Representatives of the processing industry of Kazakhstan are wondering this issue for a long time. While the most common product of the community of millers and bakers – a loaf of bread of first grade – does not get above the estimated by the Ministry of Agriculture mark of 45 tenge, a kilo of wheat of 3 class may soon jump over it with ease. Such price is expected on the domestic market in the near future by experts “Kazakh-Zerno”.
Besides, there are a whole bunch of reasons. The objective of these, unfortunately, only one – due to the dry summer the food crisis was “organized” by the leading media of the world, which resulted in a non-stop price boom for agricultural products.
But Kazakhstan is a sovereign country not in vain. Here, business is conducted on the originality of rules of the main player – government agencies, in whose competence is to promote agriculture. How far these functions are performed? To what extent they decide far-reaching plans, whether they have a strategic rationale? Judging by the fact that the Ministry of Agriculture has developed for its work Strategic plan, in which frankly admitted that the domestic agriculture has a rather unpleasant look, and, most likely, trying to follow it, then probably yes. But the current moment and what is happening in the spontaneously developing agriculture convinced of the opposite.
Besides, there are two compelling evidence. In the fire of human passion, which usually flares up during the harvest season, agricultural department in conjunction with grain carriers tossed in two sickly logs. Thus putting domestic agribusiness, which already is not really able to trade, in even more perplexing.
The situation is the main supplier of grain (according to the experts, milling in the three major grain-producing regions of Kazakhstan will be more than 10 million tons) can be called a boom. Proposals of 45 thousand tenge per ton of wheat of 3 class from elevator has already been seriously discussed. Farmers do not sell grain less than 40 thousand tenge from barn-floors.
At this rate, our processors, apparently, will soon stop. And, quite possibly, forever. Because, except for the system kicks and indulgences, native Ministry of Agriculture cannot offer them another healthy work of strategic direction.
In the center of a major incident was again Pavlodar baked goods factory. BGF again goes against logic, or rather, just defends this logic by its actions. It is known to everyone in Kazakhstan that bread of first grade costs 45 tenge, and weighs 600 grams (this doctrine was introduced by the country’s Minister of Agriculture Mamytbekov). Everyone except recalcitrant factory, whose administration is able to count the money, and to somehow enter the profitable level, pinched off 50 grams from social loaf. This immediately got into attention of the Agency for Protection of Competition. And for some reason hand of anti-monopolist, which by bitter irony, is designed to carry out the role of a regulator in the country – the defender of the business, “patted” presumptuous factory by cheek. A prescription was written to the BGF, and a loaf of bread again put on weight.
That’s how corresponding authorities in Kazakhstan took care of business. We wonder how APC would regard the actions of the Ministry of Agriculture, which offers to buy grain at 40,000 tenge, what, in fact, blew up the market?
Kazakhstan
The first alarm bell came from Azerbaijan. In a telephone conversation major grain trader admitted correspondent of IA “Kazakh-Zerno” that it became impossible to work with Kazakhstanian grain. Therefore, the company will soon completely reorient to the nearest suppliers – Russians.
Words of the respondent sounded logical: “Kazakhstanian grain, of course, is qualitative, and with our Kazakhstanian partners we have a long-standing fellowship. But you there are forming the price for a long time and we cannot wait. Moreover, in the course of our traditional monitoring we found out that some refiners in Almaty region are buying Russian grain. So, the most pessimistic predictions of experts with respect to the price collapse of the Kazakhstanian grain in 2012 are coming true. If last year we beat records for milling, but this year we fix achievements in, so to speak, beating of domestic market.
Harvest -2012 in Kazakhstan received several good punches. Do they lead to knockdown? – Unlikely, but time after time the circumstances will knock out already unstable market. Unfortunately, attacks on the market does not always come from the outside, favorite activity of our Ministry of Agriculture – self-torture.
Each of these low kicks was thoroughly investigated by correspondents of IA “Kazakh-Zerno”. The first was made by nature, showering grain crops with a powerful dose of UV light. As a result, Kazakhstan has lost 58% of the gross harvest of the previous year. For some government officials such evaluation of plant growing sector in Kazakhstan may not seem objective, but the numbers speak for themselves. Our colleagues in the grain market – Russia and Ukraine – despite all the upheavals have lost three times less. These comparisons gave a handle to talk on the volatility of grain production in Kazakhstan. Despite all the public injections in the grain sector, we have not learned how to consistently produce bread, which can not only ensure food safety, but also satisfy the ambitions of the export of grain.
