For official use only
4 NOVEMBER 1996
An FAO Crop and Food Supply Assessment Mission visited Mongolia from 7 to 18 October to review the outcome of the 1996 grain harvest and estimate national import and food aid requirements for the marketing year ending September 1997. The evaluation is based on discussions with Government, UN and other international development agencies and crop assessment visits to the main producing areas, including Selenge, Tov and Darkhan in the Central Agricultural Region.
This year, extensive and serious steppe and forest fires throughout the country caused widespread damage to forests and winter pastures. However, although the fires resulted in livestock losses, which may exacerbate current economic difficulties at household level, they did not affect output. Nonetheless, cereal production declined for the fifth consecutive year as a consequence of reduced rainfall at the beginning of the season and continuing problems in the sector, brought on by economic transition and market reforms. More specifically, in the Central Agricultural Region, which accounts for some 80 percent of national crop production, 1996 was characterized by poor fallow preparation, low quality- high quantity seed use, delays in germination, poor weed control, no fertilizer use, less than average rainfall at critical stages in the crop cycle and a protracted harvest, made worse by old machinery and a shortage of spare parts. Potato and fodder production exhibit similar characteristics. Although, livestock production, on the whole, remains comparatively stable, access to livestock products has been adversely affected by fragmentation in the sector and the break-up of state marketing channels.
Mongolia is classified as a Low Income Food Deficit Country (LIFDC). Although it is not food insecure in the normal sense, nor is it facing an emergency which may result in widespread famine, it does, like transitional economies in the CIS, have a growing population of low income groups, who are experiencing a dramatic fall in nutritional standards due to changes in their economic circumstances. As a result, like several CIS countries which are currently receiving food aid, increasing poverty in Mongolia has become a pressing problem, requiring international assistance. The Government has identified the unemployed, the elderly, female headed households, children, pensioners and small herders as those who most bear the social cost of transition. These segments of the population have extremely limited access to financial resources to purchase food, from a market which is being increasingly liberalized. Even those in employment face considerable problems in meeting household demand for food as inflation remains high and increases in food prices have so far substantially outpaced wages in the public sector.
Inevitably, dwindling domestic cereal supplies have resulted in further deterioration in the countrys ability to feed its people and large imports will be necessary in the 1996/97 marketing year to meet requirements, a situation further compounded by low cereal reserves, a decline in export trading and the countrys capacity to import sufficient quantities of grain commercially to meet the deficit. Moreover, a fall in world copper and cashmere prices, important revenue earners, will undoubtedly reduce further Government income and expenditure in the year ahead.
The Mission estimates the overall cereal import requirement for 1996/97 at 235 000 tons of wheat and 3 000 tons of rice, making a total of 238 000 tons. Of this it is estimated that the Government could finance the commercial import of some 87 000 tons, similar to last year, leaving an overall deficit of 151 000 tons, with which the country needs assistance, through emergency and programme food aid. For the most vulnerable groups in society, those categorized as being absolutely poor, it is recommended that some 22 000 tons be provided in emergency food aid, leaving a balance of 129 000 tons to be met by concessional credits and programme food assistance.
Since 1990, the country has embarked on radical transformation of economic, political and social systems, after several decades as a centrally planned economy very closely linked to the former USSR. However, the break up of the former USSR, which had hitherto provided the country with substantial economic and technical aid, the collapse of the Council of Mutual Economic Assistance (CMEA) and the introduction of austerity measures to stabilize the economy, have had major economic and social repercussions. These measures, involving the elimination of subsidies, controls over prices, tariffs, and wages, have led to shortages of critical imports, as well as rampant inflation and currency devaluation. As a result between 1990 and 1993, the economy contracted significantly, inflation peaked at over 400 percent, unemployment, hitherto unknown, averaged 7 percent of the labour force and interest rates soared.
During 1995, however, there were signs of some recovery; GDP grew by 6.3 percent, up from 2.3 percent in the previous year, the level of employment increased, unemployment fell significantly, inflation tapered off to 50 percent and interest rates declined slightly, though still remained at between 5 and 10 percent per month.
