Market took an unintentional time-out at a time when it was expected to take decisive actions

Lethargy – only few characterize grain market in Kazakhstan in other words. Contracts are concluded with less enthusiasm. Prices in the domestic market continue their run, and the finish line is not even looming ahead. There are different, sometimes conflicting, views. Tired of rising prices processors indulge in wishful thinking: price rise is artificial, and soon the market will determine the real value of the grain. Producer, being in euphoria, wants revenge for last year’s “denomination.” Trader has to cater to both, and to others, but how to do this, yet few people know.

Kazakhstan

The situation on the grain market remains tense. On the one hand the market is filling with grain from the new harvest. On the other – its implementation is hampered by confusion of prices. Stagnation in all its beauty creates unrest in the minds, stopper trade.

Farmers have always been waiting for the price. Today they peer with great enthusiasm in the reports of exchanges, read the opinions of experts. And they count the days to the promised hour, when the price of a ton of wheat will be higher than 60,000 tenge. That is the price that was generously promised for them by some optimistic (or, on the contrary) customized analytics.

Meanwhile, we should scrutinize the quotes from the exchanges more closely. Yes, ETS, including heated by the latest developments in the domestic market, really shows the growth of wheat prices. Even so, the world’s leading trading platforms day after day are signaling downward trend. Price fever continues to shake Kazakhstanian grain traders. The civilized world has seen the harvest, estimated losses, sighed at them, then realized that they are not too big and … and continue to trade as usual. Everyone always wants to eat.

One can understand the producer who wants to take revenge for last year, when they had to sell the grain at bargain prices. On average, by 18,000 tenge per ton of wheat. Today, according to our monitoring, in Kazakhstan grain traders take two and a half prices from last year’s. The average cost of one ton of wheat of the third class the grower is emerging within 43 thousand tenge per ton.

But we all understand that this figure is very ambitious. Each region form additional local conditions, somehow affecting the market situation. The North, sitting on its grain, potters around qualitative indicators of the new harvest, swearing the Food Corporation, which filled elevators with last year’s grain. And to be honest, not everyone was able to warm their hands at dumping prices. Kostanai region did not receive almost 6 million tons from the harvest of 2011. Everyone understands neither these, nor last year’s figures cannot be considered seriously. But there are no other figures in Kazakhstan.

Akmola region had a bad luck exactly by 5 tons of grain. Yes, on the one hand, looking at such terribly large shortfall, we can now clearly see, how was “got” the jubilee bread last year. But once there is need to answer for lying.

North Kazakhstan looks now like a kind of rich man among poor relatives. It can happen that in the final summary on harvesting NKR will write to himself 5,000,000 tons, which is only 3.8 million less than in 2011. But all these figures are broken down on the words of ordinary farmers. North Kazakhstan farmer addressed himself to the editorial of “Kazakh-Zerno” on the phone.

– Now officials in the region are making rigorous and focused work to create phony prosperity. The head of the district personally asked me to raise yields on the farm by 4 quintals per hectare. The same request was made to all my fellow farmers, and the figure varied and even reached 7 t / ha. And you know what can turn a refusal to this request. Working group regularly meets in the district, which consists of the supervisory and control functions.

It is a kind of a special group of the head of the district. If he commands, the will react immediately. Everyone knows it and, but for some reasons they keep silent. I, for example, refused to artificially inflate the yield. Thus I know what effects this can have. First, my shareholders are sitting on a percentage of the yield. They are all educated now.

Tomorrow I will inflate productivity and they will be the first who ask me to reply for these actions. Then will come taxmen, who need to carry out the plan for the nine months.

They will tell: You have harvested a lot, do not you want to help us? But the funny thing is that petitioners of sponsor support are running now – to sport, culture and to the nonsense. I tell them: I will give you money, and what document will you give me in return? They say, nothing, we have no authority. It means the have authority to take money, but to account for it – no. Everything is very simple. None of the sportsmen or artists will not get the money – there is a specific milking by representatives of local authorities of farmers, who got a good harvest in North Kazakhstan and received a good price for the grain. Situation is really absurd, authorities shake money from us, and motivate it by high grind, which we have to wind up at their own request. But, my dear, where this crop came from? It is at 30 percent made from the air. Thus, get your air back – this is my position.

Yes, the quality of the wheat here is unlike the neighbors have. But in fact, the area has no more than 3 million tons of grain. This conclusion we made in talks with other manufacturers, confirming the fact of additions.

Another factor, directly speaking about existing only on paper one and a half million tons, is the mood that roam among grain traders, operating in North Kazakhstan.

