Changing Land Tenure and Farm Structure in Central Asia

Zvi LermanThe Hebrew University of Jerusalem, Israel

Agricultural Transformation and Food Security in Central AsiaRegional Research Conference, IFPRI and University of Central Asia

Bishkek, Kyrgyzstan, 8-9 April 2014

What are we going to discuss?

• Agriculture: from collapse to renewed growth

• Farm structure: individualization of land and production

• Agricultural productivity and drivers of growth

• And time permitting – increasing incomes as tool to attain food security (findings from several surveys)

Four phases of agricultural development (GAO)

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

50

100

150

200

250

300

3501965=100

CentAsia

GAO for three regions

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

50

100

150

200

250

300

3501965=100

CentAsia

TransCau

European

Example of Trans-Caucasus

AzArmGru

Kaz, Taj, Tur: 1998 turnaround

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

100

200

300

400

5001965=100

Tur

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

50

100

150

200

250

3001965=100

Taj

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

50

100

150

200

2501965=100

Kaz

Kyr, Uzb: 1995-1996 turnaround

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

50

100

150

200

2501965=100

Kyr

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

100

200

300

400

5001965=100

Uzb

Dramatic individualization of land tenure: arable land

Taj Uzb

Kyr Kaz

1991 1995 1999 2003 2007 20110

1

2

3

4

5mln ha

Enterprises

Peasant farms

Households

1991 1995 1999 2003 2007 20110

10

20

30

40million ha

Enterprises

Peasant farms

Households

1991 1994 1997 2000 2003 2006 20090

200

400

600

800

1000

1200

1400

1600'000 ha

Enterprises

Peasant farms

Households

1991 1994 1997 2000 2003 2006 20090

200

400

600

800

1000

1200'000 ha

Enterprises

Peasant farms

Households

Total concentration of livestock in rural households

1960 1970 1980 1990 2000 20100

500

1000

1500

2000

2500'000 st. head

Enterprises

Individual

1980 1985 1990 1995 2000 2005 20100

2

4

6

8

10

12

14mln st. head

Enterprises

Individual

1980 1984 1988 1992 1996 2000 2004 20080

500

1000

1500

2000

2500'000 st. head

Enterprises

Individual

1980 1984 1988 1992 1996 2000 2004 2008 20120

2

4

6

8

10

12mln head

Enterprises

Individual

Kyr Taj

Kaz Uzb

Changing structure of agricultural production

Taj Uzb

Kyr Kaz

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 20110%

20%

40%

60%

80%

100%

Ent

PF

HH

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 20110%

20%

40%

60%

80%

100%

Ent

PF

HH

1991 1993 1995 1997 1999 2001 2003 2005 2007 20090%

20%

40%

60%

80%

100%

Ent

PF

HH

1991 1994 1997 2000 2003 2006 2009 20120%

20%

40%

60%

80%

100%

Ent

PF

HH

The special case of TurkmenistanOfficially reported statistics show most arable land still in “peasant associations” – former collective farms (enterprises)

In fact, land in peasant associations is distributed to family leaseholds – a family farming structure: the associations do not produce as corporate farms

1991 1993 1995 1997 1999 2001 2003 2005 20070%

20%

40%

60%

80%

100%

Enterprises Peasant farms Households

1991 1993 1995 1997 1999 2001 2003 2005 20070%

20%

40%

60%

80%

100%

Corporate Leaseholders Peasant farms Households

Change in individual land use and individual production near turnaround

arable, %

arable, %

jump GAO, % GAO, % jump

t-1 t+1 (t+1)/(t-1) t-1 t+1 (t+1)/(t-1)

Kaz (98) 16 27 1.69 53 72 1.36

Kyr (95) 26 49 1.88 69 80 1.16

Taj (98) 16 32 2.00 54 57 1.06

Uzb (96) 12 19 1.58 52 64 1.23

Tur (98) 54 84 1.56

Az (97) 6 82 13.6 67 93 1.38

Significant land reform legislation at turnaround point

Turnaround year

Date of legislation

Name of legislation

Kaz 1998 8.19973.1998

Land sharesPeasant farms law

Taj 1998 6.19966.1998

Enterprise reorganizationRight to land use

Tur 1998 12.19961.1997

Land allocation to individualsImproving farm incentives

Kyr 1995 2.1994

8.1994

Measures for deepening land and agrarian reform Procedures for implementation of land reform; reorganization of ag enterprises; land share determination

Uzb 1996 8.1994 Measures for economic encouragement of the development of agriculture

