The Central Asian agri-food sector and consumers are experiencing the negative consequences of quarantine restrictions, trade barriers and other factors.
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The coronavirus pandemic does not threaten Central Asian residents with food shortages. According to World Bank Senior Agricultural Economist Sergiy Zorya, the countries of the region quite effectively managed to ensure stable food supplies to the population during the crisis period.
“During the pandemic, Central Asian countries took urgent measures to strengthen food security and support the agri-food sector,” he explained. “In particular, the region’s governments have used state food reserves, reduced the prices for food products due to export restrictions (excluding Uzbekistan, which did not impose restrictions on the export of its fruits and vegetables) and lowering tariffs on imported food products.”
At the same time, the authorities accelerated the lifting of restrictions on the transportation of agricultural products and the movement of industry’s workers, and granted a deferral of loan payments for farmers and agricultural enterprises and other benefits that stimulate their activities. The budget for social programs for vulnerable groups was also increased.
At an online briefing to discuss the impact of coronavirus on the Central Asian agricultural sector, Sergiy Zorya categorized price leaps for some food products as the short-term consequence of COVID-19. To the same category he placed the reduction in food access due to a sharp decrease in incomes of the poor and vulnerable segments of the population and disruptions in the supply chains of raw materials (seeds and fertilizers), which lead to interruptions during spring field work and can negatively affect the future harvest of various crops.
According to the speaker, in the medium term, during the next six months, a decline in domestic food consumption is expected, as well as a decrease in demand for fruits and vegetables in Russia, the main market for most countries of the region, due to a decrease in the purchasing power of the population there. According to the World Bank, in the first quarter of this year, exports of fruits and vegetables from Uzbekistan to Russia fell by 25% compared with the same period in 2019, and in 4 months – by 42%.
According to an April express survey of the Food and Agriculture Organization Regional Office for Europe and Central Asia, the most affected sectors were fish, vegetables, meat, dairy products, wheat and potatoes. The most affected were street market farmers, restaurants, suppliers of agricultural production and transport operators. Sales decreased at both ends of the supply chain, consumers began to buy less food.
The remarkable impact of the crisis on consumers and the agro-industrial complex in the Central Asian countries results from the internal problems and the peculiarities of the region.
“The agriculture continues to play a significant role in its economy. Kazakhstan’s export quotas for wheat and flour have a large regional impact. Kazakhstan accounts for more than 90% of imports of these products from Central Asian countries,” Zorya said.
According to him, the share of the expenditures of region’s population on food is high: it is 40-60%, which makes them vulnerable to price leaps. According to pessimistic forecasts of the World Bank, the pandemic will lead to a poverty increase in the region to 2.6 million people. This will further reduce the purchasing power of the region’s population.
According to the WB economist, the coronavirus pandemic has affected the food security of all Central Asian countries. However, its effects were more tangible in Kyrgyzstan and Tajikistan, while the pandemic has least affected Uzbekistan and Kazakhstan.
One of the most striking examples of the negative impact of restrictive measures on agricultural producers of the region is the “cabbage crisis” in the Southern Kazakhstan. Due to the widespread quarantine, the ban on the export of vegetables introduced at the initial stage, the drop in demand for products in Russia, the farmers of the Turkistan region faced the problem of selling early cabbage in April.
It was impossible to sell and consume domestically all the crops that exceeded domestic needs many times. To do this, according to the farmers, every Kazakhstan resident should have eaten 20 bags of cabbage per day.
An agricultural consultant, journalist Kirill Pavlov, who constantly reports the farmers’ problems on his Facebook live broadcasts, believes that trade chains established through decades were lost just in two weeks of the crisis.
“When the acute crisis arose, vegetable markets were closed and the trends of consumption around the world decreased, we had to use every opportunity that appeared,” he says. “Instead, we introduced some prohibitions, then quotas, and then artificially created problems with certificates, etc. As a result, we lost a huge Russian market. Today, Iran took about 70% of the Russian market of the cabbage.”
Cabbage producers, according to Pavlov, suffered enormous losses. According to him, the cost value of kilogram of the vegetable is 55 tenge ($0.14), while people sold it at 5 tenge ($0.012) from the field.
“Even half of the more than 350 thousand tons of cabbage grown this year were not exported,” Pavlov complains. “Akimats had to buy some. They distributed it a lot: to the orphanages, hospitals, wherever possible. A lot was plowed over on the fields.”
Serik, one of the “cabbage crisis” victims, said that he had lost over 1.2 million tenge ($2999) from it. His farm produced about 400 tons of vegetables, but only 150 tons were sold at 9-10 tenge ($0.022-0.025) per kilogram. Last year, a kilogram cost 150-170 tenge ($0.37-0.42).
In addition, due to closed markets, a ban on celebrations and public events, there was no demand for other vegetables, such as beets. Due to large losses, difficulties with obtaining certificates, unwillingness to take risks again, the source admitted that he is likely to abandon the usual plans for planting in the next season. Many of his colleagues plan the same, he says.
