47
NATIONAL STRATEGY Kazakhstan meat and livestock industry development for 2018-2027
1
NATIONAL STRATEGY Kazakhstan meat and livestock industry development for 2018-2027
2
OF THE FOUR AGRICULTURAL EXPORT PROGRAMS, BEEF INDUSTRY IS THE TOP PRIORITY
Products ($M) Imports Exports Potential
1 Beef, live cattle 51 25 1858
2 Cereals + processing 403 1336 648
3 Lamb, live sheep 540
4 Fruits, grapes and drupes 415 11 504
5 Oil-bearing plants 140 285 355
6 Dairy 270 30 270
7 Field vegetables 187 5 187
8 Sugar 182 182
9 Hay and fodder 150
10 Poultry 150 13 150
11 Eggs and egg powder 5 120
12 Protected vegetables 107 0 107
13 Sausages and processed meat 69 1 68
14 Fish and aquaculture 67 52 67
15 Vegetables fabaceae 10 60
Total in 15 areas 2,041 1,773 5,266
Agriculture total 2,649 1,969 5,415
Top 15 products with the biggest potential
Beef industry 2,616
Crop farming diversification
1,432
Intensive gardening 611
Intensive livestock production
607
Potential balance increase, $M
Program
3
EXECUTIVE SUMMARY
Over the last 7 years we have laid foundation for beef industry, now a great momentum for making it big and national-wide:
• Kazakhstan has core success factors for beef industry: vast pastures, land for irrigation, workforce and nomadic past
• Several countries of the Middle East and Asia (China, Iran, Saudi Arabia, Viet Nam, Russia) are very attractive markets for export with stable growth rate for beef and lamb import
• Examples of Canada and Uruguay show that it is possible to develop export oriented beef industry in the country
We know how to make it a success and become the brand of “Made in Kazakhstan” initiative:
• Flexible value chain is based on low production cost and competitiveness (unlike holding model)
• 100 thousand family farms with 100-200 heads of cattle/600 sheep will be a core element of the industry
• Initial analysis shows significant cost advantage and strong economics for farmers
It will have significant benefits for economy:
• 500,000 new workplaces will be created by 2027
• $2.5B beef and lamb export revenue by 2027 (with $5B worth of livestock on a balance sheet)
• More wealth: labor productivity to raise from $8,000 per employee per year
• Human capital development in rural areas
• Multiplying effect on other industries in the country and development of local content (machinery, irrigation, renewable power generation)
Idea is ready, need approval and joint work of all parties
4
The vision that development of the beef industry
can be an important growth driver for
Kazakhstan seems well-founded. Positive
spillovers in a position to significantly boost
agricultural value-add, exports, jobs as well as
productivity
The idea to develop beef cattle breeding is
good, considering large availability and relative
low cost of pasture lands for grazing in the
country
In 2016 BCG has conducted broad analysis of
investment opportunities of 34 agricultural
sector. Beef production was highlighted among
only 4 priority ones where Kazakhstan has clear
advantage
International experts
Meat industry investors
MOU signed a memorandum of cooperation
for 240.000 of livestock heads/year export
starting in 2018
Building a meat processing farm (together
with Eurasia holding) for 4M cattle in
Ayagoz, East Kazakhstan, starting this year
Present in Kazakhstan since 4 years, looking
for opportunities to invest into beef and
lamb through AIFC
Building the meat processing plant in
Almaty for 120.000 cattle/year
EXTERNAL PARTIES SEE KAZAKHSTAN'S ADVANTAGE IN BEEF&LAMB INDUSTRY TOO
5
Why livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
6
CURRENT TREND WILL INCREASE DEMAND ON AGRO PRODUCTS WHICH WILL NEED ADDITIONAL AGRO LANDS TO BE USED WORLDWIDE
With current trends consumption of agro
products will increase x1.3 by 2030 worldwide…
… which will create a big challenge in the view
of limited agro lands resources
X1,3
2030
3,607
2013
2,759
428320
X1,3
2030 2013
X1,4
2030
1,620
2013
1,169
Cereals,
M tons
Meat,
M tons
Vegetables,
M tons
Kazakhstan has a clear global advantage with its free agro lands
• In 1980-2010 limited land sources were
compensated with increased use of fertilizers
and pesticides
• Total agro land area grew slowly with a shift
from Europe and North America to Asia and Africa
• Further growth of agro lands is limited in most
countries
7
A REAL OPPORTUNITY: BEEF AND LAMB ARE PRODUCTS THAT HAS REAL ADVANTAGE FOR KAZAKHSTAN
Natural pastures
Key success factors
for the industry
Advantages of
of Kazakhstan
5th place in the world by pasture lands
30% are used currently ✓
✓
✓
✓
Water at pastures
Irrigation of crops
Workforce 45% population live in rural areas
2.5M people are self-employed or unemployed
110M ha of pastures had ground and surface water
11KM3 of water from rivers and melt-water might be
used for crop irrigation on additional 2M ha
6M ha were supplied with wells & windmills in 5 years
via the pastures irrigation program
8
WHERE WE ARE TODAY: KAZAKHSTAN REACHED BEEF AND LAMB SELF-SUFFICIENCY IN 2017
As of today, Kazakhstan reached
beef and lamb self-sufficiency
But exports
remain at low
levels
451386
466436
2007 2017
… Mainly constrained by
152
123
151124
2017 2007
Production Consumption
Production and consumption, ths tons
Exports, ths tons
2.0
0.8
2017 2014
0.0 0.6
2017 2014
• Low numbers of cattle is only enough to cover domestic
consumption
• Fragmented market: more than 50% of cattle are in
domestic households
• Low productivity of the non-breed cattle
• Low level of technology penetration
• The absence of strict food-safety certification
• Undeveloped distribution and marketing
• Undeveloped transportation system, incl. bad roads
• Low investment attractiveness of the industry due to
unstable geopolitical factor and complicated subsidy
system
Source: Statistics Committee, Ministry of Agriculture
Beef
Lamb
9
BEEF EXPORT HAS HIGH POTENTIAL GIVEN ABUNDANT PASTURE LAND
Australia
USA
Brazil
Kazakhstan Argentina
Paraguay
Canada
Uruguay
New Zealand
0%
10%
20%
30%
40%
50%
60%
70%
80%
0 10 20 30 40 50 60 70 80 90 100
mainly milk production
Share of beef exports in total production vs. beef production per hectare of pastures
Beef
export
s / P
roducti
on
Beef production per hectare of pastures, kg per hectare
11mln tons
2–3 mln tons
0.4–0.6 mln tons
Target group of
countries
Argentine
Kazakhstan
Australia
New Zealand
Brazil
USA
Uruguay
Canada
11
14
15
109
188
196
251
350
10
INTERNATIONAL EXAMPLES: KAZAKHSTAN HAS A SIGNIFICANT POTENTIAL TO DEVELOP BEEF INDUSTRY
Key success factors
Strict food-safety certification
High-quality beef, high-yielding beef carcasses, beef genetics that are
among the best in the world
A clean and environmentally-friendly production system
A world-renowned cattle identification system that enables traceability
and source/age verification
The National Beef Strategy highlights that the long standing connections
with governments, organizations of influence and the public provide a
basis for the industry’s long-term development.
