Ministry of Agriculture “dances” to the tune of the Meat Union

And in the government, and even inside the Ministry of Agriculture of the Republic of Kazakhstan, there is a serious battle for tens of billions of tenge, which cynically and arrogantly require “support” cattle breeding in the country (or, more precisely, for bread with black caviar – for themselves meat oligarchs of Kazakhstan, close to the former Minister of Agriculture of the Republic of Kazakhstan Asylzhan Mamytbekov.  Hypocritically hiding behind the “concern” for the interests of ordinary farmers, the owners of the “meat Eldorado” are trying to preserve the golden stream that has flowed from the state treasury in their pockets over the past few years.  Notice, without the slightest benefit for the development of the industry itself and without return for ordinary farmers.

 Accustomed to dancing to someone else’s tune, officials even prepared a document called “Evaluation of the effectiveness of state subsidies in animal husbandry”.  With permission to say, “research”, they tried to distort the facts in such a way that a person unfamiliar with the realities really believed – don’t give money to the members of the Meat Union today — Armageddon and the Apocalypse will arrive tomorrow in one bottle.

 Glory to the Almighty, there are also unbiased experts with a sober look, who sorted through the shelves where and how the Ministry of Agriculture of the Republic of Kazakhstan is trying to pass out wishful thinking.  So let’s get it right.

I twist, I twirl, I want to confuse

“There is a positive correlation between the amount of subsidies allocated and the gross output of livestock products”, the nameless “specialist” of the Ministry of Agriculture whispers shamelessly in our ears.

 However, this logic causes surprise at first, then bewilderment, and, as a result, laughter.  Stop gentlemen!  Livestock GDP is growing not only from the influence of subsidies, but also from lending, public and private investment, and technology development.  Finally, there is the private sector, which, according to your data, occupies 61.7% of the structure of the shaft, and at the same time does not receive any support from the state.  So why do you compare two perpendicular processes in parallel planes?

 There is only one reason: the livestock GDP was the only convenient indicator you found in state statistics, which allows you to draw a growing chart, and against its background to dissolve large pieces of subsidies.

 If you are of the opinion that the allocation of subsidies attracted investment, then take as a basis not the shaft itself, but at least the growth rate that has developed for those agribusiness entities that have received relevant state support.  One gets the feeling that the author of the slide was guided by the expression “You can’t convince – try to confuse!”

 Since a large share of subsidies is allocated for the development of breeding and raising livestock productivity (as they are called), it is necessary to determine the effectiveness of subsidies by comparing their volumes with the growth rate of the number of livestock and adding to their productivity.  Of course, you did not do this, because you know very well that from the beginning of the 2000s to the present, the volume of state support has grown more than 200 times, and the increase in livestock numbers, as well as productivity, has not even reached natural rates.

 Notice that eastern Germany, after joining the western part, increased livestock productivity by 250% in just 15 years, and this in the absence of targeted subsidies!

Subsidies “for their own”

At first glance, it gives the impression of comprehensive support.  For example, “we have many programs, please use it!”.  But this is only an illusion for the layman.

 In fact, the recipients of these subsidies are just a small circle of close households.  And the money divided into different programs, in the end, flock to one channel and fall into one pocket – the enterprises lobbied by the Meat Union.  Recall that they head the Meat Union, this closed club of cattle breeders-oligarchs, the ex-Minister of Agriculture Asylzhan Mamytbekov and the ex-director of the department of animal husbandry of the Ministry of Agriculture of the Republic of Kazakhstan, Maksut Baktibaev.  One can only be surprised at the entrepreneurial spirit of these gentlemen, who managed to provide these dairy rivers in the sweet and sour banks with affiliate business!

So, according to the Ministry of Agriculture, large farms that have a livestock of cattle receive 20 thousand tenge of subsidies for each uterine individual.  The same farms, due to the use of artificial insemination or embryos, or the purchase of a pedigree bull (if the mating is free) receive additional types of subsidies (5-10, 80, 150-225 thousand tenge, respectively).  Due to the fact that large pedigree farms, as a rule, are also involved in cattle fattening, 80 thousand tenge of subsidies are receiving for each bull stock that is handed over and its subsequent sale for meat.  Thus, on average, large “cluster” members of the Meat Union have 100 thousand tenge of subsidies per head.

At the same time, the Ministry for some reason does not set certain requirements that could contribute to the development of other market entities, on which the livestock GDP and the cost of final products (calves, meat) also depend.  And it would be necessary!  Among these conditions, this a priori should be – the output of calves per 100 cows, a ban on unjustified slaughter of breeding stock, compulsory purchase of bull seed from domestic producers to protect their own market.

Professionals know that subsidies for livestock breeding are aiming at greater reproduction of pedigree calves for sale to other farms.  For those who are not in the know – this is a clear specialization of breeding reproducers.

Western breeders have long proved that for a substantial increase in livestock numbers, the proportion of breeding stock in the herd structure should be at least 60%.  What time is it now?  Not more than 40%.  And how is it proposed to solve this problem?  How to ensure the growing demand for heifers from commodity farms?  Continue to import burenki for fabulous money?

Moreover, the same West considers it inappropriate to engage in beef cattle breeding if the yield of calves per 100 cows is less than 90%.  In our country, this figure in the category of agrochemical industry cannot overcome the 75% barrier.  A reasonable question is being asked – dear recipients of free grants, where are the technologies?  Where is the involvement of professionals and scientists in this problem?  I remember how a couple of years ago the ministry put forward a demand for calves.  Apparently, someone still insisted on the establishment of such a criterion.  Can you imagine what kind of barrier they put in the end?  Both laughter and sin – 60 calves per 100 cows!  For what?  To drag their own!    