Overall, the transition of the economy in Mongolia has resulted in increased poverty, substantial reductions in living standards, a deterioration in services and infrastructure and skewed distribution of income and assets. In spite of some early signs of economic progress, vital areas still require substantial improvements, such as credit and interest rates, without which the grain sector will continue to regress.
Mongolia has an area of 1.6 million square kilometers and a population of some 2.35 million people (projected to mid year 1997), making it one of the most sparsely populated countries in the world. Almost half the population live in rural areas, of which 50 percent are pastoralists, who produce 86 percent of gross agricultural output. The area under pasture is vast though fragile and supports an estimated population of 28 million animals. A severe, continental climate, large distances and a transhumant/nomadic system, which has expanded dramatically since the break-up of state livestock farms make the provision of services to the livestock sector very difficult.
The crop sector, which is now based almost exclusively on rainfed cereal production during the frost free period from May to September, provides the remainder of gross agricultural output. The system employed is large scale, mechanized and is estimated to employ less than 13 percent of the population.
Privatization in the sector has progressed rapidly since 1990 and the 70 state farms under the previous planned system have been sold off since 1991, to create over 300 farm companies. Overall crop production has declined progressively, as farmers have been unable to obtain adequate loans from banks to buy machinery, seeds and fertilizers on the one hand, whilst lacking managerial skills to operate such large enterprises on the other. As a result, the area under cultivation, yields per hectare and overall production have decreased appreciably.
This year, extensive and serious steppe and forest fires throughout the country could have compromised domestic food supplies further. Although fires are almost an annual occurrence and can be used, under control, as part of good pasture management, in 1996 their severity and spread meant that the Government declared a national disaster in April. The fires were the consequence of excessively dry conditions and affected 15 of the 21 aimags (provinces) in the country, particularly Hursgal, Bulgan, Selenge, Arkhangai and Dornod. As part of widespread environmental damage, it is estimated that some 24 million hectares of forest and 7.8 million hectares of winter pasture were lost. The mission notes, however, that although the fires resulted in livestock losses, which may further exacerbate current economic difficulties at household level through loss of earnings, they did not seriously affect crop production. Nonetheless, production this year was seriously affected by reduced rainfall since the beginning of the crop season in May, and the sector continues to be severely constrained by other factors, brought on by economic changes.
With the virtual collapse of the irrigated agricultural sector since 1990, crop production is mostly dependent on adequate and timely rainfall. Given the short length of the growing season, which lasts from late May to early September in the Central Agricultural Region where around 80 percent of cereals are grown, early germination of crops is crucial for success. Although agricultural practices have evolved which aim to ensure that there is reasonable carry over of residual moisture from late summer rains in the previous year, timely germination depends on good rains following the thawing of snow in May.
The late summer rains in 1995 were normal in all areas except the North East steppe where they were reduced by some 30 percent below the long term average. However, spring rains in 1996 were uniformly late and light, particularly in the Central Agricultural Region with a concomitant 2-3 week delay in germination in that area. Records from the Hydro-Metrological Institute indicate that the North East Steppe generally and some agricultural areas in the North West had earlier and heavier rains than usual at the beginning of spring, encouraging an atypical 19 percent increase in sown area in the North East farming zone. Unfortunately, the late start in the Central Agricultural Region was followed by equally poor rains during the growing season, resulting in most of the agricultural aimags, except Overkhangai, receiving only between 55 - 78 percent of the expected rainfall. Whilst the rainfall in the North East continued to be better than expected, rains in the North West became more variable and unreliable as the season progressed, reaching only 64- 81 percent of the expected seasonal total.
