mainly engaged in financing investment projects, and compensating loan interest. According to the annual report, the share of ACC in the agricultural lending market reached 52%, and the volume of loans issued in 2019 amounted to 247 billion tenge or $ 645.3 million. Such figures are, of course, impressive. If we talk about interest rates, then, for example, the cost of ACC loans for the purchase of equipment and agricultural machinery is from 6% per annum. The lending rate on exporters is from 8%, on financing the sowing and harvesting campaign — from 1.5% per annum.