Kazakhstan: Wheat Production Prospects and Trip Report
Specialists from the USDA Foreign Agricultural Service conducted crop-assessment travel in north-central Kazakhstan during the second half of July. The team met with federal and regional agricultural officials, directors and chief agronomists of agricultural enterprises, and directors of agro-holding companies in order to examine wheat-production prospects for the current year and explore Ministry of Agriculture plans to increase grain production in future years.
The team observed evidence of excessive and persistent dryness in a large portion of the country’s key wheat production zone. Producers indicated that yield will be below normal in the Akmola and Kostanai regions, which together account for about half of total Kazakhstan wheat. Conditions were better in North Kazakhstan, the third major wheat region, and yields are likely to be average or above average. (View map of Kazakhstan oblasts.) The USDA forecasts Kazakhstan wheat production for 2009/10 at 14.0 million tons, down 0.5 million from last month but up 1.5 million from last year. Area is estimated at 14.2 million hectares, the highest level since 1989. Yield is forecast at 0.99 tons per hectare, down slightly from last month due to six weeks of dryness beginning immediately after the crop was planted. The month-to-month reduction in forecast output is based on the observations of FAS personnel who traveled throughout Kazakhstan’s main grain-production region in late July.
Over the past ten years Kazakhstan has harvested an average of 12 million tons of wheat, but production can fluctuate significantly from year to year depending on the weather. A large share of the output is high-quality milling wheat. Annual exports range from 3 to 8 million tons; the USDA estimates exports for 2009/10 at 6.5 million tons.
The Wheat Zone
Kazakhstan consists of 14 administrative territories, or oblasts. About 75 percent of the country’s wheat is produced in three oblasts in north-central Kazakhstan: Kostanai, Akmola, and North Kazakhstan. Last year, wheat area in Kostanai oblast alone stood at 3.8 million hectares, matching wheat area in the entire state of Kansas.
The soils of north-central Kazakhstan are highly variable: deep and fertile in some locations and highly salty and unsuitable for agriculture in others. The land is flat and expansive and lends itself to large-scale agriculture. Individual fields frequently measure over 400 hectares (1,000 acres).
The main crop production region in northern Kazakhstan is described as a zone of risky agriculture. Precipitation is meager – about 20 inches per year compared to roughly 30 inches in Kansas – and grain fields in this region are not irrigated. Historically, wheat yield is reduced by drought in two out of every five crop seasons. The dry climate, however, contributes to the consistently high quality of Kazakhstan wheat.
Spring wheat comprises 95 percent of total wheat area in Kazakhstan and virtually all of the wheat in the three north-central oblasts. The crop is planted in the second half of May. Harvest begins in late August and is usually finished by early October.
Grain quality is higher in the more southern and drier production regions of north-central Kazakhstan. Protein content of 14 percent (i.e., 1st-class wheat) is almost guaranteed in Akmola and southern Kostanai oblasts. Above Petropavlovsk, in northern North Kazakhstan oblast, protein content seldom exceeds 11 percent (4th-class wheat). The general rule of thumb is that quality increases as yield decreases.
July Crop Conditions and Production Prospects
Although snow cover was relatively shallow this year (snow-melt serves to replenish subsoil moisture reserves), May precipitation was about average and surface moisture was adequate for crop emergence. Many fields throughout north-central Kazakhstan, however, received virtually no rain during the month of June. Farm directors noted that fields planted later in the sowing campaign (after May 25) were typically in better condition than earlier-planted fields.
According to local agronomists, late June through early July is the moisture-critical period for wheat. Potential yield is largely set by mid-July, when the crop is advancing through the flowering stage. Since June precipitation was minimal this season, yield prospects for individual fields depended chiefly on the amount of precipitation in early July. In general, crops in North Kazakhstan oblast received timely rain in early July, and farm directors forecast that fields will achieve average or above-average yields despite the June dryness.
