Kazakhstan Agribusiness Report Q4 2010

BMI View: Like neighbouring Russia, Kazakh agriculture has been severely damaged by drought this year. We are forecasting heavy year-on-year declines in production of wheat and barley, and expect knock-on effects on the productivity of the dairy and livestock industries. Nevertheless, production is expected to bounce back, and over our five-year outlook period we are forecasting significant growth in production of all commodities surveyed in this report.

Key Views

    * Kazakhstan grain production has taken a heavy hit over the summer months as drought ruined crops in large swathes of the country, prompting us to reduce our 2010/11 forecasts significantly. We are forecasting a 30% year-on-year decline in wheat production and a 36% decline in barley production.

    * The same season, consumption of wheat is expected to fall by 1.4%. Consumption of barley, which is more important as feed, is expected to fall 28%.

    * We have lowered our livestock forecasts in light of higher feed prices. For 2010, we forecast a slight dip in poultry production to 87,000 tonnes. Pork production is forecast to rise from 225,000 tonnes in 2009 to 230,000 in 2010. Beef production is expected to remain at 395,000 tonnes.

    * Milk output is also expected to suffer. From January to July 2010, the country produced 3.36mn tonnes, up 1.9% year-on-year. We expect a slowdown in H210 and are forecasting production to come in at 5.28mn tonnes for the year, up just 0.2% year-on-year.

    * Real GDP growth expected to rise to 4.0% in 2010, rising to 7.6% in 2014.

    * We identify camel milk production as having good growth prospects. The FAO has been heavily promoting the health benefits of camel’s milk and it is receiving increasing attention in the media. If the country can entice foreign investment into new production facilities, we could see production rise and the development of an export market for Kazakh camel milk.

    * We see much growth potential for the beef industry. With ensured supply of feed and fuel and vast swathes of vacant pasture land, the country is ideally placed to become a key beef exporter over the coming decades. It is also clear that the government sees the expansion of the industry as a key part of its economic strategy over the coming years. As a result, we are forecasting beef output growth of 25.6% over our five-year forecast period to 2014, and for the trade balance to enter positive territory in 2013.