“Children’s” conditions and high standards of illogical subsidies have led dairy farms to dispense the last drop of milk from a cow, not paying attention to the need to observe basic zootechnical standards.  They don’t need it, since there are 35 tenge subsidies for milk, but nothing for the calf.  Few officials of the Ministry of Agriculture understand such concepts as the “inter-hotel period”, “average days in milking”, “reproductive qualities”, etc.  But all this data is available in herd management programs.  We advise – get up from your seats, go to the MTF and open the computer of the operator of the milking workshop.  Everything is in full view!  Just look at how long the average use of imported dairy cows lasts – no more than 3 lactations.  Calculate how many calves could reproduce and sell dairy farms to other farms, and how many were actually sold.  This is the effectiveness of subsidies in animal husbandry.

The subsidizing lines existing in cattle breeding are not linked in any way, in most cases they duplicate each other and do not have clear calculations and justifications.  Perhaps, the Ministry of Economy and Budget Planning of the Republic of Kazakhstan needs to seriously think about accepting livestock specialists and practitioners into its ranks.  Even within the walls of the Ministry of Economy, few people remember how until 2010 the rationale for subsidies per unit of production — meat and milk — was substantiated.  Focusing all their attention on the standards, the usual (annual) types of subsidies are taken by budget analysts as “for granted”, while the same types of state support may no longer be appropriate.

“Golden” feed

In its justification of the effectiveness of subsidizing, the Ministry of Agriculture provided data on the cost of production of beef in the category of agricultural producers, and they did it in dynamics for 4 years on two slides at once, 23 and 24. Moreover, the volume of production of beef in the same category – agricultural producers is given.

Having experience in production, I decided to take an interest in a statistical indicator of the cost of 1 kg of beef.  Dividing the cost of production by volume for all years gives the same result – 1300 tenge.  This cannot be!  Hence the conclusion – all diagrams are drawn.  And how in these conditions to believe other slides of the relevant department?!  Either the statistics played a cruel joke with officials, or the Ministry of Agriculture does not own the real situation…

This once again proves that officials from the agricultural department skillfully cope with the blurring of the eyes of the Ministry of Economy and the Ministry of Finance.  A significant drawback of the current subsidy system is the complete lack of economic analysis of the beneficiary enterprises, the strict disregard for such concepts as production costs and economic profitability.

The cost of beef in 1300 tenge is a complete bluff.  To make sure of this, it is enough to calculate the cost of one fodder.  Imagine that a feedlot bought a bull-calf weighing 200 kg.  For this, at current prices (600 tenge per 1 kg of live weight), the site will spend 120 thousand tenge.  A fattening calf consumes up to 4% of dry matter of its weight, meaning the daily physical volume of feed, taking into account 200 kg of weight, will be 8 kg.  Suppose that the farm uses the most primitive concentrate-hay type of feeding for fattening.  Therefore, in order to provide 8 kg of dry matter in the feed, 6 kg of barley and the same amount of hay will be required.  The production cost of barley does not exceed 30 tenge per 1 kg, and hay 8 tenge.  Consequently, the daily cost of basic feed will amount to 228 tenge.  Additional feeding with protein-vitamin supplements will amount to 120 tenge (taken to the maximum).  Add another 30% of other costs to the obtained feed-water indicator (payroll fund, electricity, veterinary preparations, etc.) – in the end you will get 452 tenge.  To feed a bull-calf up to 400 kg (i.e. +200 kg) with a daily gain of 1 kg per day, the platform will work for 200 days and will spend 90,400 tenge in total.  We summarize – 120 thousand + 90.4 thousand = 210.4 thousand tenge.  With a slaughter yield of 50% (or 200 kg of beef), the cost of meat will be 1052 tenge.  We look at wholesale prices in the market – 1500 tenge per 1 kg.  It turns out 30% profitability!

Clay feet giants

The clever magician from the Ministry of Agriculture of the Republic of Kazakhstan provides economic data on the Terra feeding platform; the Ministry of Agriculture is trying in every possible way to show the loss making of the feeding process and justify its actions to compensate for the same losses through subsidies.  Although, as we have just calculated, this is far from the case.

 The Ministry of Agriculture contradicts itself, because in 2011 the ministry, when substantiating the project “Development of the export potential of cattle meat,” argued that mega-farms were designing to cheapen costs and work more cost-effectively.  The question is – why such mega-farms, if they are not able to work cost-effectively?  Why breed giants with feet of clay if they are forcing to cover their losses with taxpayer money?

 On the contrary, such mega-farms have the best fleet of equipment, large sown areas.  They should show the lowest cost of feeding costs.  And you (Ministry of Agriculture) indicate as much as 800 tenge!  Please explain what they are making up of?  Where are the investment subsidies that have received mega-farms to reduce the cost of fixed assets?  And why did not these investment subsidies reduce the cost of feed, and with it the price of fattening services?  There are many questions … It seems that it is time to conduct a large professional economic and technological audit of mega-farms and enterprises close to the Meat Union.  Well, of course, it is high time for the competent authorities to check the role of former and current officials of the Ministry of Agriculture of the Republic of Kazakhstan in creating this thoroughly corrupt “subsidy” scheme, which in fact turns out to be a system of shoving public funds into the pockets of those close to you.

Myrzabek Smagulov

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