Kazakhstan and Ukraine. Comparison of the agro-industrial complex of the countries - Part 2

Latifundist.com and Zernotorg.ua keep on the project "Ukrainian Agro it’s not an American one.". This time they studied Kazakhstan. Read the full article at: https://latifundist.com/en/spetsproekt/834-ukrainskoe-agro-vam-ne-kazahskoe-sravnenie-apk-ukrainy-i-kazahstana

Production and consumption balances

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.

Kazakhstan, production and consumption balances, thousand tons

Ukraine, production and consumption balances, thousand tons

Export

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.

The share of agricultural products in the export supplies of countries in 2019

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

Kazakhstan, Top 10 commodity items in the country's total exports in 2019, USD billion

Ukraine, Top 10 commodity items in the country's total exports in 2019, USD billion

TOP-5 sales markets for Kazakhstan

TOP-5 sales markets for Ukraine

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.

Grain infrastructure

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%.

Gross harvest of grain, thousand tons

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.

Transportation of agricultural products

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.

Kazakhstan is trying to make the most of its transit potential, therefore it actively participates in the much-publicized New Silk Road (Eurasian Land Bridge) project, which China has been actively developing in recent years. This cross-border rail corridor is an alternative to the Suez Canal sea trade route from China to Europe.

Business organization

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.

As in other developed countries, agricultural cooperatives are developing in Kazakhstan. By the end of 2019, there were 2.8 thousand of them. At the same time, 98% of the participants are farmers and households. The state supports these associations, and in 2019, 40% of loans ($ 253.4 million) were provided by the state Agrarian Credit Corporation to cooperatives.

Land market

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.

Subsidies

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.

State support for the agro-industrial complex, $ million

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.