Meanwhile, crops in many regions of Kostanai and Akmola oblasts received little or no rain from the time of planting until around July 10. Plants in the drier areas produced only 1 to 3 tillers (shoots) this year compared to 3 to 5 in a typical year, and the grain heads and overall plant height were both significantly shorter than normal. Some fields were marked by deep cracks in the soil resulting from the persistent dryness. Late-July precipitation prevented further yield deterioration and benefited the grain-filling process, but did not reverse the loss in potential yield for fields that suffered from six consecutive weeks of dryness.
Although the dryness will likely boost the protein content of wheat grown in the areas that were subject to drought, traders indicate that the boost in grain quality will not compensate economically for the loss in yield.
The Structure of Farm Management
Farms in Kazakhstan are divided into three categories: agricultural enterprises, private (or peasant) farms, and subsidiary household plots. Agricultural enterprises tend to be large-scale operations (similar to the State and collective farms of the Soviet era) and are involved strictly in commercial production of commodities. Agricultural enterprises account for about 65 percent of Kazakhstan grain production. The average size of the 5,000 enterprises that are involved in grain production is about 3,000 hectares, but large-scale operations dominate the grain-production sector. According to the 2006 agricultural census from the State Statistical Agency, 77 percent of the total grain output from agricultural enterprises is produced on enterprises that are larger than 5,000 hectares (about 12,500 acres).
Peasant farms are typically family farms and are substantially smaller than agricultural enterprises. Nearly 200,000 peasant farms produce grain, and they account for about 35 percent of the country's output. According to the 2006 census, 95 percent of the farms are smaller than 1,000 hectares.
Peasant farms, like agriculture enterprises, produce commodities chiefly for sale rather than for private consumption, but official data indicate that grain yields on peasant farms are significantly lower than on agricultural enterprises. Agricultural officials and other observers attribute the yield gap in large part to the aging machinery fleet on peasant farms; peasant farms typically cannot afford to lease or purchase new equipment. The director of one large agricultural firm in Akmola oblast suggested that farms smaller than 1,000 hectares are not economically viable.
Household farms are small personal subsidiary plots (average size 0.15 hectares, or about one half of one acre) that are used to produce crops or livestock chiefly for personal consumption. Kazakhstan's 3 million household farms produce less than 1 percent of Kazakhstan grain but account for 50 percent of the country’s poultry inventory and 85 percent of the cattle.
Agro-holding companies play a large role in Kazakhstan agriculture. An agro-holding company typically operates as an umbrella company for numerous individual agricultural enterprises, providing operating capital and marketing channels for commodities produced on the farms. In Kostanai, the top grain-producing oblast in Kazakhstan, over 40 percent of the agricultural area is held by the four largest holding companies. (The largest holding company controls 900,000 hectares in Kostanai – 20 percent of the total sown area in the oblast – and owns 70 percent of the grain elevators.) In North Kazakhstan oblast, about 20 agro-holding companies control 80 percent of the sown area.
The government owns all agricultural land – all the land in the country, for that matter. Farmland is leased to holding companies, agricultural enterprises, and peasant farmers under 49-year leases.
Cheap Fuel and Fertilizer
Government support for agriculture has been increasing significantly over the past five years, in the form of subsidized prices for fuel, seed, fertilizer, and agricultural chemicals. The government reduces the price that enterprises pay for mineral fertilizer by 40 percent, not through direct subsidies to farmers but through subsidies to fertilizer producers. Fertilizer application rates are gradually increasing, but still stand at only a fraction of the amount applied during the Soviet era when the agricultural sector benefited from massive State subsidies. Note, however, that the average wheat yield for the past 5 years (2004 through 2008) is 8 percent higher than the average yield of 1986 through 1990, which was the peak of the so-called intensive technology movement in the Soviet Union.
Fuel prices are subsidized by a similar percentage and in a similar manner to fertilizer prices (i.e., through payments to fuel suppliers, not direct subsidies to farms). According to an official at the Ministry of Agriculture, the government allocated 84 billion tenge (about US$560 million) to support the 2009 sowing and harvest campaigns, and has spent 65 billion tenge to date.
