“The unpreparedness of the economy of Kyrgyzstan to force majeure, its dependence on wheat imports, and low reserve of wheat have become obvious during the Covid-19 pandemic. Such unforeseen circumstances should become a lesson to learn for the republic,” Nurlan Tokobaev, expert in food security, wrote in his article for CABAR.asia.
The economy of Central Asian states is rather agrarian. On the average, over a half (Kazakhstan – 41%, Kyrgyzstan – 66%, Tajikistan – 74%, Turkmenistan – 51.3%, Uzbekistan – 50%) of population in the region live in rural areas. The amount of workers in agriculture is 18 to 52 per cent (Kazakhstan – 18%, Kyrgyzstan – 27%, Tajikistan – 52%, Uzbekistan – 22%).
Wheat is considered a vital food in Central Asian states and is one of strategically important crops – it provides most of calories and nutrients in the ration of the regional people. The crop acreage for wheat in Central Asia increases since 1991, especially in Uzbekistan, Turkmenistan and Tajikistan.
According to the information of Kleffmann Group, an agricultural market research company, in 2019 the wheat-growing area across the world was 218 million hectares, which is equal to the area of South America. Five Central Asian countries have in average 14.5 million hectares of crop area in aggregate (India – 30 million hectares, Russia – 27 million hectares, European Union – 26 million hectares, China – 24 million hectares, USA – 15 million hectares), which is 6.7 per cent of all crops in the world.
Among Central Asian states, Kazakhstan is an all-sufficient leader in wheat production in the region and exports wheat to neighbouring republics, which receive 75 per cent of exported wheat in average. The Republic of Kazakhstan takes 10th place among top 10 global wheat exporters, it has 2.3 per cent of all global trade of this crop.
Kazakhstan exports wheat to over 20 countries in the world every year. According to table 2, in 2016 to 2020, the dynamics of annual export of wheat from Kazakhstan to the global market increases gradually from 4 to 6 million tonnes.
However, Tajikistan, Turkmenistan, Kyrgyzstan, Uzbekistan and Afghanistan are dependent on foreign wheat procurements and on the market of Kazakhstan, to be more specific. According to the International Grains Council, in 2019 in Tajikistan the volume of imported wheat was 60 per cent of annual consumption, in Kyrgyzstan – 40 per cent, Uzbekistan – 30 per cent, Turkmenistan – 20 per cent.
In fact, according to the global criteria of food security, the country should ensure 85 per cent of wheat produced by domestic producers, and 17 per cent of reserve wheat (of annual consumption rate) for unexpected cases.
Depressing reality of Kyrgyzstan
If we analyse the wheat market of Kyrgyzstan separately, the annual consumption of wheat is 800-900 thousand tonnes per annum (based on the average physiological rate of consumption – 115.3 kilogrammes per year). However, Kyrgyzstan produces annually about 600 thousand tonnes of wheat and caters for domestic market for 67 per cent. At the same time, nearly one half of the wheat harvest in Kyrgyzstan is low quality feed grain for animals.
The wheat produced in Kyrgyzstan has a relatively low level of gluten compared to the imported one, which makes it of poorer quality. The wheat imported from Kazakhstan, Russia and Uzbekistan is used for food.
According to the drawing, the share of wheat imported from Kazakhstan was 93-99 per cent in the last 3 years. However, this figure decreased to 49 per cent in 2020, and the share of wheat from Russia increased up to 50 per cent. In our opinion, this is related to restrictive quotas imposed by Kazakhstan during the Covid-19 pandemic. In late March 2020, Kazakhstan imposed restrictions and set quota for wheat and flour export (200 thousand tonnes of wheat, 60 thousand tonnes for flour) for Central Asian states (Tajikistan, Uzbekistan, Kyrgyzstan and Afghanistan). However, the government of Kyrgyzstan made a deal with Russia on the import of 33 thousand tonnes of wheat given the need for wheat supplies.
Unpreparedness of economy of Kyrgyzstan to force majeure, its dependence on wheat imports, and low reserve of wheat have become obvious to the public during the Covid-19 pandemic. Such unforeseen circumstances should become a lesson to learn for Kyrgyzstan. That’s why Kyrgyzstan must ensure 85 per cent of wheat produced by domestic producers, and 17 per cent of reserve wheat based on the annual consumption rate regardless of any difficulties and circumstances.
Information about real reserves of wheat available in the State Material Reserves Fund of the Government of the Kyrgyz Republic (Fund) is closed. If we try to calculate the total reserve of wheat in these funds based on official statistical data, the reserve of wheat in 2020 even declined and was -33.73 tonnes. This is mainly related to the fact that wheat output in Kyrgyzstan declined by 504 thousand tonnes. This is why it was obvious that during the Covid-19 pandemic in 2020 there was not enough wheat in the warehouses of the Fund.