Benchmarks
Availability of productive land resources: large flatlands and adequate
soil quality gave to a natural development of the cattle industry
Adoption of the latest technologies: electronic tracking to ensure high
quality and safety
Strict health and certification control: Certified Natural Meet Program
ensures that the meat produced meets phytosanitary, quality and
environmental standards
Generating brand value: internationally acknowledged high-quality
meet with strict certifications rules contributed to the formation of brand
value
Beef exports
Source: UN Comtrade, Food and Agriculture Organization of the United Nations
Uruguay
Canada
15 mln ha 12 mln number of cattle
14 mln ha 12 mln number of cattle
0
300
600
900
1 200
1 500
1 800
2007 2009 2011 2013 2015
Fresh or chilled meat of bovine animalsFrozen meat of bovine animals
0
200
400
600
800
1 000
1 200
1 400
2007 2009 2011 2013 2015
USD mln
USD mln
CAGR +14%
CAGR +4%
11
Why livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
12
THE PROGRAM IS AIMED TO CREATE NEXT GENERATION OF LIVESTOCK FARMERS
Current Plan by 2027
Family farms 20K 100K
Workplaces in agro 100K 600K
Pastures used 58M ha 100Mha
Number of cows 7M 15M
Number of sheep 18M 30M
Export revenue $30M $2,4B
Beef &lamb production
600K t 1,1M t
Meat plants 14 21
13
IMPLEMENTATION OF THE PLAN WILL BE REALIZED IN 3 PHASE
0 Step
2018 2 Step
2022-2024
3 Step
2025-2027
• Priority strengthening of
existing farmers
• Import of purebred heifers
• Insurance of veterinary
risks
• localization of production
machinery and equipment
production
• Creation of training
centers in each region
• Access to new markets
• Logistics
• Attraction of investors
• Increase of labor
productivity and
production volumes
• Development of
cooperation and industry
self-regulation
• Achievement of leading
position in target export
markets:
– Development of the
brand of national
products
– Further increase in
product quality and
production costs due
to the scale of the
industry
Farm & Land Technology and
production
Leading position in
exports
4 trln kzt
Kazakhstan will enter the "top-5"
beef exporters worldwide
Exports of agricultural products
will increase 3-fold - to USD7.3bln,
entering country's top -3 exported
products
Labor productivity - USD8,000 per
worker employed in the beef
industry
Ensured order for domestic
industry
Lessens pressure on the urban
labor market, social tension
Raising the level of education of
rural residents
The adoption of new technologies
and automation will increase the
attractiveness of the profession for
young people
1. Investment subsidies for irrigating pastures and the decrease of % rate assumes removal of production and cattle subsidies
The number of farms,
ths 33 57 100
The number of
workplace, ths. 265 385 600
Export revenue, USD
mln 222 828 1 858
Target indicators
20
100
30
2017
1 Step
2018-2021
Adoption
of strategy
• Comprehensive
strategy, analysis of
capacity of feedlots
and irrigation of
pastures, maps of
pastures for
subsequent irrigation
• Analysis of pasture use
efficiency and priority
allocation to farmers
• Preferential lending
14
LAND ALLOCATION FOR NEW FARMERS, FEEDLOTS AND MEAT PLANTS WILL BE DETERMINED RELATED TO CLIMATIC FACTORS
Petravlovsk
Russia
Russia
3000
Forest Steppe
Steppe
Dry Steppe
South-Siberian mountain
Semi-Desert Central Asian mountain
III
Desert
Foothill-desert-steppe
Subtropical desert
Subtropical foothill desert
VII
VII
Kyzylorda
Kostanay
Astana
Pavlodar
Semipalatinsk
Ust-Kamenogosrk
Almaty
Taldykorgan
Karaganda
Taraz
Shymkent
Aktyubinsk
Uralsk
Atyrau
Aktau
Kokshetau
Kyrgyzstan
China
Uzbekistan
Turkmenistan
3000
3000
3000
3000
3000
6000
6000
1000
1000
16,000
16,000
16,000
3000
500 3000
3000
1000
1000
2000
3000
500
500
500
1000
1000
Number of new farmers (beef
cattle)
Total
4 M
80 000
80
Number of new beef cattle
New cattlemen
New feedlots
(x20 000 heads)
Number of new farmers
(sheep)
Total
12 M
20,000
3
Number of new sheep
New sheep men
New processing plants
New processing plants 4
15
THE PROGRAM COVERS ALL ELEMENTS OF VALUE-ADDED CHAIN IN BEEF PRODUCTION
Pla
nned
quanti
ty
Breed livestock
farms
Meat processing
plants
Desc
ripti
on
Providing farmers with
breeding bulls,
improving genetics for
the whole industry
Farms
Obtaining inexpensive
calves due to pasture
grazing of cows (50-
200) and selling bull-
calves in autumn to
feedlots
Feedlots
