Ministerial populism destroys Kazakhstan’s agro-industrial complex

The government has banned the shipment of buckwheat, rice, soy, flax, rapeseed, sunflower, and vegetable oil abroad.  Also, flour was banned.  A ban on wheat export is expected the other day.

 The farmers of Kazakhstan are shocked by this decision.  Indeed, the domestic market of the country for most agricultural products is overlapping with a large supply.  For grain and flour – and in general at times!  And the export ban is just a hindrance to farmers in the sale of their products.  Indeed, if there is no sale to the foreign market, then inside Kazakhstan they will simply have no one to sell their goods to, reports.

Fables of Omarov

Not later than last fall, the Minister of Agriculture Saparkhan Omarov cheerfully reported to the government about a grain harvest of almost 20 million tons.  This is 10 times more than Kazakhstan needs for its food needs.

 However, only six months passed, and the country suddenly imposed a ban on the export of flour, motivating the decision with the need to ensure the domestic market during the quarantine period. 

For what?

There is no logical answer to this question.  Indeed, if the data of the Ministry of Agriculture on the crop were true, then there would be nothing to worry about – by now, at least half of the last year’s crop should have remained in the country.  And given the weak export last fall (1.4 million tons instead of the planned 2.8 million), there would have been even more.  Think for yourself – be in the bins of 10-11 million tons, then what’s the point of banning grain exports ?!  A new crop in six months.  1 million tons is enough to feed itself.  Plus, exports (grains and flour together) will be a maximum of another 1 million tons per month.  Total annual consumption for half a year is 7 million tons.  We subtract them from ten, and we get the transient residue of the “excess” grain, which the Ministry of Agriculture of the Republic of Kazakhstan lamented several years ago.

 But no, Saparkhan Omarov sounded the alarm.  And no wonder!  Who, no matter how he knows, that the beautiful figures of last year’s harvest were “drawn” in the regions.

 So the minister covers his ass, advocating a ban on grain.  Because, apparently, it does not even have an approximate picture – how many Kazakhstan farmers actually threshed in 2019 from their fields burnt by the sun?

Strict reality

However, the real picture is known to both traders and flour mills.  And despite the millions of postscripts of officials, they are sure that there will be enough grain for Kazakhstan until the fall.

 The figures are as follows: in 2019, Kazakhstan actually collected not 20, but 12 million tons of grain.  This volume, although not in abundance, is enough for the country to close the domestic market before a new crop, and for export.  Therefore, the reinsurance of fearing for his chair (and what he sits in it) Saparkhan Omarov makes no sense.

 Yes, there will be no carryover.  But wasn’t the Ministry of Agriculture of the Republic of Kazakhstan himself advocating this when he spoke of the need for diversification, a move away from monoculture and a reduction in the area under wheat?  This is precisely the situation that has developed this year – there is no “extra” grain, but there will be no shortage either.  There are exactly as many grains as needed, and this is good for the market!  No need to climb into it!  And here comes Saparkhan Omarov and other officials of the old school, who are considered that the ban is the only effective regulatory measure.  And they ruin the entire industry with their populist movements – just to calm the panicking people.  Yes, you’d better have raised the tenge from where you dropped it!

Unnecessary bans

Prohibition is always bad for the market. In the case of the ban on flour exports is bad from several sides.

First, at the wrong time. Now comes the preparation for the planting season. And farmers need money to payback. A specially to this point, keep “emergency reserve” to sell and then to buy seeds, fuel, spare parts, etc. This grain to them — like gold, which always in the price and is not subject to devaluation and inflation — it can always be sold.

But a ban on the export of flour has confused all the cards. Farmers are already complaining — millers purchase grain stopped. In the absence of export they have no sense of work — if Kazakhstan is now 6 million tons of grain, and the country needed 1 million, what to do with 5 million? Answer, Mr. Omarov!

Secondly, not being able to sell grain, the peasants will not be able to drop out because of lack of funds. As you know, banks in agro industrial complex are not, and KazAgro did not bother significantly to increase the amount credited to the CDF. Provided 70 billion — a drop in the ocean. So that the output of farmers have one try to obtain a Bank loan. It is understood by the bankers, by raising the lending rates of the villagers up to 40% per annum! Calculate what will be the cost in this way financed grain!

Thirdly, people are losing their jobs. And that — in times of crisis. And millers, and farmers are forced to tighten their belts. Of course, some people fall under the reduction. And join the army of those people who can only rely on manual. It is an extra burden on the budget.

Fourth, suffering image of the Kazakhstani suppliers as reliable partners. Having signed the contract, the buyer is awaiting his execution. And no force majeure can’t make him believe Kazakhstan to the trader if he failed it once.

“On behalf of the Union of millers and bakers of Kazakhstan, we have prepared a letter to the government, which disagree with the imposed ban and present their arguments”, was told by Dos-Mukasan Taukebayev, Director of the milling company “Mutlu”. “We guarantee that the domestic flour market, we will provide in any case, even if exports are allowed. So, we ask to cancel the ban, and destructive to the whole grain and milling industry. There is no crisis of food we have, and to impose restrictions on trade for no reason. Otherwise, we will burn the contracts, together with the crisis and the virus, we will get a long-term negative consequences such as undermining the image of us as reliable partners”.

Myrzabek Smagulov

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