Grain solitaire in Kazakhstan was almost formed

Undoubtedly, the main event of the end of November can be called VI Kazakhstanian Grain Forum «KazGrain-2012″ that took place in Astana on November 23-24. It is difficult to judge its significance, because the “parade was led by” all the same – the Ministry of Agriculture, “KazAgro”, “Food Corporation” …

The reports about the welfare of the grain industry in Kazakhstan alternated with calculations of foreign analysts, which were not as rosy. Kazakhstan fulfills a very modest role in the map of global grain supply, in general, on the C grade. And the main dash in the crop sector is steady grind. Volatility of harvest entails changes in market conditions.

The application of modern agricultural technology, including crop rotation and the introduction of new agricultural technologies, improvement of use of qualitative fertilizers with trace elements along with traditional fertilizers, the use of new innovative technologies (No-till or zero-till technology), investment in infrastructure through joint ventures with neighboring countries and partner countries, the development of new alternative export routes by increasing rail capacity, expansion of storage and warehousing, the widespread introduction of crop insurance, de-monopolization of the grain market.

Such recommendations were given to our grain growers by FAO economist, but rather to those who are in charge of them. Partly desk “farmers” admit insolvency of programs for the industry development. But the fact remains – growers can barely cope with abnormal, like the current drought, phenomena, and the Ministry of Agriculture can give them a little help.

Kazakhstan

At the abovementioned grain forum very actively discussed the results of satellite monitoring of farmlands, according to which the harvest in Kazakhstan should be 1.4 million tons less than the figures given by the regional departments of agriculture.

Meanwhile, the Ministry of Agriculture has published information about the grain which the country’s elevators received. It was found that of the total new grain harvest, which currently stands at 14 million 699.2 thousand tons, CRP in the country, since the start of harvesting campaign to November 22, received only 3 million 575 thousand 477 tons. This is 7.6 million less than for the same period last year.

Concluding, we can say that about 11 million tons of new grain harvest are concentrated in the mills and in the barns of farmers. Or we cannot say that? Vice-Minister of Agriculture Muslim Umiryaev, speaking in the debate at the Grain Forum, said that the final results of harvest will be announced in reports of Statistics Agency. And while we still do not know what grain balance of Kazakhstan in reality is? Regarding 2011-2012 carryover stocks the situation eventually cleared – 6 million tons of grain. Threshold – 14.7 in bunker weight, 11 million tons – in pure, foreign-expert weight.

It is worth returning to the forecasts of Rabobank. According to them, Kazakhstan will harvest 15.5 million tons of grain in 2013, which is 4.5 more than the harvest that experts predict for our country in 2012. In general, we are waiting for an average year. Therefore, in this scenario, there is any logical reason to influence the price of domestic grain market. However, the main export shipments are ahead. In Kazakhstan we used to work at the end of the year. Builders take up hammers and trowels only with the first snow (after tendering), breeders receive subsidies only in the autumn steeply, and go abroad to buy high-yielding cattle, choosing from the residues.

So, grain growers roll up their sleeves closer to the New Year, when the regional competitors devastate their export barns. Export data from the Customs Committee for October have already signaled albeit a modest (about 150 thousand tons of grain and flour together), but still increase in deliveries abroad.

It was shipped 335.3 thousand tons of wheat and meslin, totaling 83,394 thousand U.S. dollars. For comparison, in September the figure was 256.4 thousand tons. Recipients of Kazakhstanian grain are traditionally divided into two categories: the CIS and other countries. In this section exporters only returned the August figures of supplies to the CIS: 282.7 thousand tons compared to 164.5 thousand tons of grain in September. Rest of the world imported 52.5 thousand tons of grain, which is half less than the September figures.

Among the major importers of Kazakhstanian grain in June in the CIS we can mark out Azerbaijan with 80 thousand tons and Tajikistan – 95.7 thousand tons (in these directions export of Kazakhstanian grain put on weight by to 30 thousand tons). Kyrgyzstan also became active and purchased 38.5 thousand tons, and Uzbekistan – 68.6 thousand tons. Regarding foreign countries, there Kazakhstanian wheat reduced the number of recipients. In terms of weight the biggest was sent to Georgia – 25 thousand tons. Traditional importer Iran bought the same 18.3 thousand tons, as in September. Deliveries to other countries (China and Latvia) did not exceed 5 thousand tons.

In September 10.6 thousand tons of barley was shipped abroad (3,339$), the entire weight was divided between Kyrgyzstan, Tajikistan and Uzbekistan.