Intensive fattening,
conversion of grain to
meat, commodity
lots, utilization of
manure under
irrigation
Industrial
slaughtering of
cattle, production of
finished products,
deep processing
Distribution and
marketing
Part
icip
ants
Investors
(mid-sized business)
Farmers Investors
(mid-sized business)
Investors
(large business)
Investors
(large business)
Distribution of goods
to markets, final
pricing
Private farms (based
on the experience of
USA, Australia,
Canada, Uruguay)
Integrated holdings
(based on the
experience of
Russia) ✗
✓
1. MLA – Meat and Livestock Australia. Business association of meat producers, which has representatives in the main export markets, where it promotes Australian products
MLA1 model 150 310 20 ths
100 ths
30 100 14 18
16
FARMER – CENTRAL ELEMENT OF ECOSYSTEM IN THE NEW MODEL
BREEDING FACILITIES –
REPRODUCTORS
GENETIC IMPROVEMENT FOR
THE WHOLE INDUSTRY
PROVISION OF LAND and
LOANS
• Based on the selection of
best farmers
FEED PRODUCTION
• Irrigation of 1 mln ha
PROVISION OF TECHNOLOGY
• Localization of machinery
and equipment production
EDUCATION SYSTEM
COOPERATION and SELF-
REGULATION
FEEDLOTS
• Conversion of grain to meat
MEAT PROCESSING PLANTS
• Industrial slaughters
TRACEABILITY OF MEAT
PRODUCTS
PROVIDING FARMERS WITH BREEDING MANUFACTURERS
(GENETICS)
Farmer
ACCESS TO KNOWLEDGE
AND COOPERATION
RESOURCES FOR BUSINESS ENSURED REALIZATION
CHAIN
17 17
THE PROGRAM IS AIMED AT A REFERENCE FARM MODEL
1. Grazing
2. Mating of breeding stock
3. Calves at foot
4. Collection of hay
5. Collection of straw
6. Weaning of offspring
7. Cow nutrition и heifer calves on farm
8. Selling bulls after weaning on feedlot
9. Care for incalvers2
10.Preparation for calving
Main activities Targets Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
×1
×2
or
×2
×1
11.Calving and offspring
12.Preparing cows for mating
13.Preparing heifers for selling
Used resources
on farms
×4
×1
KZT22 mln
USD 16000
Revenue
Labor
productivity
per
employee
KZT11 mln
USD 8000
100 heads
200 heads
Head counts
Mowing machine + crop collector1
Feed-distributor Clamp
1. Or purchase from hay producers
2. The winter farm should be located near populated areas or should have access to transportation
18
Project financials (in M KZT)
Based on herd with 50 mother cows/ per year
(might be doubled on the same capacities) per 1 farm
FOR FARMERS – LOANS WITH MATURITY OF 15 YEARS AND INTEREST RATE OF 4%, (SUBSIDY IS ONLY FOR WATER FOR PASTURES AND A SUMMER HOUSE)
11
2,43
8,57
Revenue (*based on 80% yield assumption)
OPEX (105 t of hay, 21 t x barley, fuel)
EBITDA
Bulls for feedlot (20 heads per year x175K) 3,50
Heifers (15 heads per year x 400 ths) 6
Cows for slaughter (5 per year x 300 ths) 1,50
46,9 CAPEX
50 cows 20
Equipment 14,9
Buildings and well 12
Leasing and credit (15 years, 4%) 2,12
Cattle repayments (15 years) 1,78
Net Profit (per year) 4,67
Financial sources: • 5M KZT one-off subsidy for 80% water facilities cost and 50% summer house
cost
• 5.3M KZT one-off farmers investment for 20% water facilities cost, 50% summer
house cost
• 38.2M KZT – credit, leasing (equipment and working capital)
50 cows
2 bulls 40* calves
20 heifers
20 bulls
15 yearling
heifers for sale
20 weaned
bulls
for sale
5 heifers replacement
5 rejected
cows
5 culled
cows
for sale
19
HI, I AM BEKZHAN – KAZAKH FARMER – PARTICIPANT OF THE PROGRAM
"I am a Kazakh farmer, participant of the program. I specialize in livestock breeding. To open my farm, worth KZT47 mln, I invested own funds of
KZT5.3mln. The state provided me with a 49-year land lease, and also provided KZT5mln subsidies for well, wind pump and summer house. I borrowed for the rest for 15 years at 4% per annum. Expenses were at the highest level in the first year and I did
not gain any profit, because calves grow only next year. From the second year I started to gain a net income of KZT8.6mln, of which KZT3.9mln is attributable to service the loan. Living expenses amount to KZT4.7mln, which I will use to feed a family and upgrade my tools.
20
FUNDING MECHANISM OF A REFERENCE FARM
Title Price Funding Creditor Deposit Wells at a pasture 1 500 000
Local executive body (investment
subsidies of Department of Agriculture) Not needed Wind pumps for the rise of water 3 000 000
Water storage 500 000
Mobile home 2 000 000 Local executive body (agency
agreement with the Agricultural
financial support fund, etc.)
