GRAIN SURPLUS THREATENS SMALL FARMS IN KAZAKHSTAN

style="mso-fareast-font-family:"MS Mincho"">Far from being a boon, last year's
record harvest turned into a major headache for grain producers in Kazakhstan. While
agricultural officials are racking their brains over how to sell off millions of tons of
grain from last years stock, disenchanted farmers doubt the ability of the government to
effectively handle the situation on the market.

style="mso-fareast-font-family:"MS Mincho"">There was every reason for the
former communist leaders to call Kazakhstan  "the
major granary" of the Soviet Union. At that time, this underdeveloped part of the
Union accounted for over 20% of the agriculturally productive land. The sudden breakup of
the old agricultural system resulted in the sharp fall of production and further
impoverishment of crop producers. Despite the efforts of the government to prop up
agricultural sector, little has changed since then.

style="mso-fareast-font-family:"MS Mincho"">Last year, the country has produced
16 million tons of grain, rich enough to cover both domestic consumption and export needs.
But the harvest, unusually abundant against the background of the worsening state of
agriculture, brought no solace to farmers. Many of them had to sell their produce for $50
a ton, far below the price fixed by the government. Traditional customers of Kazakhstani
farmers in neighboring Russian regions, awash with their own overproduced crop, refused to
buy the wheat from Kazakhstan even for that low price.

style="mso-fareast-font-family:"MS Mincho"">To complicate the matter, most
farmers last year could not gather their crop in time for shortage of harvesting machines
and diesel oil. As a result of this, hundreds of hectares of fields remained unharvested.
This year again, grain producers face the same problems. Predictions say that Kazakhstan
will gather a bumpy harvest of 14 million tons. But the main question is whether farmers
will be able to sell their produce with much profit.

style="mso-fareast-font-family:"MS Mincho"">According to the Ministry of
Agriculture, the country still has 4,3 million tons of unsold wheat from last year's
stock. Kazakhstan has lost its hope of dumping some of the surplus grain on Afghan markets
as part of humanitarian aid. Main export destinations this year are Uzbekistan, Mongolia,
some African countries and, most notably, Iran. Kazakhstan pins much hope on the Aktau
seaport in its efforts to reach the Iranian market. That maritime route can be used only
after the construction of the railroad which would link the major grain-producing northern
parts of the country with the Aktau seaport. However, this project still lies remote, as
construction works are delayed.

style="mso-fareast-font-family:"MS Mincho"">In the South of the country, farmers
have already brought in their crop. In the northern regions, the harvest season has begun
with some delay. After long months of rainy and cool summer in most parts of the country,
the crop is still unripe. Some estimates indicate that about 30% of the produce is lost
between fields and storage facilities due to bumpy roads, obsolete trucks and theft from
railcars.

style="mso-fareast-font-family:"MS Mincho"">Most of the woes of the Kazakhstani
farmers stem from the inability of the government to effectively handle the market
situation and work out a flexible pricing policy. Grain-producers are increasingly getting
disenchanted with the rules imposed on them by the state-run "Prodkorparatsya"
grain company. Some of them maintain that purchasing prices should be much higher and that
the government must introduce daily price quotations to make the whole affair transparent.
These demands have so far not been heeded.

style="mso-fareast-font-family:"MS Mincho"">Marat Yermukanov, Kazakhstan