The State also provides support to research facilities, paying 40 percent of the research and development costs for breeder and foundation seed. Most enterprises use only first-reproduction seed (similar to certified seed in the U.S.) or higher-quality elite seed.
Nearly every agricultural enterprise that the team visited displayed an impressive fleet of both domestic and foreign machinery. In general, enterprise directors expressed satisfaction with the quality and efficiency of domestic tractors but prefer western cultivators, seeders, and combines.
The quality gap is especially striking in the case of grain-harvesting combines. According to the director of a 200,000-hectare agriculture holding company in Akmola oblast, the difference between a Russian-made Yenisei grain combine and a John Deere combine “is the difference between earth and sky.” One John Deere combine can do the work of four Russian units. Service for his Deere combines is good, and parts are readily available even for his 11-year-old machines. But he also noted that the price of a John Deere combine is about four times the price of a Yenisei machine.
Data from the State Statistical Agency indicate that a high portion of Kazakhstan’s agricultural machinery – including 77 percent of its tractors and 59 percent of its grain combines – are at least 20 years old. The statistics maybe be somewhat misleading, however, because the data certainly include machines that are no longer in use. As is the case in Ukraine and Russia, the overall efficiency of Kazakhstan’s machinery fleet is likely improving due chiefly to the replacement of aging grain-harvesting combines with new equipment. In Kostanai oblast, for example, 20 percent of the total machinery fleet has been acquired within the past five years. During this time, agricultural enterprises have purchased 2,500 combines (both foreign and domestic), 1,800 tractors, and other new machinery.
The dominant crop rotations for fields under conventional tillage systems are essentially unchanged from Soviet times, except that the share of wheat relative to barley and oats has grown as planting decisions have become increasingly market-driven. The four-crop (or four-field) rotation is the most popular, and typically includes two consecutive years of wheat followed by one year of barley, oats or sometimes an oilseed crop depending on the location. Some enterprises have eliminated barley and oats from the rotation and plant nothing but wheat.
Conventional rotations include a year of clean fallow, during which no crop is planted. The purpose of the fallow year is to preserve soil moisture. Two consecutive years of wheat almost always follow the fallow year, and the first wheat crop enjoys the benefit of increased subsoil moisture. Assuming normal weather, yield drops by 15 to 20 percent for the second wheat crop.
One of the most interesting developments in Kazakhstan agricultural in recent years has been the emergence and growth of reduced-tillage technology (described in Kazakhstan as moisture-saving technology). There is no strict definition of what constitutes reduced tillage or minimum tillage, but the term typically implies the elimination of moldboard plowing and an increased reliance on chemical weed control. Under a strict no-tillage system, neither plowing nor secondary tillage is used.
Although grain producers indicate that there is no clear yield advantage to either conventional or reduced tillage in a season of normal precipitation, reduced tillage preserves soil moisture and reduces (but certainly does not eliminate) the risk of yield loss in the event of drought. Adoption of a reduced-tillage regime also enables grain producers to eliminate the fallow year from the typical four-year crop rotation and plant a crop every year, which substantially increases the productivity of the field. According to the Ministry of Agriculture , the share of clean fallow has decreased from 20 percent of arable land five years ago to 16 percent this year.
According to the Ministry figures, reduced tillage is employed on 10.3 million hectares, or almost 60 percent of the sown grain area. Of this, 1.3 million hectares are no-tillage. The Ministry has set a nation-wide goal of up to 80 percent reduced tillage within five years. Reduced tillage is most widely used in Kostanai oblast. According to the Deputy Governor, 75 to 80 percent of sown area in Kostanai is under reduced tillage. In Akmola, reduced tillage accounts for nearly 60 percent of sown area. Reduced tillage is not as widely used in North Kazakhstan oblast because it lies within the forest-steppe zone, which typically receives more precipitation than the steppe (arid grassland) zone in which Kostanai and Akmola are situated.
Reduced-tillage technology lowers fuel costs by eliminating one or more field operations, but increases herbicide costs because cultivation is replaced with chemical weed control. A typical weed-control system involves the pre-planting application of a non-selective herbicide like Roundup or Terminator, followed by the use of selective herbicides during the vegetative period. According to agricultural-enterprise directors, the savings in fuel costs roughly compensate for the increased chemical costs.