In October it was sent 219,633 tons of flour abroad, as mentioned above. The main recipients of our flour as earlier are CIS countries. They put about 90% of the total weight, or 203,297 tons. And in the context of importing countries stands out Uzbekistan, which imported 140,673 tons of flour from Kazakhstan in the above mentioned period. In Tajikistan was delivered 43,500 tons. The main and the sole importer of Kazakhstanian flour among foreign countries is Afghanistan. Here, in October was delivered 16,144 tons.

Meanwhile, the analyst of IA “Kazakh-Zerno” continues to depict his picture of export Kazakhstanian of grain. According to him, the export potential is far from exhausted. He insists that Kazakhstan has its own club of grain importers, who may be called regular consumers of Kazakhstanian grain, buying it regardless of crops in Kazakhstan and its export potential. As an example we can take Uzbekistan.

All the five years he bought grain from Kazakhstan in the range of 1-2 million tons, depending on the volume of its own harvest.

The exception was last year, when Uzbekistan bought more than this limit by almost 800 thousand tons, which can be explained, firstly, by good price offers from Kazakhstan, having in this period surplus of grain in storages, and secondly, by the growing needs of the milling industry of the country. We see that even reduced export offer of Kazakhstan in the 2010-11 year, failed to significantly reduce the volume of grain imports of Uzbekistan.

Everything that was said above can be attributed to Tajikistan too. Purchase level is lower here, but there is about the same stability in volumes of purchases with the same surge of imports in the last crop year in Kazakhstan. Kyrgyzstan also adjoins this block of permanent importers. It buys a stable volume of grain in the amount of 400 to 650 thousand tons per year, regardless of the prevailing market conditions and the volume of export supply in Kazakhstan.

In principle, exporters may be relatively calm for this segment. Stability of supplies to these countries for a long period allows making positive forecasts of exports in this direction. But there is plenty more to do in order to prevent competitors from entering this market in the best possible form.

The first is, of course, the issue of price and the quality of grain, the second – improved delivery service. We should not expect an increase in future supplies of raw material – wheat, in these countries, for example, as a result of population growth, hardly worth it. There are several reasons. First – high migration of population from these countries, and the second is associated with gradually changing diet of the local population towards the variety of foods consumed, of course, in the more affluent social groups. The shift away from single-supply occurs throughout Asia. In South-East Asia and southern China this mono-product has long been rice.

An important aspect of development of this market is also the issue of increase in export a share of grain in the form of flour, as opposed to the local milling industry. The fight for the value added by processing the grain can be a major factor in the development of this market. How to win this competition is a topic for another conversation, but at this point there are non-market risks in the form of possible restrictions on imports of flour in these countries while increasing purchases of grain under the pretext of protecting the domestic milling industry.

Considerable share in Kazakhstan’s grain export is taken by Azerbaijan. But here we see a slightly different picture. With record grain supplies to the country in the 2011-12 season, there is no stable annual exports. Azerbaijan has more opportunities to replace Kazakhstanian wheat with Russian product, their own or even any other in the case of high prices, as it did in the 2010-11 season. That is, the Azerbaijani market is more sensitive to price changes.

A similar situation occurred in the 2010-11 season in the Iranian market. There was grain in Kazakhstan, but deliveries to that country fell sharply – to about 103 thousand tons. However, Iran did not miss the opportunity to buy Kazakhstanian grain in favorable conditions. In the current year Iran get additional opportunities to diversify its imports by Pakistanian and Indian grain.

Extremely high volatility of import of Kazakhstanian grain is in Egypt too. Deliveries to this country are growing at a high supply of exports and thus with low prices and are falling when the supply is low and prices high. In the case of Egypt it should be noted that Egypt has a greater choice of import destinations. This country has the opportunity to choose the best options for delivery within the parameters of price and quality.

All of the above countries can be classified as medium adherence to Kazakhstanian grain. In case of favorable conditions, these countries happily buy large amounts of grain, even above their real needs. But when prices are high, supplies are falling sharply and alternative supplies are used or there appears a “pent-up demand” until the time of more favorable conditions.

For importing countries of this segment should be used another marketing strategy, which has already been partially implemented by Kazakhstan. Turkey and the EU give a more particularly look at Kazakhstan as a source of wheat, which also includes several other marketing programs for this market.

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Dynamics of wheat contracts on the ETC Exchange for November was negligible. Recent changes on the Exchange took place in the middle of November.
On Wednesday, November 7, rose two wheat positions. Contracts with performance in February rose by 500 tenge, and with performance in March for 990 tenge per ton of wheat of 3 class.

And on Thursday, November 8, occurred a new increase. This time contracts with performance in March rose by 10 tenge and with performance in April by 1000 tenge per ton of wheat of 3 class.

On November 15, contracts for November delivery closed with a price tag of 39,500 tenge per ton, and on November 13 opened contracts for May delivery. Contracts with performance in December fell in price by 1,500 tenge, with performance in February, March and April by 1000 tenge.  Contracts for May   delivery fixed at a price of 44,500 tenge per ton.

