This is precisely the picture which the analysts of IA “Kazakh-Zerno” faced with during the study of market participants’ forecasts for the foreseeable future.
Just a week ago the prices of wheat and flour were higher than today. A drop in not significant – about 2,000 tenge per ton. Barley has retained its value, but only because of small reserves from old harvest- 198,224 tons as of August, 1 or 2.2% of the total grain stocks. What kind of price changes can be expected in the near future? It all depends on many factors, including the tone of the world grain market.
And in the world markets prices rally associated with worse expectations and speculations on this subject, has almost disappeared. As of August 14, we again fix another decline in prices on world markets. Wheat futures on world markets dropped for three consecutive days. During this time, wheat in Chicago has lost nearly $14 per ton. We can only reliably verify whether the markets calm down or preparing for a new leap up? But only time will tell this.
On August, 14 the only exception was for wheat on LIFFE exchange in London. But here the wheat was at a low level and added only 0.3%. In Paris futures fell 1.6%. In the U.S., wheat dropped 1.9% in Chicago, and 2% in Kansas City. Corn that day lost 0.4%, while soybeans rose by 0.4%.
“The price of grain increases in a galloping pace. What is the reason of such dynamics, and you must be very happy about this?”- A question was asked by a journalist of Vesti 24 TV channel to the well-known analyst and investor Jim Rogers. She received a depressing answer:
“Some agricultural products increased in price by 50% last month, and I can assure you that this is not normal. This growth will slow, but in the next few years they will be much higher. The growth will be enormous. We lack the world’s resources, and we have to raise prices significantly.
Stocks are now virtually zero. This is the lowest level ever recorded. But this is only one point. The situation is really dire, because there is a total lack of everything in agriculture. In America, the average age of farmers – 58 years, and in Japan – 66. In this situation will benefit those countries that have farms and farmers, and also rain. The latter can earn a lot on this. But for the next few years, the prices will increase more and more.
I want to emphasize one more feature. In America, people prefer to study public relations, rather than to study agriculture. What can be done in this situation by the governments of grain-producing countries? Just to go out of the way, because we have so few farms. And this is due to confusion in the government. In India, for example, a farmer is allowed to have no more than five acres of land. What kind of return are we talking about? Thousands of farmers in India have committed suicide in recent years. There are a lot of such countries in the world, including those of the former Soviet republics that have unlimited potential in the development of agriculture, but they just need to keep their farmers alone. In the current situation, Asia feels itself the best way, because the continent had saved a lot of money for a rainy day. “
Despite the poor forecasts, the harvest in the northern hemisphere is defined almost exactly. Only northern territories of Russia, Kazakhstan and Canada are still unharvested. Moreover, Canada expects increase of many crops.
But not only the global balance of grain determines the cereal prices in one separately chosen country – Kazakhstan. There are some specific factors of pricing. Whatever it was with the loss of crops, this year the situation with the presence of grain in Kazakhstan seems less problematic than it was in 2010 after drought, when it was harvested 12.5 million tons of grain. This year, according to the official projections, there will be even more grain. But there were no such high carryover stocks – about 8.5 million tons. That year Russian export ban was looming ahead, which became an additional load on the Kazakhstan market. This year, there is no prohibition.
Until recently, as has been repeatedly informed by our agency, there was felt a lack of interest to the grain of the old crop in the grain market of Kazakhstan. Grain traders read into reports from the field, listened to opinions on the planned volume of the current crop. Manufacturers, fearing to jinx prices, better sealed their barns in the expectation that the price of bread will continue to grow. That was helped by unceasing information flow about drought in countries traditionally considered the leading importers of grain.
And now appeared the first tons of 2012 crop. I must say, not all were happy about them. As it was expected, in drought conditions grain in the spike formed with excellent gluten. Humidity in almost all regions allows you to trade bread virtually from the field. It would be bought very quickly in terms of today’s deficit … if not one “but” – natural weight let down. Insufficient precipitation this spring and summer left its impact.
Conducting our regular monitoring, journalists of “Kazakh-Zerno”, in addition to information about the current prices, asked grain traders to make a small forecast for September. How will emerge the market environment in September? – was our question. Commenting on this, market participants unwittingly told about the current situation.
Not all want to be named in the information means of our agency. But, as we believe, the names of our respondents would say little to an ordinary reader, but you can be sure these people are involved in grain trade for many years.
