Kaskarbayev, J. A., PhD, A. I. Barayev Scientific-production centre of grain farming, Shortandy-1, Kazakhstan
The theory of comparative advantage says, that if each country specializes in those goods and services where they have an advantage, then total output and economic welfare can be increased, and it will lead to more efficient use of resources (www.tutor2u.net). The reality today shows that countries should specialize in production of those products that have demand, and that production of which would efficiently use existing resources in the country.
For the crop sector of Northern Kazakhstan, these issues are one of most important ones nowadays. In general, the region is exploiting the existing comparative advantage and produces grain (mainly of wheat), by meeting domestic needs and selling it to other countries. However, in the existing conditions, other kinds of crops can be produced, which also have demand and efficiently use the conditions and resources: soil, moisture, production and marketing infrastructure, people, capital, etc. This is proved by results of the research and by practices in other countries with similar natural and climatic conditions.
The main important advantages of these crops are:
- They can contribute into sustainability of crop production. According to agronomic studies, mass and continuous growing of grain (mostly wheat) in rotation with fallow has negative effect on soil fertility. Crop diversification, by including pulses, oil crops and groats/cereals in rotations, could contribute into avoiding this effect. In addition, they could occupy part of fallow, that causes wind and water erosion (Vorobyev, 1977; Laboratory reports, 2002-2005).
- They can use the resource more efficiently. In the existing soil-climatic conditions, crop production in the region is mainly represented by wheat. However, agronomic studies and practices in countries with similar conditions show that other crops with higher profitability can also be grown. This may increase efficiency of resource use in the region. Alternative crops (AC) may have lower yield, but usually they have higher prices.
- They can reduce the risk in agribusiness. As generally known, there are two kinds of risks in crop production business: (1) production and (2) market risks (Zentner et al, 2002). At this moment, crop producers in NK region run high risk in their business, because they mostly rely on one crop – wheat. In last several years, average wheat yield in the region was changing from 0.88 to 1.17 ton per ha (Agriculture, forestry and fishery of Kazakhstan, 2005), and its price was fluctuating from 50 up to 150 US$ per ton (AgroInform, 2003-2006). Crop diversification, i.e. simultaneous production of other crops, can reduce the existing risk in the agribusiness, as income will depend not only on wheat, but also on other crops.
- They can improve feed availability. At this moment, there is lack of inexpensive high-quality compound feed in Kazakhstan. Insufficient and unbalanced feeding is one of reasons of low productivity and profitability in livestock production (SAP, 2002). Increase of production of pulses and oil crops can provide raw materials for feed producing industry.
- They can improve food availability. Wheat production excessively covers needs of Kazakhstan. However, production of plant oil and pulses doesn’t cover it (SAP, 2002). Crop diversification and processing developing in the region may cover this deficit.
- They can improve rural well-being. In NK region, well-being of much rural population depends on well-being of producers, especially big ones. If crop diversification can increase producer’s income, then it may positively influence well-being of rural population.
In order to solve abovementioned problems, Kazakh and ICARDA researchers within an ADB supported project, defined possible alternative crops for the region and developed agro-technology for them. Also, various crop rotations with these crops were offered in order to reduce areas under wheat and fallow. These results are currently available for adoption in production.
However, despite existing positive effects of these crops, their areas are still marginal in the region and producers do not grow them. One of the reasons is lack of socio-economic studies of crop diversification, producers’ attitudes, production economics, marketing and government policy. In order to study these aspects, on-going research was extended by inclusion of socio-economic research, supported by the Wilfried Thalwitz scholarship from IFAR. This material presents the results of this research.
Initial materials and methodology
The material contains information on:
- Economic assessment of alternative crops production;
- Analysis of socio-economic aspects of crop diversification adoption in the region;
- Analysis of government policy in crop diversification.
Economic assessment of production of alternative crops. Main objective of this part of the study was to identify and compare profitability of different crops, considered as alternative to wheat in the North Kazakhstan region. The crops are compared solely and in rotation with wheat to see their economic effect on following crops. The data is taken from 5-year experiment at Laboratory of agro-technology at A. I. Barayev Scientific-Production Centre of Grain Farming (SPCGF) under ADB funded ICARDA Project on Soil and Water Management (Kaskarbayev, Suleimenov, Project reports).
