Kazakhstan - wheat market in the IInd quarter of 2017

Source

APK-Inform

Basing on the official statistics figures, APK-Inform analysts updated their supply and demand balances of wheat in Kazakhstan in 2016/17 MY. Despite the fact that in the last quarter of the season-2016/17 the exports of wheat totaled 1 mln tonnes, which became the maximum index of April-June period for five recent years, the general export volumes in 2016/17 MY showed somewhat lower figures compared with the previous expectations.

Also, the current review provides the updated forecast of Kazakh wheat supply and demand balances in 2017/18 MY.

 

Key points

 

Supply and demand balances of wheat in Kazakhstan, `000 tonnes

 

2015/16

2016/17

2017/18

Changes, %

2016/17-
2015/16

2017/18-
2016/17

Beginning stocks

4530

4283

5288

-5,5%

+23,5%

Planted areas, `000 ha

11771

12431

12000

+5,6%

-3,5%

Harvested areas, `000 ha

11571

12373

11880

+6,9%

-4,0%

Yield, c/ha

11,9

12,1

11,0

+1,9%

-9,2%

Production

13748

14985

13068

+9,0%

-12,8%

Imports

100

50

50

-50,0%

 =

Total supply

18378

19318

18406

+5,1%

-4,7%

Consumption:

9 944

10 100

10 033

+1,6%

-0,7%

food

4854

5030

4933

+3,6%

-1,9%

feed

1950

2000

2100

+2,6%

+5,0%

seeds

2490

2400

2350

-3,6%

-2,1%

losses

370

390

370

+5,4%

-5,1%

others

280

280

280

 =

 =

Exports

4152

3930

4000

-5,3%

+1,8%

General distribution

14095

14030

14033

-0,5%

+0,03%

Ending stocks

4283

5288

4373

+23,5%

-17,3%

Stocks-to-distribution ratio

30%

38%

31%

 

 

Hereinafter, there are presented estimations and forecasts of APK-Inform Agency (July 2017)

 

The estimation of wheat production in Kazakhstan in 2016/17 MY remained unchanged, and totals 15 mln tonnes, an increase of 9% compared with the harvest-2015 (13.7 mln tonnes). As for the forecast for the season-2017/18, then due to the current absence of Kazakh official statistics on crop planted areas, APK-Inform Agency did not change its previous estimations in July 2017, and still announced its forecast of wheat harvest volumes at 13 mln tonnes, down 12.8% compared with the previous season.

APK-Inform estimation of the total supply of Kazakh wheat in 2016/17 MY totals 19.3 mln tonnes (up 5.1% compared with the season-2015/16). But the total supply of wheat in 2017/18 MY will reach 18.4 mln tonnes, down 4.7% compared with the forecast for last season.

Also, APK-Inform analysts increased their estimations of domestic consumption of the grain in 2016/17 MY by 2% compared with the figures in June forecast, to 10.1 mln tonnes (up 1.6% compared with 2015/16 MY). As for separate distribution articles, APK-Inform estimations of food consumption increased to 5 mln tonnes, due to rather high processing rates of the grain, and feed consumption remained unchanged - at the level of 2 mln tonnes.

As for the season-2017/18, the domestic consumption of wheat in Kazakhstan will slightly reduce to 10 mln tonnes, down 0.7% compared with the previous MY. Food consumption of Kazakh wheat will total 4.9 mln tonnes (down 1.9% compared with 2016/17 MY).

In July 2017, APK-Inform estimated the export potential of wheat in 2016/17 MY at 3.9 mln tonnes, down 5.3% compared with the figures in the season-2015/16 (4.15 mln tonnes).

  

The forecast of wheat exports in 2017/18 MY reduced to 4 mln tonnes, down 1.8% compared with the season-2016/17.

Taking into account the recent adjustments, the carry-over stocks in 2016/17 MY remained almost unchanged, and totaled 5.3 mln tonnes, up 23.5% compared with the previous season (4.3 mln tonnes). In 2017/18 MY, the carry-over stocks of wheat will reach 4.4 mln tonnes, down 17.3% compared with the previous season volumes.

 

According to the official statistics figures, in the second quarter of 2017 the production of wheat flour totaled 910 thsd tonnes, up 6% compared with the period of April-June of 2016 (858 thsd tonnes).

In the whole 2016/17 MY, the production of wheat flour in Kazakhstan totaled 3.86 mln tonnes, up 7.1% compared with the previous season volumes.

