01/2017
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9 K A Z A K H s ta n Agriculture Bulletin KazAgro National Holding financing spring sowing Chinese to invest in agriculture projects
Industry stakeholders reject new subsidy rules
State cooperative expansion program questioned
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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6)
KazAgro National Holding financing spring sowing ......................................................................... 2 KazAgro subsidiary reports KZT 3.5 billion profit ............................................................................ 2 Cattle insemination program would increase growth ..................................................................... 2 Two cases of bird flu confirmed ...................................................................................................... 3 2600 feedlots created with FFSA funds ........................................................................................... 3 MP: KazAgro programs ineffectively communicated ...................................................................... 3
Foreign Aid ................................................................................................................. 3 7)
Chinese to invest in agriculture projects ......................................................................................... 3
Private Sector.............................................................................................................. 4 8) 9) 10) 11) 12) 13) 14) 15) 16)
Saudi company to invest in Kazakh poultry farm ............................................................................ 4 Industry stakeholders reject new subsidy rules .............................................................................. 4 Rukavitsin: Honey exports could reach 5 tons ................................................................................ 4 UAE companies interested in purchasing legumes ......................................................................... 5 Agricultural output at KZT 3.62 trillion ............................................................................................ 5 State cooperative expansion program questioned ......................................................................... 5 Turkish-backed agricultural ventures announced ........................................................................... 6 Agri-management conference to be held in Astana ....................................................................... 6 2016 agriculture sector figures released ......................................................................................... 6
Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Kazakhstan’s agricultural sector. This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa. Read more »
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BFC Agriculture Bulletin
State Initiatives 1)
KazAgro National Holding financing spring sowing
February 6th, 2017, http://www.kazagro.kz/en/holding?p_p_id=newsportlet_WA
KazAgro National Holding has started the financing of the 2017 sowing campaign. In order to achieve greater coverage and maximize the efficiency of the financing, priority will be given to agricultural cooperatives. In addition, the Ministry of Agriculture has determined that the priority crops for this year are oil producing crops (sunflower, rapeseed, flax and soya), barley, sugar beet, rice, corn, cotton, oats and potatoes. To support timely spring sowing and harvesting works, short-term loans are planned from the KazAgro state budget (KZT 60 billion) as well as non-budget funds (KZT 35 billion). Lending for spring sowing and harvesting works will be implemented through direct lending to agricultural producers via JSC Agrarian Credit Corporation, funding to second-tier banks for on-lending to agricultural cooperatives and producers, and financing to microfinance organizations and regional investment centers for on-lending to agricultural producers.
2)
KazAgro subsidiary reports KZT 3.5 billion profit
January 27th, 2017, http://agrosektor.kz/agriculture-news/fond-finpodderzhki
In 2016, the Fund for Financial Support of Agriculture (FFSA) – a KazAgro subsidiary – reported a net profit of KZT 3.5 billion. The Fund’s loan portfolio grew from KZT 69.2 billion to KZT 82.6 billion, with active borrowers increasing from 28,700 to 36,600. The FFSA provided on-lending funds to five microfinance institutions and direct funding for the creation of 440 household farm feedlots, 17 milk collection points and 226 household dairy farms. KazAgro is the national holding company responsible for implementing state agricultural policies.