Crop rotations used are 4-field crop rotations with conditionally 1 000 ha/each field: fallow-crop-wheat-wheat. Under “crop”, different crops are considered:
- Bread wheat;
- Durum wheat;
- Field pea;
The first rotation, with the bread wheat, is a traditional one, and was used as a control/check. A traditional method, with technological scheme, was used in calculations. In order to simplify and speed up the calculation process, electronic version of the technological scheme in MS Excel spreadsheet was constructed by connecting its sheets. Prices for grain were taken from province visits and from approximations for those crops, which are not traded in the region. Prices for seeds were taken as 30% above the grain (they may be underestimated). For lubricants (diesel oil, autol, nigrol and solid oil) average price was used (68 KZT/liter). Elevator service tariffs (acceptance, cleaning, drying, storage and delivery) are average, and used for all kinds of grain. Prices used in calculations are average, without subsidies.
Labor cost, fuel consumption, depreciation and taxes are taken from normative values at SPCGF.
It is necessary to note, that in these calculations, depreciated cost of the machinery is very low, some of it does not have it (written off). That is why, shares of such costs as depreciation, repair, investment and taxes, are low in total costs. At various farms, the situation may be different and individual approach to each case should be done. In some cases, production of some crops may need purchase of additional machinery, may be new. In this case, profitability will change. The calculations covered only direct costs.
Analysis of socio-economic aspects of crop diversification adoption in the region. In order to find answer to a question “How to expand areas under alternative crops”, 2nd phase of the work was devoted to socio-economic study, which included meetings and interviews with stakeholders, having relation to CD in the region. They are – government organizations, agricultural producers, agricultural processing enterprises, unions and associations of producers and processors, traders, consumers and research organizations.
Among government organizations, following representatives were selected to visit: provincial and district departments of agriculture, and territorial committees of MoA. For the study, it was important to know their attitudes to CD, reality and practice of CD, existing and needed measures to promote CD, as well as to get statistical data on crop production and processing, information on producers, processors, and consumers of AC in the respective province and/or district.
Among producers, farms practicing and not-practicing CD were selected. First group of farms is interesting because they are doing CD, could grow alternative crops (AC) and found what to do with them after harvest. That is why it was interesting to know: why they decided to grow other crops, what they do with the crop, where they market it, what problems in production and marketing exist, and what measures, they think, could be effective in promoting CD. From second group, interesting to know why they do not grow other crops, what they need in order to decide to grow AC.
One group of potential buyers/purchasers of AC in the region is processing enterprises: producers of cereals/groats, plant oil, rye flour and compound feed. Demand of this group could be a part of a general aggregate demand that could cause and “pull” CD in the region. Cereal producers could affect areas under such crops as field pea, chickpea, lentil, buckwheat and millet; plant oil producers – sunflower, rapeseed, mustard and flax; flour producers – rye; compund feed producers – field pea, chickpea, sunflower, rapeseed and mustard. Like agricultural producers, processing enterprises are also divided into 2 groups: ones that use AC, and others – that do not use. From the first group, interesting to know what they produce from AC, where and how sell it, what is a load, where they get grain/seeds (raw materials) for processing, purchase and selling prices, problems and difficulties with processing and marketing. From the second group, interesting to know why they don’t work with AC, whether they are interested in them, and what they need in order to work with AC. Finally, was interesting to know their opinion on CD in the region and their capacities to absorb increased amounts of AC in case of their production growth.
Another group of potential buyers are livestock and poultry farms and enterprises that need feed. Potentially interesting crops for them are field pea, chickpea, sunflower, rapeseed and mustard. These enterprises can work with agricultural producers, as well as with feed producers, by buying grain/seeds or feed. Their permanent demand could be a good stimulus to increase areas under AC. For the study, interesting was to learn whether they need these crops, how they use them and how much. If do not, then whether it is interesting for them to use the crops’ products in feeding.
Research organizations can offer information on agro-technology of these crops in different soil-climatic conditions, on processing technologies, on effect from feeding and on potential economic effect. Part of these also lays on this work.
