EBRD buys into Kazakh wheat

Medium_kazexportastyk
EBRD spent $45m on a 13 per cent stake in KazExportAstyk, Kazakhstan’s third biggest grain producer and its biggest producer of oil seeds, controlling and operating 1 million ha of farmland
Open Central Asia Magazine | 3 April 2012

EBRD buys into Kazakh wheat

Isabel Gorst, Financial Times Blogs, Mar 29, 2012

Kazakhstan is well known as an emerging oil power with a growing role in meeting the world’s energy needs. Less well known is the central Asian country’s huge agricultural potential and ability to contribute to global food security.

Against a backdrop of rising world wheat prices, the European Bank for Reconstruction and Development has chosen Kazakhstan as the destination for its first ever equity investment in farming.

In a statement on Thursday the EBRD said it had spent $45m on a 13 per cent stake in KazExportAstyk, Kazakhstan’s third biggest grain producer and its biggest producer of oil seeds.

“It’s a big step but there is huge potential,” says Gilles Mettetal, the EBRD’s director of agriculture. “A lot of attention in food security is given to people who need food. We need to find ways to support food suppliers as well.”

Last year, Kazakhstan reaped 27m tonnes of grain – including 22.7m tonnes of wheat – in its biggest harvest since independence two decades ago. It plans to export about 15m tonnes during the current crop year ending in July.

Agricultural experts say Kazakhstan could almost double grain production if modern farming methods were applied and arable land abandoned after the fall of the Soviet Union brought back under the plough. The use of advanced technology and seeds could help mitigate the risk of weather damage to crops in Kazakhstan, which is vulnerable to heat waves and drought.

Efforts to produce more grain are only one side of the picture. Kazakhstan also needs to establish reliable and cost effective routes to export markets. Black Sea ports serving hungry grain markets in North Africa can only be reached by crossing Russia, where the railway system is already struggling to handle domestic grain cargoes. China and Iran are ready to buy more Kazakh grain but first there must be investment in railway and port infrastructure.

Founded in 1999, KazExportAstyk is an integrated agricultural group controlling 1m hectares of agricultural land – an area about the same size as Denmark. Downstream, the company owns grain storage and milling facilities and a grain export terminal on the Ukrainian Black Sea. Ruslan Moldabekov, KazExportAstyk’s founder and majority shareholder, has set a goal for the company to produce 1 per cent of global grain output and is looking for foreign investors to support development of grain export infrastructure.

One way out of the export bind would be for Kazakhstan to convert grain into meat and dairy products for local consumption, says Mettetal. Moving in that direction, KazExportAstyk plans to use part of the EBRD equity investment to develop animal husbandry projects in Kazakhstan.

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