Kusto Group's Daniel Kunin: Kazakhstan's Agricultural Industry is Primed for Success

Kazakhstan like no other emerging economy is uniquely capable of emulating the American model of agricultural prosperity. Using the American experience as a model, recreating successes and avoiding mistakes, Kusto Group ambitiously aims to establish in Kazakhstan in 10-20 years what it took America 100 years to accomplish. 

Kusto Group, under the guidance of Chairman of the Board of Directors Yerkin Tatishev, aspires to establish a sophisticated modern agriculture ecosystem in Kazakhstan based on an integrated protein strategy. Tatishev's comprehensive approach will likely have far-reaching implications on the country's economy as Kusto Group aims to take into consideration all aspects of the agro-value chain.

Daniel Kunin, Managing Director of Kusto Group, detailed the company's inclusive strategy:

"This is a project where the winners can include local farmers in rural and under-developed regions - it can include city dwellers looking for affordable, local sources of food and meat, and it can benefit exporters and foreign customers with a growing demand for healthy products.  Many others who stand to benefit in the complex web that is agribusiness. I believe Kazakh agriculture will stand out because it will be sustainable - which is a very attractive way to generate income, reduce poverty and build lasting wealth."

Developing an agricultural ecosystem in Kazakhstan

The American model of agroindustry advocates and employs techniques that improve crop performance, boost water conservation, encourage non-GMO crop development, and promote a sustainable impact on the land. While the United States and Kazakhstan may not be comparable today in terms of agricultural output and yields - Kazakhstan is uniquely similar in crucial ways. Introducing all elements of success in the American model, the country can jumpstart meat production on a national scale.

 "We do not approach the deficits or shortcomings experienced today in the industry with pessimism," says Kunin, "but rather with optimism that they provide an opportunity to realize the enormous potential in Kazakhstan."

Kusto Agro, the agricultural division of Kusto Group, has already established itself as a rising player in the Ukrainian market after entering eight years ago. The company seeks to take advantage of the competencies acquired there to the maximum extent possible in Kazakhstan.

Kusto Group's vision is to contribute to establishing the foundation ecosystem to support Kazakhstan's greater agricultural transformation. The company shares the country's long-term goal of developing a productive, sustainable industry that could one day rival the prosperous oil and natural resources sector.

The company, which operates in multiple divisions across three continents, has focused its efforts in five primary domains: non-GMO seed cultivation, feed and agro production, mechanized irrigation and water efficiency, livestock rearing, processing and export.

Yernur Aydarkin, Managing Director of Kusto Agro Kazakhstan, explained Kusto Group's holistic approach at the recent Central Asian AgTech Summit saying, "You can draw an analogy with human health - it is ideal when everything works in tandem: sleep, proper nutrition, physical activity, mental state. Also, in the agricultural business, quality inputs will result in a well-functioning system - from the production of high-quality feed, the use of the best seeds and irrigation technology to the sale of finished products."

Kazbeef: A holistic approach to livestock 

Kusto Group's livestock division, KazBeef, has been building and expanding its operations in the beef cattle market for the last few years in the Akmola region of Kazakhstan. 

Kazbeef was established with a commitment first and foremost to quality. The company seized the opportunity to introduce a new class of livestock and was the first to import premium Angus and Hereford breeding stock from the United States. 

Today, the company is thriving with 120,000 hectares of pasture in the Akmola region alone, 5 thousand heads of breeding stock cattle and two feedlots with a total capacity of 15 thousand heads of cattle. The company recently built a new state-of-the-art meat processing facility in Schuchinsk, increasing storage capabilities to 6,000 tons of produce per year.

KazBeef's production figures illustrate the company's impressive achievements. In 2018, KazBeef supplied more than 1 thousand tons of meat to the domestic Metro distribution network. The company expects to increase output by an additional 50% to 1.5 thousand tons by the end of this year. In the next two to three years, Kazbeef aims to achieve a projected production volume of 8 thousand tons.

Given the tremendous agricultural potential of Kazakhstan, these volumes are just the beginning. The ninth largest country in the world has an abundance of wide-open space, rich, fertile land, and a climate ideal for animal rearing - taken together, the country is primed to become a regional and global leader in agriculture.  

