How Kazakhstan's farmers can increase profitability by 2.5 times?

How Kazakhstan's farmers can increase profitability by 2.5 times?

In 2018, agricultural exports amounted to only 1 trillion tenge. A low indicator is associated with low output. At the same time, the prospects for agricultural development in Kazakhstan are quite high – the country can increase profitability by 2.5 times due to the production of flax, soy and lentils. And, the demand for grain crops in the world can provide the country with at least an additional 250 billion tenge.

The territory of Kazakhstan simultaneously extends in Eastern Europe and Central Asia and is characterized by a diverse landscape: almost a quarter of the land is covered with steppes, half of the country is desert and semi-desert, and the rest of the quarter is foothill massifs. 80% of the republic’s area is characterized as agricultural land. However, only 40% of the land or 96 million ha is used in this sector.
Of course, the vast territory of the country, not involved in agricultural purposes, just forms the basis for the development of the agro-industrial complex. Moreover, the prospects for agricultural development of Kazakhstan during its membership in the Eurasian Economic Union, the Belt and Way initiative and the World Trade Organization are increasing due to the possibility of increasing international investment in this sector and the growth of foreign trade turnover.

Gross agricultural output over the past five years has shown positive dynamics with an average annual growth of 9%. According to the results of nine months of 2019, the output reached 3.7 trillion tenge, an increase of 14.3% compared to the same period in 2018. The regional leader of the country is the Almaty region, which produced products worth 586 billion tenge. The three leaders also include North Kazakhstan Region (508.1 billion tenge) and Turkestan Region (445.8 billion tenge).

The main share in the structure of food production is occupied by grain processing (22.3%), dairy (16.7%), bakery (15%), meat processing (13.6%), oil and fat (7.9%), fruit and vegetable (7, 6%) of the industry.

The unstable changes in crop volume observed since 2010 are caused not only by adverse weather conditions, but also by insufficient technological equipment of the industry in almost all production stages, including post-harvest processes. As a result, only 2-3% of produced vegetables and fruits are processed in the country. However, Kazakhstan is one of the largest manufacturers and exporters of certain types of products like cereals and flour. In the export of flour, the country occupies a leading position in the world market.

An important feature of agricultural production is that annual consumption growth exceeds the volume of food production. As a result, a free niche in the market is replenished due to imports, whose share for a number of goods remains very substantial. For example, domestic producers of cheese and cottage cheese cover consumer demand only by 55%, fish by 51%, and poultry by 57%.

In 2018, the export of agricultural products in Kazakhstan increased by 30.5% and amounted to 13.5 million tons. In monetary terms, exports exceeded  3 billion US dollars. At the same time, the export of processed products amounted to 3.5 million tons, and in monetary terms 1.3 billion US dollars. The positive dynamics was caused by an increase in exports to priority markets for Kazakhstan, in particular to Iran, by almost 2 times (export volume – 329 million US dollars), to the countries of the European Union by 20.8% (329 million US dollars), to China by 43.7% (258 million US dollars), to Turkey by 34.2% (113 million US dollars), to the Gulf countries (Qatar, Kuwait, UAE, Saudi Arabia, Oman, Bahrain) by 3.8 times (3.6 million US dollars).

The structure of the world grain harvest is about 35% formed from corn, 26-28% from wheat and rice, 5% from barley and 5% from other species (rye, millet, oats, sorghum). At the same time, approximately 12-15% of the grain from the harvested crop is involved in world trade, the rest is consumed domestically. Obviously, a limited volume of interstate supplies defines Kazakhstan as a key exporter of wheat and flour. At the same time, the potential of Kazakhstan is increasing due to adverse environmental conditions in a number of foreign countries. For example, the traditional drought in Australia leads to the unfilled Australian markets, in particular Indonesia, which in turn creates competition between countries. As a result, only from Australia, Kazakhstan can increase wheat exports to 10.9 million tons per year.

Agricultural productivity is only 5 thousand US dollars per person. For comparison, in Belarus the figure is 33.5 thousand US dollars, in Russia – 18.4 thousand US dollars. At the same time, Kazakhstan can increase the profitability of the turnover of agricultural products by 2.5 times by 2022. The impetus for growth will be an increase in the production of highly profitable types of crops, such as lentils, flax and soy. In 2018, Kazakhstan exported 33 thousand tons of soybeans at a price of  400 US dollars per ton, while a ton of wheat costs 2 times cheaper. Exports of flax and lentils are in high demand among European countries.

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