– If we have as much grain as it is written in the reports, we would not have such price. We would not have time to fight back from proposals. Actually, our managers do every day telephoning households and, believe me, not every day we can get a contract. Growers unwillingly sell their grain. Wheat prices rose significantly. If earlier at the Bulaevskii elevator wheat was sold by 43 thousand, at the moment they do not want to sell wheat for such price. I even heard the prices of about 50-55 thousand per ton for wheat of 3 class. But this is from the category of fiction yet. Although, we inevitably strive to that. At the Smirnoffskii elevator they ask 45 thousand tenge per ton. From the field wheat is offered at 40 thousand.

In Kostanai region the situation is not better. As it was mentioned above, grain yield in the physical mass was only 2.8 million tons. How many of them is air – it is hard to judge. And growers of the region are seriously talking of 60-thousand mark for local grain. Our regional correspondent says the same weak market activity, citing the opinion of grain traders. One of them, the director of the mill gives in the following figures:

The last transaction made by us for the purchase of wheat – 43,000 tenge per ton. And this is despite the fact that we will have to take out the grain to the mill – over 200 kilometers. There is little grain on the market. The farmers have to pay debts, and only this somehow moves them for parting with the bread. Those who have the ability to wait, just say: we will wait for the price of 50 thousand tenge. Someone has set the target for 60 thousand. One supplier had agreed to a price of 45,200 tenge per ton, but he changed his mind at the last moment”, said the source of our news agency.

Our respondent from Akmola region is in no hurry to make a statement regarding prices, however, presents a very valid comment. According to him, the market reacts very adequately. All  people want to sell at a higher price.

“This is the peak. Some are just waiting while Russian export resources will be exhausted “- said grain traders. There are rumors among the participants of the grain market that Russia will stop the export of grain and flour by December this year, and the road will open to Kazakhstanian food products. That is, we again lose Russia, which is connected to the ports of the Black Sea, enough cars for shipment, some improved model for distribution of grain.

Pricing police in the grain market of Akmola region was as follows: the producers are asking 45 thousand tenge for a ton of wheat, but it is difficult to find a buyer for such a price. From 40 to 42 thousand tenge farmers estimate the cost of barley. But its real price at which traders can buy grain is 38 thousand. Flour of first-rate now is sold by on 65-67 thousand tenge.

In other regions of Kazakhstan, the overall situation is simple. The received bread of 200 thousand tons of grains  in the regions goes to domestic consumption. Here also aims subsidized grain of Food Corporation. Aktobe region was severely hurt. Eastern Kazakhstan with its 540 thousand tons (on the given date) is fighting off the Russians who buy large quantities of grain. Here, , according to the head of Food Corporation, a purchase price for the state reserve (40 thousand tenge per ton of wheat of 3 class) declared the Ministry of Agriculture, will serve a kind of flap.

According to Beybithan Kabdrakhmanov, during a recent trip to the EKR, this price should discourage Russian speculators from Kazakhstanian grain.

She discouraged also domestic grain trade, and very cool, and it, fortunately or unfortunately, is working not only on East Kazakhstanian grain. However, we face the fact. Ministry of Agriculture sparked the 40-thousand boundary, and the market easily overcame it.

As a result, the grain market of Kazakhstan seems to us a kind of funnel through which grain flocks to our major importers in Central Asia. But some part of it is deposited in the “pockets” of millers in the south of the country. It here in a controversy of exporters and importers the price of refined product is born. The millers in the country cannot boast that everything is well.

According to one of the market participants, the balance sheet cannot be achieved by buying grain in the north by at least 40 thousand tenge and sending it further in the form of flour yet, paying the carrier over 66 thousand tenge per wagon to Saryagash.

We have heard statements of our importers on the reorientation to grain grown in Russia, which has already established market, showing enviable stability. We have heard threats of our Tajik partners to turn towards Pakistani grain. We already have almost lost Azerbaijani market, which willingly “reorients” to the Russian grain.

And what is the opinion of international experts about Kazakhstan crop and prospects for the export? According to the IGC, Kazakhstan will harvest 13 million tons of grain in 2012/13 MY, with carry-over stocks at the beginning of the season in the amount of 6.1 million tons. For domestic consumption of grain Kazakhstan will need about 9.3 million tons. 7.2 million tons will go for export, and at the end of the year the reserves will amount to 2.6 million tons. Last year, according to the estimate of IGC, Kazakhstan exported 11.4 million tons of grain.

Since September, 13 to September, 28 there was an increase in the cost of wheat contracts for some items. During this period, the contracts were closed with the execution in September and opened for delivery in March.

