With a combination of extreme summer drought and severe winter chill taking its toll on Mongolia’s livestock industry, the country is looking to financial incentives and targeted investment to bolster regional exports.
Snowed under
Mongolia’s livestock industry is falling victim to a climatic phenomenon known locally as a dzud, which usually occurs when an especially dry summer is followed by an extreme winter.
With temperatures as low as minus 46°C, nearly 16°C below normal averages, and snowfall in some areas reaching as high as 70 cm, pastures and already-low fodder stores have become virtually inaccessible to many grazing livestock.
Although less than 50,000 livestock have perished thus far, officials have warned that the effects of the current cycle could be more severe than the last dzud, which struck in 2009 and 2010 and left 9.7 million animals dead.
Mongolia enters this dzud from a position of relative strength, however, with the number of livestock in the country up 34 per cent year-on-year in 2015 at 56 million head.
Agriculture is a key contributor to Mongolia’s economic output, accounting for around 16 per cent of GDP – only slightly less than the mining industry – and providing employment to some 30 per cent of the workforce, according to World Bank figures.
The dzud comes as the broader economy continues to contend with low commodity prices and weaker demand from China, which have combined to weaken growth in the minerals sector.
According to data released by the National Statistical Office in mid-February, GDP expanded by 2.3 per cent in 2015, its slowest rate in six years and just over one-third the pace recorded in 2014.
Carry-through effects
In addition to impacting farmers and herders, this year’s dzud could have far-reaching effects on the broader Mongolian economy.
A recent call for aid by the International Federation of Red Cross and Red Crescent Societies warned of the risks of large-scale urban migration by farmers from rural areas, as experienced during the 2009/2010 season.
With herders in badly affected areas selling off their remaining livestock, the sudden oversupply has driven down livestock prices, further increasing hardship.
In an effort to assist the ailing agriculture sector, the government announced a deal with the State Bank of Mongolia in February to cut interest rates on loans to herders from 29.5 per cent to 18 per cent.
The move is expected to encourage a similar curtailing of interest charges at private commercial banks.
In addition to lowering repayment costs and easing the debt burden of livestock producers, the move is likely to encourage renewed activity in the sector, R. Burmaa, minister of food and agriculture, said.
“We will take measures to lower interest rates for new loans for herders to 10 per cent starting next month, in order to stabilise income, advance the competitiveness of agricultural products, support domestic production and to increase export products,” she said.
Export-driven growth
The country has aspirations to become a major meat exporter, eyeing consumer markets in China, South Korea and Russia, with the latter in search of new suppliers following the imposition of further sanctions by the West.
Mongolia plans to invest up to 180 billion tugrik (US$87.9 million) to develop meat exports in 2016 – 80 billion tugrik (US$39.1 million) to create additional meat reserves and 100 billion tugrik (US$48.9 million) to boost overseas deliveries – R. Burmaa told media.
However, while the Mongolian Meat Association estimates the country’s export potential could rise to 600 million tugrik (US$293.2 million) per year, with over 100,000 tonnes exported to Russia alone, exports have averaged around 10 per cent of the country’s potential in recent years.
At present, horsemeat accounts for the majority of exports, at 80 per cent of the total, with the balance composed of beef products.
Though demand for beef in the region is strong, Mongolia will need to invest heavily if it hopes to carve out a larger market share in Russia or China, where importers require higher standards of veterinary certification for livestock.
These efforts have paid off in the past, for example improvements in bio-security prompted China to resume meat imports at the end of 2015, following a two-year hiatus caused by concerns over foot-and-mouth disease.