In this part of the material on studying crop diversification possibilities in the NK region, mostly results from practice are presented. This is the biggest part of the research by time, resource and effort use. It includes description of reality: production, processing, trade and state regulation. It included visiting four provinces (Pavlodar, Akmola, North Kazakhstan and Kostanai), where the author had a chance to meet with representatives from abovementioned organizations. This material contains information on two provinces, namely Pavlodar and Akmola, as data from rest two provinces are not yet analyzed.
Analysis of government policy in crop diversification. This part of the research included analysis of existing government programs in agriculture and interviews with representatives of the Ministry of Agriculture, and of province and district departments of agriculture.
The research partly covered issues of marketing of alternative crops, and more in-depth study is planned after documenting the implemented activities and data obtained.
Results and discussion
Main indicators from calculation results are summarized in Table 1. The profitability is selected as main indicator in ranking the crops and rotations. In % expression, it is a ratio of net income to total costs, multiplied by 100%.
Table 1. Main economic indicators of crops, KZT/ton, %
Source: author’s calculations
More profitable than wheat (67%) crops are: lentil (118%), sunflower (94%), mustard (80%), durum wheat (77%) and field pea (70%). Less profitable are: chickpea (64%) and rapeseed (18%), Profitability results are shown in Figure 1.
Lentil is most profitable because its price is one of the highest (30 000 KZT/ton): 2.7 times higher than for wheat, whereas cost per ton is only higher by 2 times. Lentil has higher cost per ton than wheat, mainly due to lower yield, and more costs for seeds and pesticides. Certainly, lentil’s price used in calculations is conditional, because it is not traded inside Kazakhstan. However, it shows great potential of this crop.
Sunflower’s success is also due to its high price. Moreover, sunflower production needs fewer operations (eight) than wheat (nine), which results in lesser costs for labor and fuel. In addition, less costs are needed for seeds due to lower seeding rate (20 kg/ha); wheat seed rate is 120 kg/ha. Under production conditions, this crop is also profitable even at lower yield.
Mustard has higher price than wheat (24 000 KZT): ratios between mustard and wheat prices and costs are 2.1 and 2.0. In addition, costs for seeds are less with mustard because of smaller seed rate (9 kg/ha). However, costs for pesticides are higher due to double “Karate” herbicide application. Only few producers grow mustard, although it can be spread over large area because there is permanent demand for it.
Figure 1. Profitability of crops, %
Source: author’s calculations
Durum wheat is more profitable also due to higher price (ratio – 1.2) despite lower yield: surplus from higher price is larger than loss from lower yield.
Field pea has also higher price (1.59 times) with higher cost per ton (1.57). Costs per 1 ha for seeds and herbicides are higher than with wheat, due to higher seeding rate and expensive application of “Pivot” herbicide. Nevertheless, relatively good yield with price make this crop more profitable.
Following crops are less profitable than wheat: chickpea (64%) and rapeseed (18%). Chickpea is a little less profitable mainly due to higher costs for seeds and herbicides. Seeds – higher seed rate (315 kg/ha) with higher seed price; herbicides – high costs for “Pivot” herbicide application. Potentially, chickpea’s yield can be increased by introduction of varieties resistant to ascochytosis, which can be found in ICARDA’s collection.
Rapeseed became less profitable mainly due to much lower yield (0.75 t/ha). This crop doesn’t have high drought resistance and needs more moisture. Also this crop is less familiar for producers and the equipment used was developed for wheat growing. Northern part of NK region would be more suitable. Rapeseed has almost same cost per ha as mustard: rapeseed – 15 293 KZT/ha, mustard – 15 766 KZT/ha, and same price – 24 000 KZT/ton. However, difference in yields makes its cost per ton much higher: rapeseed – 20 391 KZT/ton, mustard – 13 361 KZT/ton. Yield level of 1.1 t/ha would make this crop more profitable than wheat.
In Figure 2, profitability is presented in terms of net income per ha. Ranking by this indicator looks slightly different from ranking by profitability in %. Anyway, it shows that most of alternative crops are potentially more profitable than traditional soft wheat. Lentil has kept its top position by the highest net income per ha (23 375 KZT). Chickpea moved from less profitable than wheat to the 2nd most profitable crop rank, by bringing more profit per ha (17 386 KZT). The third most profitable crop is dry pea (15 448 KZT). Such oil crops, as sunflower and mustard, and durum wheat has kept their relatively more profitable positions. Rapeseed anyway is less profitable than soft wheat in ranking by this indicator.