We remind, on Thursday, September 13, wheat contracts rose by three positions at the exchange ETS. Contracts for delivery in October rose by 1260 tenge, for delivery in December and January – by 500 tenge per ton of wheat of 3 class.

As a result, during the above mentioned period wheat contracts for delivery in October rose by 2,470 tenge, in November and December price has not changed, in January increased by 500 tenge, and in February  – by 1000 tenge per ton of wheat of 3 class. The contracts for delivery in March are sold at 46,500 tenge per ton.

The values of wheat futures on the ETS exchange according to delivery month as of September 13, 2012 (tenge per ton)

The values of wheat futures on the ETS exchange according to delivery month as of September 28, 2012 (tenge per ton)

On Wednesday, September, 26 at the ETS exchange wheat futures’ growth stopped and the situation did not change until September, 28.

Against this background has been noticed an increase in prices in the market of cash sales of grain in Kazakhstan. During the first half of September the prices of wheat of 3 class and higher continue to rise, and in view of regions was formed a positive trend in the range of 300-600 tenge per ton.

The prices for all grades of flour responded adequately to the raise of grain price. Flour of all grades jumped by 300-500 tenge per ton.

Currently, you can buy wheat of 3 class from new harvest in Astana for 43,100 tenge ($287.29; here and further is applied the exchange rate of National Bank of Kazakhstan on 09/29/2012) per ton. The wheat of 4 class is sold by 40,100 ($267.29). First-rate flour in the capital of our country costs 59,700 tenge ($397.93) per ton. Second-rate flour is sold by 56,900 tenge ($399.27) per ton, and flour of extra class – by 61,700 tenge ($411.27) per ton.

A ton of wheat of 3 class can be purchased for 41,600 tenge ($277.29), wheat with gluten content above 27 percent – for 44,400 tenge per ton ($ 295.95), wheat of 4 class – 38,600 tenge ($257.29), barley of a 2 class now costs 34,900 tenge ($232.63) per ton in Akmola region. Flour of extra class costs 60,600 tenge ($ 403.93), first- and second-rate flour is offered at 58,600 tenge ($390.6) and 55,800 tenge per ton ($ 371.94), respectively.

In the North Kazakhstan region wheat of 3 class is sold by 41,000 tenge ($273.29) per ton, wheat with gluten content above 27 percent – by 43,300 tenge ($288.62), wheat of 4 class – by 38,000 tenge ($253.29). The current price of barley is 34,400 tenge per ton ($229.3). In the North Kazakhstan the price of flour of extra class is 59,200 tenge per ton ($394.6), first-rate flour costs 57,200 tenge ($381.27) and second-rate flour costs 54,400 tenge per ton ($362.61).

In Kostanai region the price of wheat of 3 class rose to the level of 41,800 tenge per ton ($278.62). Wheat with gluten content above 27 percent is sold by 42,800 tenge ($285.29). Wheat of 4 class costs 38,800 tenge ($256.62). The price of barley of 2 class is 34,100 tenge ($227.3) per ton. The market price of flour of all classes went up: extra class – to 59,200 tenge per ton ($394.6), first-rate – to 57,200 tenge ($381.27) and second-rate flour to 54,400 tenge ($362.61) per ton.

In Pavlodar region the price of wheat of 3 class is 42,800 tenge per ton, or $ 285.29 per ton; wheat of 4 class is sold by 39,800 tenge ($265.29). The price of barley is 36,800 tenge ($ 245.29) per ton. Flour of extra class costs 61,400 tenge ($409.27) per ton, first-rate flour costs 59,400 tenge ($395.93) per ton, second-rate flour costs 56,600 tenge ($ 377.27) per ton.

In Karaganda region wheat of 3 class costs 45,200 tenge ($301.28) per ton, wheat with gluten content above 27 percent costs 46,600 tenge ($310.62) per ton; wheat of 4 class costs 41,100 tenge ($273.95). The price of barley is 36,500 tenge ($243.29) per ton. In Karaganda, traders sell flour of all rates at the following prices: first-rate – 59,800 tenge ($398.6) per ton, second-rate –57,000 tenge ($ 379.94) per ton and extra class – 61,800 tenge ($411.93) 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 43,100 tenge ($289.29) per ton, barley- 35,100 tenge ($233.96) per ton. In the West region of the country the price of wheat of 3 class fixed at 45,800 tenge ($305.28) per ton. The cost of first-rate flour in East Kazakhstan is 59,100 tenge ($407.27) per ton, second-rate flour costs 54,300 tenge ($361.94) per ton, and flour of extra class – 61,100 tenge ($407.27) per ton. In the West Kazakhstan prices for flour are as follows: extra class costs 61,700 tenge ($411.27), first-rate – 59,700 tenge ($397.93), second- rate -56,900 tenge ($379.27) respectively.

