Competition on flour producing markets of Russia and Kazakhstan to increase

Source

APK-Inform

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In the current year, the droughts in Kazakhstan and Russia effected not only grain market, but also flour market. And it was expected. It is about the fact what position is the flour industry in to date, and how flour export volumes from Kazakhstan changed, explained Eugene Gan, the Head of the Union of Grain producers and bakers of Kazakhstan.

- Eugene Albertovich, how did flour export dynamics from Kazakhstan change to date? Are there any differences compared to the last year?

During the first two quarters of the year, flour export trading used to face the stable development, and almost repeated the scenario of the last two years. By the beginning of the III quarter it allowed us to think that in the current year we will reach new export rates at the level of 2.4-2.5 mln tonnes of flour. And in such way we would increase the export volumes compared to the last year level, when the country exported 2.2 mln tonnes of flour.

But unfortunately, the droughts intervened in our plans. The prices faced the sudden increase. Russia imposed prohibitive measures for grain exports from the country, which forwarded already growing grains prices. Finally, our buyers on the traditional sales markets were not ready psychologically for the scenario.

- What is going on to date on the market?

To date, during the long years we watch not monthly increase of flour export volumes during the autumn period, as it used to be traditionally, but their fall. The most essential fall was in October 2010. Finally, in the month flour export volumes totaled only about 2/3 from the export volumes in October of the last year. Usually, the export volumes were more by 10-15%.

To date, analyzing grain price scenario on the domestic market and grain balances, it is possible to say – it is unlikely that flour export volumes will face an increase during the period of November-December.

According to my opinion, in the current year flour export volumes from Kazakhstan will total the level of 2.3-2.35 tonnes, but far not 2.5 mln tonnes, as it was expected previously. Nevertheless, despite the expected export volumes decrease, in Kazakhstan the general annual export volumes will total the higher level compared to the last year level. It will allow us to save the leading positions by flour export volumes in the world. But at the same time, it is anxiety for me the fact that the rates of flour export volumes increase will be negative at the end of the year.

- How will the expected beginning of flour exports from Russia in January 2011 effect flour export volumes from Kazakhstan?

Taking into account that in January Russia opens flour exports, the competitive environment will face an increase. Altai flour will come on the market of the Middle Asia, where flour exports from Kazakhstan occupies the lion share of the market. It will certainly effect Kazakhstan flour export volumes.

- Would you tell me if flour export ban imposed by Russia, which is valid from August till to date, allows Kazakh flour to take the opening market niches, which previously were taken by Russian flour producers?

I can say we did not receive any essential flour export volumes during the period. And even if there was the certain increase, it did not essentially affect the general flour export volumes increase from Kazakhstan. Though, we expected that we will be able to replace about 150-200 thsd tonnes of flour on the market. It is about the fact flour prices increased, and Russian market was not ready to purchase the commodity. And our flour importers – Tajikistan, Afghanistan, Uzbekistan, now try maximally to delay time and use grain volumes harvested in the current year, by processing grains into flour. Taking into account that beginning from January flour export trading from Russia will be renewed, their hopes may become true, and we may lose some parts of the market.

- What flour volumes get to the Middle Asia?

The Central Asian market takes over 95% from all flour export level. It is expected that in the current year about 1 mln tonnes of Kazakh flour will leave to the markets of Uzbekistan and Afghanistan.

We exported for just only about 800 tonnes to Russia, it is less than 1% from all the volume.

- This year due to the fact that Russia imposed grains export ban, it was expected that Kazakhstan grain will particularly replace Russian grain on the traditional sales markets. And flour tried to force market in cooperation with grains, didn't it?

It did. And there was negotiation flour process, but the price became the problem. As of August-September prices level was even, and when Russia closed export, flour prices on the domestic market faced the essential decrease. And flour price in Kazakhstan faced the essential increase. Finally our flour price was not suitable also.

- How competitive will flour from Altai Krai of the Russian Federation be next year due to export opening?

The droughts did not suffer Altai Krai as strong as it was in other regions of Russia. Export potential is saved. They have desire to work on flour export market, and according to my opinion they will be traditional competitors on our markets.

- Would you please provide at least small forecast regarding price situation development next year?

According to my opinion, the current trend for grains prices increase will continue. During the first half of 2011 price scenarios will depend on the fact grains balance in Russia and Kazakhstan. A lot of will be formed by the circumstance, for how long time harvested grains volumes in Russia will be sufficient in order to satisfy the domestic demands, and how rational will Kazakhstan use harvested grain. There probably will be rather interesting situation, when Kazakhstan and Russian markets will press each other. And at the same time depend on each other. Thereafter, it is unlikely to expect grains prices decrease in Kazakhstan also on the base of the fact. It is rather possible that they will face an increase. But there is the issue, how will it depend on the Russian market intenseness. It is rather possible that Russia will soon face grains import demand in the volumes, which Kazakhstan will not be able to satisfy.

Another year feature – Russia has a lot of transportation services between oblasts, and grains goes not to the ports, but out of the ports to the zones, face grains shortage. There are a lot of unpredictable factors, which can be decisive. So it is difficult to forecast prices level.

- How did grains market change during the last years?

It became extremely speculative – some one said some thing in one place, and in the other end of the  terrestrial globe the market faced prices essential increase. The information exchanged also increased essentially. Market became very sensible.

Though on the other hand, there is the recent example – Russia imposed grains export ban. We expected grains prices will increase by 50 USD. But nothing happened. Prices increase by 12-13 USD, and then decrease, due to the fact that world market capacities are sufficient in order to compensate Russian volumes. And it was speculative burst, with help of which some one earned.

Interviewed Nikolay Latyshev

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