Figure 2. Profitability of crops, KZT/ha
Source: author’s calculations
Above analysis is based on solely crops. However, their effect on following crops can make the profitability rating different. This is illustrated in Table 2 and Figures 3 and 4. Per ha indicators assume area of whole rotation (including fallow area).
Table 2. Main economic indicators of crop rotations, KZT/ha, %
Cost per ha
Income per ha
Net income per ha
Source: author’s calculations
Comparison based on rotations allows assessing various crops in a system, by their effect on the following crops. Solely, one crop may be highly profitable, but this profitability may be at the expense of following crops, e.g. one crop consumes much moisture or high weed population remains from the preceding crop. On the contrary, the crop itself may be not very profitable, but it raises profitability of the following crop, e.g. by nitrogen fixation or breaking weed and disease cycles.
Lentil has kept its leading position (Figure 3). This is based firstly on its own high profitability, and its positive effect on the following crops. For example, wheat after lentil has profitability level of 64%, whereas wheat in control – 46%. Main reason – higher yield (1.89 t/ha versus 1.65 t/ha). Last crops in both rotations have negative profit margins.
Chickpea in the rotation rating became second profitable crop. Reason is the same as with lentil – higher profitability of wheat after chickpea (75%), caused by higher yield after chickpea (2.06 t/ha).
Field pea – same effect and reason: 75% profitability level and 2.05 t/ha yield level of wheat after field pea.
Durum has comparatively better effect on wheat after it: profitability – 59% at 1.83 t/ha yield level.
Figure 3. Profitability of rotations, %
Source: author’s calculations
Sunflower is not a good preceding crop for wheat. Wheat’s profitability after this crop is just 4%, caused by lower yield – 1.50 t/ha and more operations (nine). However, wheat after this wheat has better profitability level, even with the same yield. Reason – less operations (seven). Absence of negative profitability in the rotation and high profitability of sunflower led to its high level in general. But this issue needs more thorough testing, as in literature it is recommended to have repeated sowing of sunflower only after 8 years.
Figure 4. Profitability of rotations, KZT/ha
Source: author’s calculations
Mustard and rapeseed are also better preceding crops than wheat, resulting in higher yields than after wheat. But more operations (nine) with wheat after mustard make this rotation slightly less profitable than control/check variant. Wheat after rapeseed has much higher profitability level due to good yield and less operations (seven). However, this doesn’t affect much on general rotation’s profitability level, because rapeseed itself and last crop in the rotation have low and negative profitability.
In Figure 4, ranking of the rotations by net income per ha of rotation area is presented. In general, it does not differ from ranking based on profitability in %.
At the end, it is worthwhile to mention, that above results assume marketing of crops for certain prices, and there are no problems with marketing. However, some of the crops are almost not traded in NK region at all, and probability to sell for these prices is not high. That is why, in order to have crop diversification in the region, it is important to ensure sufficient price levels and to have demand (where/whom to sell).
Analysis of opportunities and constraints of crop diversification in the region, namely Pavlodar and Akmola provinces, gave following results:
- Pavlodar province has the most diversified agriculture among four North Kazakhstan provinces. This can be explained by soil and climatic conditions featured with lower soil fertility and drier climate. Because of this, the Province was not important in the grain production balance and was allowed to look for other alternatives. Most popular alternatives to wheat are sunflower and buckwheat. Their expansion has been provoked by high demand from processing enterprises. This is due to high demand of population for sunflower oil and buckwheat groats/cereals. Another crop – millet, used to be most popular among alternative crops in Soviet times. However, nowadays it is loosing its popularity due to low demand.
- The agriculture in Akmola province is less diversified as compared to Pavlodar province. Dominating crop – wheat. Reason of dominance is existence of demand for wheat grain from processing and exporting companies (including government-owned). Additionally, infrastructure of wheat sector is well developed. Groats/cereals have demand from population, but there is no functioning processing enterprise in the province. Sunflower has good marketing potential. Rapeseed production just started, marketing issues need to be worked out.
- Main factor of a certain crop expansion – demand with a good price for it.
- Other important limiting factors for alternative crops’ expansion are: unavailability of seeds; old age of varieties; lack of knowledge on production of alternative crops; lack of access to information and advices/recommendation on production technology; lack of work stability and low professionalism/competence of some local government organizations.