As we said, the new crop has low natural weight. This was emphasized almost by all of our respondents. In these circumstances the proposal of grain from the old crop has intensified. According to one respondent, it was provoked by quiet conditions and even a slight decline in the domestic market. Producers faced the risk of “miss” a maximum price, got last year’s reserves from the bottom of their hoppers.
The same hutch became a reason for keeping prices. “Our milling plant is now under repair – said the representative of LLC “Altyn Dan”, in South Kazakhstan. – But we are monitoring the situation in the region and in neighboring areas. We can assert with confidence – mills in the south still have a month’s supply of raw materials, so they are not involved in the pricing process. And after, I think, they will have to wait until the price will become stable. Although the first cutting of fields and information from the elevators are telling us that it does not meet the third class. All parameters are normal, but natural weight is not up to the third grade. Grain is puny. All this suggests that prices will increase. There will be needed more coarse grain to form volumes. And the choice of millers, in my opinion, will lean toward the grain from the old crop, which is also not very qualitative, but at least meets the GOST. “
Here are some comments of millers. Suppliers also agree with these words, but also mention one more thing:
“I think that in two weeks the wheat of third class will cost 45,000 tenge. Well-known factors influence this – the bread burnt in Kostanay, Akmola region. In North-Kazakhstan region after recent rains went wormwood. And as we know, wormwood – it’s not qualitative wheat. Yes, there was a short-term decline in these days, but things will change in the near future. “
Upon learning that his opinion will be published, trader jokingly said that such information could affect the market.
“This publication is not necessary at all. Farmers will freeze all their supplies after reading it. I should say there will be no good prices; almost all wheat will not meet the class requirements. Only distilling plants will work on our grain! – said the expert, and then he added: – You see, this prediction can be rotated at will. We will wait and monitor the prices. “
Our regular commentator from Astana gave a more detailed description of the pricing policy.
“In the future prices will continue only to rise. First, natural weight is not going in regions. New grain has already been tasted, and more and more preferred grain harvest of 2011.
In my vision, in the short term that is in September barley will cost approximately 35,000 tenge, and believe me it is not the end. Wheat by the end of October there will be no less than 45 thousand tenge. I will explain why old grain currently listed better. Harvesting has just begun and the first volume we received from the regions where the bread was most affected by the drought. Nothing definite is heard from northern region. Traders and manufacturers synchronize watches with the main grain operator – Food Corporation. It has already established the price of barley and it is high enough – 28,000 tenge, and, despite this, the sales price is much higher – 32-33 thousand tenge. This is attributed to the fact that the forage produced this year is weak. That, in turn, will trigger an unprecedented demand. Barley this year will “shoot”, and may be not lower than the price of wheat. Demand grows – Iran and other Asian republics already evince interest in our barley.
Although it “falls short” by natural weight now: 580 at a standard of 630 for the 2 class.
“I do not know how we will fit into the baseline, – said the next respondent. – Nobody promises us natural weight of 700. All this will affect the price.”
Therefore, farmers want one price for the new crop, and we, as a trading company, want a slightly different price. At first, I think it will be 32-33-34 thousand tenge, but in October during the start of mass harvesting, we can wait another increase in prices. Old crop now costs 36-37 thousand. And this, I think is its bar. As for barley, we will focus on the Food Corporation and give 28,000 per ton. And by the way, I would like to note that the national company still will have its say in the formation of prices for wheat.
We conclude our poll by somewhat different assumption. According to another participant of the grain market, in September prices in the cash market expect decline. And there are four objective reasons for that:
“First – old grain will pressure on the market for a long time. Uncertainty as to our main stock holder – is preserved. How to behave in this situation is not yet clear. Second – whatever it was, Russia, in spite of all the bad predictions, gets its bread, and traditionally makes us competition. Third – do not forget that from August incentives for grain transportation were removed. Fourth – we still have only the initial data of the harvest in 2012. I think when the north will massively throw its grain into the market, prices are to slow down and decline”
Meanwhile, Kazakhstanian grain is losing its positions in Central Asian direction. As previously reported, the question is how seriously Tajikistan will be redirected to the grain from Pakistan in future, and how will it affect Kazakhstan’s exports of grain and flour in this country. The decision of the Tajik leadership to diversify supplies of grain in the country is quite healthy phenomenon due to higher prices for Kazakhstanian grain and flour.