Property acquired Farm for winter storage 5 000 000 4 500 000
Mobile machine tool for cattle 1 000 000 900 000
Breeding bulls 1 000 000 0 Operator (rent for a season) Not needed
Heifer calves 20 000 000 18 000 000 KazAgro (loan)/operator (goods credit) –
resources of Employment program)
Irrigated pastures,
cattle Current assets for 1 year 1 700 000 1 700 000
Tractor (80 horsepower) 6 500 000 5 850 000
KazAgro (loan/leasing) – KazAgro
resources, additional loan
Equipment acquired,
joint-stock company
«KazAgroGarant»*
guarantee
Hay baler 300 000 270 000
Rake 200 000 180 000
Hay compactor 3 000 000 2 700 000
Provider of cattle feed 3 500 000 3 150 000
Summary 48 550 000 37 250 000
*joint-stock company «KazAgroGarant» guarantee is provided only for farmers’ loans in credit associations, microfinance organizations
In KZT
21
Project financials (in B KZT)
Centre of the cluster of 1000 farmers with 50.000
cows, buying 20 000 weaned bulls annually
MODEL OF FEEDLOT ASSUMES A LONG-TERM AND LOW INTEREST LOAN, NO SUBSIDIES
Sever-Agro feedlot for 14 000 heads, Kostanai region
per 1 feedlot
7.7
5.6
2.1
Revenue (Bulls from feedlot - 20 000 heads x385K)
OPEX
EBITDA
4.9 CAPEX
Feedlot for 20 000 heads 2
Equipment, machinery and grain storage 2
Irrigation (2500 ha)* 0.9
Leasing and credit (15 years, 4%) 1
Net profit (per year) 1.1
Bulls from farmers (20 000 heads x175K) 3.5
Feeds & management (20 000 heads x105K) 2.1
22
PROCUREMENT CENTERS PROVIDE DEMAND FOR FARM PRODUCTS
Participants
Meatprocessing Breeding and
farming Feedlots
Distribution and
marketing
Farmers Investors
(mid-sized business)
Investors
(large business)
Investors
(large business)
Description Obtaining
inexpensive calves
due to pasture
grazing of sheep
(600) and selling in
autumn
Intensive fattening,
conversion of grain to
meat, commodity
lots, alignment of
seasons
Industrial
slaughtering of
livestock, production
of finished products,
exports
Distribution of goods
to markets, final
pricing
Planned
quantity 1 ths. 20 ths.
0 10 4 7 MLA1 model
1. MLA – Meat and Livestock Australia. Business association of meat producers, which has representatives in the main export markets, where it promotes Australian products
23
REFERENCE: DETAILED BEEF PRODUCTION IMPLEMENTATION PLAN
Первый этап Второй этап Третий этап
Unit 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 10 years 2028
New farms ths 1 2 4 5 7 8 9 11 14 18 80
Total farms ths 1 3 7 13 20 28 37 48 62 80 80 80
Demand for broodstock ths heads 50 100 220 260 348 402 451 549 716 901 3 997
Cattle imports by years ths heads 50 100 200 200 200 150 60 0 960
Total number of broodstock ths heads 50 150 370 630 978 1 380 1 831 2 380 3 096 3 997 5 931
Bulls from feedlots /
capacity ths heads 20 60 148 252 391 552 732 952 1 239 4 346 3 198
Beef export ths tons 15 +6 +18 +44 +76 +117 +166 +220 +286 +372 1 304 879
Revenues from exports USD mln 70 +30 +90 +222 +378 +587 +828 +1 099 +1 428 +1 858 4 397
Feedlots (х20.000 heads) quantity 0 1 2 4 5 7 8 9 11 14 62
Meat processing plants
(х120.000 heads) quantity 1 1 1 1 4
1 step:
Farms and land
2 step:
Technologies and
production
3 step:
Leadership in exports
24
REFERRENCE: A DETAILED PLAN FOR IMPLEMENTATION OF SHEEP BREEDING
Первый этап Второй этап Третий этап
Units 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 10 years
New farms ths. 0.25 0.5 0.75 1 1.25 1.5 2 3 4 5.75 20
Total farms ths. 0.25 0.75 1.5 2.5 3.75 5.25 7.25 10.25 14.25 20 20
Number of sheep needed ths
heads 150 300 450 600 750 900 1 200 1 800 2 400 3 450 12 000
TOTAL number of small cattle
in new farms
ths
heads 150 450 900 1 500 2 250 3 150 4 350 6 150 8 550 12 000 12 000
Feedlots (х100.000 гол МРС) Quantity 1 1 1 1 1 1 1 1 1 1 10
Capacity of feedlots for small
cattle
Ths
heads 100 200 300 400 500 600 700 800 900 1000 1 000
Capacity of meat processing
plant for small cattle
Ths
heads 4 000 8 000 12 000 12 000
Sheep export Ths tons 2 4 8 14 20 28 39 55 77 108 354
Export revenues USD mln 7 20 41 68 101 142 196 277 385 540 1 769
1 step:
Farm and lands
2 step:
Technologies and
production
3 step: Leading position
in exports
25
MEASURES ARE IMPLEMENTED TO MINIMIZE VETERINARY RISKS
• The responsibility for veterinary control is divided between the
Committee for Veterinary Control and Supervision (the Ministry of
Agriculture) and akimats
• Control over the implementation of veterinary measures -
at the level of the rural akim and veterinarian
• 2 zones for foot and mouth disease according to the
International Epizootic Bureau
• Low penetration of technologies and lack of digitization in
veterinary medicine and statistics
• Low investment attractiveness of the industry due to high
veterinary risks
• Centralization of veterinary control in the Ministry of
Agriculture
• Monitoring the implementation of veterinary measures - at
the regional level
• Zoning of territories (according to the International Epizootic
Bureau)- at least 20 zones, taking into account the landscape
and transport
• Compartment of large farm exporters
• Animal identification system based on electronic ear tags
RFID, equipping veterinarians with electronic scanners
• Product traceability system “from field to table”
• Insurance of veterinary risks in cattle breeding
Current Target
26
Why livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
27
THE NEED FOR BARLEY WILL BE ENSURED BY THE REPLACEMENT OF EXPORTS, IN HAY AND SUCCULENT FODDER - IRRIGATION OF 1 MLN HA OF LAND
Farms Feedlots
Feedlot sites use barley, juicy feed and hay as feed**
For the production of hay, the construction of an
irrigation system is required
For the production of hay and succulent fodder, the
construction of an irrigation system
Irrigation
(succulent
fodder), ths ha
3 26 12
Irrigation
(hay), ths ha 16 130 58
Irrigation
(hay), ths ha 132 839 385
Farms use barley and hay as cattle feed
Example: a farm with 50 cows
Need
1 feed day per
head, kg
Winter
storage*,tons
50 cows, 20 heifers,
tons
Barley 2 0,3 21
Hay 10-12 1,5 105
The need for barley will be met through the replacement of exports (export earnings from this grain in the form of meat - 10 times higher)
For the production of hay and succulent fodder, it will be necessary to irrigate ~ 1 mln ha of land by 2027.
