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Analysis of the Walnut Value Chain in the Kyrgyz Republic

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Analysis of the Walnut Value Chain in the Kyrgyz Republic MAY 2012 WORKING PAPER Analysis of the Walnut Value Chain in the Kyrgyz Republic A PROFOR WORKING PAPER A PROFOR WORKING PAPER DISCLAIMER All omissions and inaccuracies in this document are the responsibility of the authors. The views expressed do not necessarily represent those of the institutions involved, nor do they necessarily represent official policies of PROFOR or the World Bank. Suggested citation: Bourne, Willie. 2012. Analysis of the Walnut Value Chain in the Kyrgyz Republic Working Paper. Washington D.C: PROFOR. Published in May 2012 For a full list of publications please contact: Program on Forests (PROFOR) 1818 H Street, NW Washington, DC 20433, USA [email protected] www.profor.info/profor/knowledge Profor is a multi-donor partnership supported by: Learn more at www.profor.info 5 ACKNOWLEDGMENTS This analysis was funded by the Program on Forests (PROFOR), a multidonor partnership managed by a core team at the World Bank (www.profor.info), as an input into a larger study on the development potential of forests in the Kyrgyz Republic conducted by the Rural Development Fund (www.rdf.in.kg). This report, written by Willie Bourne, presents findings from a rapid appraisal and field study of the walnut value chain in Jalal-Abad province in southern Kyrgyz Republic between March 28 and April 1, 2011. The field survey was undertaken by a small team of researchers and forest field staff from Toskool-Ata leskhoz. The Rapid Market Appraisal (RMA) team would like to thank Mr. Rysbek Akenshaev, Head of Department of the Jalal-Abad Provincial State Department for Forestry and Ecology, for his assistance in setting up survey arrangements, and also to Mr. Orazaly Erimbetov, Head of Toskool-Ata leskhoz, for making all the local arrangements for training and local survey activities. In particular, the RMA team would like to acknowledge all the market participants who gave their time to answer questions. These include walnut leaseholders, forestry representatives, government agencies, NGOs, projects, exporters and processors, collectors, traders, and other private sector participants. From a review of documents on walnut production and marketing, it appears that this may be one of the first reports on the walnut value chain in southern Kyrgyz Republic. As a result, much of the data could not be validated with other sources. Finally, the researchers are grateful to Mr. Andrew Mitchell, Senior Forestry Specialist for Europe and the Central Asia region, World Bank in Washington, for his support and positive encouragement with study activities. Acknowledgment is also due to the Director of the Rural Development Fund (RDF), Mrs. Jyldyz Tabaldieva for her assistance in facilitating the study. The study team members included the following personnel: Umut Zholdoshova RDF Study Team Leader Suriya Israilova RDF Research Assistant, Janara Isalieva RDF Research Assistant, Bishkek study Salavat Sulaimanov RDF Research Assistant, Bishkek study Gulmira Ismailova National consultant Altynbek Nazirov Deputy Director of Toskool-Ata leskhoz Tynchtykbek Mamatkulov Kara-Bulak village, Toskool-Ata Nurlan Churekov Official from the Local Authority in Kara-Bulak village, Toskool-Ata Gulsana Kuvakova Interpreter Willie Bourne International Value Chain and Marketing Specialist ([email protected]) 6 TABLE OF CONTENTS EXECUTIVE SUMMARY _____________________________________________ 13 I. STUDY INTRODUCTION AND METHODOLOGY __________________ 22 1.0 Introduction _____________________________________________________ 22 1.1 Background_____________________________________________________ 22 1.2 Methodology ____________________________________________________ 22 1.3 Data analysis within a market and value chain framework _________________ 23 1.4 Methodology limitations ___________________________________________ 25 1.5 Walnut RMA schedule ____________________________________________ 25 II. RMA FINDINGS ____________________________________________ 26 2.0 Walnut value chain background _____________________________________ 26 2.1 Walnut forests of Jalal-Abad ________________________________________ 26 2.2 Economic value of walnut forests ____________________________________ 27 2.3 Walnut yield and production information_______________________________ 28 2.4 Walnut and kernel grading criteria for variety selection ___________________ 28 2.5 Forest institutional and management systems __________________________ 29 III. UPSTREAM: PRODUCER LEVEL _____________________________ 33 3.1 Toskool-Ata leskhoz profile_________________________________________ 33 3.2 Walnut production ________________________________________________ 34 3.2.1 Walnut forest production _________________________________________ 34 3.3 Market chain description from farm gate to Massy market _________________ 37 3.3.1 Market chain description from leskhoz ______________________________ 37 3.3.2 Long-term supply and price data at the leskhoz _______________________ 38 3.3.3 Seasonal walnut supply and price data at the leskhoz in 2010 ___________ 39 3.3.4 Strength, Weaknesses, Opportunity, and Threats (SWOT) analysis ________ 40 3.3.5 Concluding remarks _____________________________________________ 40 7 IV DOWNSTREAM MARKET CHAIN: WHOLESALE MARKETS ________ 42 4.1 General wholesale market characteristics _____________________________ 42 4.2 Main market actors and functions ____________________________________ 43 4.3 Walnut and kernel wholesale markets ________________________________ 44 4.3.1 Massy market in Nooken district ___________________________________ 44 4.3.2 Bazar-Korgon walnut and kernel wholesale markets ____________________ 45 4.3.3 Jalal-Abad walnut and kernel wholesale markets ______________________ 48 4.3.4 Summary Jalal-Abad walnut and kernel market chain map _______________ 49 4.4 Income and cost analysis for different actors ___________________________ 51 4.4.1 Breakeven point for storage options ________________________________ 51 4.4.2 Cost and returns for walnut cracking or shelling services ________________ 51 4.4.3 Cost and returns for small collector trader ____________________________ 52 4.4.4 Cost and returns for small kernel trader in Bazar-Korgon ________________ 53 4.5 Walnut supply, demand, and price trends _____________________________ 53 4.5.1 Long-term supply, demand, and price trend for walnuts _________________ 54 4.5.2 Walnut grades _________________________________________________ 54 4.5.3 Seasonal trends for walnuts ______________________________________ 55 4.5.4 Concluding remarks for walnut trends _______________________________ 55 4.6 Kernel price, supply, and demand trends ______________________________ 56 4.6.1 Long-term supply, demand, and price trend for kernels _________________ 56 4.6.2 Kernel grades and seasonal prices for 2011 __________________________ 56 4.6.3 Seasonal volume trend for kernels in 2010/11 ________________________ 57 4.6.4 Concluding remarks for kernel trends _______________________________ 57 4.7 Walnut and kernel processing and export _____________________________ 58 4.7.1 Background of export companies __________________________________ 58 4.7.2 Processing, grading, drying, and packaging for export __________________ 59 4.7.3 Cost and returns for exporters _____________________________________ 59 4.7.4 Documentation, shipping, and importation ___________________________ 60 4.7.5 Other walnut processing and manufactured goods _____________________ 61 4.7.6 Official Kyrgyz Republic export figures for walnuts and kernels ___________ 61 4.7.7 Summary of export issues ________________________________________ 65 8 4.8 Walnut and kernel retail markets ____________________________________ 66 4.8.1 Background to retail markets in Bishkek and Jalal-Abad_________________ 66 4.8.2 Walnut and kernel retail markets in Jalal-Abad retail bazaar ______________ 66 4.8.3 Osh retail bazaar in Bishkek for walnuts and kernels ___________________ 67 4.8.4 Retail supermarkets and grocery stores in Bishkek for walnut products _____ 69 IV VALUE CHAIN SUPPORT SERVICES __________________________ 70 5.1 Government services and support for enterprise and business development __ 70 5.1.1 Ethnic unrest in southern the Kyrgyz Republic ________________________ 70 5.1.2 Relevant Kyrgyz laws guiding the business sector _____________________ 70 5.1.3 Relevant policies _______________________________________________ 70 5.1.4 Business promotion _____________________________________________ 71 5.1.5 Customs and export services _____________________________________ 71 5.1.6 Market infrastructure ____________________________________________ 72 5.1.7 Governance issues _____________________________________________ 72 5.2 Sector-specific providers __________________________________________ 73 5.2.1 Support industries ______________________________________________ 73 5.2.2 Equipment for post-harvest management and processing _______________ 73 5.2.3 Technical Services______________________________________________ 74 5.3 Cross-cutting providers ____________________________________________ 74 5.4 Financial institutions ______________________________________________ 75 5.4.1 Summary of providers in Jalal-Abad ________________________________ 75 5.4.2 State-owned AYIL bank __________________________________________ 75 5.4.3 FINCA micro-credit company ______________________________________ 76 5.4.4 OJSC Commercial Bank Kyrgyzstan ________________________________ 77 5.4.5 Conclusions for the provision of microfinance in Jalal-Abad province _______ 78 VI THE GLOBAL ENABLING ENVIRONMENT
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