There is a buyer for every product - Grain Union of Kazakhstan

Source

APK-Inform

2840

  

Kazakhstan traditionally keeps rather strong positions on the global market of grain crops producers and exporters. In 2015/16 MY, low quality figures of wheat became the major challenge for Kazakh market operators. The Chairman at the Grain Union of Kazakhstan, Nurlan Ospanov and the Founder of OJSC Northern Grain, member of the Grain Union of Kazakhstan, Evgeny Karabanov reported to APK-Inform journalists about the last season results on the grain market and development prospects for a new season.

 

- The last season for the Kazakh grain market was quite challenging: devaluation of the Kazakh tenge, small share of high-protein wheat in the general harvest, and high prices. How would You characterize the results of 2015/16 MY?

Nurlan Ospanov (N.O.): I can describe the results of 2015/16 MY as satisfactory. Of course, grain qualitative indices remained the key issue (low gluten and protein content, and low nature). But as you know, there is a buyer for every product, and despite the poor quality of grains of the harvest-2015, in the season-2015/16 the general exports of grains and flour in grain equivalent totaled more than 8.6 mln tonnes. Except for the traditional directions of Kazakh grain exports (Iran, Azerbaijan, and Central Asian countries), last season Kazakhstan provided active grain supplies to Russia, China, and flour - to Afghanistan. The exports of flour to Afghanistan significantly helped to the market. Afghan consumers had problems with the supply of flour from Pakistan, so they found a good replacement of even higher quality at the reasonable price. The carry-over stocks of grains were the lowest for 8 recent years. According to analysts and market participants, as of August 1, 2016 (the beginning of the harvesting campaign in southern oblasts of the country), the real stocks of grains did not exceed 900 thsd tonnes.

 

- The forecasts of grain production in Kazakhstan in the season-2016/17 is quite optimistic, however the issue of grain quality characteristics remains open-ended. How do You estimate the prospects for the new season, which problems will come to the fore?

Evgeny Karabanov (E.K.): The harvesting campaign-2016 in Kazakhstan came to the finish line. Due to the adverse weather conditions (wet spring, large number of precipitations in July, and very hot weather in August) in all grain-producing oblasts of Kazakhstan, there was observed rather difficult phytopathogenic situation with development of fungal diseases of grain crops - brown rust and Septoria blight. Despite the taken measures, and the allocated fungicides from the Ministry of Agriculture, diseases caused significant damages to the crop areas, both in quality and yield indices. There were no opportunities for timely treatment of crops, due to large number of precipitations, and later treatment procedures did not bring the required effect. According to experts, the loss of yield in three major grain-producing oblasts of the country (Akmola, Kostanay and North Kazakhstan oblasts) totaled more than 25%, due to development of diseases. In addition, development of crops diseases was also observed in Pavlodar, Karaganda, Aktobe and East Kazakhstan oblasts. The reporting problems caused reduction of the general grain harvest, sharp decline of the quality of wheat in gluten and protein content, as well as low natural weight. 4-grade wheat formed the major share of the grain, more than 70%, especially in the content of gluten, protein and nature. Even in the regions of Kazakhstan, which in previous years traditionally produced high-quality grains with good gluten and protein content, wheat demonstrated average gluten (21-25%) and protein indices (11.5-13.5%). Generally, we estimate the quality of wheat harvest at the lower level compared with last year. Of course, it will affect the export market of wheat. The traditional importers of Kazakh grain, such as Iran, Azerbaijan, and China in recent years, who used to purchase high-quality milling wheat, will buy much smaller volumes of the grain. However, the exports of grains and flour to Afghanistan and Central Asian countries will slightly increase compared with the last year level. Such trend will partially neutralize the drop of exports towards Iran, Azerbaijan and China. Generally, in the season-2016/17 the exports of wheat and flour in grain equivalent will vary within the range of 7-7.5 mln tonnes. Due to good harvest volumes of barley and expected purchasing of the grain by Iran, and possibly Russia and Saudi Arabia after the New Year, the export prospects of barley in the season-2016/17 total 0.95-1 mln tonnes. Also, we should mention a good harvest of flaxseed, which planted areas in 2016 significantly increased due to good prices and strong demand in previous years. Generally, the exports of Kazakh flaxseed will reach 8.5-9 mln tonnes.

 

- What is Your forecast for the development trends in prices for new crop wheat?

E.K.: During several recent years, the prices of Kazakh wheat were heavily dependent on the Russian grain prices in the boundary regions. Due to the simplified procedure of goods movement within the territory of the Customs Union, any disbalance of prices is immediately closed by the supply of the required goods. Therefore, the prices of Russian grains will mainly determine the price situation on the Kazakh grain market. As for the September dynamics, we observed significant difference in prices for 3-grade and 4-grade wheat, which totaled 25-30 USD/t, depending on grain quality. Taking into account favorable weather conditions during the harvesting campaign, as well as some difficulties with introduction of electronic grain receipts, agricultural producers did not hurry to supply grains to the elevators and provide mass selling operations. The reporting factor, combined with the low carry-over stocks, contributed to some heating of wheat prices on the market in September. The average growth of prices on the domestic market totaled 6-8 thsd KZT/t for 3-…5-grade wheat. In November-December period, the number of grain offers on the market will increase due to the need of agricultural producers to settle their credit debts, leasing and other payments. Therefore, we can expect for stabilization of grain prices on the market until the end of 2016, especially there was already provided the price parity with the Russian grain in several border oblasts. The demand for Kazakh barley from Iran will mainly form the grain prices. In the following months, especially in the beginning of 2017, Russian grain prices will make its impact at the Kazakh grain prices.