 

In April-June of 2017, the production of wheat groats decreased by 52% compared with the same period of 2016, and totaled 4.5 thsd tonnes only. According to the official statistics, in June 2017 the production volumes totaled 0.5 thsd tonnes, which became the minimum figure for the reporting month during five recent seasons.

Generally, in 2016/17 MY the production volumes of wheat groats decreased by 18%, and totaled 22.1 thsd tonnes.

 

According to the Customs Control Committee at the Ministry of Finance of the Republic of Kazakhstan, in April-June of 2016/17 MY the exports of wheat totaled 1 mln tonnes, which became the maximum figure for the reporting period during five recent seasons. Generally, in 2016/17 MY Kazakhstan supplied 3.7 mln tonnes of wheat on foreign markets, up 2.9% compared with the previous season.

In 2016/17 MY, Uzbekistan (1.7 mln tonnes) and Tajikistan (1 mln tonnes) traditionally became the main countries-importers of wheat from Kazakhstan. Afghanistan took the 3rd position with its share of supplies at 8% (293 thsd tonnes), but China almost reached the same position with its high purchases. And China imported 7% of the grain volumes (266 thsd tonnes). In July, NC Food Contract Corporation JSC and Chinese companies signed several agreements on the supply of Kazakh agricultural products to China, which will allow delivering large-scale grain volumes to the country.

Also, we should note Turkey among importers of Kazakh wheat. In June, the country imported 19.5 thsd tonnes of the grain, which became the maximum monthly figures during 3 recent seasons. Therefore, Turkey took the 6th position in the rating of countries-importers of wheat from Kazakhstan, and Azerbaijan moved down to the 7th position.

 

Price tendencies

In April 2017, the market segment of milling wheat faced competing price trends. In most cases, offer/bid prices for 3-grade wheat remained unchanged. In turn, purchasing prices for 4-grade wheat slightly increased, due to the requirements of grain processors to urgently replenish their raw commodity stocks. According to market participants, agricultural producers declined the number of offers of 4-grade wheat. Also, it should be noted that adverse weather conditions somewhat supported the prices, because slowed down the work of market participants, and many access roads to granaries were flooded, which troubled the grain delivery to elevators. By the end of the month, bid prices for 4-grade wheat varied within the range of 41-44`000 KZT/t EXW.

On the export market, in the border crossing Saryagash there were no significant price changes. Only by the end of the month, offer prices for 4-grade wheat slightly increased, due to the domestic market impact, as well as the increased demand from major importers. Thus, by the end of the month offer prices for 4-grade wheat varied within 158-163 USD/t DAP.

In June 2017, there was observed rather mixed price dynamics in the market segment of milling wheat. So, in the beginning of the reporting month bid prices for 4-grade wheat continued steadily growing. At the same time, the demand for 3-grade wheat remained rather inactive. And the number of grain offers exceeded the demand level. We should note that grain producers almost did nor provide large-scale batches of high-quality wheat on the market. However, since the third ten-day period of June the market segment of milling wheat showed a bearish trend in terms of the usual seasonal factor. Thus, bid prices for 4-grade wheat varied within the range of 43-46`000 KZT/t EXW.

On the export market, in the border crossing Saryagash there were observed competing price trends. Thus, in the beginning of June 2017 offer prices for 4-grade wheat slightly increased due to rather high demand of buyers. At the same time, by the end of the month offer prices for the grain reduced to 169-174 USD/t DAP, due to reduction of the import demand rates. In the port Aktau, the prices did not face any significant changes and mainly remained at declarative level.

 

 

Impact factors on the Kazakh wheat market in the short-term prospect

Active harvesting rates of winter grains will provide further increasing of the supply of wheat on the market, and somewhat influence the price situation.

In August, the weather factor will have a dominant impact on the qualitative characteristics of the harvest of spring crops, especially in the period of milky kernel and gold ripeness.

Also, the seasonal factor will have a strong impact on the domestic prices. So, many elevators and flour milling companies stopped their activities for realization of seasonal maintenance and repair works. Most consumers announced declarative purchasing prices only, while expecting for coming of new crop grains on the market.

High carry-over stocks of wheat will put pressure on development of the price situation.

Demand of major countries-importers will impact on formation of prices for the grain. The season-2016/17 demonstrated that rather active demand for 4-grade wheat and slightly lower demand for 3-grade wheat can reduce the price premium between the reporting wheat grades.

 

Natalia Gavruk, analyst at APK-Inform Agency

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