3)
Cattle insemination program would increase growth
January 25th, 2017, http://eng.kazakh-zerno.kz/index.php?option=com_content&task=view&id=1533&Itemid=1
The government will not reach its 2017-2012 beef production targets should it fail to introduce a strong artificial insemination program, according to Kazakh-Zerno’s Sergey Buyanov. Production is to increase 58% by 2021, which amounts to 11.6% annually. Yet from 2011-2015, output grew only 10.4%, representing a 2% annual increase, reported Buyanov. Despite importing at least USD 92 million worth of purebred bulls during that period, low breeding stocks continue to hamper growth – the government cannot expect a fivefold increase in annual growth pursuing the same strategy, argued Buyanov. While lack of quality feed and poor living conditions affect production, breed quality continues to pose a significant challenge, added Buyanov. Small-scale farms and households account for 80% of livestock. Optimally, every two years, one new breeding bull should be introduced per 30 cows. Yet this is clearly too expensive for the average farmer, observed Buyanov. A single breeding bull costs KZT 300,000 and the same again in annual maintenance; a dose of sperm costs just KZT 2,000. While a bull can inseminate up to 300 cows per year, with state-ofthe-art know-how, the equivalent volume of sperm can inseminate 10,000 cows – the economics are clear, insists Buyanov. While the Akmola Livestock Breeding Center in Kosshy stocks 15 million doses of sperm, only 25,000 were used in the past 10 months across a population of 475,000 cows, reported Buyanov. A pilot artificial insemination project in Karaganda involving 20 farms should provide a good paradigm for a nationwide program, concluded Buyanov. Page 2
BFC Agriculture Bulletin
4)
Two cases of bird flu confirmed
January 20th, 2017, http://www.aljazeera.com/news/2017/01/kazakhstan-confirms-h5-bird-flu-wild-swans170120201235723.html
The Ministry of Agriculture confirmed that two wild swans found dead in Aktau, on the Caspian Sea, were infected with H5 avian influenza, or “bird flu”. Since late last year, various strains of bird flu have been reported across parts of Europe and Asia, leading to a cull of 22.5 million birds in South Korea and human deaths in China. In certain cases, avian influenza can be transmitted to humans. Should human to human transmission become possible, it could lead to a worldwide epidemic, according to Yale University.
5)
2600 feedlots created with FFSA funds
January 12th, 2017, http://www.kazagro.kz/web/fond/about?p_p_id=newsportlet_
The Fund for Financial Support of Agriculture provided loans worth KZT 8.7 billion for the creation of 2600 feedlots accommodating 70,000 cattle. The Fund also provided loans of up to KZT 3 million for the purchase of livestock and feed. The funding comes as part of the Business Roadmap 2020 and Employment Roadmap 2020 programs. The FFSA is a subsidiary of KazAgro – the national holding company responsible for implementing state agricultural policies.
6)
MP: KazAgro programs ineffectively communicated
January 6th, 2017, https://kapital.kz/economic/56511/deputat-informaciya-o-novyh-programmah-kazagro-ne-dovoditsya-doselchan.html
KazAgro’s programs are not effectively communicated to Kazakhstan’s rural population, according to Member of Parliament Dania Espaeva. While KazAgro has many support programs, farmers find its structure confusing and do not know which subsidiaries will be able to help in their particular circumstances, said Espaeva, adding that an awareness raising program should be launched. KazAgro is the national holding company responsible for implementing state agricultural policies.
Foreign Aid 7)
Chinese to invest in agriculture projects
January 25th, 2017, http://kazakh-tv.kz/en/view/news_kazakhstan/page_180456_
Representatives of the Chinese Business Consulting Company and the Kazakh National Chamber of Entrepreneurs “Atameken” met to discuss agricultural trade. Chinese businesses are interested in investing in greenhouses and fruit crops in South Kazakhstan, according to the consulting company. A prospective greenhouse complex could generate USD 62 million in annual revenues while creating 1,500 jobs, the parties estimated. China is interested in Kazakhstan’s organic produce, observed economist Vilmur Auken, including meat and vegetables. The Asian Infrastructure Investment Bank (AIIB), headquartered in Beijing is currently considering 9 projects worth USD 1.7 billion developing the Western ChinaWestern Europe corridor in Kazakhstan. While Chinese-Kazakh trade turnover currently totals USD 14 billion, it could exceed USD 40 billion once a transit highway has been completed.