 

- The export geography of Kazakh grains is rather stable. Taking into account all features of the geographical location of Kazakhstan and its logistics, what are the prospects for expansion of sales markets?

N.O.: Wheat forms the major share in the general exports of Kazakh grains. High cost of grain delivery to the markets of potential consumers is the main limiting factor, which slows down expansion of the export geography of Kazakh grains. At the same time, due to the low quality of new crop wheat, the Kazakh grain does not have any significant competitive position in quality in comparison with Russian and Ukrainian wheat. And the logistics cost for delivery to the Russian deep-sea ports of the Black Sea total 70-75 USD/t. The cost of delivery to the Baltic ports will be even higher: 100-105 USD/t. Therefore, we should not expect for coming of Kazakh wheat on the traditional markets of Russia and Ukraine in the current season. There will be small-scale export volumes (150-200 thsd tonnes) of durum wheat to the EU countries and Turkey. Also, it is expected to increase the exports of sunflower seed to China to 120-130 thsd tonnes, rapeseed and flaxseed to the EU countries - to 350-400 thsd tonnes. Any hopes for increasing of Kazakh grain exports to China in the current season will not come true. As noted above, Kazakhstan will increase its export volumes at the expense of the growth of flour supply to Afghanistan. We do not expect for any other new directions of Kazakh grain exports in the season-2016/17.

 

- How do You estimate the delivery of Kazakh grains to Russia? Did the exports increase during several recent seasons?

E.K.: The exports of Kazakh grains to Russia do not demonstrate stable trends. Due to streamlining of goods movement within territory of the Customs Union, the border exports, or so-called "grey exports", form rather large share in foreign trading operations, but such cargo movements are not registered. According to various estimations, in the season-2015/16 the "grey exports" from Kazakhstan to Russia totaled nearly 300 thsd tonnes. In the same period, Russia supplied nearly 100 thsd tonnes of seed grain to Kazakhstan. The general exports of Kazakh grains to Russia in the season-2016/17, including the "grey exports", totaled 550-600 thsd tonnes. 3-grade wheat, hard wheat (durum), rapeseed and flaxseed, barley formed the major share in the grain supplies. The export volumes from Russia to Kazakhstan, including the illegal "grey exports", totaled nearly 100-150 thsd tonnes, including seeds of grains, oilseeds and pulses.

 

- During several recent years, Kazakhstan has been actively developing its cooperation with China. Do You consider China as one of the most perspective export routes for Kazakh market, and why?

N.O.: During three recent years, there was observed a steady growth of grain export trading from Kazakhstan to China. Of course, there were some problems related to the supply of grains in packing (50 kg bags), and reloading to Chinese transport at the border crossing Dostyk/Alashankou. However, after launching of a new railway line from Kazakhstan towards Altynkol/Khorgos, signing of the protocol between the Chinese authorities and Kazakhstan on the supply of bulk grains in grain carriers, and construction of the terminals in China for receipt and shipment of grains, we can expect for significant enlargement of the export of grains from Kazakhstan to the People`s Republic of China. In addition, we signed a protocol for the supply of soybeans, and prepare to sign the reporting protocols on barley, rapeseed, flaxseed, etc. Also, it should be noted that Kazakh companies started supplying flour to China. The above mentioned factors allow for the conclusion about the prospects of the Chinese direction of Kazakh grain exports. In the nearest years, it is expected to significantly increase the exports of Kazakh grains to China - to 1-1.5 mln tonnes annually since 2017/18 MY, and nearly 2-2.5 mln tonnes by 2020.

 

- What are the prospects for further development of trading with grains and other crops between Kazakhstan and Iran?

N.O.: In the current year, it will be 20 years since Kazakhstan has started exporting grains to Iran. Iran already became one of the main buyers of Kazakh wheat and barley, including vegetable oils, wheat flour and bran in recent years. Some limitation of crops supplies was caused by inability of Ak Bidai terminal in the Aktau port and the railway line Sarakhs to provide transportation of Kazakh grains in accordance with the requirements of Iran. However, due to commissioning of the railway line Uzen-Beineu-Gorgan and a grain terminal in the Northern port of Aktau, in the current year the capacities for grain delivery to Iran almost doubled. The potential of new and old trade routes allows to Kazakhstan to supply nearly 2.5 mln tonnes of grains to Iran in the current year. Iran needs imported forage crops: wheat and barley. As for milling wheat, Iran needs high-quality grain only. Thus, we estimate that Kazakhstan will annually supply Iran with wheat, barley, rapeseed, flaxseed at the level of not less than 1.5 mln tonnes.

 

Interviewed by Polina Kalaida, APK-Inform

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