Example: feedlot with 20 000 feed places
Need
1 feed day per
head, kg
For feeding time
(210 days), tons
For 20 000
heads, tons
Barley 7 1,47 29 400
Hay 5 1,05 21 000
Juicy feed 5 1,05 21 000
* The length of winter keeping is 150 days on average. ** In case of small amount premix is added
28
TO IRRIGATE 1 MLN HA BY 2028, IRRIGATION INFRASTRUCTURE ALONG MAJOR RIVERS AND THE COLLECTION OF MELT SNOW WATER WILL BE REQUIRED
Petropavlovsk
Kostanai
Astana
Pavlodar
Semipalatinsk
Ust-Kamenogorsk
Almaty
Taldykorgan
Karaganda
Taraz
Shymkent
Aktyubinsk
Uralsk
Atyrau
Aktau
Kokshetau
Kyrgyzstan
China
Russia
Uzbekistan
Turkmenistan
Канал
имени
Сатпаева
р. Урал
р. Тобол
р. Иртыш р. Ишим
р. Кигаш
р. Иле Kysylorda
р. Шу
р. Нура
р. Есиль
р. Сырдарья
Russia
Snowmelt
Watersheds of
major rivers
9 km3/year
Irrigation along
watercourses
and canals
2 km3/year
Artificial dams
Additional benefit - flood
protection
1. Detailed analysis in Appendix
А
B
Sources of water for
irrigating 1 mln ha1:
APPROACH: Irrigation infrastructure will be built-first in areas with maximum potential. For
their identification, the Asian Development Bank will provide technical assistance
29
Why red meat and livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
30
CHINA, VIETNAM, RUSSIA AND MIDDLE EAST ARE THE MOST ATTRACTIVE MARKETS FOR BEEF EXPORT
Country Consumption,
ths tons (2016)
CAGR 2016-26
(%)
Production –
Consumption, ths
tons (2026)
Trade value split
livestock/
chilled/ frozen
Import markets
of chilled and fresh beef
Import markets
of frozen beef
Import markets
of livestock
China 7 900 1,9% 834 8%/2%/90% 100% – Australia
30% – Brazil, 27% – Uruguay,
18% – Australia,
9% – Canada
67% – Australia,
33% – New Zealand
Russia 2 001 1,1% 542 9%/24%/68% 99% – Belarus 47% – Brazil, 27% – Paraguay,
17% – Belarus
36% – Австралия, 26% –
Нидерланды, 16% – Германия,
7% – Венгрия
Vietnam 1 338 1,5% 1 209 67%/2%/31% 79% – Australia, 9% – USA,
9% – New Zealand
61% – India, 20% – USA,
13% – Australia
78% – Australia,
18% – Thailand
Egypt 1 237 1,5% 512 12%/0%/87% 48% – Denmark, 28% –
Ukraine, 18% – Hungary 59% – Brazil, 38% – India 100% – Germany
Japan 1 191 0,0% 744 1%/62%/37% 51% – Australia, 45% – USA 57% – Australia, 33% – USA 100% – Australia
Korea 740 0,8% 480 0%/26%/74% 58% – Australia, 42% – USA 47% – Australia, 43% – USA,
7% – New Zealand 100% – Canada
Iran 381 0,9% 191 no information China, Australia, Turkey
Israel 233 1,6% no information 29%/7%/64% 63% – Poland, 14% – Hungary,
14% – Argentina
30% – Uruguay,
22% – Paraguay, 17% –
Argentina, 17% – Brazil
28% – Romania,
23% – Australia, 20% – Portugal,
12% – Hungary
Saudi Arabia 176 1,5% 106 4%/26%/70% 42% – Argentina, 32% –
Pakistan, 19% – India
68% – India, 19% – Australia,
5% – New Zealand 66% – UAE, 26% – Somalia
World 68 355 1,1% -300 17%/46%/37%
*Based on estimates of Association of Cattle Breeders, **data as of 2015
Note: choice of attractive markets included several parameters that are not depicted on slide – i.e. transportation, local prices, customs
Source: OECD-FAO Agricultural Outlook 2017-2026; UN comtrade database
Preliminary
31
TARGETED MARKETS: MIDDLE EAST AND ASIA; KAZAKHSTAN WILL GAIN UP TO 10% OF IMPORT OF THESE COUNTRIES BY 2026
Targeted flows of cattle meat products
Kazakhstan can gain a 10% market share
of beef imports
Source: the analysis of project team
Cattle doctrine assumes the
replacement of only 70% of
beef and lamb by local
production due to water
resource and land constraints
Beef import market of 5 targeted countries-importers in 2026, ths tons
286
834
542
2,882
1,209 286
Beef export from
Kazakhstan
Beef imports
10%
191 106
Saudi Arabia
Iran
China
Viet Nam
Plan - export from Kazakhstan Russia
32
KAZAHSTAN HAS PRICE ADVANTAGE IN COMPARISON WITH AUSTRALIA IN BEEF SUPPLY TO CHINA 195$/ HEAD
1,018 – cost price 587 - margin 1,605
4023
6561,2
5471
685
1,800
6364
4794
Farmer price for a feedlot
Added value on a feedlot
Transportation and quarantine costs
Actual cost
Kazakhstan Australia
1. Cost price 374, Depreciation (15 years, 4%) included. 2. Actual cost based on current price - 700 KZT/kg of live weight 3. Based on contract price with CITIC 4. According to
MLA.COM.AU
• Free land
• Low labor costs
• Low taxes
• Low costs for irrigation feed
• High income of calves – 93% (Kazakhstan – 80%)
• Daily weight gain at feedlots – 1.7 kg
(Kazakhstan – 1.4 kg)
• Developed transport infrastructure
Competitive advantages
В $ per head
Price comparison on beef production stages (with delivery to China)
• Kazakhstan has price advantages in delivery to China (195 USD per head)
• There is an additional margin stock in comparison with Australian beef at the expense of current high margin of Kazakhstan
suppliers (587 USD per head, or 37%, versus 6% of Australian farmers)
102 - margin
33
CHINA, IRAN AND SAUDI ARABIA ARE THE MOST ATTRACTIVE MARKETS FOR LAMB EXPORT
Country Consumption,
ths tons (2016)
CAGR 2016-26
(%)
Production –
Consumption, K tons
(2026)
Trade value split
livestock/
chilled/ frozen
Import markets
of chilled, fresh and frozen
