Since the beginning of the season the price of wheat on world markets rose by 50-60 dollars, and no one knows when this will end

In northern Kazakhstan harvesters already come out in the field. Some farmers have started mowing barley and legumes. A little bit earlier began the harvesting campaign in Kostanai region. The first who started the harvest of grain were farmers of southern areas of the region and Arkalyk. Harvesting will take massive campaign by August 15, and the main task is to hold it fast and lossless.

On the eve of President Nursultan Nazarbayev has met with four governors of northern regions – Kostanai, Akmola, North Kazakhstan and Pavlodar – in Borovoe, in order to compare notes before the start of a great harvest.

“This year will be difficult for the agriculture of the Republic. Dry weather, of course, affects the amount of the crop, on the other hand, it leads to higher export prices for grains. Thus, the price of 120-160 dollars per ton has increased substantially, and I think that, given such a rise in prices agricultural workers should not lose their income. In addition, the recent rainfall had a positive effect on the maturation of crops, and now the sunny weather will only help us. You should thoroughly prepare for the harvest, “- said the President of Kazakhstan, opening the meeting.

Regional governors voiced forecasts of grain harvest in their areas. Thus, in Akmola expected grain yield will average 8.5 q / ha. Estimated volume of the crop in the region will be about 3.7 million tons. In Kostanai region farmers plan to collect about 3 million tons of grain. This region was mostly affected by the drought. In the North-Kazakhstan region bar for the harvest was estimated at 4.6 million tons.

This forward-looking estimates and harvest, of course, will adjust them downwards or upwards. Last year, for example, at the same time farmers began a harvest from the official estimate for the approximate yield of 21-22 million tons. But it turned out to be 29 million tons in bunker weight. So let’s see, let’s calculate and speculate.

Kazakhstan

Kazakhstan continues to discuss the harvest prospects in 2012. If in the northern regions, the main grain growing areas, harvesters just began to come out in the fields, in the south and west regions of the Republic harvesting campaign is in full swing.

According to the Ministry of Agriculture, as of August 9, harvesting is almost complete in Zhambyl region and coming to an end in the South Kazakhstan, and in Aktobe, East-Kazakhstan and Kyzylorda regions farmers have not removed even a quarter of the crops. The rate of harvest in the regions vary widely. If last year Zhambyl growers had already dealt with harvest, but this year they have fallen behind on 10.3%. In contrast, farmers in Western Kazakhstan for that day have collected three times more crops than last year. Total in the seven areas was harvested 34.7%. Last year on this date was collected only 26.8% grain.

This year, the southern regions do not get on the grain yield and, therefore, on milling of grain. Milling this year amounted to 684.9 thousand tons, which is 299.8 thousand tons less than last year. And this, despite the fact that this year large areas have been harvested. The average grain yield is 9.8 tons per hectare, which is almost a third lower than last year (see table № 1).

Using simple calculations, we can determine that on retention of data on the mill and harvested acreage at this level, by the end of harvest seven regions of Kazakhstan will fill the granaries of the republic with 1973.7 thousand tons of grain. In the past year, based on USDA data, there were 3674.3 thousand tons or 1700.6 thousand tons more. But the overall yield of Kazakhstan, which is determined by the end of the autumn harvest, arise more concerns.

Table 1. Dynamics of the harvesting campaign in Kazakhstan on August 9, 2012

So, on the basis of calculations, we can say that Kazakhstan is facing the loss of grains of about 1700.6 thousand tons. Now, it is not clear how great is this loss in the total for Kazakhstan, and how it will affect the entire crop. Projections for grain production from the Ministry of Agriculture of Kazakhstan still have not been changed. Official forecasts look that way. According to the forecast balance, in the current year the country will collect about 12.8 million tons of grains with an average yield of 8.1 quintals per hectare. Earlier, the harvest was projected at 14 million tons with an average yield of 8.7 q / ha.

It is difficult to make an accurate prediction right now, especially under conditions of oversaturation of information on drought and crop loss. As a rule, in the center of media attention is negative information, which traditionally attracts a large audience. Let’s try to escape from it and to count again.

Last year, Kazakhstan harvested 29 million tons of grain in bunker weight. The share of above stated regions in this harvest as it has been said above is 3674.3 thousand tons, or 12.7%. When you save last year’s proportions, which, of course, may or may not happen, but possibly, Kazakhstan can harvest about 15,540 tons. Of course, the proportions of this year may be different, they can change in one direction or another, but unlikely in a large extent.