The area sown each year is largely determined by the area left fallow in the previous year in accordance with the current practice of a wheat-fallow rotation. The mission notes that rigid adherence to this policy has slipped, with some farm companies expanding cultivation into the previous years grain area, in a vain attempt to increase production. At the same time a variety of factors were behind the 48 percent decline in area under cereals from 1989 to 1995 (Table 1). The factors responsible for the reduction were:
Table 1: Area, Yield and Total Production of Cereals and Potatoes (1989 - 1995) 1/
|Year||Area (ha)||Yield (kg/ha)||
|1989||673 400||990||664 119||12 600||7 600||96 382|
|1990||654 100||1 100||718 300||12 200||10 700||131 100|
|1991||615 300||970||595 300||10 100||9 700||97 500|
|1992||592 600||830||493 900||8 700||9 000||78 500|
|1993||546 400||880||479 500||8 900||6 800||60 100|
|1994||449 100||740||330 700||7 800||6 900||54 000|
|1995||356 421||730||261 396||6 200||6 700||41 800|
Such factors were clearly evident during mission field trips and ministry discussions, and with the delayed start in the season which resulted in a further decline in sown cereal area of 13 percent this year. The actual area of cereals harvested in 1996 was 17 percent below last years substantially reduced level. Over the same period cereals other than wheat have completely disappeared from all agricultural aimags, except Tov, where some 3 000 hectares of barley are still grown.
Overall yields also exhibit a marked downward trend. In addition to the factors outlined above, this is attributed to:
Further, with the withdrawal of State support for seed selection and multiplication, all farmers are presently using their own seed with a consequent deterioration in quality. Throughout the Central Agricultural Region, 2 row early maturing varieties, mostly Orchon and Scala, predominate. The mission noted that only on one of the 8 farm companies visited, had the seed been changed in the past 5 years. Given the poor quality of seed, inherent in on-farm storage and use under deteriorating conditions, a widespread cessation of seed dressing and reduced seed bed preparation, seeding rates have increased, to around 180 kg/hectare, thereby increasing input costs, and reducing the potential sowing capacity of the farm and/or saleable stocks. Table 1 shows that yields decreased from 1 100 kg/hectare in 1990 to 730 kg/hectare in 1995. A similar mean national yield is noted for 1996, indicating no further decline, despite this being a drier year. This is mostly the result of better yields, over a large area, in the North East (750 vs 590 kg/hectare), due to favourable rainfall.
The mean national yield of 730 kg/hectare masks a range from an anomalous 1 450 kg/hectare in Houd aimag (1 000 hectares only) to 210 kg/hectare in Uvs aimag. Both aimags are located in the North West steppe farming zone, where rainfall was very variable. The range of yields in the Central Agricultural Region is much smaller (570 to 830 kg/hectare), as the rains, although poor, were more evenly distributed. Fortunately, although the season was late the period after sowing was frost free, enabling crop development to progress unhindered up to harvest. Equally fortunately, given the apparent lack of agricultural chemicals, there were no significant outbreaks of pests and diseases, although there were incidents of smut noted in Darkhan aimag, which indicates that the wheat crop will be much more vulnerable in a wetter year.
With regard to the farming practices, the critical state of farm machinery in all aimags suggests that all farm operations are conducted with reduced efficiency. Harvesting and handling losses are therefore likely to be higher and grain quality ex-farm lower due to poor cleaning prior to transport to the mill. The drier year, however, meant that grain arrived at the flour mills with a lower moisture content, reducing the need to dry on arrival, thus earning some farmers a bonus. Of the three flour mills visited, one had closed and the other two had each accepted less than 25 percent of a capacity of 86 000 tons from the new harvest and had no carry over stocks. The management did not anticipate further purchases of more than 5 000 tons, at either mill.
Average overall cereal production costs of U.S.$ 151 quoted to the Mission are higher than the U.S.$ 136 quoted by the 1996 ADB mission, due to different sources and the increased price of fuel. The Missions estimates of costs, based on the risk avoiding system of no chemical inputs and fewer cultivations, suggests a production break-even point for the 1996 season of 790 kg/hectare sold at U.S.$ 192 per ton, (current prices), a yield only achieved from 34 percent of the harvested area. This would suggest that the majority of farm companies will be approaching next season with increased debts, older and lower quality seed, poorer fallow processing and even less ability to extricate themselves from a downward spiral of production.