We remind, during the period from September, 28 to October, 29 declined the values ​​of contracts for all terms of performance, closed October positions with a price mark of 39,500 tenge per ton of wheat of 3 class and opened April positions.

Overall, during the month December contracts fell in price by 1,500 tenge, contracts with performance in February decreased by 500 tenge per ton of wheat of 3 class.

The values of wheat futures on the ETS exchange according to delivery month as of October 29, 2012 (tenge per ton)

The values of wheat futures on the ETS exchange according to delivery month as of November 29, 2012 (tenge per ton)

Against this background has been noticed a slight decline in the cash market sales of grain in Kazakhstan. During the second half of November, the price of wheat of 3 class and above reduced, and a negative trend in the amount of 500-300 tenge per ton formed in regions.

The prices for all grades of flour responded adequately to the increase in grain prices.

Currently, you can buy wheat of 3 class from new harvest in Astana for 44,300 tenge ($294.55; here and further is applied the exchange rate of National Bank of Kazakhstan on 11/29/2012) per ton. The wheat of 4 class is sold by 39,800 ($264.63). First-rate flour in the capital of our country costs 61,000 tenge ($405.58) per ton. Second-rate flour is sold by 57,900 tenge ($384.97) per ton, and flour of extra class – by 63,500 tenge ($422.21) per ton.

A ton of wheat of 3 class can be purchased for 43,000 tenge ($285.9), wheat with gluten content above 27 percent – for 45,800 tenge per ton ($ 304.52), wheat of 4 class – 37,700 tenge ($250.66), barley of a 2 class now costs 36,100 tenge ($240.03) per ton in Akmola region. Flour of extra class costs 62,700 tenge ($ 416.89), first- and second-rate flour is offered at 59,900 tenge ($398.27) and 55,800 tenge per ton ($ 371.01), respectively.

In the North Kazakhstan region wheat of 3 class is sold by 42,100 tenge ($279.92) per ton, wheat with gluten content above 27 percent – by 43,900 tenge ($291.89), wheat of 4 class – by 37,800 tenge ($251.33). The current price of barley is 34,900 tenge per ton ($232.05). In the North Kazakhstan the price of flour of extra class is 61,000 tenge per ton ($405.58), first-rate flour costs 58,500 tenge ($388.96) and second-rate flour costs 55,400 tenge per ton ($368.35).

In Kostanay region the price of wheat of 3 class rose to the level of 42,300 tenge per ton ($281.25). Wheat with gluten content above 27 percent is sold by 44,600 tenge ($296.54). Wheat of 4 class costs 38,500 tenge ($255.98). The price of barley of 2 class is 34,700 tenge ($230.72) per ton. The market price of flour of all classes went up: extra class – to 61,000 tenge per ton ($405.58), first-rate – to 58,500 tenge ($388.96) and second-rate flour to 55,400 tenge ($368.35) per ton.

In Pavlodar region the price of wheat of 3 class is 43,500 tenge per ton, or $ 289.23 per ton; wheat of 4 class is sold by 38,500 tenge ($255.98). The price of barley is 35,700 tenge ($237.37) per ton. Flour of extra class costs 63,200 tenge ($420.21) per ton, first-rate flour costs 60,700 tenge ($403.59) per ton, second-rate flour costs 57,600 tenge ($ 382.98) per ton.

In Karaganda region wheat of 3 class costs 44,200 tenge ($293.88) per ton, wheat with gluten content above 27 percent costs 45,600 tenge ($303.19) per ton; wheat of 4 class costs 40,800 tenge ($271.28). The price of barley is 36,900 tenge ($245.35) per ton. In Karaganda, traders sell flour of all rates at the following prices: first-rate – 61,100 tenge ($406.25) per ton, second-rate –58,000 tenge ($ 385.64) per ton and extra class – 63,600 tenge ($422.87) per ton.

Over the past period the cost of wheat in the East and West Kazakhstan went up. The price of wheat of 3 class in EKR is 42,500 tenge ($282.58) per ton, barley- 35,700 tenge ($237.37) per ton. In the West region of the country the price of wheat of 3 class fixed at 44,200 tenge ($293.88) per ton. The cost of first-rate flour in East Kazakhstan is 60,400 tenge ($401.6) per ton, second-rate flour costs 55,300 tenge ($367.69) per ton, and flour of extra class – 62,900 tenge ($418.22) per ton. In the West Kazakhstan prices for flour are as follows: extra class costs 63,500 tenge ($422.21), first-rate – 61,000 tenge ($405.58), second- rate -57,900 tenge ($384.97) respectively.

