On measures of "KazAgro" Holding" JSC to develop livestock 

Dear deputies!

On measures of "KazAgro" Holding" JSC to develop livestock. 

Slide 1. Totally there are 162 projects with cost of 135.8 billion tenge in investment portfolio of the Holding on livestock. 

including,

- 25 projects with production capacity of 134 thousand tons on dairy direction (for 29.1 billion tenge).

- 10 poultry plants of meat direction with total production amount of 68 thousand tons (68.24 thousand tons, for 26.8 billion tenge) 

- 11 poultry plants of egg direction (for 4.5 billion tenge) for production of about 600 million eggs a year (595.8 billion).

Under development of distant livestock the Holding in the past year financed more than 4 000 farms for purchasing 8.7 thousand heads of horses and 123.8 thousand heads of small cattle.

As you know in 2012 the drought led to significant increase in prices for forage. To support feed base the Holding under memorandums closed with poultry and pig-breeding farms supplies about 300 thousand tons of grain (as of 10.06.13 the poultry plants were supplied with 211.6 thousand tons or 80% of the plan, pig-breeding farms – 31 thousand tons or 79% of the plan).

It shall be noted that development of forage production is one of priority of investment policy of the Holding and inseparably associated with development of livestock. At present we have financed 15 projects on this direction (for 3.3 billion tenge).

Loan resources are submitted for purchasing of equipment and machines, current assets for fodder cropping, improvement of pastures, establishment of feed factories and so on.

Furthermore, in priority order the Holding finances leasing of forage harvesters and forage procuring agricultural machines. Thus, last year 439 units of agricultural machines for 1.2 billion tenge were leased (in 2013 – 196 units for 970.2 billion tenge). In the current year the program of leasing of wind turbines to supply with energy of distant lands. 

The Holding finances implementation of 19 projects (for 10.9 billion tenge) for processing of livestock products including 15 projects for processing of 27 thousand tons of meat, 4 projects for processing of 18.1 thousand tons of milk per year.

Besides, in the current year about 3.2 billion tenge will be directed to purchasing and processing of leather raw and wool with receipt of export-oriented products that is 5 times more than the last year. At present 1 billion tenge is allocated.

In result of measures taken it is expected decrease of import dependency on milk for 16%, on poultry meat – for 52%, improvement of farmers supply with agricultural machines for production and processing of forage, production of export-oriented processed products from leather raw and wool.

Slide 2. Special attention is given by the Holding to implementation of project "Development of export potential of cattle meat". 

The Holding task is financing of three elements of the project: 

- import of high-productive breeding cattle with establishment of breeding reproductive farms, 

- purchasing of cattle seed stock and seed bulls for farms, 

-  and establishment of feedlots. 

In 2011-2012 with financial support of the Holding 53 reproductive farms imported 22 677 heads of breeding cattle that amounts to 103% of the plan (totally for 136%). Besides, from own assets agricultural producers imported 7 336 heads.

At present application of 20 agricultural producers more are approved for importing of 10 589 heads (plan for the year – 14 thousand heads, imported 264 heads, including KAF – 84 heads). Applications are continuing to accept.

Breeding reproductive farms sold 874 heads of high-productive cattle.

Slide 3. Important element of meat project is formation of commercial herd in peasant farms and farms.

Under this direction, at present about 3 thousand farms have been financed for purchasing of 138 thousand seed stock of cattle or 140% of the plan (with plan of 82 thousand heads, 2.4 thousand of agricultural producers purchased 115 thousand heads).

Monitoring of Sybaga program showed that in spite of hard winter and expensive prices for forage, our borrowers have good indicators of adult and young stock safety. (Adult stock – 98.8%, young stock – 97.3%).

Slide 4. To form meat parties meeting the world standards it is provided establishment of feedlots – this is the third element of the Project.

Under this direction with financial support of the Holding feedlots were commissioned with developed infrastructure for 29.8 thousand feed places (with account of feedlots of 2010 – for 12.1 thousand places). According to the monitoring results, their provision with feed base is 113% of the current heads needs. Average level of provision of 1 head of cattle with natural hayfield is 51.4 Ha that exceeds normative requirements.

In whole, the Holding implements the given plan indicators, but we cannot admit presence of problems at the Project implementation.

The first block of issues is related with taxation at transfer of imported breeding cattle to leasing. According to the current laws, lessor is exempted from payment of VAT for imported cattle, but at change of leasing object in result of mortality, disposal, the changed leasing object is subject to VAT payment. These costs, finally, fall on lessor.

The second block of issues is related to risks insurance in livestock, shortly they are characterized as the following: Insurance premium satisfying insurance companies will make loan resources expensive for farmer significantly. But decreased tariff will not cover risks of insurance companies. To solve this problem systematically, the Ministry of agriculture created a working group which includes representatives of agricultural producers, insurance companies and the Holding.

The third, and perhaps, main block of issues is related to inactive process of formation of feed contingent to fill feedlots.

At present farmers are interested to feed young stock themselves to receive additional income. But, these farms mainly are small ones, and cannot produce meat with world standards for stable exporting in amount of wholesale quantity. 

Therefore, for successful implementation of the Project for development of export potential of cattle meat it is necessary to take measures stimulating farmers to supply young stock to feedlots. Among these motives we see improvement of subsidizing policy and development of additional mechanisms for farms financing.

Slide 5. To solve this problem the Holding formed proposals on subsidies, and work is starting for establishment of Livestock cluster. 

Goal of the Cluster is joining of resources of all interested participants of the Project for procurement of quantities of meat for export. 

Cluster mechanism provides financing of meat processing plants and modern feedlots which on the basis of forward deals with farms will purchase young stock for its feeding and meat production.

The essential condition for financing will be liability of processors to export minimum 20% of meat production amount under a single Kazakhstan brand.

Thus, full production chain will be carried out from reproduction and bringing of young cattle to export of meat and related products (leather raw and others).

Slide 6. Besides, in the current year it is starting implementation of program for financing of breeding bulls purchasing for further transfer to common herd. It allows to increase productivity of private cattle and thereby make a contribution to increase of gross amount of meat production.

Slide 7. Finally I want to note that sectorial program "Agribusiness-2020" provides termination of capitalization of the Holding from the Republican budget starting from 2014. Despite this, the Holding does not plan decrease amount of Agrisector financing.

To implement all the given tasks we actively attract borrowing assets. Thus, in result of work made by the Holding in the current year was received maximally possible credit rating from world rating agencies – at the level of the sovereign one. It allowed to place debut Eurobonds for 1 billion of US dollars. It shall be noted that at deal closing, order book amounted to more than 3.0 billion US dollars and it allows to judge about attractiveness of Kazakhstan agrarian sector for international investors.

The Holding plans to develop this and other directions of assets attraction for development of agribusiness complex further. 

Thank You for attention!