Representatives of the greenhouse business are also in a difficult situation. It was unprofitable in Kazakhstan long before the corona crisis. According to the Chairman of the Association of Greenhouses of the Turkistan Region and Shymkent, Myrzakhmet Snabaev, due to closed borders, producers sold export-oriented goods (60-70% of greenhouse vegetables in Southern Kazakhstan are grown for exports – Ed.) on the local market at very low prices.
In March last year, a kilogram of cucumbers was sold at 450-500 tenge ($1.12-1.25), but this year – at 150-200 tenge ($0.37-0.5). At the same time, its cost value is 200-250 tenge ($0.5-0.62). In order to cover utility costs, mainly for heating in greenhouses, which lasts from two to four winter and spring months, and have at least a small profit, according to Snabaev, the price should be at least 400-500 tenge ($1-1.25).
The Head of the Association compared the work of greenhouses during the period of the corona crisis with the monkey business. According to him, greenhouse farms’ owners did not earn anything during quarantine, and some are in debts.
On the eve of the melons and gourds season, fearing the “cabbage crisis” repetition, Kirill Pavlov addressed the Minister of Agriculture Saparkhan Omarov on social networks requesting to lift the prohibitions and prevent delays. According to him, on the second day after the publication, an order on lifting all export restrictions was issued.
Pavlov believes that export restrictions harm many agricultural sectors. Meanwhile, the agricultural exports, in his opinion, could become one of the key areas of development of the Kazakh economy in the next year or two.
“Amid the upcoming food crisis, which is expected globally this autumn, Kazakhstan, as a country with great agricultural opportunities, providing itself with crops many times higher than required domestically, could become a world’s exporter of agricultural products. However, the smart agricultural management is needed for this. Experiments with prohibitions and artificial obstacles are not needed, and some authorities do not need to put personal interests above the state’s,” the agricultural consultant argues.
The Governor of Astana International Financial Centre Kairat Kelimbetov is convinced that Kazakhstan can benefit from the problem of food security as one of the main challenges for the global economy after the pandemic. In RIA Novosti agency interview, he said that Kazakhstan and Russia could become the world’s largest food suppliers after the COVID-19 pandemic.
Previously, at a government meeting, Prime Minister Askar Mamin said that Kazakhstan has the real potential to become one of the world’s food trading hubs.
In addition, at the meeting on June 3, the Minister of Agriculture Saparkhan Omarov reported that despite the crisis due to the coronavirus pandemic, following the results of four months of this year, the situation in the agricultural sector remains stable. In particular, gross agricultural output increased by 2.2%, while food production increased by 2.4%.
“Currently, the republic is able to completely provide itself with basic food products of its own production. At the end of 2019, the growth of gross agricultural products was recorded at 0.9% and amounted to 5.2 trillion tenge ($12.99 billion),” says Lidia Parkhomchik, the expert at the Institute of World Economics and Politics (IWEP) at the Foundation of the First President of the Republic of Kazakhstan.
According to the expert, Kazakhstan is steadily increasing its export potential. In 2019, the export of agricultural products grew by 6.5% and amounted to $3.3 billion. Supplies to China significantly increased (by 50.5%), as well as to the EAEU countries (by 8.2%) and Central Asia (by 7.4%).
The economist, expert at International Strategy Partners Group and Agrifood Consulting International consultant Nurbek Achilov believes that a high level of food security in Kazakhstan and the whole region is due to several factors.
They are sufficient volume of agricultural production in Kazakhstan, its export to neighboring and non-CIS countries, the focus of almost all Central Asian countries on the agricultural sector, and the low cost of high-quality agricultural products.
According to the expert, the coronavirus period, which exposed many problems of the agricultural sector, allowed us to draw some conclusions. First, it is necessary to invest in the processing of agricultural products.
“During the coronavirus period, there were temporary difficulties with the sale and export of cabbage and other agricultural products,” he explained. “Perhaps, if the effective system of procurement and processing of products functioned, many negative consequences for farmers could be avoided.”
Storage, logistics, and effective sales of products to the final consumer require improvement. Nurbek Achilov sees another important reason for the farmers’ high losses in the absence of thermal warehouses in the region with a sufficient number of cabbage exporters.
“When the Northern regions needed cabbage and there was not a slightest barrier to transporting agricultural products within Kazakhstan, our farmers simply did not know what to do and where to transport the products,” the economist notes.
The problems of communication with farmers, in his opinion, once again demonstrated a lack of qualified personnel, a knowledge system and the transfer of experience in the agricultural sector. In addition, under the virus threat, there is a tendency to strengthen the protective measures of countries by introducing new requirements for product’s quality, inspections, standards and procedures. All this, according to Achilov, will affect the speed of products’ transportation, additional certification and costs for customers.
“Without an effective information system, any product, especially fresh fruit and vegetable, is in a high-risk zone. Therefore, many countries, especially neighboring ones, will create additional favorable conditions for the development of unified systems for providing the population with agricultural products,” the source concluded.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project.