Not surprisingly the situation regarding other field crops is similar to wheat. Potatoes, in particular have dropped in area from 12 600 hectares in 1989 to 6 200 hectares in 1995. The Mission notes a further drop of 874 hectares in the past year. Yields have fallen from a fertilizer supported 9-10 tons/hectare in the early nineties to 6.7 tons/hectare in 1995. The combination of reduced yields and area results in an overall decline in production of 63 percent.
Vegetable production has also declined over the same period by 55 percent and fodder by a remarkable 92 percent since 1991.
Cereal and Potato Production in 1996
The estimated total cereal production for 1996 to be used in the 1996/97 marketing year (October/September), juxtaposed with the 1995 harvest situation, is provided by aimag in Table 2. The table shows the extreme importance of the Central Agricultural Region, which contributed 83 percent of the harvest in both years and the complete absence of cereal production in the Gobi desert aimags.
Table 2: Total Cereal Production 1995/96, by Region and Aimag
|Aimag||Harvested area (ha)||Yield (kg/ha)||Prod. (tons)||Harvested area (ha)||Yield (kg/ha)||Prod. (tons)|
|Central Agricultural Region||234 248||780||181 934||278 577||790||219 860|
|Orchon||1 279||750||954||1 311||860||1 122|
|Tov||65 282||830||54 390||77 815||730||56 528|
|Bulgan||35 376||800||28 221||41 894||830||34 748|
|Darkhan||13 342||570||7 624||16 753||930||15 611|
|Overkhangai||8 944||620||5 550||13 484||350||4 730|
|Selenge||110 025||770||85 195||127 320||840||107 121|
|North West Steppe||31 479||360||11 463||50 780||500||25 431|
|Arkhangai||4 712||300||1 480||21 750||490||10 582|
|Uvs||15 090||210||3 191||17 468||480||8 411|
|Houd||1 001||1 450||1 452||1 105||770||855|
|Hursgal||9 000||530||4 801||9 414||540||5 128|
|North East Steppe||32 365||750||24 239||27 064||590||16 105|
|Dornod||10 530||760||7 955||8 381||740||6 236|
|Henty||11 000||950||10 469||7 240||830||6 016|
|Sukhbaatar||10 835||540||5 815||11 443||340||3 853|
|Grand total||298 092||730||217 636||356 421||730||261 396|
The estimated total cereal production for 1996 is 217 636 tons from 298 092 hectares, being 17 percent lower than last year. The Central Agricultural Region mirrors exactly the national figure, marking a 17 percent decline; whilst the 50 percent increase in production in the North East farming zone, due to good rainfall, is more than matched by a 55 percent reduction in output in the North West farming zone, where good early precipitation was followed by poor main season rains.
The production of potatoes is estimated at 35 946 tons from an area of 5 349 hectares. This translates into some 9 000 tons of grain equivalent for use in Ulan Baatar and other provincial capitals. In addition a further 6 446 tons of potatoes were imported in 1996, marking an increase of 67 percent over 1995.
Estimated at providing 92 kg of meat and 130 kg of milk products per caput, the 28 million livestock in Mongolia play a fundamental role in the nutritional status of the population. In contrast with crop production, cattle and horse numbers are estimated to have increased steadily, and goat numbers dramatically, since 1989. Conversely sheep numbers are estimated to have fallen by around 4 percent. The significant rise in goat numbers from 1.4 million to 3.5 million breeding females may be explained by the increasing importance of cashmere sales for household income generation and food security and the greater suitability of small ruminants for new small scale pastoralist units.
The Mission notes that whilst the fires this year destroyed much of the countrys fodder reserve left over from the 1995 summer in fifteen aimags the fires were, by and large, swiftly followed by rains with consequent pasture regrowth. All stock noted during field visits were seen in good condition and local government livestock specialists estimated that both meat and milk production were normal, with stock showing little or no adverse effects. In addition no widespread outbreaks of disease or parasitic infestations were recorded in 1996.