They, according to popular wisdom, grow, like appetite, at dinner. With the latest Ministry of Agriculture decided recently, calling the final figure of grain shipped in 2011-12 MY. It turned out to be 12.7 million tons. In this case, the claim is made that in the current marketing year Kazakhstan will not slow the pace of exports and will be able to handle over a million tons abroad every month. Is not it a dream, when today our own grain is too expensive for us?
The second blow to the jaw of the grain market has come not just from those who should support it in every possible way . The Ministry of Agriculture of Kazakhstan made a proposal to buy wheat of 3 class for state reserves at 40 thousand tenge per ton. Anyone who is any way connected with the grain market, understand how farmers are waiting for this figure. They build entire business on it. And now agricultural department makes a sweeping gesture toward the grower. And, no one is worried that this purchase will be held in more than moderate limits. That according to the signed decision by the Prime Minister Karim Massimov, on this purchase of grain in 2012 is allocated a total of 9 billion 250 million tenge from the budget. Wheat alone (given that the proposal of the Ministry of Agriculture will be approved), can be bought only 231,250 tons for this amount of money.
But the Food Corporation is already spending the money for purchase of barley and the Ministry of Agriculture is going to purchase ordinary wheat for livestock producers.
Whatever it was, the producers got their bearings on prices, and the most persistent of them live, as if the motto of wartime: not even a step backwards.
Optimistic expectations of some experts, predicting the price of corn in the winter period would be in the region of 50 000 or even 60 000 per ton, give them confidence.
Considering all these factors, wheat and barley are now traded mainly in small batches directly from agricultural enterprises. Farmers are calculated on liabilities to banks, closing costs.
One of producers in a conversation with our correspondent stated: “Farmers are now in the euphoria of the high prices.” But how long it will last is a rhetorical question. Indeed, out of the blue grain business in Kazakhstan received another slap in the face of him with whom it actually was waiting for – from the tandem of carriers “Kazakhstan Temir Zholy” (KTZ) and “Kaztemirtrans” (KTT). In business circles of Kazakhstan since March this year, there was active talk about conversion of inventory fleet of cars of KTZ to private balance of KKT. This was discussed in July, in particular, with the president of the Union of Millers Eugene Hahn. Public man then suggested that the increase in tariffs for graintransportation could rise by 15-20%.
But it was a gut-punch. You can invest this fact in all sorts of language, to remember all sorts of terms, but the essence of innovation of Kaztemirtrans is one – prices of transportation of grain have doubled. Today, to a regular increase in export prices interviewed traders added five dollars per ton. In all directions.
The motivation of Kaztemirtrans to introduce a new tariff seems logical. Previously, shippers paid for the use of railway services together.
Now the cars have a new owner who has approved additional pay for their rent. Thus, a global problem of equation the difference of lease of rolling stock with Russian or Ukrainian operators is resolved. Will the Kaztemirtrans withstand such competition? After all, according to the calculations of the Russian agency «Infoline-analytics” in the CIS fleet of rail grain carriers has about 61,1 thousand cars. The largest fleet have Russian companies – 36.3 thousand, followed by Ukraine -12.2 thousand, Kazakhstan takes the third place – 5.2 thousand.
Right now experts are browsing possible scenarios for the development of transport market. According the IA “Kazakh-Zerno”, now large suppliers will be seriously engaged in reviewing contracts for rental cars. Some part of the capital, which previously has served to the KTZ, will go to the Russian market. Quite possibly, the financial departments of companies viewed purchase options of their own grain carriers. And there are enough offers from the Russian, Ukrainian, Belarusian producers.
What does the “Kaztemirtrans” offer for double payment? As recognized by the carrier, the degree of wear of the rolling stock, as of January, 1 was 61.2%. The average age of freight cars was 26 years. During 1991-2003 no wagons have been acquired. During the 2013-2016 period the JSC “KTT” will write off 9944 cars on working lifespan. 25% of loading in Kazakhstan is provided by Non-Kazakhstan Park. As a result of disposal of cars, without replenishment by new wagons, fleet of cars in Kazakhstan can shrink by 68%. Agree, not very similar to the handout.
