Pastoral Farming in the Ili Delta, Kazakhstan, under Decreasing Water Inflow: An Economic Assessment

Abstract

River deltas provide the most productive pastures in Central Asia. Simultaneously they are highly vulnerable to water inflow changes. The aim of this study was to conduct an economic assessment of the short- and medium-term effect of reduced water inflow on farmers’ performance within the Ili Delta. Primary data were collected through 35 interviews with farmers and additional experts in 2015. Production parameters for three types of individual farms were estimated and entered into a full cost accounting. Contribution margins were calculated for three scenarios: (I) sufficient water inflow (normal situation), (II) decreasing water inflow, and (III) significantly reduced water inflow (worst case). Farmers purchase hay to adapt to pasture production loss due to decreasing water inflow. This more than doubled the variable costs of worst case in comparison to normal situation for small-, medium-, and large-scale type of individual farm. Monte Carlo simulation indicates a risk of 74% (small-scale farm) and 3% (medium-scale farm) that already variable costs will exceed revenues. Despite their high fixed costs, only large-scale individual farms generate positive net farm income from operations in the worst case due to government payments from participation in elite bull program that account for one-third of total revenue.