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Wednesday, 28 August 2002

GRAIN SURPLUS THREATENS SMALL FARMS IN KAZAKHSTAN

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By Marat Yermukanov, Kazakhstan (8/28/2002 issue of the CACI Analyst)

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.

There was every reason for the former communist leaders to call Kazakhstan  "the major granary" of the Soviet Union.

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.

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.

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.

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.

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.

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.

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.

Marat Yermukanov, Kazakhstan

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