According to the National Statistical Committee, the dynamics of the wheat growing area in Kyrgyzstan did not decline, but in 2021 the harvest decreased almost twice compared to 2020, in other words, the wheat output reduced from 504 thousand tonnes to 275 thousand tonnes. The sharp decline in the wheat harvest has been related by many experts to the draught and shortage of irrigation water in the country. In June 2021, the air temperature in the majority of areas in Kyrgyzstan reached 45 degrees Celsius, and it was mainly arid with a minimum precipitation rate. Farmers of Chui region have held a few protests in Bishkek because of the lack of irrigation water.
Thus, Kyrgyzstan has to import wheat and flour from neighbouring countries in order to meet the people’s demand. This is why this year Kyrgyzstan provided some benefits to exporters of wheat and flour. For example, former chair of the government of the Kyrgyz Republic Ulukbek Maripov signed a decree that reads that wheat and flour imports are exempt from VAT for one year (August 1, 2021 to August 1, 2022).
However, these steps of the government can indeed affect the operations of many enterprises producing and processing wheat in Kyrgyzstan. In other words, they can lead to the reduction in the number of flour-milling companies, decrease in wheat demand, and decrease of wheat-growing areas.
However, when regulating prices, the government must take into account not only the country’s population, but also entrepreneurs. The deficit in wheat output and the heightened demand cause rise in the price of the product. As a result, wheat prices in Kyrgyzstan have gone up for almost 40 per cent for the year.
Thus, based on our analysis, we can determine the following problems in the wheat market of Kyrgyzstan:
- Deficit in wheat output due to low domestic output;
- Shortage of wheat reserves;
- Dependence on wheat imports;
- Draught and deficit of irrigation water.
Recommendations
- In order to ensure food security in Kyrgyzstan, we need to produce (85%) 645 thousand tonnes of high-quality wheat domestically, ensure the reserve stock of wheat for 50 thousand tonnes, allow only (15%) 114 thousand tonnes of wheat to be imported.
- According to the law “On food security of the Kyrgyz Republic”, to ensure food security, the country must have national staple food reserves sufficient for at least 90 days for vulnerable groups. Vulnerable people in Kyrgyzstan, in our opinion, are those people whose consumer expenditure is below poverty line (according to the National Statistical Committee of the Kyrgyz Republic, in 2020 the population with consumer expenditure below poverty line was 25.3 per cent, or 1,664 thousand people). For example, in order to meet the 90-day need of vulnerable groups, Kyrgyzstan has to have a certain amount of wheat grain in stock. The annual wheat grain demand of vulnerable groups in Kyrgyzstan (1,664 thousand people in 2020) was: 115.3 kilogrammes per capita (average physiological standard of consumption) × 1,664 thousand people = 192 thousand tonnes of wheat grain. Total: 192 thousand tonnes × 90 days/365 days = 47.3 thousand tonnes + 5% (storage loss) 2.4 thousand tonnes = 50 thousand tonnes.
- The quality of wheat produced in Kyrgyzstan should be improved. This problem should be solved by focusing on development of a new variety of wheat adapted to the climate of Kyrgyzstan in order to improve its gluten level. In our opinion, plant breeders and scientists (agronomists) of the K.I.Skryabin Kyrgyz National Agrarian University should deal with it. As the world practice shows, plant breeders from all over the world try not only to adapt the new variety of wheat to complex climatic conditions, but also to improve its yield. For example, scientists of the Agrarian University of Bashkortostan developed wheat germs of the new and unique variety of wheat based on natural and climatic conditions in a given location. Moreover, a new variety of wheat with improved gluten level and yield was usually developed during 10 to 12 years. They decided to plant wheat in a greenhouse in winter instead of planting it in spring into bare soil, as usually. Thus, they could obtain research material at least twice a year. It should be noted that it took researchers of the Agrarian University of Bashkortostan seven years to determine the perfect place, accurate temperature regime and humidity. In order to identify the best variety in Bashkortostan conditions, they had to cross wheat with more than ten varieties during these years.
- Moreover, farmers of Kyrgyzstan need to irrigate wheat in a timely manner to get high-quality wheat with high level of gluten. However, in 2020, Kyrgyzstan had deficit of irrigation water. Therefore, the government must modernise irrigation systems, build new waterworks to control the flow rate. As Chinese farmers have shown, it is necessary to dig deep wells to pump out water from deep layers of soil.
- When regulating prices, the government must take into account not only the country’s population, but also entrepreneurs. Therefore, to improve the competitiveness of flour-milling companies in Kyrgyzstan, VAT on wheat imports needs to be removed, and high excise duties should be applied to imported wheat, which will result in slumping demand for flour imported from Kazakhstan and Russia and in increase in the durum wheat supplies. Kyrgyzstan can actively develop the process of flour processing domestically and export flour to the markets of Afghanistan and Tajikistan, which will make Kyrgyzstan competitive with Kazakhstan.