There are also more optimistic assessments of the crop. The harvest may be even higher, and there are enough reasons for this. One of the main is the high cost of grain on the eve of the beginning of the mass harvesting of grain. That is, we can say that the grain will be harvested without remainder, and even from the fields with an extremely low yield, which is to be written off. Farmers try to minimize the loss of grain, because at current prices, they can take for it the almost two times more money than last year. Experts of IA “Kazakh Grain” put the number closer to 18 million tons.

Export of Kazakhstanian grain promises to change the main directions. At least, it was declared by the President of Grain Union of Kazakhstan, Nurlan Tleubayev. He believes that the days of Kazakhstan’s exports of grain to the Black Sea market are almost numbered. Nurlan Tleubayev hastened to assure his colleagues from Russia and Ukraine that Kazakhstan will soon cease to be their competitor for the grain in this region. “I want to say to my colleagues from Russia and Ukraine, bear us another 12 months, and from the harvest of 2013 we will not be your competitors in the Black Sea.”

He recalled that from 2013 – the first quarter of 2014 the railway will connect Turkey and Georgia, the railway from Kazakhstan through Turkmenistan to Iran will begin to work and delivery of grain to the China will intensify. “We refuse to transit through Russia. We have a port of Aktau, our cars will pass through the Caspian Sea, Azerbaijan, Georgia and will come to Turkey. With the completion of the railway between Georgia and Turkey, the cost of delivery of Kazakhstanian grain to Turkey will be reduced from $ 135 per ton to $ 41 per ton”, said Tleubayev.

According to the President of Grain Union, in 2013, when will work all the necessary infrastructure, Kazakhstan in general will not deliver the grain through transportation corridor of the Black and Baltic seas.

We cannot accept that the transit of Kazakhstanian grain through Russia to the ports of the Black Sea is not very profitable as for grain producers and traders.

Kazakhstan had to subsidize the exports in this direction for two years, since transportation costs are often comparable to the price of transported grain. So, to take out the grain in that direction, growers need to reduce the price to the limit, but the State has to pay extra on top. Almost all the profits in this case go to transportation and infrastructure system in Russia.

But there were no other areas at that time, and now there are not. The traditional Central Asian market, unfortunately, is not dimensionless. It is significantly limited by low purchasing power of the population of Central Asian countries, as well as attempts to restrict the import of wheat from Kazakhstan by increase of production of local cereals and flour. We should also note the artificial limits. This is the periodic introduction of import duties, for example, by Kyrgyzstan, undue delay in movement of grain carriers on the territory of Uzbekistan and other issues.

But these are only assumptions, even if you take into account the high level of competence of the expert. At least this year it will not happen, because in the Black Sea there will not be so much grain. But is it possible to stop the flow of grain to ports on the Black Sea once within a year and redirect it to another channel. Time will tell.

We recall, in the first half of July wheat futures on the stock exchange ETS stubbornly unchanged. The last change was on July 4. That day on the stock exchange ETS wheat contracts ceased growth and played down.

But the change came on July, 16. That day on the stock exchange ETS wheat contracts rose on the two positions and the July contracts closed. During July 17, 18 and 19 on the Stock Exchange ETS wheat contracts rose in almost all positions. As of July, 20 contracts with the execution in August rose by 380 tenge, in October –  by 400 tenge, in November –  by 420 tenge, in December –  by 420 tenge, in January – by 560 tenge per ton of wheat of 3 class.

From July, 20 to July, 27 wheat futures continued to rise. On Friday, July, 27 at the exchange ETS rose wheat contracts with distant deadlines – in October, November, December and January. Wheat for delivery in August and September did not change the values. As a result the contracts with the execution in October rose by 280 tenge, in November – by 110 tenge, in December by 340 tenge and in January – by 460 tenge per ton of wheat of 3 class.

Thus, wheat contracts at the exchange ETS were growing every day until July, 27, following the increase in the market of cash sales. As a result, nearby wheat contracts with performance in August rose from July, 4 to July, 27 by 3000 tenge, from 24,000 to 27,000 tenge per ton, or 12.5%. Despite this impressive growth, prices of futures market are far below prices in the market of cash sales. They are far away from the real market values.

But then all kinds of motion in the segment of the derivatives market stopped. During the period from July, 27 to August, 3 wheat contracts have not changed the values. This week the stagnation continued. Prices have not changed on August 6,7 and 8.

