In the run-up to Kazakhstan's early June referendum on changes to the constitution, supermarket tags on food items deemed “socially significant” offered artificially lowered prices. The move was only put in place on a temporary basis and appeared to be a means of drumming up support for President Kassym-Jomart Tokayev ahead of the vote. But the attraction of such price controls to Kazakhs was clear. Double-digit inflation was eating into disposable incomes. Lingering economic impacts of the COVID-19 pandemic combined with economic disruption caused by Russia’s invasion of Ukraine and the resulting sanctions imposed on Moscow were exacting a worrying toll.
There is more to the story, however. Kazakhstan has been experiencing difficulties in various food production sectors for several years. Some troubles have derived from climate change-driven factors, others from issues with subsidies.
On the climate front, heatwaves and droughts experienced across Central Asia last year led to mass die-offs of cattle and shortages of cattle feed. Wheat production was substantially affected in Kazakhstan, the 12th largest wheat exporter. Seeing as Central Asia is one of the most vulnerable geographies when it comes to climate change, these troubles were likely only a beginning. Now that global food security is an ever-growing concern, Kazakhstan might have good reason to worry.
Reports in 2020 cited the Kazakh Egg Producers Association as saying that Kazakhstan’s egg industry could collapse by the end of that year, noting that production could fall from 4.5bn eggs in 2019 to 2bn-3bn eggs in 2020 as small and medium sized egg farms would be forced to cease operation. Local farmers blamed the ending of state aid due to “negative production dynamics” after the Kazakh Agricultural Ministry announced in the same year that the authorities no longer saw the need to pay production subsidies to egg producers, as the country’s level of self-sufficiency on eggs had reached a record-breaking 120%. The government has paid Kazakhstani tenge (KZT) 75bn ($178mn in 2020) to egg producers during the past decade in the form of subsidies.
Back then, the Egg Producers Association believed that ending the state aid would lead to the domestic market becoming flooded with egg products from Russia and Belarus, making Kazakhstan potentially dependent on imports from those countries. Of course, such dependence might not be ideal under the current global dynamics taking hold.
These and other pre-Ukraine War dilemmas show that Kazakhstan might not necessarily be prepared to face an impending global food crisis.
The war in Ukraine and subsequent sanctions levied on Russia have hit Kazakhs in the wallet. The impact started with a sharp spike in prices of basic foodstuffs in March and continued with double-digit food inflation in the months that followed. The spike caused nervous consumers to rush to grocery stores for sugar, cereals and flour. Even when deliveries to stores from warehouses appeared on schedule, shelves with these goods remained mostly empty for several months straight.
The president, Tokayev, lambasted the government for failing to take control of the situation as food inflation approached 20%. Sugar prices alone skyrocketed by nearly 80% in the first half of this year. The prices of some foodstuff commodities were up by 80%, Tokayev fumed at a cabinet meeting.
Overall inflation, which was “the most serious problem,” was running at a seven-year high, he said, in remarks quoted by Vlast.kz.
Other basic foods saw price jumps. Flour prices leapt 33%, pasta and poultry 30%, bread 17% and cooking oil 16%.
Kazakhstan’s southern regions and border nations in Central Asia were again experiencing heatwaves this year. While a big producer of its own food, Kazakhstan relies on fruit and vegetable imports from southern neighbours, such as Kyrgyzstan and Tajikistan, to meet domestic demand. Issues with water shortages and abnormal levels of heat meant hiked fruit and vegetable prices in the smaller “stans”. This further drove up food prices in Kazakhstan.
The Syr Darya river flowing near Kyzylorda in south-central Kazakhstan. Water scarcity is becoming an increasing headache for the country amid climate change (Credit: Petar Milošević, cc-by-sa 3.0).
Last year, the Kazakh government failed to react effectively to a heatwave that caused droughts and harmed the nation’s agricultural sector. As yet, it is unclear whether the government’s response to this year’s climate conditions is adequate, but the situation might be dire in the long term.
Hong Kong-based nonprofit environmental organisation Earth.org has identified Central Asia as a region among the most vulnerable to desertification caused by climate change. Over 60% of Central Asia is vulnerable to desertification processes, Earth.org said in a report. Although much of the Central Asian region was classified as having a desert climate, the issue had now spread toward southern Kazakhstan along with northern Uzbekistan and Kyrgyzstan and around areas of the Junggar Basin in northwestern China, it pointed out. Glaciers in Central Asia are currently unable to replenish ice and, as a consequence, less meltwater is set to flow to nearby regions, leading to water shortages that affect agriculture and people’s daily livelihoods.
Current and projected population (under SSP2) in drylands, in billions. (Here, SSP2 refers to the socio-economic pathway SSP2 (‘Middle of the Road’) model used in greenhouse gas scenarios for developing climate policies) (Credit: Earth.org).
Despite the worrying outlook, Tokayev’s regime is seemingly optimistic about Kazakhstan’s food industry, so much so that it sees Kazakhstan as able to help out other nations moving ahead.
Food hub for the world?