In Almaty region the price of wheat of 3 class for today is offered by 45,100 tenge ($300.62) per ton, wheat of 4 class – by 42,100 tenge ($280.62); barley of 2 class is sold by 36,300 tenge ($241.96) per ton. The cost of flour of extra class in this region is 62,000 tenge ($413.27) per ton, first-rate –60,000 tenge ($399.93) per ton, second-rate – 57,200 tenge ($381.27) per ton.

In Zhambyl region the price of wheat of 3 class for today costs 46,200 tenge ($307.95) per ton, barley of 2 class is sold by 37,400 tenge ($249.29) per ton. The cost of flour of extra class in this region is 63,200 tenge ($415.26) per ton, first-rate –60,300 tenge ($401.93) per ton, second-rate – 57,500 tenge ($383.27) per ton.

In the South Kazakhstan region wheat of 3 class is offered by 46,000 tenge ($306.62) per ton, wheat of 4 class – by 43,000 tenge ($286.62), barley – by 35,900 tenge ($239.294) per ton. The cost of flour of extra class in this region is 62,800 tenge ($418.6) per ton, first-rate – 60,800 tenge ($405.27) per ton, second-rate – 58,000 tenge ($386.6) per ton.

In Aktobe region wheat of 3 class is offered by 46,400 ($309.28). Flour of extra class can be purchased for 63,000 tenge ($419.93) per ton, first-rate – 61,000 tenge ($406.6) per ton, second-rate – 58,200 tenge ($387.94) per ton.

In Kyzylorda region wheat of 3 class is sold currently at 46,700 tenge ($311.28) per ton. The cost of flour of extra class is 64,900 tenge ($432.6) per ton, first-rate – 62,900 tenge ($419.26) per ton and second-rate – 60,100 tenge ($400.6) per ton.

In the south capital, Almaty, you can buy wheat of 3 class by 46,100 tenge ($307.28) per ton. Flour of extra class costs in Almaty 63,800 tenge ($425.26) per ton, first-rate – 61,800 tenge ($411.93), and second-rate – 59,000 tenge ($393.27) 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 $332-338 per ton, with gluten content of 27-30 percent – $347-353 per ton. Barley costs $276-282 per ton. Flour of extra class is sold by $454-464, the cost of first-rate flour is $430-439 and the second-rate -$ 408-414 per ton.

At the elevators of the South Ural railway the current cost of wheat of 3 class is $ 303-308 a ton, wheat with gluten content above 27 percent – $317-322. The price of barley there is $247-252 per ton. Flour of extra class can be bought by $432-445; first-rate flour is $408-418 and the second-rate – $383-401 per ton.

At the station Sary-Agash (Kazakhstan – Uzbekistan, DAP) wheat of 3 class costs $342-348, wheat with gluten content above 27-30 percent – $357-363. The price of barley there is $286-292. Flour of extra class can be bought by $460-470, first-rate flour is $440-449 and the second-rate -$418-424 per ton.

At the station Tobol (DAP) wheat of 3 class costs $319-324, wheat with gluten content above 27-30 percent – $334-339. Barley is sold by $257-262 per ton. Flour of extra class can be bought by $441-453, first-rate flour is $421-428 and the second-rate -$402-412 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 the station Hajraton (Uzbekistan – Tajikistan, CPT) is $414-424 per ton; wheat with gluten content above 27-30 percent is sold by $418-425 per ton. Barley can be bought by $350-357 per ton. Flour of extra class is offered by $583-593, first-rate flour is $553-563 and the second-rate – $530-537 per ton.

At the station Sarahs wheat of 3 class on the CPT terms is sold by $412-422 per ton; wheat with gluten content above 27-30 percent is sold by $416-423, barley – $361-368. Flour of extra class is sold by $581-596, first-rate flour is $552-559 and the second-rate – $535-542 per ton.

In the port of Aktau on FOB conditions wheat is sold by $344-351, wheat with gluten content above 27-30 percent is sold by $ 366-373, barley – $303-310. Flour of extra class is sold by $478-490, first-rate flour – by $468-485 and second-rate – by $443-460 per ton.

Reference: $1 = 149.86 tenge, 1 euro = 194.02 tenge, 1 ruble = 4.85 tenge, 1 som = 3.19 tenge, 1 pound sterling = 243.09 tenge, 1 hryvna = 18.39 tenge.

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Alimbek Gabitov