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101087 AGRICULTURE IN TRANSITION Public Disclosure Authorized AGRICULTURAL PRODUCTIVITY AND MARKETING Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized DEBRA RASMUSSEN AND CHARLES ANNOR-FREMPONG MONGOLIA FEBRUARY 18, 2015 Agricultural Productivity and Marketing Report TABLE OF CONTENTS Table of Contents ........................................................................................................................................... i EXECUTIVE SUMMARY ................................................................................................................................ ix 1 Background to the Study....................................................................................................................... 1 1.1 Background and Objectives .......................................................................................................... 1 1.2 Methodology and Issues ............................................................................................................... 1 1.3 Structure of the Report ................................................................................................................. 2 2 The Agricultural Setting ........................................................................................................................ 3 2.1 The Challenge of Shifting Paradigms ............................................................................................ 3 2.2 Agricultural Resources .................................................................................................................. 4 2.3 The Policy Environment ................................................................................................................ 5 3 Agricultural Output and Contribution to GDP .................................................................................... 12 3.1 Transition’s Impact on Agriculture and Rural Livelihoods .......................................................... 12 3.2 Agriculture’s Contribution to GDP and Employment .................................................................. 13 3.3 Agricultural Output ..................................................................................................................... 14 4 Demand and Trade.............................................................................................................................. 19 4.1 Trends in Domestic Demand and Consumption ......................................................................... 19 4.2 Agricultural Exports ..................................................................................................................... 22 4.3 Issues in Export Readiness .......................................................................................................... 27 4.4 Agricultural Imports .................................................................................................................... 28 4.5 Terms of Trade ............................................................................................................................ 30 5 Agricultural Production and Productivity ........................................................................................... 31 5.1 Livestock Sector .......................................................................................................................... 31 5.2 Crop Sector.................................................................................................................................. 50 5.3 Integrating and Intensifying Crop and Livestock Production ...................................................... 63 5.4 Supply and Quality of Inputs ....................................................................................................... 65 5.5 Finance ........................................................................................................................................ 67 5.6 Risk Management ....................................................................................................................... 69 5.7 Innovation – Training, Research and Extension .......................................................................... 71 5.8 Cooperatives ............................................................................................................................... 73 5.9 Pasture Management Groups and Mechanisms......................................................................... 74 6 Marketing Systems and Issues ............................................................................................................ 75 World Bank Mongolia Agriculture Productivity and Marketing Study P a g e | i Agricultural Productivity and Marketing Report 6.1 Livestock and Livestock Products ................................................................................................ 75 6.2 Crop Marketing Systems and Issues ........................................................................................... 80 6.3 Commodity Exchange, Auction and Related Subsidies ............................................................... 83 6.4 Grading and Price-Quality Relationships .................................................................................... 84 6.5 Food Safety and Quality .............................................................................................................. 85 7 Processing and Value Added ............................................................................................................... 86 7.1 Meat ............................................................................................................................................ 86 7.2 Hides and Skins ........................................................................................................................... 89 7.3 Fiber and Fiber Products ............................................................................................................. 90 7.4 Milk and Milk Products ............................................................................................................... 94 7.5 Milling and Crushing ................................................................................................................... 97 7.6 Livestock Feeds ........................................................................................................................... 98 7.7 Potato, Vegetable and Small Fruit Processing ............................................................................ 99 7.8 Common Issues ......................................................................................................................... 100 8 Competitiveness and Potentials ....................................................................................................... 102 8.1 Competitiveness, Key Issues and Actions ................................................................................. 102 8.2 Potential Productivity Levels and Output ................................................................................. 106 8.3 Profitability ................................................................................................................................ 116 8.4 Comparative Advantage and Potential Markets ....................................................................... 125 9 Conclusions and Recommendations ................................................................................................. 133 9.1 Recommendations .................................................................................................................... 133 9.2 Role of the Public and Private Sector:....................................................................................... 147 Appendix A: Stakeholder Meetings and Contacts Appendix B: References Appendix C: Selected Major Policy and Regulatory Issues Appendix D: Potential Cluster Development in Mongolia World Bank Mongolia Agriculture Productivity and Marketing Study P a g e | ii Agricultural Productivity and Marketing Report Figures Figure 3.1: Percentage Change in Livestock Product Production 2006-2012 Figure 3.2: Crop Production since Transition (‘000 mt) Figure 4.1: Trends in the Volume of Cashmere and Wool Exports Figure 5.1: Extensive Livestock Numbers, 1990 to 2012 Figure 5.2: Hay, fodder crops and total FU (1989/90 and 1999 to 2012) Figure 5.3: Total livestock to available fodder (1989/90 and 1999 to 2013) Figure 6.1: Seasonality in Beef Prices, Ulaanbaatar 2008-2013 by Month Figure 6.2: Function of the Agricultural Stock Exchange Figure 7.1: Meat Supply Chain Figure 7.2: Slaughter House Locations Figure 7.3: Milk Supply Chain Tables Table 3.1: Real GDP and Agriculture's Share at Constant 2005 Prices (Billon MNT) Table 3.2: Agriculture's Share of Employment (‘000 persons) Table 3.3: Gross Agricultural Output (Billion MNT) at Constant 2005 Prices Table 3.4: Output of Main Livestock Products (‘000 mt) and Percentage Change from 2006 Table 3.5: Output of Main Crop Products (‘000 mt) and Percentage Change from 2006 Table 4.1: Per Capita Food Consumption, Mongolia (kg/capita and % of 1989) Table 4.2: Forecast Demand for Potatoes, Vegetables and Fruits Table 4.3: Export Value, Select Commodities, Standard Classification of International Trade (Mill USD) Table 4.4: Share of Exports by Major Commodity Group, 2006-2012 (%) Table 4.5: Processed and Semi-Processed Exports, 2006 to 2012 Table 4.6: Meat Exports from Mongolia, 2008-2012 Table 4.7: External
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