Yes, the program of modernization of the rolling stock in KTT is under way, but according to the latest information of KTT about incoming new freight wagons, according to the procurement plan for 2012 it is needed to purchase of 14,756 freight cars (including 1261 grain carriers and 2000 covered wagons). Depressing backlog of plans. To date, 6887 cars were accepted into service (including 65 grain carriers and 849 covered wagons).
There are 65 new grain carriers and 849 new covered wagons. The introduction of a new principle of charging, no sooner not later, in early September – in the midst of harvest. With the addition of these two facts creeps a seditious thought: whether Kazakhstan needs a grain pool, which we have been increasing over the years, which we are so proud of? Kazakhstan may need it, but the carriers seem to consider it as an extra segment of the market.
Despite all this, grains are grown in Kazakhstan. So to speak, in autopilot mode. And this round loaf bursting bins of homeland needs an outlet. It seems to be a need for it. But who would buy bread that in the ear becomes gold. Interesting conversation we have with a trader involved in the supply of grain to the Uzbek market. At that end of the telephone wire companion from Uzbekistan long resented that the price of wheat is very expensive. Personal opinion of interlocutor: the prices are unreasonably overstated because of innovations of Kaztemirtrans. And eventually suffers a buyer. There are no problems with barley now, though appeared the news that since the 15th the price will rise by another $ 13-15. He did not say anything regarding flour.
This story with a representative from Uzbekistan is taken by no accident. Tashkent in the spring announced about the diversification of domestic grain production, and supported the application with very categorical measure – the introduction of a 15% excise duty on imports of flour from Kazakhstan. Measure, though not popular, but very natural. Since we do put our AIC in a raw material overshoe, why not do this to our partners? The outrage of Uzbek grain trader is understandable. Mills of the motherland, ready to send to Afghanistan and other neighboring countries of Kazakhstan grain flour, are standing.
Still moderately have said our Kyrgyz respondent: “The price is growing in Kazakhstan, and we, therefore, observe the rise in prices. Further increase in wheat prices is expected. Purchase of wheat from Kazakhstan is made for $ 305-320, although before this the price was $285-290”. But disturbing notes are already heard in his voice.
Finally, a comment Azerbaijanian trader that we gave at the beginning of this review: “There is no Kazakhstanian wheat, work is carried out with a Russian product.”
And what the Russian product? All advanced public of grain market of Russia rose against commodity interventions. As it was reported earlier, the President of the National Union of Grain Producers Pavel Skurikhin opposed the state’s participation in the formation of grain prices this year.
According to an authoritative expert, total grain output this year allows for the internal needs of domestic consumers in full.
“I believe that the holding of trade interventions in the current year would be premature and would inevitably lead to the destabilization of the situation on the grain market. Existing grain prices now allow our agricultural producers to distribute cost-effective our products across the country, thereby reducing the volume of grain designated for export,” – said Skurikhin.
In a study of APK-Inform dedicated to the Russian grain market, in particular, was stated: “Price situation in the market of milling wheat showed no significant change. Trade and procurement activities have remained relatively stable.”
Stability is the key to a successful business. The law, coined not by us.
***
On the ETS exchange wheat contracts throughout the first half of September were rising almost non-stop. Price increase occurred in all positions, without exception.
On Thursday, September, 13 on the ETS exchange wheat contracts rose again in three positions. Contracts with performance in October rose by 1260 tenge, with performance in December and January by 500 tenge per ton of wheat of 3 class.
As a result, during the first half of September wheat contracts with performance in September rose by 2000 tenge per ton; in October – by 4770 tenge, in November – by 4500 tenge, in December, January and February -by 5000 tenge per ton of wheat of 3 class.
The values of wheat futures on the ETS exchange according to delivery month as of August 31, 2012 (tenge per ton)
|
Wheat |
September |
October |
November |
December |
January |
February |
|
3 class |
36 500 |
32 260 |
37 000 |
37 500 |
38 000 |
38 500 |
The values of wheat futures on the ETS exchange according to delivery month as of September 13, 2012 (tenge per ton)
|
Wheat |
September |
October |
November |
December |
January |
February |
|
3 class |
38 500 |
37 030 |
41 500 |
42 500 |
43 000 |
43 500 |
In addition to influence of the world market, such a rapid increase in prices can be explained by exchange interventions of the Food Corporation, which still tends to keep the grain in the country in conditions of worsening of regional and global grain balance.