So, the forecasts of our most pessimistic readers are coming true. We remind, in late July on the site “Kazakh-zerno.kz” was posted a poll in which we offer our readers to respond to a present-day question: “Grain is ripening in the fields, and in the south the harvesting campaign is underway. At this time disputes on the theme what the loaf of Kazakhstan bread will be are exacerbated. What is the amount of grain Kazakhstan will receive in 2012? “
Most wishing to take part in the survey (27.8%) declined to answer; choosing a neutral option that it is too early to make predictions. 23.7% of respondents joined the forecast of the Ministry of Agriculture that evaluated domestic bread in volumes of 14-15 million tons. While almost as many (21.6%) agreed with the most optimistic picture – 20 million tons. While all the evidence indicates that a minority (13.6%) voted for the version of the “Farmers of Kazakhstan will not be able to harvest an average yield due to adverse weather conditions in many parts of the country” can win.
These are the results; these are times and opinions. And now, we will learn the analysis of the current situation in the field.
***
In the market of cash sales of grain in Kazakhstan prices were as follows.
Currently, you can buy wheat of 3 class from new harvest in Astana for 37,100 tenge ($277.7; here and further is applied the exchange rate of National Bank of Kazakhstan on 08/14/2012) per ton. The wheat of 4 class is sold by 34,200 ($228.85). First-rate flour in the capital of our country costs 52,200 tenge ($349) per ton. Second-rate flour is sold by 51,300 tenge ($343.25) per ton, and flour of extra class – by 54,200 tenge ($362.65) per ton.
A ton of wheat of 3 class can be purchased for 35,400 tenge ($ 275), wheat with gluten content above 27 percent – for 39,900 tenge per ton ($ 267), wheat of 4 class – 31,300 tenge ($209.4), barley of a 2 class now costs 31,600 tenge ($211.45) per ton in Akmola region. Flour of extra class costs 55,300 tenge ($ 370), first- and second-rate flour is offered at 53,300 tenge ($356.65) and 50,500 tenge per ton ($ 337.9), respectively.
In the North Kazakhstan region wheat of 3 class is sold by 36,500 tenge ($ 256.9) per ton, wheat with gluten content above 27 percent – by 38,800 tenge ($259.6), wheat of 4 class – by 30,800 tenge ($206.1). The current price of barley is 31,100 tenge per ton ($208.1). In the North Kazakhstan the price of flour of extra class is 53,900 tenge per ton ($360.65), first-rate flour costs 51,900 tenge ($347.25) and second-rate flour costs 49,100 tenge per ton ($328.5).
In Kostanai region the price of wheat of 3 class rose to the level of 37,300 tenge per ton ($274.3). Wheat with gluten content above 27 percent is sold by 38,300 tenge ($256.2). Wheat of 4 class costs 31,500 tenge ($210.7). The price of barley of 2 class is 30,800 tenge ($218.7) per ton. The market price of flour of all classes also went up: extra class – to 53,900 tenge per ton ($360.6), first-rate – to 51,900 tenge ($347.2), and second-rate flour – to 49,100 tenge ($328.5) per ton.
In Pavlodar region the price of wheat of 3 class is 38,200 tenge per ton, or $ 275.7 per ton; wheat of 4 class is sold by 33,600 tenge ($224.8). The price of barley is 33,500 tenge ($ 224.1) per ton. Flour of extra class costs 56,000 tenge ($374.7) per ton, first-rate flour costs 54,000 tenge ($361.3) per ton, second-rate flour costs 51,200 tenge ($ 342.6) per ton.
In Karaganda region wheat of 3 class costs 39,200 tenge ($279) per ton, wheat with gluten content above 27 percent costs 41,700 tenge ($288) per ton; wheat of 4 class costs 34,300 tenge ($229). The price of barley is 33,200 tenge ($222.1) per ton. In Karaganda, traders sell flour of all rates at the following prices: first-rate – 54,100 tenge ($362) per ton, second-rate –51,300 tenge ($ 343.2) per ton and extra class – 56,100 tenge ($375.4) 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 38,400 tenge ($244.2) per ton, barley- 31,800 tenge ($212.8) per ton. In the West region of the country the price of wheat of 3 class fixed at 41,000 tenge ($274) per ton. The cost of first-rate flour in East Kazakhstan is 53,700 tenge ($359.3) per ton, second-rate flour costs 48,900 tenge ($327.2) per ton, and flour of extra class – 55,700 tenge ($372.7) 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 40,200 tenge ($274.3) per ton, wheat of 4 class – by 36,700 tenge ($245.5); barley of 2 class is sold by 33,000 tenge ($220.8) per ton. The cost of flour of extra class in this region is 56,300 tenge ($376.7) per ton, first-rate –54,300 tenge ($363.3) per ton, second-rate – 51,500 tenge ($344.6) per ton.
