• Food and agriculture sector

The food and agriculture sector

Overview

As the world's 9th largest country, Kazakhstan's untapped potential for food production can be seen as its best kept secret or our largest failure. Either way, the food and agriculture sector in Kazakhstan has tremendous potential and with current government and industry ambitions set at increasing productivity levels from the record 22m tonnes produced in 2007 to in excess of 30m tonnes; there exist a number of substantial investment opportunities. Nevertheless, in spite of having a land mass the size of Europe, Kazakhstan's agricultural potential is ironically overlooked by the foreign investment community who choose instead to focus on the country's famous natural resource market.

Dating back to the 1960s and Krushchev's Virgin Lands campaign when Kazakhstan accounted for the vast majority of grain production in the region, Kazakhstan's farming industry currently accounts for just over 3% of global grain supplies despite the chronic underinvestment that has characterised the industry following the decline and break-up of the Soviet Union. The desperate need for further investment and the upside investment opportunity for the country's food and agriculture industry is demonstrate by the fact that, whilst employing a third of the domestic work force, it still only contributes to less than 6% of total GDP and struggles to achieve an average yield of 1.3 tonnes a hectare. Far less than its neighbours in the Ukraine and Russia.

There will be a range of challenges in building the country's capacity to compete in this market and it will require significant investment in its infrastructure and technology. The lack of trains (only 5,100 units) causes major difficulty for grain exporters, so the Black Sea region is almost closed to the country. It has to acquire or build transport terminals in the Ukraine on the Black Sea to achieve a much increased margin. Kazakhstan is currently considering modernizing the border transportation line between Dostyk-Alashankou to increase its export capacity with China, which would generate significant further growth opportunities.

The main competition will be from Russia and Ukraine. The obvious markets for Kazakhstan will continue to be Tunisia, Sudan, Syria and Pakistan. With a new terminal at Aktau, Iran continues to be another opportunity. Kazakhstan also shares a border with China, which could be a key player in the grain export market for Kazakhstan if it invests in the nessary building terminals and storage facilities. Kazakhstan grain is renowned for its superior quality and the Chinese flour makers could provide endless market opportunities.

With continuing increases in global food prices and food production shortfalls, the potential for Kazakhstan - and its 10 million hectares of arable land in the middle of the Central Asian region linking east to west - as a global food producer is significant. What is very much needed though is a significant increase in productivity, efficiency and transport infrastructure which can be brought about by further investment in technology, equipment and infrastructure alongside increased funds for the application of fertiliser and pesticides.