Our last monitoring of prices in the domestic market can be described as the most emotional of late. Perhaps, there was no a person from more than 150 respondents, who refused to comment on the introduction of the new tariff by “Kaztemirtrans.” The first who felt the rise of costs for transportation of Kazakhstanian grain were foreign buyers, who usually receive bread after surcharge for delivery.
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 1500-2000 tenge per ton. Barley continues to strengthen its positions, since the publication of our last survey, sales grew by an average of 1200-1500 tenge. After all price hikes this growth seems to be negligible. Moreover, experienced market participants continue to predict price rise for this grain.
The prices for all grades of flour responded adequately to the raise of grain price. Flour of extra class jumped by 4,000 tenge, first – and second-rate increased by about 2000 tenge per ton.
Currently, you can buy wheat of 3 class from new harvest in Astana for 42,700 tenge ($285.23; here and further is applied the exchange rate of National Bank of Kazakhstan on 09/20/2012) per ton. The wheat of 4 class is sold by 39,700 ($265.19). First-rate flour in the capital of our country costs 59,300 tenge ($396.28) per ton. Second-rate flour is sold by 56,500 tenge ($377.27) per ton, and flour of extra class – by 61,300 tenge ($409.98) per ton.
A ton of wheat of 3 class can be purchased for 41,300 tenge ($275.86), wheat with gluten content above 27 percent – for 44,100 tenge per ton ($ 294.54), wheat of 4 class – 38,300 tenge ($255.85), barley of a 2 class now costs 34,900 tenge ($233.16) per ton in Akmola region. Flour of extra class costs 60,300 tenge ($ 402.31), first- and second-rate flour is offered at 58,300 tenge ($389.61) and 55,500 tenge per ton ($ 370.6), respectively.
In the North Kazakhstan region wheat of 3 class is sold by 40,700 tenge ($271.52) per ton, wheat with gluten content above 27 percent – by 43,000 tenge ($287.87), wheat of 4 class – by 37,700 tenge ($251.51). The current price of barley is 34,400 tenge per ton ($229.49). In the North Kazakhstan the price of flour of extra class is 58,900 tenge per ton ($393.64), first-rate flour costs 56,900 tenge ($380.94) and second-rate flour costs 54,100 tenge per ton ($361.26).
In Kostanai region the price of wheat of 3 class rose to the level of 41,500 tenge per ton ($277.53). Wheat with gluten content above 27 percent is sold by 42,500 tenge ($283.2). Wheat of 4 class costs 38,500 tenge ($257.51). The price of barley of 2 class is 34,100 tenge ($227.83) per ton. The market price of flour of all classes went up: extra class – to 58,900 tenge per ton ($393.97), first-rate – to 56,900 tenge ($380.27) and second-rate flour to 54,100 tenge ($361.26) per ton.
In Pavlodar region the price of wheat of 3 class is 42,400 tenge per ton, or $ 283.2 per ton; wheat of 4 class is sold by 39,400 tenge ($263.19). The price of barley is 36,800 tenge ($ 245.84) per ton. Flour of extra class costs 61,000 tenge ($407.31) per ton, first-rate flour costs 59,000 tenge ($394.28) per ton, second-rate flour costs 56,200 tenge ($ 375.27) per ton.
In Karaganda region wheat of 3 class costs 44,700 tenge ($298.53) per ton, wheat with gluten content above 27 percent costs 46,100 tenge ($307.21) per ton; wheat of 4 class costs 40,600 tenge ($271.52). The price of barley is 36,500 tenge ($243.17) per ton. In Karaganda, traders sell flour of all rates at the following prices: first-rate – 59,400 tenge ($396.62) per ton, second-rate –56,600 tenge ($ 378.94) per ton and extra class – 61,400 tenge ($410.32) 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 42,700 tenge ($285.2) per ton, barley- 35,100 tenge ($234.5) per ton. In the West region of the country the price of wheat of 3 class fixed at 45,300 tenge ($302.88) per ton. The cost of first-rate flour in East Kazakhstan is 58,800 tenge ($392.61) per ton, second-rate flour costs 54,000 tenge ($360.59) per ton, and flour of extra class – 60,800 tenge ($406.31) per ton. In the West Kazakhstan prices for flour are as follows: extra class costs 61,300 tenge ($409.65), first-rate – 59,300 tenge ($396.94), second- rate -56,500 tenge ($377.27) respectively.