In order to encourage the increased use of reduced tillage, the Ministry of Agriculture offers a higher direct subsidy for no-tillage wheat (up to $6 per hectare) than for conventional-tillage wheat (approximately $3 per hectare) The Ministry also plans to increase government subsidies for herbicides.
For enterprises with old machinery, the adoption of a reduced-tillage system typically requires the replacement of outdated seeders with newer units designed to accommodate the technology. According to data from the State Statistical Agency, 75 percent of Kazakhstan’s 86,000 seeders are at least 20 years old. This machinery upgrade can be prohibitively expensive, especially for small enterprises or family farms.
According to the Ministry of Agriculture, there are currently 5 million hectares of idle land in Kazakhstan, but only 2 million are suitable for crop production. Idle land is arable land that has remained unplanted for at least several years. A significant amount of arable land was essentially abandoned following the breakup of the Soviet Union in 1991, including land that was only marginally productive and which specialists agree never should have been used for crop production. (Clean fallow is not considered idle land because it remains a regular part of the crop rotation.)
Interviews with local agricultural officials in Akmola, Kostanai, and North Kazakhstan oblasts indicate that idle-land recovery efforts are most active in Kostanai. Last year, about 250,000 hectares of idle land were recovered, and the average recovery rate is 150,000 hectares per year. Agricultural enterprises in Kostanai have recovered a total of 1.0 million hectares to date, and officials expect that an additional 0.3 to 0.4 million will eventually be recovered. Land is being recovered in Akmola oblast as well, but there is a relatively small amount of idle land in North Kazakhstan oblast.
One enterprise in Kostanai oblast has recovered 3,000 hectares of idle land, which comprises 30 percent of its total sown area. According to the enterprise director, direct recovery costs are remarkably low – only $16 per hectare for treatment with a non -selective herbicide to kill the existing vegetation – and the field is able to produce an average yield only one year after recovery. Other farm directors have indicated higher costs, but the recovery costs for idle land in Kazakhstan are not prohibitively expensive, unlike central Ukraine or central Russia where specialists estimate that costs can run as high as $700 per hectare. (View pictures of idle field, 1st-year wheat after idle, and 2nd-year wheat after idle.)
Strategy to Boost Grain Production
A senior official at the Ministry of Agriculture shared information with the team regarding the Ministry's strategy for increasing crop production in Kazakhstan. The plan focuses chiefly on boosting yield rather than expanding area.
Proposed measures include:
- A technology-driven increase in yield through continued government subsidies for fertilizer, herbicides and pesticides, and high-quality seed.
- An increase in the use of reduced tillage, which would enable grain producers in arid regions to diminish the risk of drought and reduce the amount of fallow.
- The introduction of more oilseed crops into the rotation: chiefly sunflowers in the drier areas and rape in the northern, less arid regions.
- An increase in pulse area to improve soil fertility. Since pulses are a legume crop, they have the ability to fix nitrogen which makes them a good predecessor for other crops.
- An expansion of sown area through the recovery of potentially productive but currently idle land. This would increase total sown area by as much as 10 percent.
Some measures, such as the use of reduced tillage and the recovery of idle land, offer clear economic benefits and are already being adopted by agricultural enterprises. Furthermore, the steadily growing subsidies for inputs and the support for agricultural research have already contributed to the recovery in yield following the post-Soviet nose dive. Few directors of agricultural enterprises, however, indicated that they embrace the idea of introducing pulses or oilseeds into the crop rotation at the expense of reducing the frequency of wheat. Profitability drives crop-selection decisions, and “wheat is king.”
The valuable contribution of Zhamal Zharmagambetova, agricultural specialist for the USDA Foreign Agricultural Service in Astana, Kazakhstan, is gratefully acknowledged.
Current USDA area and production estimates for grains and other agricultural commodities are available on IPAD’s Agricultural Production page, or at PSD Online.