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BFC Agriculture Bulletin
Private Sector 8)
Saudi company to invest in Kazakh poultry farm
February 3rd, 2017, http://astanatimes.com/2017/02/saudi-company-allocates-more-than-90-million-to-south-kazakhstanpoultry-farm/
Al Ramez International Group from Saudi Arabia will provide EUR 85 million in financing for the construction of a poultry farm in the South Kazakhstan region. The financing will be for the construction of an incubator, a poultry yard for growing chickens, a slaughterhouse and a broiler as well as a fodder plant. When completed, the farm will have an annual production capacity of 30,000 tons of meat. At the meeting where this deal was finalized, representatives of the Saudi company also expressed a desire to invest in other agricultural areas such as cultivating sheep and cattle and have offered to help in exporting meat. Kazakh business ties with Saudi Arabia have a good future prospect as Saudis view Kazakhstan as having the conditions, political stability and harmony which allow investors to freely work. The trade turnover between Kazakhstan and Saudi Arabia reached USD 50 million in 2015 and is expected to significantly increase in the coming years.
9)
Industry stakeholders reject new subsidy rules
January 27th, 2017, http://palata.kz/en/news/25409
Ministry of Agriculture proposals may leave farmers with investment subsidies approved in 2016 without payment. The National Chamber of Entrepreneurs “Atameken” discussed the draft proposals with Vice Minister of Agriculture Gulmira Isayeva. In 2016, approved applications for investment subsidies totaled KZT 83 billion, yet the budget for such subsidies totaled KZT 25 billion. Even if 2016 applications were prioritized and this year’s budget of KZT 25 million utilized, that leaves a KZT 33 million deficit, and no money for further applications in 2017, said Isayeva. Atameken put the proposals to associations, unions and the business community, resulting in over 400 amendments submitted to the Ministry of Agriculture. Atameken Agribusiness and Food Industry Director Rustem Kurmanov noted that the draft has caused uncertainty for industry stakeholders. The rules were last modified in August 2016 – constant change interferes with business development, argued Kurmanov. The draft proposals also prioritize cooperative subsidy payments and stipulate that entities receiving subsidies over KZT 500 million will be paid in installments instead of single lump sums, said Isayeva.
10) Rukavitsin: Honey exports could reach 5 tons January 27th, 2017, http://astanatv.kz/news/show/id/54525.html
Honey exports to the Chinese market may be possible should the State Veterinary Service work with China’s Inspection and Quarantine Services, said National Beekeeping Association President Igor Rukavitsin. The totality of Kazakhstan’s production could be exported there, reported Rukavitsin. With Chinese market access and state support, annual honey exports could reach 5 tons. The state has set aside KZT 2.4 trillion for honey industry development over the next five years.
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BFC Agriculture Bulletin
11) UAE companies interested in purchasing legumes January 26th, 2017, http://palata.kz/en/news/25386
United Arab Emirates companies – Selkar Trading FZE, EMCO International, and Al Dahra Holding – have expressed interest in importing Kazakh legumes, said National Chamber of Entrepreneurs “Atameken” Deputy Chairman Nurzhan Altaev. In December 2016, EMCO said it would purchase 200,000 tons of legumes from 80 producers for export to the UAE and Iran. Selkar Trading Director Rakhim Nilavar noted that Canadian legumes usually reach the market in January, while Kazakh legumes are ripe by November, when legumes are in significant demand and prices higher. The UAE’s requirements are in line with international standards, where quality processing and packaging technologies command a premium, said Nilavar. Transportation must be considered carefully, said Altaev – at two weeks, transit through Iran is twice as fast but twice as expensive as transit through Russia. With Kazakhstan’s 180 million hectares of pastureland, legume production has a bright future, said Altaev.
12) Agricultural output at KZT 3.62 trillion January 25th, 2017, https://kapital.kz/economic/56977/selskoe-hozyajstvo-interesno-investoram.html
In 2016, agricultural output totaled KZT 3.62 trillion, a 5.5% increase year-on-year, according to the Ministry of National Economy. Crop production totaled KZT 2 trillion, livestock production KZT 1.61 trillion, and agricultural services KZT 9.4 billion. The grain harvest totaled 21.5 million tons, including 17.8 million tons of wheat; 2.2 million tons of barley; 502,600 tons of rice; 347,000 tons of oats; and 63,900 tons of millet. The share of agricultural investments covered by loans increased to 25% from 18% in 2015. Total loans disbursed stood at KZT 33 billion. KazAgro – the national holding company responsible for implementing state agricultural policies – accounted for 45% of all loans. In 2016, total agricultural investment increased by 51%.
