March 19, 2010

Kazakhstan, Central Asia's top grain producer, wants to double shipping subsidies for grain producers to encourage them to boost exports at a time of falling global prices, according to a senior official.

Ex-Soviet Kazakhstan, the world's ninth-largest country, harvests grain on vast swathes of land but its landlocked location has so far limited exports to neighbouring countries and nearby markets such as Iran and Afghanistan.

Seeking to break into new markets, Kazakhstan has introduced subsidies to enable producers to sell grain in Baltic and Black Sea ports by reducing their shipping costs.

Kazakhstan has also entered eastern markets such as China and South Korea this year after getting sanitary clearance from Beijing, and plans to expand sales further to Southeast Asia.

Deputy Agriculture Minister Marat Orazayev said his ministry wanted to strengthen subsidy policies further to help producers reach far-away buyers. He told reporters that falling global grain prices and high transit tariffs through Russia have hampered exports, leading the government to consider boosting subsidies.

"In connection to this we have proposed the government increase the shipping subsidy to US$40," he said. The size of the current subsidy is US$20 per tonne.

The price of the US CBOT grain futures <Wc1> has fallen by about 14 % so far this year on rising global supply and reserves.

Last year, Kazakhstan harvested 21 million tonnes of grain, mostly wheat, up from 15.6 million tonnes in 2008, and plans to nearly double exports to 10 million tonnes. It has already sold about five million tonnes in the current season.