The foreseeable future of Mongolia’s agriculture

Published on Tuesday, 06 December 2016

Published by Enerelt Enkhbold on Tuesday, 06 December 2016

Livestock farming in Mongolia.
Livestock farming in Mongolia.

If there is one thing one should know about Mongolia, it is the important role that agriculture plays in the lives of the people. Agricultural is deeply embedded in Mongolia’s traditions and everyday life, and encompasses almost every aspect of people’s lives.

Agriculture has long remained integral to the economy of Mongolia. Modern scientific studies claim that the meteoric rise of Genghis Khan and his conquests were fueled by a huge increase in the Mongols’ herds of horses and livestock at the time. The tree ring data suggests that a change in climate with unusually heavy rainfall and mild temperatures in the early 13th century boosted the Mongolian plateau’s grassland productivity, resulting in an accumulation of horses and food on the steppe.

Today, agriculture is still vital to the country’s economy. It employs nearly one-third of the workforce and generates more than 10% of GDP. A considerable portion of Mongolians will likely continue to be involved in agribusiness for the foreseeable future, even if mining and services sectors are growing rapidly.

Mongolia has hundreds of years of experience in animal husbandry, which directly or indirectly employs about a quarter of the country’s workforce. Animal breeding is part of the lives of Mongolians. Mongolian livestock consists of five primary kinds of animals or tavan khoshuu: goats, sheep, cattle, horses, and camels. Animal husbandry accounts for over 80% of the country’s agricultural production. With its 56 million heads of livestock (as of 2015) and unique location between two giant economies—the People’s Republic of China (PRC) and the Russian Federation—Mongolia has enormous potential to boost its meat production, dairy food processing, and other value-added activities, in particular cashmere wool and animal skin products. Accessing export markets is critical for Mongolia’s economic growth and to lift rural populations out of poverty.

The government’s estimate for potential annual meat exports reached $1 billion in early 2016. This is possibly not a distant dream for Mongolia, since a Russian meat corporation has proposed the purchase of 7,000 tons of beef and horses and the PRC wants to import 150,000 tons of meat annually. Actually, Mongolia now sells less than a tenth of its potential for annual meat exports, and much less than the 40,000 tons of meat per year the country exported during the socialist period.

The constraints that have kept Mongolia from realizing its meat export potential include low technological and production capacity, logistics limitations, few meat plants, quotas, and phytosanitary barriers. Existing processing plants require substantive upgrading to improve production capacity and meet quality and sanitary requirements. Due to poorly developed logistics and trade procedures, the costs of trading across borders are considerable. For adequate and sustainable supply of meat products into the market, Mongolian farmers need to establish a good business model that includes animal nutrition supplements during the long winter months.

The animal husbandry business in Mongolia is directly affected by the harsh weather and the fact that herders still follow the conventional pasture herding method, which makes them especially vulnerable to extreme climate events like the dzud, the particularly severe winter experienced last year. The dzud caused many animal deaths and sudden shortages in animal fodder, led to a dramatic reduction in animal numbers during the winter. Investing in the animal nutrition sector through fodder crop farming is necessary for the continuous development of the country’s agriculture sector.

Despite the numerous challenges faced by Mongolia, international investors are still interested in agriculture. They are ready to bring new agricultural technology to the sector, and build modern plants in the country. They see the untapped huge potential for Mongolia’s agriculture because it is organic, less polluted, and the least industrialized in the region. However, one of the key constraints discouraging foreign direct investments in agriculture is related to sanitation.

A 2013 ADB assessment found that the existing sanitary and phytosanitary laboratory network has insufficient capacity to establish adequate protection against risks to animal and plant health in Mongolia. Despite the fact that Mongolia has significantly improved its sanitary and phytosanitary system over the past decade, the potential for exporting agricultural products is far from being fully realized. Sanitation requirements imposed on cross-border trade limit Mongolia’s agribusinesses growth, and diminish its competitiveness for agricultural export because the country has no internationally accredited laboratories.

The road ahead for Mongolia is exciting and full of opportunities. Through our work, I look forward to seeing the further development of the agriculture sector in the years ahead.