In Almaty region the price of wheat of 3 class for today is offered by 44,600 tenge ($297.88) per ton, wheat of 4 class – by 41,600 tenge ($277.86); barley of 2 class is sold by 36,300 tenge ($242.5) per ton. The cost of flour of extra class in this region is 61,600 tenge ($411.65) per ton, first-rate –59,600 tenge ($398.95) per ton, second-rate – 56,800 tenge ($379.27) per ton.
In Zhambyl region the price of wheat of 3 class for today costs 45,600 tenge ($304.55) per ton, barley of 2 class is sold by 37,400 tenge ($249.84) per ton. The cost of flour of extra class in this region is 61,800 tenge ($412.99) per ton, first-rate –59,800 tenge ($399.29) per ton, second-rate – 57,000 tenge ($380.61) per ton.
In the South Kazakhstan region wheat of 3 class is offered by 45,400 tenge ($303.22) per ton, wheat of 4 class – by 42,400 tenge ($283.2), barley – by 35,900 tenge ($239.84) per ton. The cost of flour of extra class in this region is 62,300 tenge ($416.32) per ton, first-rate – 60,300 tenge ($402.62) per ton, second-rate – 57,500 tenge ($384.94) per ton.
In Aktobe region wheat of 3 class is offered by 45,800 ($305.88). Flour of extra class can be purchased for 62,500 tenge ($417.65) per ton, first-rate – 60,500 tenge ($404.95) per ton, second-rate – 57,700 tenge ($385.28) per ton.
In Kyzylorda region wheat of 3 class is sold currently at 46,100 tenge ($307.55) per ton. The cost of flour of extra class is 64,400 tenge ($430.66) per ton, first-rate – 62,400 tenge ($416.96) per ton and second-rate – 59,600 tenge ($398.95) per ton.
In the south capital, Almaty, you can buy wheat of 3 class by 45,500 tenge ($303.88) per ton. Flour of extra class costs in Almaty 63,300 tenge ($422.99) per ton, first-rate – 61,300 tenge ($409.29), and second-rate – 58,500 tenge ($390.61) 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 five 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 $346-351 per ton, with gluten content of 27-30 percent – $358-363 per ton. Barley costs $280-285 per ton. Flour of extra class is sold by $487-499, the cost of first-rate flour is $446-457 and the second-rate -$ 424-429 per ton.
At the elevators of the South Ural railway the current cost of wheat of 3 class is $ 300-305 a ton, wheat with gluten content above 27 percent – $314-329. The price of barley there is $244-249 per ton. Flour of extra class can be bought by $447-452; first-rate flour is $405-415 and the second-rate – $380-398 per ton.
At the station Sary-Agash (Kazakhstan – Uzbekistan, DAP) wheat of 3 class costs $338-344, wheat with gluten content above 27-30 percent – $353-359. The price of barley there is $282-288. Flour of extra class can be bought by $476-486, first-rate flour is $436-445 and the second-rate -$434-440 per ton.
At the station Tobol (DAP) wheat of 3 class costs $316-321, wheat with gluten content above 27-30 percent – $331-336. Barley is sold by $254-259 per ton. Flour of extra class can be bought by $563-570, first-rate flour is $418-425 and the second-rate -$399-409 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 $409-419 per ton; wheat with gluten content above 27-30 percent is sold by $412-420 per ton. Barley can be bought by $345-352 per ton. Flour of extra class is offered by $588-598, first-rate flour is $548-558 and the second-rate – $495-502 per ton.
At the station Sarahs wheat of 3 class on the CPT terms is sold by $400-407 per ton; wheat with gluten content above 27-30 percent is sold by $411-418, barley – $356-363. Flour of extra class is sold by $587-604, first-rate flour is $537-544 and the second-rate – $500-507 per ton.
In the port of Aktau on FOB conditions wheat is sold by $340-347, wheat with gluten content above 27-30 percent is sold by $ 362-369, barley – $ 299-306. Flour of extra class is sold by $494-506, first-rate flour – by $464-481 and second-rate – by $429-436 per ton.
Reference: $1 = 149.88 tenge, 1 euro = 195.38 tenge, 1 ruble = 4.86 tenge, 1 som = 3.20 tenge, 1 pound sterling = 242.64 tenge, 1 hryvna = 18.44 tenge.
Alimbek Gabitov
