Kazakhstan's subsidy may affect grain prices

Kazakhstan may have severely threatened the revival in wheat prices by tripling its support for grain trains in an effort to boost exports, according to a leading analyst.

 

The Black Sea agricultural powerhouse said it would double to US$40 a tonne the subsidy for grain transported through Russia and introduce a similar incentive for consignments to China. The move is aimed at enhancing the access of the land-locked country to export facilities.

 

While Kazakhstan's exports have risen by 1.3 million tones to 5.5 million tonnes since September, they remain well below potential after a harvest of nearly 21 million tonnes last year.

 

However, the initiative threatens a rebound in international wheat prices, which have recovered to about US$170 a tonne free on board in Black Sea and French ports, Andrey Sizov, managing director of Moscow-based consultancy Sovecon, said.

 

"With this new subsidy they can seriously hit world wheat prices, which have just began to recover," Sizov said, noting that Kazakhstan could now, in theory, offer wheat at about US$160 a tonne, excluding freight.

 

The latest tender by Egypt, the world's biggest wheat importer, was won with an offer of Russian wheat at US$167.70 a tonne, excluding freight.