sheep
Import markets
of sheep live
China 4 812 2,1% 232 1%/0%/99% 62% New Zealand; 36%
Australia, 100% Australia
EU-28 1 116 0,6% 172 0%/40%/60% 85% – New Zeland, 10% –
Australia 75% – Andorra, 25% – Switzerland
Nigeria 488 2,7% 5 0%/0%/100% 100% Turkey no information
Algeria 324 2,1% 4 0%/76%/24% 62% Spain, 26% New
Zealand, 9% Australia 100% Niger
Saudi Arabia 193 1,7% 228 74%/11%/15%
39% Australia, 26% New
Zealand, 12% Pakistan, 12%
India
69% Sudan, 18% Somalia, 9% Jordan
Iran 296 2,2% 9 no information Australia, New Zealand no information
Malaysia 40 1,6% 46 8%/10%/82% 73% Australia, 26% New
Zealand 100% Australia
World 14 554 1,9% 0
Note: attractive markets include several parameters that are not depicted on slide
Source: OECD-FAO Agricultural Outlook 2017-2026; UN comtrade database
Preliminary
34
FINANCING STRUCTURE OF THE PROGRAM № Need for financing, KZTbln 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 10 лет 1 Infrastructure and equipment for irrigation 7 16 36 46 60 71 81 97 125 158 697
2 Farmers 71 143 295 341 433 478 516 628 823 1 062 4 790
3 Feedlots 0 4 8 18 21 28 32 36 44 58 250
4 Working capital for feedlots 0 6 11 25 29 39 45 51 61 80 347
5 Meat processing farms foreign and private investments
6 Knowledge extension systems, learning farms 0 1 1 1 2 2 2 3 3 4 19
7 Veterinary risk insurance 0 1 1 3 4 6 7 10 12 16 59
8 Rate subsidizing for farmers and projects 0 0 5 14 27 43 61 85 117 352
Total 79 170 352 439 564 652 727 884 1 154 1 495 6 515
Available sources (current budget programs, approved loans)
№ Financing sources, KZTbln 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 10 лет Private investments and available credit funds
1 Co-financing - farmers (10%) 7 14 29 34 43 48 52 63 82 106 479
2 Co-financing – feedlots (20%) 1 2 4 4 6 6 7 9 12 50
3 Return of loans from farmers 4 12 28 47 71 97 125 160 543
4 Return of loans from feedlots 0 0 1 2 4 6 8 10 30
5 Own funds of KazAgro (portfolio 600) 20 30 30 30 32 34 29 25 33 263
6 Trust funs of KazAgro (National fund loan 120) 20 20 20 10 10 10 10 10 10 120
7 World Bank, ADB, EBRD, IDB - irrigation (available at 600) 7 16 36 46 60 71 81 97 125 158 697
8 Foreign investments (meat-packing plants) foreign and private investments
Budget loans (repayable funds)
9 Program of productive employment 20 20 20 20 20 20 20 20 20 20 200
10 Program «Agricultural mortgage» 1 4 7 7 7 7 7 7 7 7 61
11 Investment subsidies for watering, summer house 6 13 26 31 41 48 55 70 92 119 500
Budget subsidies (non-repayable funds)
12 Subsidies for import of cattle 15 30 60 60 60 45 18 0 0 0 288
13 Rate subsidizing for farmers and projects 0 0 5 12 24 37 53 73 102 305
14 Program «Serpin, relocation from the South to the North» 2 10 10 10 10 10 10 10 10 10 91
15 Program Bastau business, NANOC and knowledge extension 1 2 2 2 2 2 2 2 2 2 15
Total (approval is not needed) 59 150 246 281 328 372 407 471 588 749 3651
Necessary sources for the program
Source necessity yearly, KZTbln 20 20 108 159 236 280 320 413 566 746 2869 1 Budget loans for livestock program (15 years) 20 20 20 20 20 20 20 20 20 20 200
2 LOAN (UAPF) - 11% per year 40 60 120 150 210 310 450 600 1940
3 Export financing, private investments, private equity funds 30 40 50 50 20 0 0 0 190
4 World Bank, ADB, EBRD, IDB (project investments) 0 4 9 11 13 15 21 21 28 120
5 Second-tier banks (projects and working capital) 0 14 30 35 47 55 61 75 98 415
35
Why livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
36
THE PROGRAM WILL MAKE A GUARANTEED ORDER FOR RELATED SECTORS PRODUCTS – INDUSTRY AND BUILDING, ALTERNATIVE ENERGY
Need for equipment and provision Quantity (new ones)
Autonomous power supply (solar panels) 100 000
Autonomous drinking water supply 100 000
Boreholes for livestock, wind and solar pumps
Fencing for pastures (poles, wires, electric fence) 400 000 km
Tractor 80 hp. with attachable equipment 100 000
Hay carrier 100 000
Hay-mowing 100 000
Baler 100 000
Autonomous heating 100 000
Fixer for cattle 100 000
50 000
37
OFFERED INITIATIVES MIGHT POSITIVELY AFFECT KAZAKHSTAN’S ECONOMY
Contribution to agro
objectives
Digitalization
potential
Mentality shift
of farmers
• Agricultural products
export increase by $1-2
bln a year
• Increase of productivity of
the sector
• Creation of new
workplaces (500 ths),
reduction of poverty and
unemployment
• Electronic land cadaster
• Farms accounting
electronic system
• Statistics and big data
• System of end-to-end
product traceability from
farm to table
• Farm as a small family
business
• Up to date technologies
• Stable income
• Guaranteed state support
• Simple taxation
• Alignment with Ruhani
Zhangyru program objectives
38
Why livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
39
WE NEED TO WORK FURTHER ON KEY ELEMENTS OF THE MODEL TO MAKE IT A REAL STRATEGY
National idea
formulation
Sector strategy and
business plan
Current stage Next phase Implementation
Model concept
Market potential assessment
List of markets to focus
Financial estimation
Result estimation (target)
Sales and distribution
strategy.