- Provincial departments of agriculture in three provinces of NK region (except Pavlodar) are very interested in CD, but are limited in capacity. There are issues they cannot do, e.g. breeding, testing of crops in different zones, marketing development. Here, more collaboration with research organizations and respective financing for it are needed.
- Most of producers support CD, even very much. Reasons – risk minimization, profit maximization, keeping crop rotations. Main indicator in selecting crops is profitability and its probability (or risk). Main factors are prices, demanding amounts, and their stability.
- Producers would like GO to be their partner in CD, if they are interested in it. Collaboration options: subsidies for AC seeds; regulation of prices and volumes on the market; provision of consultation services; marketing support/promotion.
- There is a social/psychological factor affecting CD expansion. It is a relationship between willingness to diversify crop production and age of farm managers. In general, younger ones are more interested in CD than older ones.
- Processing companies are interested in CD because they need raw materials. From government, they wish to have planning on national level, fair and transparent tenders of big government organizations (e.g. Ministry of defense) and support in provision of money for equipment purchase and for running costs.
On the national level, there are two main documents that reflect government policy in crop diversification in the North Kazakhstan region. These are Conception of sustainable development of agro-industrial complex of the Republic of Kazakhstan for 2006-2010 and in Program of priority measures for 2006-2008.
The measures of the Conception and the Program show that there is understanding of what is needed in order to diversify crop production in the region. Most significant measures are: in production – prioritization of subsidies to diversifying producers; in processing – subsidization of leasing and credits for running costs; in marketing – FCC’s guarantee to buy grain/seeds of alternative crops (only in plans). The success of this policy will depend on how these plans will be implemented. However, the understanding of crop diversification has some important shortcomings:
- All crops are dumped and mixed up. This doesn’t give clear picture on each crop activities.
- Policymakers admit that there is need in crop diversification, but in reality, mainly there are plans and support measures only for rapeseed (centralized provision of hybrids and construction of oil plant). However, many specialists’ opinion shows that this crop is too overestimated in the Program. It is quite risky crop to adopt on large areas. Its adoption should be limited by ordinary chernozem zone for the first time.
- Pulses, most significantly contributing into sustainability of crop production in the region, are very underestimated. The program does not plan their increase, which certainly makes the program weaker.
Conclusions and recommendations
- Spring wheat so far is almost the single crop in agriculture of northern Kazakhstan occupying most of cropland.
- There are many alternative crops, which potentially could be good replacement of part of cropland occupied by bread wheat. Not many producers complained about low crop productivity even at pretty poor cropping practices.
- Food legumes have the best chances to be part of crop rotations, as they are potentially profitable cash crops and contribute to sustainability of cropping systems.
- Strangely but producers claimed on no market for millet which was traditional food for Kazakh people. Moreover, cereals and pulses are found as most healthy food in the whole world. This is a challenge to work on changing eating habits.
- Food legumes and cereals other than wheat could be marketed to other countries for much better prices than inside of the country and demand for which is steadily growing in the world.
- Oilseeds (sunflower, rapeseed, mustard) are also good crops to be adopted by farmers for improved economical efficiency.
- Producers are interested in crop diversification. However, they are mainly constrained with lack of markets for alternative crops.
- Processing enterprises and traders are also interested in crop diversification, because it may bring them more profit.
- Ministry of agriculture developed measures to promote crop diversification in the north Kazakhstan region. Main measures include subsidization of production and processing, and purchase of crop by government-owned Food Contract Corporation (FCC).
- There is great potential for crop diversification in the northern Kazakhstan. Agricultural policies should be promoting crop diversification for better rural livelihoods, sustainability and profitability of agriculture.
- Promotion of crop diversification in the region needs to be systematic in order to secure efficiency and sustainability of measures. Development of programs and/or projects by crop and by province could be a good solution for this. These programs have to be interdisciplinary (agronomy, livestock, food technology, economics, etc.) and stakeholders from different spheres should be involved in it (national and local farmers’ and government organizations, regional and local research institutes, producers, processors, traders, etc.).