According to Yerkin Tatishev, "The basic ingredients are there, and now we need to make use of the best technology and investment to make it a reality. However, such a transition cannot happen overnight. It requires policymakers and business leaders to work hand-in-glove and develop an approach characterised by a broad range of high-growth, high-skilled and high-quality industries. I am pleased to see this collaborative approach starting to fall into place, particularly in areas that can benefit lower-income rural communities." 

Helping to fuel growth is a growing demand for high-quality beef in both domestic and neighboring markets such as China, a country with an almost unlimited capacity.

"There is definitely demand," says Aydarkin. "For example, we were recently approached by one of the largest beef dealers in China, that sees volumes of more than 500 thousand tons of meat annually. This is more than the entire annual output in Kazakhstan! They looked at our enterprise, tasted our meat and said that they are prepared to take everything that we offer, the condition - a stable supply. Of course, it is important not to put all your eggs in one basket. After all, if you configure the entire system with only an eye on China, any problems entering the market will result in huge losses for the industry. Therefore, our strategy is to sell part of our volume inside Kazakhstan and export the rest. This guarantees us stability. It is also important for us to provide Kazakhstanis with high-quality, healthy meat."

Kusto's efforts to introduce innovation and best practices to Kazakhstan

An integral part of Kusto Group's strategy is reliable, quality feed production. For the company, securing their own food supply is a key to profitability - ensuring quality and avoiding the volatility of prices and unmanageable logistics. Kusto Group's agricultural operations include the cultivation of non-GMO corn for grain and silage, barley, and other crops.

Kusto Group's investment in feed production goes beyond providing a supply for its own integrated livestock operations by offering a high-quality, stable domestic product to farms that partner with the company. Smaller third-party feedlots who do not have the financial means to invest in their own feed operations can also benefit from Kusto Group's feed cultivation. 

The company continues to pursue a vision of collaboration that benefits the entire agricultural ecosystem of Kazakhstan, not just their own operations. This strategy has motivated Kusto Group's efforts to improve seed production and cultivation abilities and to introduce modern soil irrigation technology. 

As non-GMO seed production is a fundamental element of the American model of development, the company initiated a joint venture with the Minnesota-based Baumgartner Agricultural Science and Service (BASS) to introduce novel production methods to Kazakhstan. It is estimated that 10% of Kusto Group's production will be used to supply their own operations, and the rest will be sold on the domestic market and exported to Asia and Europe.

Kusto Group also signed a deal this year to partner with US-based Valmont Industries, a leading producer of precision irrigation systems, to build a production facility in Kazakhstan. Currently, only 7% of arable land in Kazakhstan is irrigated, which accounts for about 40% of the country's agricultural production. The introduction of modern irrigation technology will no doubt have a positive, far-reaching impact on the industry.

The company also inked a landmark deal with Tyson Fresh Meats, a division of the American Tyson Foods, one of the world's largest food production companies, to build a state-of-the-art meat processing facility in Kazakhstan with an estimated harvest capacity of 2,000 head per day. The deal is projected to provide an annual economic benefit in excess of one billion dollars (USD) to the country.

Achieving long-term, profitable growth and sustainability

"Building a sustainable protein export business and modern agricultural sector in Kazakhstan is a fascinating, supremely complex and interesting project," Daniel Kunin explains. "By definition, it requires long-term thinking, strategic planning, intensive stakeholder mapping and understanding, and the creation of a network of inter-linked partnerships that are both joint ventures but also intensive public-private partnerships."

Kusto Group also aims to integrate farmers into their agricultural ecosystem. Farmers are at the heart of transitioning the sector from the framework of Soviet-modeled subsistence farming to a competitive network of small commodity producers. The company's initiatives include a breeding stock rental program to help farmers establish and build their own herds at a lower initial investment cost. Engaging individual farmers in the transition to modern agribusiness will help the entire system to increase productivity and achieve stable, sustainable growth.

"Achieving our ambitious - but attainable - vision of helping transform Kazakhstan's agricultural system will create a modern, competitive and prosperous sector in the national economy that can complement and maybe one day surpass the oil industry," says Kunin. "Once the elements of a well-functioning system are established, success will follow."