Access to markets
Engagement of farmers
Improvement of
veterinary system
Risks and measures to
minimize them
Sustainable and
predictable financial
program
Land management and
pasture preservation
Ecological aspects
Farmers cooperation
model
Current document
2018-2021
Farms and
land
2022-2024
Technology
& production
2025-2027
Export and
excellence
40
NECESSARY MEASURES FOR THE PROJECT
Priority allocation of
pastures for farmers
Concessional lending
for farmers
Import of purebred
heifers
Creation of training
farms in each district
Localization of all
related production
facilities
Veterinary risks
insurance
76 mln ha
4% 15 years
Unified agricultural tax
for farming
1% of turnover
1 mln
heads in 10 years
Synchronization with the
Nurly Zhol and Nurly Zher
programs to create
infrastructure for farms and
clusters
41
FOUNDATIONS OF THE PROGRAM ARE ALREADY ESTABLISHED
Nucleus
20 000 farms
30 feedlots, 14 meat processing plants
Electronic data management system and identification system
Electronic land cadastre
Loans for the reconstruction of irrigation systems
Pasture flooding program
Self-regulation of breeding business and industry
Land Code (allows to withdraw land from inefficient users)
Value chain
elements
Infrastructure
The legislative
framework
International
agreements
Status of a country free from FMD (9 + 5) regions
Agreement on trade of mutton with China, Iran. Beef - in the process
Memorandum of partnership and cooperation with the state corporation CITIK (China)
on the supply of livestock
3 foreign investors: the construction of meat processing plants and farms
Elements Achievements
42
IT IS NECESSARY TO INVOLVE A WIDE RANGE OF PARTICIPANTS Participants Events
Gov-t Approve the program by Government Decree
Monitoring the execution of indicators on a quarterly basis
Ministry of
Agriculture
Analysis of the livestock consumption of pastures and the availability of groundwater for their subsequent distribution to farmers
To analyze the effective use of land
Launch an insurance mechanism in livestock production
Organize a massive training of farmers, extension
Synchronize the irrigation reconstruction program based on plans for the location of feed production facilities (the Water Resources Committee of the Ministry of
Agriculture)
Ministry of
economy, Ministry
of Finance
Organize additional funding for the program
Ministry of
Investment and
Development
Localize production of machinery and equipment
Synchronize the program Nurly Zhol, reconstruct the road Usharal - Dostyk, Almaty - Ust-Kamenogorsk
Local executive
bodies
To carry out the withdrawal of inefficiently used land in accordance with the norms of the current Land Code
Organize program funding through agents
Ministry of Labor
and Social
Protection of
Population
Synchronize employment, training (Bastau) programs, resettlement from South to North
Grants for start-up in the amount of 2-3 million tenge per farmer
43
Why livestock sector?
About the program
Supply of feed crops and irrigation
Markets
Benefits of the program
Next steps
Appendix
44
DYNAMICS OF PEDIGREE CATTLE MEAT BREEDS
36,732,222,5
41,512,6
2016 2014 2012
231.7 252.6
443.8
337.7 393.0
2013 2015
x2
Breeding-stock
Imports of livestock
264,0250,1224,0191,1
155,3135,7111,4Kazakh white-
headed breed
84,576,457,9
47,333,8
21,68,2
Angus
(import 30 ths)
48,844,439,535,322,9
17,5
1,4
Hereford
(import 15 ths)
46,743,846,540,1
27,124,819,0Auliekol breed
45
CURRENTLY THERE ARE 30 FATTENING SITES WITH A TOTAL CAPACITY OF 134 000 CATTLE
Name of company Adress Capacity, голов
ТОО «АкТеп» Актюбинская обл., Алгинский р-н
КХ "Жаке" Карагандинская обл., Бухаржырауский р-н
ТОО "Абая" Павлодарская обл., Щербактинский р-н
ТОО "Crown Batys" ЗКО, Зеленовский р-н
ТОО "Терра" Костанайская обл., Карабалыкский р-н
ТОО "ЩГМЗ" (KazBeef Ltd) Акмолинская обл., Зерендинский р-н
ТОО "Архарлы Майбурек" Алматинская обл., Алакольский р-н
ТОО "ОтесБиоАзия" Алматинская обл., Балхашский р-н
ТОО "Динара Ранч" Алматинская обл., Балхашский р-н
ТОО "Global Beef KZ" Костанайская обл., Тарановский р-н
ТОО "Атамекен Агро" СКО, Есильский р-н
ТОО "SC Food" Акмолинская обл., Аккольский р-н, с.Азат
ТОО "Агро Экспорт ЛТД" Акмолинская обл., Коргалжинский р-н
ТОО "Жана Береке" Акмолинская обл., Ерементауский р-н
ТОО "Ерементау Кулан" Акмолинская обл., Ерементауский р-н
ТОО "Бастау" Акмолинская обл., Атбасарский р/н
ТОО "Empire Food" Алматинская обл., Жамбылский р-н
ТОО "MPS" Алматинская обл., Райымбекский р-н
КХ "Шадиев" Алматинская обл., Кербулакский р-н
КХ "Жаксылык" Алматинская обл., Балхашский р-н
К/Х "Жантизер" Актюбинская обл., Хромтауский р/он
ТОО "Елім-Ай Кокпекты" ВКО, Кокпектинский р-н, с. Кокжайык
ТОО "KAZ MEAT KORDAI" Жамбылская обл., Кордайский р-н
ТОО АПХ "Сарыарка" Карагандинская обл., Абайский р-н
ТОО "Караман-К" Костанайская обл., Карасуйский р-н
ТОО "Шаган жер" Кызылординская обл.