13) State cooperative expansion program questioned January 25th, 2017, http://eng.kazakh-zerno.kz/index.php?option=com_content&task=view&id=1532&Itemid=1
The new state agro-industrial complex development program envisages conglomerating 670,000 smallscale farms into 1,584 cooperatives over the next five years, according to Kazakh-Zerno’s Sergey Buyanov. Most small-scale producers, depending on their situation, are either exempt from tax, pay the simplified 3% tax plus 10% in pension contributions, or enjoy a 70% tax rebate. With the newly formed cooperatives paying commercial tax of 29.2%, however, it must be considered whether this is advantageous for farmers, warned Buyanov. Take Kazakhstan’s first cooperative, formed of 115 private farms located in 5 villages in Karaganda. The famers were required to register as private entrepreneurs before forming the cooperative. While subsequently obtaining KZT 278 million in preferential loans, the farmers – having been exempt from tax beforehand – must now pay 6% interest plus 29.2% tax on profits and 10% in pension contributions, said Buyanov. A cooperative must currently comprise a minimum 20 farms – most farmers want to reduce this to 10, as joint liability rules require that all partners be known and trusted, argued Buyanov.
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BFC Agriculture Bulletin
14) Turkish-backed agricultural ventures announced January 11th, 2017, http://agronews.kz/news/business-apk/21136.html
Several Turkish businesses have expressed interest in building greenhouse complexes in and exporting organic fertilizers to South Kazakhstan oblast. Kassanov Investment Group will cooperate with local entrepreneurs and sponsor the projects, which also include tourism, healthcare and highway construction ventures, said founder Ziyatdin Kassanov. The local government will also provide support, assured Governor of South Kazakhstan Zhansseit Tuimebayev.
15) Agri-management conference to be held in Astana January 6th, 2017, http://agroinfo.kz/priglashenie-k-uchastiyu-v-mezhdunarodnoj-konferencii-agroupravlenie-2017-kazaxstan23-24-fevralya-2017-goda-v-astane/
The international “Agri-management Kazakhstan 2017” conference will be held in Astana on February 23-24. The conference will gather business and IT department managers, researchers, and solution developers and integrators to discuss agricultural management issues across the sector. Topics will cover livestock and crop production, storage and processing, and the use of drones. Further information can be found at www.kz.agroconf.ru.
16) 2016 agriculture sector figures released January 5th, 2017, http://khabar.kz/ru/news/ekonomika/item/72229-ob-em-investitsij-v-selskoe-khozyajstvo-rk-sostavil-228mlrd-tenge-v-2016-godu
In 2016, agricultural investment totaled KZT 228 billion – up from 148 billion in 2015. The increase is partly due to the state cattle export, cooperative, and investment subsidy programs. Cattle numbers increased 1.3%; meat production 3.5%; milk 3.1%; and eggs 0.1%, according to the Ministry of Agriculture. The grain harvest totaled 23.7 million tons at average yields of 15.4 t/ha, meeting domestic demand with 8.5 million to 9 million tons remaining for export. Grain exports totaled 7.9 million tons, a 12% increase year-on-year. Food production totaled KZT 1.2 trillion, a 3.8% increase year-on-year. Cereal production increased 36%; sugar 49%; flour 13%; and vegetable oil 14%, reported the Ministry. During the same period, 3.5 million tons of vegetables and 2.2 million tons of melons were harvest, which exceeds 2015 levels by 511,000 tons. The oilseed crop totaled 2 million tons, up by a factor of 1.5 compared to 2015.
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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content. The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners. Copyright of articles is retained by their authors.