Changing role of individual farms 1991-2010

Share of arable, % Share of GAO, %

1991 2010 1991 2010

Kaz 1 39 32 71

Kyr 3 76 44 98

Taj 7 86 36 91

Tur 5 93

Uzb 8 98 33 98

Average 5 78 36 90

Russia 2 31 24 56

Ukraine 7 49 27 60

Azerbjn 4 84 35 95

Fragmentation/consolidation: number and size of peasant farms

• Kyr/Taj: number of farms rapidly increases, average farm size decreases

• Uzb: inverse pattern due to “land optimization” campaign – number of farms down, ave size up (since 2007-2008)

19911993

19951997

19992001

20032005

20072009

20110

50

100

150

200

250

0102030405060708090100

ha per farm number of farms

num

ber o

f far

ms,

'000

ha p

er fa

rm

Uzb

19951997

19992001

20032005

20072009

20112013

0

10

20

30

40

50

60

70

80

0

5

10

15

20

25

30

Number cultiv/farm

'000

farm

s

culti

vabl

e ha

/far

mTajKyr

Growth is faster in countries that have more land in individual use

Russia: Faster growth in regions with more land in individual use

Agricultural growth is driven by individual sector

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20100

20

40

60

80bln som (1999 prices)

Ent

PF

HH

• Taj -- households• Kyr – peasant farms• Kaz – indiv (mainly peasant

farms): 400 bln tenge 1998-2011 vs. 100 bln tenge in enterprises

Kyr

Kaz

1998 2000 2002 2004 2006 2008 20100

200

400

600

800

1000bln tenge (2000 ag prices)

0

200

400

600

800

1000

Ent

Indiv

Taj

1998 2000 2002 2004 2006 2008 20100

500

1000

1500

2000

2500

3000

3500

4000mln somoni (2003 prices)

Ent

PF

HH

Land and Labor Productivity in CIS 1980-2004

1980 1985 1990 1995 2000 20050

20

40

60

80

100

120

140

Land

Labor

19

Productivity of land and labor in CIS 1980-2004

Productivity of land and labor in CIS by region 1980-2004

1980 1985 1990 1995 2000 20050

20

40

60

80

100

120

Land

Labor

1980 1985 1990 1995 2000 20050

20

40

60

80

100

120

140

160

Land

Labor*

Transcaucasia

Central Asia

European CIS

1980 1985 1990 1995 2000 20050

50

100

150

200

250

Land

Abandon

Labor

20

Households outperform all farms by relative productivity (2006-2010)

Kaz Kyr Taj Uzb0

1

2

3

4

5

6

7

8% GAO/% arable land

Ent

PF

HH

Based on GAO per ha of arable land; Kaz scale compressed (HH=61!)

Productivity gaps among farms of different types: households on top

Kyr

TajUzb

Kaz

1999 2001 2003 2005 2007 2009 20111

10

100

1000som/sown ha (current prices)

Enterprises

Peasant farms

Households

1995 1997 1999 2001 2003 2005 2007 2009 2011100

1000

10000soum/ha (2006 prices)

Enterprises

Peasant farms

Households

1991 1994 1997 2000 2003 2006 200910

100

1000

10000

100000somoni/ha (2003 prices)

Enterprises

Peasant farms

Households

1990 1993 1996 1999 2002 2005 200810000

100000

1000000

10000000'000 tenge/sow n ha (2008 prices)

Enterprises

Peasant farms

Households

Kazakhstan: Productivity vs. share of enterprises in agriculture

The five points represent the five zones: North, South, East, Center, West

South

North

Kazakhstan’s regions

WEST: Ман – Mangistau; Аты – Atyrau; ЗКО – West Kazakhstan Oblast; Акт – Aktyubinsk; NORTH: Кос – Kostanai; СКО – North Kazakhstan Oblast; Акм – Akmola; Пав – Pavlodar; EAST: ВКО – East Kazakhstan Oblast; CENTER: Кар – Karaganda; SOUTH: Кыз – Kyzylorda; ЮКО – South Kazakhstan Oblast; Жам – Zhambyl; Алм – Almaty Oblast

Kazakhstan: Higher grain productivity in the South

Zone Sown to grain, %

Share of harvest, %

Relative productivity

Yields, kg/ha

North 72 65 0.90 710-930

South 8 19 2.34 1,800-3,200

East 4 5 1.29 1,160

Center 6 5 0.78 680

West 10 6 0.61 310-570

Kazakhstan 100 100 1.00 880

Enterprises lose out even where they have the strongest advantage

North South

Leading commodities GrainHorticulture, technical crops

Grain yields Low High

Farming structureStrong presence of enterprises

Mainly individual farms

Farm sizes Very largeSmaller than in the North

Productivity Lowest Highest

Agroholdings in Kazakhstan???