Official estimates put the level of stored hay at 495 670 tons as of the beginning of October, 1996. This compares unfavourably with a level of 657 800 tons in 1995. However, during field visits, the Mission noted that hay was still being collected in the Central Agricultural Region. This, therefore, suggests that stocks will increase over the next couple of months. It is worth noting, however, that even if hay collection continues, fodder reserves are bound to be low for the coming winter, as the reduced area and yield of cereals will mean a poor straw harvest. The reduction in on-farm transport capability, will limit straw collection from fields and its distribution to other areas and the movement of livestock to sites with straw supplies.
Concentrate feed requirements for livestock remaining under intensive conditions, plus supplementary feed to lactating dairy cows and young stock in grazing areas, are supplied from two sources: the former from compounds prepared at the flour mills from bran, low quality wheat and ground straw; the latter from low quality wheat, sweepings and cleanings collected from on-farm processing after harvest. In the Missions final balance, ex-mill animal feeds are included in the conversion factor from wheat to flour, estimated at 70 percent, and on-farm livestock feed included with handling, harvest losses and wastage, estimated at 10 percent.
As with other components of the agricultural industry, the support structures to the livestock sector, which were previously provided by the Ministry, have all but collapsed. As a result, the previous marketing chains are now non-existent and new ones have yet to be created. Milk produced from the summer pastures, some 100-150 km from aimag towns, is, therefore, much less available to urban consumers. This is likely to have reduced both milk consumption in such towns and the incomes of pastoralists.
Given the decline in cereal production in addition to problems of flour distribution to remote aimags, household consumption of meat in rural areas is expected to rise as more animals are slaughtered for home use, sold or locally bartered at village level for other goods. Such measures will inevitably reduce the herd size of many of the newly established units, which are already of questionable viability.
Formal meat exports, which declined to 2 000 tons in 1992 from 24 300 tons in 1990 are still pegged at the same level. However, these exports do not include animals that may be exported to neighbouring countries on the hoof.
Markets are not well developed for grain. For example, grain is not channeled through local markets, but sold directly to flour mills. These mills set prices according to government guidance and the perceived purchasing capacity of the local population.
In May this year, meat prices were double those in similar markets in 1995. Conversely, cashmere prices were around 50 percent lower, partly reflecting marketing difficulties, following the break-up of the national herd and partly lower international prices.
Given the dependence of the population on animal products to meet half its nutritional requirement of approximately 3 000 calories/day, it is imperative that these new marketing chains are established as quickly as possible.
Mongolia is classified as a Low Income Food Deficit Country (LIFDC), where the issue of food security is of great importance, as supplies could be disrupted by problems of adverse weather and transport over large distances.
Although the country it is not food insecure in the normal sense, nor is it facing an emergency which may result in widespread famine, it now has a growing population of low income groups, who are experiencing a dramatic fall in nutritional standards due to transitional problems which, inter alia, have resulted in a precipitous decline in foodcrop production in recent years. As a result of liberalization in food markets, prices of essential commodities have risen sharply, whilst the purchasing capacity, or access to food, of the poor has declined dramatically. In addition the recent liberalization of fuel, electricity and gas prices will undoubtedly raise household expenditure on these items and increase further the number of people vulnerable to food shortages.
Several years of declining cereal production and the lack of sufficient imports to build stocks, means that the overall food supply situation remains extremely tight. Moreover, although there has been some improvement in the countrys export performance and foreign reserve position since 1993, its capacity to import sufficient quantities of food and essential inputs for agriculture still remains significantly constrained. In the 1996/97 marketing year (October/September) the situation could be further aggravated by falling export revenues and foreign exchange as a result of lower world market prices for copper and cashmere (the two leading exports), and heavy debt repayments. Certainly the country is in no position to meet its import requirement for cereals, and will only have, at best, a capacity to import some 87 000 tons, similar to last year. Some imports through private and Government share holding companies are available on credit, which will ease pressure on expenditure somewhat. In a further move to encourage flour imports, the Government has provided limited amounts of subsidized credit to potential importers and has waived its import duty.