In Zhambyl region the price of wheat of 3 class for today costs 41,200 tenge ($255.6) per ton, barley of 2 class is sold by 34,100 tenge ($228.8) per ton. The cost of flour of extra class in this region is 56,500 tenge ($378) per ton, first-rate –54,500 tenge ($364.6) per ton, second-rate – 51,700 tenge ($345.9) per ton.
In the South Kazakhstan region wheat of 3 class is offered by 41,000 tenge ($269) per ton, wheat of 4 class – by 36,200 tenge ($242.2), barley – by 32,600 tenge ($218.1) per ton. The cost of flour of extra class in this region is 57,000 tenge ($381.4) per ton, first-rate – 55,000 tenge ($368) per ton, second-rate – 52,200 tenge ($349.3) per ton.
In Aktobe region wheat of 3 class is offered by 41,500 ($257.6). Flour of extra class can be purchased for 57,400 tenge ($384) per ton, first-rate – 55,400 tenge ($370.7) per ton, second-rate – 52,600 tenge ($351.9) per ton.
In Kyzylorda region wheat of 3 class is sold currently at 41,700 tenge ($262.3) per ton. The cost of flour of extra class is 59,200 tenge ($396) per ton, first-rate – 57,200 tenge ($382.7) per ton and second-rate – 54,400 tenge ($364) per ton.
In the south capital, Almaty, you can buy wheat of 3 class by 41,100 tenge ($248.2) per ton. Flour of extra class costs in Almaty 58,000 tenge ($388.1) per ton, first-rate – 56,000 tenge ($374.7), and second-rate – 53,200 tenge ($355.9) 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 $269 per ton, with gluten content of 27-30 percent – $281 per ton. Barley costs $248 per ton. Flour of extra class is sold by $392, the cost of first-rate flour is $381 and the second-rate -$ 365 per ton.
At the elevators of the South Ural railway the current cost of wheat of 3 class is $ 239 a ton, wheat with gluten content above 27 percent – $255. The price of barley there is $216 per ton. Flour of extra class can be bought by $370, first-rate flour is $359 and the second-rate -$343 per ton.
At the station Sary-Agash (Kazakhstan – Uzbekistan, DAP) wheat of 3 class costs $272, wheat with gluten content above 27-30 percent – $295. The price of barley there is $252. Flour of extra class can be bought by $392, first-rate flour is $381 and the second-rate -$365 per ton.
At the station Tobol (DAP) wheat of 3 class costs $259, wheat with gluten content above 27-30 percent – $271. Barley is sold by $221 per ton. Flour of extra class can be bought by $368, first-rate flour is $357 and the second-rate -$341 per ton.
At the station Amuzang (Uzbekistan – Tajikistan, CPT) – the cost of wheat of 3 class is fixed at $323 per ton; wheat with gluten content above 27-30 percent is sold by $330 per ton. Flour of extra class is offered by $429, first-rate flour is $420 and the second-rate – $400 per ton.
The average price of wheat of 3 class at the the station Hajraton (Uzbekistan – Tajikistan, CPT) is $326 per ton; wheat with gluten content above 27-30 percent is sold by $332 per ton. Barley can be bought by $315 per ton. Flour of extra class is offered by $446, first-rate flour is $434 and the second-rate – $412 per ton.
At the station Sarahs wheat of 3 class on the CPT terms is sold by $327 per ton; wheat with gluten content above 27-30 percent is sold by $335, barley – $323. Flour of extra class is sold by $453, first-rate flour is $441 and the second-rate – $418 per ton.
In the port of Aktau on FOB conditions wheat is sold by $301, wheat with gluten content above 27-30 percent is sold by $ 324, barley – $ 301. Flour of extra class is sold by $400, first-rate flour – by $394 and second-rate – by $378 per ton.
Reference: $1 = 149.22 tenge, 1 euro = 184.06 tenge, 1 ruble = 4.68 tenge, 1 som = 3.17 tenge, 1 pound sterling = 234.14 tenge, 1 hryvna = 18.44 tenge.
Alimbek Gabitov