Speaking at the 14th BRICS Summit on June 24, Tokayev most particularly stressed the emerging issue of global food security. He proposed that Kazakhstan could take on a central role to help stem difficulties.
“Over the last few months, the world food situation has gone from bad to worse. Millions of lives are at stake if the global food supply chains continue to degrade. Today, three of the world's four major food producers are BRICS members, and the BRICS countries' total agricultural GDP accounts for more than half the world total,” the Kazakh leader said, referring to the BRICS major emerging markets grouping of Brazil, Russia, India, China and South Africa.
Tokayev said that resolving the food crisis effectively would require a fully coordinated international response.
Biome vegetation zones in and adjacent to the Pontic-Caspian steppe grasslands region of the Eurasian Steppe. The Kazakh Steppe is characterised by large areas of grasslands, converted to cropland and pasture, and sandy regions (Credit: Dbachmann, cc-by-sa 3.0).
“Kazakhstan is committed to contributing to these efforts by employing its huge agricultural potential. […] Kazakhstan could contribute its fair share by playing [the role of ] a kind of ‘a buffer market’ between East and West, South and North. In the long-term, we need to keep an open, fair, interconnected and resilient global economy. Here, I see a lot of potential in BRICS-plus, [China’s] One Belt - One Road and the Greater Eurasian Partnership initiatives, ushering in a new era of growth and connectivity,” the Kazakh leader said.
Tokayev also spoke at the sixth summit of the nations that border the Caspian Sea, held in the Turkmen capital of Ashgabat, on June 29. There, he proposed creating a kind of a collective food hub via enhancing trade ties and transport links. His proposal appeared inspired by the strengthening of transport links with countries like Azerbaijan that only became possible after Russia was hit by international sanctions, hitting its transit role in international trade.
"It is pleasing that a significant increase is observed in Kazakhstan's trade with Azerbaijan—of 2.3fold—and with Iran and Turkmenistan—of twofold,” Tokayev said at the summit, according to the official website of the Kazakh president. “Our exports of high-quality wheat [around 5mn tonnes] and food wheat [around 1.5mn tonnes) make up a large share of this. We have more than one million tonnes of oil-bearing crops in the reserves. Also, Kazakhstan has significant potential to increase exports of meat and dairy products."
"Systemic integration between these centres and the Caspian food hub would open up new opportunities for efficient cooperation between farmers, buyers, transporters, sellers and consumers. And, most importantly, it would provide reliable guarantees for the sale of all products to be supplied," Tokayev noted.
Kazakhstan has long invested in its agriculture and food production sectors as a way of diversifying its economy away from reliance on oil exports, so perhaps there is still hope for the sector.
Can Kazakhstan manage given its own insecurity?
Without the assurance of its own food security, Kazakhstan may not be the ideal candidate for its own proposed plan.
"The government cannot only ensure food security but also reduce inflation, but it is not taking any cardinal action," economist Maksat Halyk told RFE/RL.
Halyk pointed out that the government, for instance, has this year delayed addressing the question of purchasing quality grain abroad, despite last year’s droughts demonstrating that domestic grain seeds could not withstand the water scarcity.
Some measures are being carried out, nevertheless.
For instance, the press service of the Ministry of Agriculture has been cited in local media reports as saying that this year subsidies for egg production have been increased, reversing some of the aforementioned issues created by the ending of egg production subsidies in 2020.
“The rules for subsidising the development of livestock breeding, improving the productivity and quality of livestock products have been amended and supplemented in terms of including subsidising food eggs,” the ministry said.
The rules came into effect on June 30, 10 days after their official publication. It was also indicated that the sum allocated from the republic’s budget to subsidise egg production this year was KZT6.5bn.
Head of the Association of Food, Sugar and Processing Industries of Kazakhstan Aizhan Nurzagaliyeva has had a few things to say with regards to the issue of fixing food inflation—and particularly sugar inflation—troubles.
Nurzagaliyeva told Cabar.Asia that subsidies for irrigation “need to be increased to 70%” and benefits need to be established “for transportation by rail”.
“These are minimal support measures compared to the preferences given by the governments of Russia and Belarus to their sugar producers. That's why their sugar industry is so dynamic and export-oriented," she said.
"It is necessary to increase rather than reduce the cultivated areas. During a meeting with farmers in late March, the minister of agriculture said that the ministry has such plans. Hopefully, maybe at least next year, this will come to fruition," Naurzgalieva added.
According to her, the disruptions caused to import flows of food products—as a side-effect of the conflict in Ukraine—can be looked at as both a challenge and a point of growth for Kazakh producers. That’s the case, she said, if they are regarded as presenting an opportunity to develop a niche, achieve production of higher-quality products and engage in import substitution. But taking this approach would still require help from the government, she added.
Naurzgalieva also observed that it was high time for Central Asia’s largest economy to create a separate food industry committee, which would deal specifically with food security issues.
Agriculture Ministry data confirm that there are sufficient stocks of food to ensure food security. They amount to 1.4mn tonnes of “socially important goods”, with most of the goods located in production and retail warehouses.
Only time will tell whether the government’s outward optimism on agriculture and food will be interlinked with the required action to pay off.