“[An agro-holding] typically operates as an umbrella company for numerous individual agricultural enterprises, providing operating capital and marketing channels for commodities produced on the farms.

By the mid-2000s around fifteen very large grain holdings had emerged in Kazakhstan. For example, Ivolga-Holdings controlled about a million hectares of farmland and owned eleven elevators in Kazakhstan … and accounted for 500,000-700,000 tonnes of grain exports from Kazakhstan per year (Wandel, 2009).

In Kostanai oblast, which is the most important grain-producing region of Kazakhstan, over 40 per cent of the agricultural area is held by the four largest holding companies [Unsourced].”

Agroholdings in Kazakhstan???

• “Agro-holdings play a major role in grain and wheat production but no reliable data are available concerning their share”

The case of wheat production in KazakhstanInterim report EUR 2013, EC Joint Research Center (2014)

• In Russia, “Agroholdings control 6.6% of sown area and produce 7.7% of the grain harvest – slightly less than 6 million tons”

2006 data from V. Uzun, N. Shagaida, V. Saraikin

FAO/REU Policy Study No. 2012-2 (July 2012)

Conclusions

• Recovery of agricultural growth is associated with individualization of farming

• Small family farms have become the backbone of post-transition structure

• A new farming structure requires a new market infrastructure for farm services (government policies!)

Food Security

• Food insecurity = Vulnerability• Improved income is the best tool for

alleviating vulnerability and ensuring food security

Income increases with farm size

Tajikistan (TajLSMS 2003) Uzbekistan (WB 2006)

Income increases with farm size: dehkans and farmers in Uzbekistan

Family Income

Income per one family member

FarmersDehkans

Income of family, thousand sum

Plot, hectare

FarmersDehkans

Income per one person, thousand sum

Plot, hectare

Source: 2007 survey of dehkans and farmers, MinAg,Tahlil, and Mashav

Wellbeing increases with farm size: Tajikistan

Level of wellbeing

HH plots (ha)

Family dehkan farms (ha)

Low 0.5 8

Medium 1.0 10

Comfortable 2.3 10

Source: May 2011 PPCR survey Source: 2008 FAO survey

Income and wellbeing rise with commercialization

Tajikistan (2011 PPCR) Uzbekistan (2007 UNDP)

Households sell! Milk in Uzbekistan

More produced, more sold…but sales channels are underdeveloped

Activities

Milk selling farms (“sellers”)

36%

Share of output sold by “sellers”

60% (1600 kg)

Sale channels:

Neighbors, friends 53%

Market (direct) 36%

Middlemen 33%

Source: 2007 UNDP survey Source: 2007 UNDP survey

Factors increasing family income (Tajikistan)

Positive effect of capitalsFactors Effect

Human capital

Family sizе +

Age of HH head +

Years of schooling +

Physical capital

Plot size +

HH leases land +

HH has machinery +

Effect of land leasingWithout leasing

With leasing

Household plots, ha

0.7 20

Family dehkan farms, ha

3.2 28

Family income, somoni

159 212

Per capita, somoni

25 27

The benefits of land reform for the rural population

More land to smallholders

Higher well-being Higher commercialization

Household income highly diversified (Uzbekistan)

Livestock

Crops

Pension

Salary

Business Migrants

Source: 2007 survey of dehkans and farmers, MinAg,Tahlil, and Mashav

Four approaches to raising rural incomes

• Increases in productivity (output per unit of land or per head of livestock) – intensive approach (advisory services, government supported R&D)

• Increases in endowments (land, livestock, machinery, fertilizer) – extensive approach

• Increases in commercialization: – improved access to market channels (service

cooperatives)– shift to higher value-added products (advisory

services)• Diversification into non-agricultural activities in rural

areas

Fifth approach: Overcoming the “curse of smallness”

• Contract arrangements with processors (Nestle in Uzbekistan, Danone in Ukraine, a domestic dairy in Azerbaijan)

• Effective enlargement through creation of service cooperatives:– Collection and sale of products from scattered small

farms– Processing (value added!)– Purchase and supply of farm inputs– Feed mixing centers and feed sale stations– Machinery pools for joint servicing of arms