In the past, stocks of wheat and flour were set aside to act as a buffer against shortfalls in production and, more recently, for the purposes of price regulation. Yet stocks have been declining appreciably as production and imports have not been sufficient to meet demand. It is estimated that some 10 700 tons of wheat equivalent were available as carry over stocks at the beginning of the current marketing year, with an additional 2 910 tons of grain stored as strategic seed reserve.
Assuming that commercial imports materialize, the country would still have an uncovered import deficit of 151 000 tons of wheat. Of this 22 000 tons should be provided as emergency assistance to 141 000 of the most vulnerable (absolutely poor) people in society. The remaining 129 000 tons should be targeted as programme food aid or concessional imports. The cereal balance is outlined in Table 3.
In the balance, utilization is estimated on the following assumptions:
Table 3: Mongolia: Foodgrain Supply/Demand Balance 1996/97 (October/September)
|A. Domestic Availability||231||-||231|
|Opening Stocks 1 October 1996||13||-||13|
|On farm feed use, losses & impurities||22||-||22|
|Government closing stocks||12||-||12|
|C. Import requirement||235||3||238|
|Anticipated commercial imports||84||3||87|
|Food aid pledged|
|Uncovered import deficit||151||-||151|
|- Emergency assistance||22||-||22|
|- Programme food aid||129||-||129|
In addition to economic problems brought on by transition and market reforms other factors have also increased the incidence of poverty in Mongolia. These include pronatal policies in the past, which supported large families with generous subsidies and welfare programmes. Under current economic transformation, however, subsidies and welfare programmes have been cut dramatically, which have pushed many households below the poverty line. One repercussion of this has been the incidence of child abandonment and an increase in the number of street children in urban areas. Moreover, the privatization programme for animal herds resulted in many families owning below-subsistence herd sizes. It is estimated that 20 percent of households (mostly headed by females) received less than 10 animals, not enough for a family to survive on. With structural reforms, as noted earlier, unemployment has increased as non-viable enterprises ceased to operate.
The Government has identified the following as the most vulnerable; (1) female headed households, where the incidence of poverty reached 60 percent of individuals, compared to 31 percent for those living in male headed households; (2) small herders in rural areas, who are faced with low incomes from herds, inadequate marketing outlets and support services and exposure to frequent climatic risks; (3) the unemployed, of which 58 percent are classified as poor and vulnerable; (4) pensioners; (5) the elderly; (6) children who have lost one or both parents; and (7) disabled people. In addition a recent poverty assessment report by the World Bank, found that unlike most low income and other transitional countries the incidence of rural poverty in Mongolia is marginally lower than that in urban areas, which is characterized by a high concentration of very poor households, exacerbated by the closure and downsizing of state enterprises and rural-urban migration.
As a result of poverty, there has been deterioration in various social indicators, such as; school enrollment, maternal mortality, infant mortality and morbidity, which prior to 1990 had been impressive compared to other countries at similar levels of development. The Government presently classifies households with an income of 6 900 tugriks (U.S.$ 12) per person/month in rural areas and 8 000 tugriks (U.S.$ 14) per person/month in urban areas as being below the poverty line and poor. Households with an income of less than 40 percent of this minimum are classified as being absolutely poor. In 1995 the number which fell into the absolutely poor category were estimated at 6 percent of the population. Although the proportion must surely have increased since then, using 6 percent as a basis and projecting it into the mid year population in 1997, the number of absolutely poor would be around 141 000 people. The Mission, therefore, recommends that this section of the population be targeted for emergency food assistance to help cushion the impact of transition.
|This report is prepared on the responsibility of the FAO Secretariat with information from official and unofficial sources and is for official use only. Since conditions may change rapidly, please contact Mr. Abdur Rashid, Chief, ESCG, FAO, (Telex 610181 FAO I; Fax: 0039-6-5225-4495, E-Mail (INTERNET): GIEWS1@FAO.ORG) for further information if required.|
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FA 4/50 MONGOLIA