ТОО "Тайынша Астык" СКО, Тайыншинский р-н
ТОО "Кайып ата" ЮКО, Казыгуртский р-н
ТОО "Каз Малы" Алматинская обл., Уйгырский р-н
ТОО МТС "Жайма" Павлодарская обл., Баянаульский р-н
Итого: 134 000
8,000
1,500
1,500
3,000
3,000
3,000
3,000
3,000
5,000
3,000
3,000
3,000
5,000
10,000
3,000
3,000
3,000
3,000
3,000
10,000
5,000
5,000
3,000
3,000
3,000
8,000
5,000
5,000
3,000
14,000
46
EXAMPLES OF INEFFICIENT USE OF PASTURES
# Region Name of land user pastures Cattle heads as per Livestock
Identification System Unutilized area
1
Akmola Region
Baumanskoye LLP 56,514 919 47,373
2 Sochinckoye LLP 86,050 791 77,260
3 Yen-Dala LLP 38,088 810 25,428
4 Yesil Agro LLP (Dairy) 38,910 1,943 23,169
5 Atbasarskaya Niva LLP 85,313 595 79,870
6 Almaty Region
Korporatsiya Suyk-Tobe LLP 12,437 - 12,437
7 Rakhat-Tur LLP 33,965 - 33,965
8
East Kazakhstan Region
KASKABULAK LLP 37,499 258 24,283
9 Kalbatau LLP 66,522 2,567 41,720
10 Koroselevskoye LLP 22,046 543 17,664
11
West Kazakhstan Region
Birlik mal zayyty 118,950 140 96,028
12 Crown Batys 13,314 - 13,314
13 Chapayevskiy 21,635 - 19,857
14
Kostanay Region
Alibi LLP 21,137 - 21,137
15 Altynsarino LLP 57,106 5,793 12,527
16 Diyevskoye LLP 47,112 2,633 14,184
17 Ivolga LLP 204,585 - 204,585
18 Karasu LLP 119,869 - 119,869
19
Mangistau Region
Senek LLP 1,885,400 - 1,876,556
20 Karagantubek LLP 162,399 197 153,496
21 Taushyk LLP 149,050 - 122,039
22 Pavlodar Region
Bayanaul Agro LLP 19,291 - 19,291
23 Moynak-2015 LLP 22,685 - 14,092
24
Karaganda Region
Brokker LLP 110,282 255 96,702
25 Zhenis Breeding Farm LLP 161,255 - 145,342
26 Kaynar LLP 68,249 1,117 54,986
27 Otkanzhar LLP 83,437 106 59,411
28 Taldysay-2030 LLP 80,466 105 76,032
29 North Kazakhstan Region
Kyzyltu Nan LLP 82,564 - 82,564
30 Ar LLP 50,417 - 49,851
TOTAL: 3,635,030
47
COST AND COMPETITIVENESS (EXAMPLE: EXPORTS TO CHINA)
# USD
1. The cost price of a bull Angus (270 kg 205 days), 50 cows 374
1.0. Rate of return 80%
1.1. Cost of land 0
1.2. Wells in pastures (20 years) (subsidies 80%) 2,2
1.3. Farms for 50 cows (20 years) 16
1.4. Cost of a cow (10 years) 110
1.5. Costs for feed & operating costs 152
1.6. Interest & Tax & Amortization (15 years, 4%) 6,7%
1.7. The selling price of the feedlot (270 kg 205 days) 547
Profit and profitability 173 (46%)
Cost per 1 kg of live weight 1,38
The selling price from farmers to the feedlot for 1 kg of live weight 2,03
2. The cost of feeding a bull (280 kg to 550 kg, 210 days 1.3 kg) 444 (on top of 547)
2.1. Feeding area per head (including irrigation) (15years) 50
2.2. Feed & operating costs per head (210 days) 328
2.3. Interest & Tax & Amortization (15 years, 8%) 14%
2.4. Losses 3%
2.5. The selling price of live bulls (550 kg +), per head 1203
Profit and profitability 212 (48%)
Cost per 1 kg of live weight 1,8
The selling price from the feedlot for 1 kg of live weight 2,2
# USD
3. Export of live bulls (China) 300
3.1. Quarantine (feeding area), per head 50
3.2. Transportation cost per head (Uch-Aral) 100
3.3. Quarantine, food and care in Uch-Aral 90
3.4. Transport costs to Alashankou, for the head 60
Cost per 1 kg for logistics and export 0,55
4. Net price in Alashankou, for 1 kg of live weight 2,73
Contract price (KMTIC) in Alashankou, for 1 kg of live weight 3,3
Contract price (KMTIC) in Alashankou, 550 kg bull 1815
The price for quarantine and processing 100
The selling price of the skin, offal, fat, bones, etc., behind the head 500