Table 2. The values of wheat futures on the ETS exchange according to delivery month as of August 8, 2012 (tenge per ton)

In the market of cash sales of grain in Kazakhstan for the period from the middle of July to July, 29 the prices of wheat of 3 class and above continue its frenzied growth and increased in the range of 5000-10000 tenge ( in some areas to 14 000 tenge) per ton in the different regions of the country. Ordinary wheat also is not behind it, trading in which, however, in some areas are closed for the above stated reasons.

The same pattern was observed with barley, although the jump is not that pretty predictable, like in wheat. Harvest of southern Kazakhstan have filled the market, hence the decrease in consumer activity. The price of grain pulls the cost of a ton of flour like the locomotive. It jumped bty 15 000, sometimes 20 000 (!) tenge during 2 weeks.

Currently, you can buy wheat of 3 class from new harvest in Astana for 40,000 tenge ($226.7; here and further is applied the exchange rate of National Bank of Kazakhstan on 08/10/2012) per ton. The wheat of 4 class is sold by 35,700 ($238.1). First-rate flour in the capital of our country costs 53,700 tenge ($384.1) per ton. Second-rate flour is sold by 52,800 tenge ($352.1) per ton, and flour of extra class – by 55,700 tenge ($370.7) per ton.

A ton of wheat of 3 class can be purchased for 39,100 tenge ($ 260.7), wheat with gluten content above 27 percent – for 41,900 tenge per ton ($ 279.4), wheat of 4 class – 33,300 tenge ($222.1), barley of a 2 class now costs 33,600 tenge ($224) per ton in Akmola region. Flour of extra class costs 57,300 tenge ($ 382.1), first- and second-rate flour is offered at 55,300 tenge ($368.7) and 52,500 tenge per ton ($ 350.1), respectively.

In the North Kazakhstan region wheat of 3 class is sold by 38,500 tenge ($ 256.7) per ton, wheat with gluten content above 27 percent – by 40,800 tenge ($272), wheat of 4 class – by 32,800 tenge ($218.7). The current price of barley is 33,100 tenge per ton ($217.4). In the North Kazakhstan the price of flour of extra class is 55,900 tenge per ton ($372), first-rate flour costs 53,900 tenge ($359.4) and second-rate flour costs 51,100 tenge per ton ($340.7).

In Kostanai region the price of wheat of 3 class rose to the level of 39,300 tenge per ton ($262). Wheat with gluten content above 27 percent is sold by 40,300 tenge ($268.7). Wheat of 4 class costs 33,500 tenge ($223.4). The price of barley of 2 class is 32,800 tenge ($218.7) per ton. The market price of flour of all classes also went up: extra class – to 55,900 tenge per ton ($372.7), first-rate – to 53,900 tenge  ($359.4), and second-rate flour – to 51,100 tenge  ($340.7) per ton.

In Pavlodar region the price of wheat of 3 class is 40,200 tenge per ton, or $ 268 per ton; wheat of 4 class is sold by 35,600 tenge ($237.4). The price of barley is 35,500 tenge ($ 236.7) per ton. Flour of extra class costs 58,000 tenge ($386.7) per ton, first-rate flour costs 56,000 tenge ($373.4) per ton, second-rate flour costs 53,200 tenge ($ 354.7) per ton.

In Karaganda region wheat of 3 class costs 40,700 tenge ($271.4) per ton, wheat with gluten content above 27 percent costs 43,200 tenge ($288) per ton; wheat of 4 class costs 35,800 tenge ($238.7). The price of barley is 34,700 tenge ($231.4) per ton. In Karaganda, traders sell flour of all rates at the following prices: first-rate – 55,600 tenge ($370.7) per ton, second-rate –52,800 tenge ($ 352.1) per ton and extra class – 57,600 tenge ($384.1) 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 40,400 tenge ($269.4) per ton, barley- 33,800 tenge ($225.4) per ton. In the West region of the country the price of wheat of 3 class fixed at 42,500 tenge ($283.4) per ton. The cost of first-rate flour in East Kazakhstan is 55,700 tenge ($371.4) per ton, second-rate flour costs 50,900 tenge ($339.4) per ton, and flour of extra class – 57,700 tenge ($384.7) per ton. In the West Kazakhstan prices for flour are the same.

In Almaty region the price of wheat of 3 class for today is offered by 42,200 tenge ($281.4) per ton, wheat of 4 class – by 38,700 tenge ($258); barley of 2 class is sold by 35,000 tenge ($233.4) per ton. The cost of flour of extra class in this region is 58,300 tenge ($338.7) per ton, first-rate –56,300 tenge ($375.4) per ton, second-rate – 53,500 tenge ($356.7) per ton.