- Training on cultural practices of alternative crops is urgently needed. Suffice to say that sunflower is being found profitable at seed yields of 400 kg/ha up while 1,000 kg/ha can be easily achieved. The crop has been harvested under snow because driers are not available. Oilseeds are sown with old grain drills and harvested with aged poor quality harvesters with enormous rate of losses, etc.
- Crop diversification in the region should be demand-pulled in order to secure its sustainability.
- Marketing issue should be a starting point to begin from. Marketing is recognized as main constraint for diversification and many efforts should be taken to develop internal and external markets. This is legacy of Soviet era when marketing problem didn’t exist at all. Internal market for pulses is not developed absolutely because people traditionally didn’t eat pulses and they don’t know how to cook these foods.
- In case if demanded and profitable products are identified, producers may need:
Seeds of good varieties,
Information and consultations on production technology,
Additional machinery and equipment,
Money for running costs (e.g. for seeds, pesticides, etc.),
Risk insurance in production and marketing.
These aspects are partly reflected in government policy: support of breeding, subsidized leasing, pre-financing with no interest, futures contracts with FCC. However, there are still some limiting factors: lack of good varieties, lack of consultation services, risk insurance service needs some improvements.
- In case if demanded and profitable products are identified, processors may need:
Equipment for processing new crops,
Money for running costs (e.g. for purchase of raw materials),
Information and consultations on processing technology,
Risk insurance in production and marketing.
These aspects are also partly reflected in government policy: subsidized leasing and credits for running costs.
- In case if demanded and profitable products are identified, marketers (they can be producers, processors or special traders) may need:
Up-to-date information on demand and prices,
Risk insurance in marketing,
Money for running costs (e.g. for purchase and marketing).
Much of success in promotion of crop diversification will depend on fairness, efficiency and stability of work at national and local level government organizations, responsible for implementation of planned and financially approved measures. Unfortunately, there are controversial opinions among policy makers concerning crop diversification. Some of them want Kazakhstan to become great grain exporting country. Thus, policy makers should be convinced that crop diversification is also a way to better livelihoods in rural area and to sustainable agriculture, which becomes strategically the only approach for future success in agriculture.
Comparative advantage and international trade (www.tutor2u.net).
State agro-food program of the Republic of Kazakhstan for 2003-2005 (SAP). Decree of the President from 5.06.2002 #889. Astana 2002.
“AgroInform” journal of the Ministry of agriculture, 2003-2006.
Vorobyev, S. A., et al. Farming. Moscow, “Kolos”, 1977.
Zentner et al. Economics of crop diversification and soil tillage opportunities in the Canadian prairies. Agronomy journal, Vol. 94, March-April 2002. p. 216-230.
Agriculture, forestry and fishery of Kazakhstan in 2000-2004. Statistical yearbook. Almaty, 2005.
Crop planning guide 2004. Brown soil zone. Saskatchewan Agriculture, Food and Rural Revitalization.
Reports from Laboratory of field crops agro-technology, 2002-2005 гг.
System of conducting agriculture in Pavlodar province: recommendations. Pavlodar, 2003.
System of conducting agriculture in Akmola province: recommendations (not published).
On crop harvest in Pavlodar province (2002-2005). Provincial statistical yearbook.
On crop harvest in Akmola province (2002-2005). Provincial statistical yearbook.
Conception of sustainable development of agro-industrial complex of the RK for 2006-2010. Decree of the Government of the RK on 22.06.2005 #10. Astana, 2005.
Plan of activities on implementation of the Conception of sustainable development of agro-industrial complex of the RK for 2006-2010. Decree of the Government of the RK on 30.06.2005 #654.
Program of priority measures for 2006-2008 on realization of the Conception of sustainable development of agro-industrial complex of the RK for 2006-2010. Decree of the Government of the RK on 6.03.2006 #149.
Plan development of “Food contract corporation” JSC for 2006-2008. Decree of the Government of the RK on 13.01.2006 #41.
The material contains information on importance of crop diversification in the North Kazakhstan region, results of economic assessment of alternative crops production, results of surveys of producers, processors, intermediaries and administrations in Pavlodar and Akmola provinces, results of analysis of government policy in crop diversification in the region, as well as conclusions and recommendation on further promotion measures.
 KZT – Kazakh tenge, currency in Kazakhstan. Rate on 17.04.2005: 1 USD≈129 KZT.