In Almaty region the price of wheat of 3 class for today is offered by 44,500 tenge ($295.88) per ton, wheat of 4 class – by 39,800 tenge ($264.63); barley of 2 class is sold by 36,500 tenge ($242.69) per ton. The cost of flour of extra class in this region is 63,800 tenge ($424.2) per ton, first-rate –61,600 tenge ($409.57) per ton, second-rate – 58,200 tenge ($386.97) per ton.

In Zhambyl region the price of wheat of 3 class for today costs 43,500 tenge ($289.23) per ton, barley of 2 class is sold by 36,800 tenge ($244.68) per ton. The cost of flour of extra class in this region is 64,400 tenge ($428.19) per ton, first-rate –61,600 tenge ($409.57) per ton, second-rate – 58,500 tenge ($388.96) per tons.

In the South Kazakhstan region wheat of 3 class is offered by 44,700 tenge ($297.21) per ton, wheat of 4 class – by 42,700 tenge ($283.91), barley – by 37,700 tenge ($250.66) per ton. The cost of flour of extra class in this region is 64,600 tenge ($429.52) per ton, first-rate – 62,100 tenge ($412.9) per ton, second-rate – 59,000 tenge ($392.29) per ton.

In Aktobe region wheat of 3 class is offered by 44,800 ($297.87). Flour of extra class can be purchased for 65,800 tenge ($437.5) per ton, first-rate – 61,300 tenge ($407.58) per ton, second-rate – 59,300 tenge ($394.28) per ton.

In Kyzylorda region wheat of 3 class is sold currently at 44,700 tenge ($297.21) per ton. The cost of flour of extra class is 66,700 tenge ($443.48) per ton, first-rate – 64,200 tenge ($426.86) per ton and second-rate – 61,100 tenge ($406.25) per ton.

In the south capital, Almaty, you can buy wheat of 3 class by 45,300 tenge ($301. 2) per ton. Flour of extra class costs in Almaty 65,600 tenge ($436.17) per ton, first-rate – 63,100 tenge ($419.55), and second-rate – 60,000 tenge ($398.94) per ton.

As you can see, the table of prices for Kazakhstanian wheat, barley and flour on export borders of the Republic is provided with a running start at 7-10 dollars. It is advised to add so much to the real price of exporters, taking into account new tariffs of Kaztemirtrans.

The cost of wheat of 3 class with gluten content of 23 percent on DAP terms at the station Lugovaya (Kazakhstan – Kyrgyzstan) is $334-342 per ton, with gluten content of 27-30 percent – $349-357 per ton. Barley costs $276-284 per ton. Flour of extra class is sold by $490-502, the cost of first-rate flour is $446-476 and the second-rate -$ 444-454 per ton.

At the elevators of the South Ural railway the current cost of wheat of 3 class is $ 305-311 a ton, wheat with gluten content above 27 percent – $318-325. The price of barley there is $247-252 per ton. Flour of extra class can be bought by $468-478; first-rate flour is $444-454 and the second-rate – $419-429 per ton.

At the station Sary-Agash (Kazakhstan – Uzbekistan, DAP) wheat of 3 class costs $344-352, wheat with gluten content above 27-30 percent – $359-369. The price of barley there is $286-294. Flour of extra class can be bought by $496-506, first-rate flour is $476-486 and the second-rate -$454-464 per ton.

At the station Tobol (DAP) wheat of 3 class costs $321-328, wheat with gluten content above 27-30 percent – $336-346. Barley is sold by $257-264 per ton. Flour of extra class can be bought by $477-487, first-rate flour is $457-467 and the second-rate -$438-448 per ton.

At the station Amuzang (Uzbekistan – Tajikistan, CPT) trade was not conducted during the study period. The station is closed due to scheduled maintenance.

The average price of wheat of 3 class at the station Hajraton (Uzbekistan – Tajikistan, CPT) is $416-426 per ton; wheat with gluten content above 27-30 percent is sold by $420-429 per ton.

Barley can be bought by $352-359 per ton. Flour of extra class is offered by $619-629, first-rate flour is $586-596 and the second-rate – $566-576 per ton.

At the station Sarahs wheat of 3 class on the CPT terms is sold by $414-424 per ton; wheat with gluten content above 27-30 percent is sold by $418-428, barley – $361-370.

In the port of Aktau on FOB conditions wheat is sold by $346-355, wheat with gluten content above 27-30 percent is sold by $ 368-378, barley – $303-312. Flour of extra class is sold by $514-524, first-rate flour – by $504-514 and second-rate – by $479-489 per ton.

Reference: $1 = 150.52 tenge, 1 euro = 195.25 tenge, 1 ruble = 4.86 tenge.

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Alimbek Gabitov