In Zhambyl region the price of wheat of 3 class for today costs 42,700 tenge ($284.7) per ton, barley of 2 class is sold by 35,600 tenge ($237.4) per ton. The cost of flour of extra class in this region is 58,000 tenge ($386.7) per ton, first-rate –56,000 tenge ($373.4) per ton, second-rate – 53,200 tenge ($354.7) per ton.

In the South Kazakhstan region wheat of 3 class is offered by 42,500 tenge ($383.4) per ton, wheat of 4 class – by 37,700 tenge ($251.4), barley – by 34,100 tenge ($227.4) per ton. The cost of flour of extra class in this region is 58,500 tenge ($390.1) per ton, first-rate – 56,500 tenge ($376.7) per ton, second-rate – 53,700 tenge ($358.1) per ton.

In Aktobe region wheat of 3 class is offered by 43,000 ($286.7). Flour of extra class can be purchased for 58,900 tenge ($392.7) per ton, first-rate – 56,900 tenge ($379.4) per ton, second-rate – 54,100 tenge ($360.7) per ton.

In Kyzylorda region wheat of 3 class is sold currently at 43,200 tenge ($288) per ton. The cost of flour of extra class is 60,700 tenge ($404.8) per ton, first-rate – 58,700 tenge ($391.4) per ton and second-rate – 55,900 tenge ($372.7) per ton.

In the south capital, Almaty, you can buy wheat of 3 class by 43,100 tenge ($287.4) per ton. Flour of extra class costs in Almaty 60,000 tenge ($400.1) per ton, first-rate – 58,000 tenge ($386.7), and second-rate – 55,200 tenge ($368.1) per ton.

The dynamics of grain and flour prices on export boundaries of the republic is absolutely different.

Prices of Kazakhstan wheat, barley and flour on the export the borders of the Republic were formed as follows:

The cost of wheat of 3 class with gluten content of 23 percent on DAP terms at the station Lugovaya (Kazakhstan – Kyrgyzstan) is $274 per ton, with gluten content of 27-30 percent – $286 per ton. Barley costs $253 per ton. Flour of extra class is sold by $397, the cost of first-rate flour is $386 and the second-rate -$ 370 per ton.

At the elevators of the South Ural railway the current cost of wheat of 3 class is $ 246 a ton, wheat with gluten content above 27 percent – $262. The price of barley there is $223 per ton. Flour of extra class can be bought by $377, first-rate flour is $366 and the second-rate -$350 per ton.

At the station Sary-Agash (Kazakhstan – Uzbekistan, DAP) wheat of 3 class costs $278, wheat with gluten content above 27-30 percent – $301. The price of barley there is $258. Flour of extra class can be bought by $398, first-rate flour is $387 and the second-rate -$371 per ton.

At the station Tobol (DAP) wheat of 3 class costs $266, wheat with gluten content above 27-30 percent – $278. Barley is sold by $163 per ton. Flour of extra class can be bought by $375, first-rate flour is $364 and the second-rate -$348 per ton.

At the station Amuzang (Uzbekistan – Tajikistan, CPT) – the cost of wheat of 3 class is fixed at $330 per ton; wheat with gluten content above 27-30 percent is sold by $337 per ton. Flour of extra class is offered by $436, first-rate flour is $427 and the second-rate – $407 per ton.

The average price of wheat of 3 class at the the station Hajraton (Uzbekistan – Tajikistan, CPT) is $332 per ton; wheat with gluten content above 27-30 percent is sold by $338 per ton. Barley can be bought by $306 per ton. Flour of extra class is offered by $452, first-rate flour is $440 and the second-rate – $418 per ton.

At the station Sarahs wheat of 3 class on the CPT terms is sold by $334 per ton; wheat with gluten content above 27-30 percent is sold by $342, barley – $330. Flour of extra class is sold by $460, first-rate flour is $448 and the second-rate – $425 per ton.

In the port of Aktau on FOB conditions wheat is sold by $308, wheat with gluten content above 27-30 percent is sold by $ 331, barley – $ 308. Flour of extra class is sold by $407, first-rate flour – by $401 and second-rate – by $385 per ton.

Reference: $1 = 149.95 tenge, 1 euro = 184.98 tenge, 1 ruble = 4.75 tenge, 1 som = 3.18 tenge, 1 pound sterling = 234.58 tenge, 1 hryvna = 18.54 tenge.

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Alimbek Gabitov