May 24, 2012

 

Kazakhstan to pay US$30/tonne for record grain exports

 

 

In order to help push exports toward a record 13 million tonnes, Kazakhstan will pay nearly US$30 for every tonne of grain delivered to the Black Sea for the rest of this season, the country's agriculture minister told Reuters in an interview.

 

Wary of limited export capacity, Kazakhstan is investing in new elevators, ports and railroads to supply Iran and its Central Asian neighbours, but will also encourage farmers to cultivate more feed grains, corn and oilseeds to avoid an oversupply of wheat in future, Asylzhan Mamytbekov said.

 

"Today, we have over-production of wheat. Farmers are suffering," Mamytbekov said. "Our traditional markets cannot absorb our wheat, and the government needs to subsidise part of the expense involved sending grains to less profitable markets."

 

Landlocked Kazakhstan, five times the size of France, harvested a post-Soviet record 27 million tonnes of grain last year. Though among the world's top 10 wheat exporters, the hefty transport costs involved in moving grain to distant ports often render it less competitive than Russian or Ukrainian grain.

 

The Kazakh government would subsidise exporters by paying KZT4,000 (US$27) toward every tonne of grain shipped by rail to ports on the Black and Baltic Seas between now and the end of the marketing year in June, Mamytbekov said. The subsidies would also apply to shipments to China, he said, though volumes are small. A similar programme at the start of the current season subsidised the first 2.5 million tonnes of exported grain at a rate of KZT6,000 (US$40) per tonne.

 

Mamytbekov said Kazakh grain exports this season were on track to reach 10 million tonnes by June 1. Using the preferred Kazakh marketing year of September to September, he said another three million tonnes would be shipped over the next three months.

 

"We're set for a record this year," he said, forecasting a minimum 13 million tonnes.

 

Iran, which shares a Caspian Sea coastline with Kazakhstan, has been among the Central Asian country's biggest export markets this season. Mamytbekov said Kazakh grain exports to Iran would reach between 900,000 tonnes and one million tonnes.

 

"Roughly speaking, that's half a million tonnes by rail and half a million by sea," he said.

 

Kazakhstan's proximity to Iran has made its grain a viable alternative for private Iranian buyers in the face of international sanctions, though tough terms with cash payment in advance are being requested.

 

Asked about the effect of the sanctions on business with Iran, Mamytbekov said: "They create problems with payment. Private business supplies mainly on condition of pre-payment." But he added: "As far as I know, the sanctions don't apply to food products. These are considered humanitarian goods."

 

Kazakhstan ships grain to Iran by rail via its Central Asian neighbours and by sea from its Caspian port of Aktau to the Iranian port of Amirabad. Barley was shipped from the latter early in the season, though recent shipments comprise wheat. A new railroad across western Turkmenistan, currently under construction, will also allow Kazakhstan to export a further 1.5 million tonnes annually to Iran, Mamytbekov said. But Syria, which is also suffering difficulties importing grain, was not a major market for Kazakhstan, the minister said.

 

"Our grain would be expensive there," Mamytbekov said. "Syria has access to the sea, so it's easier to buy French, Hungarian or Ukrainian grain via the Mediterranean."

 

Kazakhstan would also expand grain storage capacity to more than 15 million tonnes over the next year from the current 13.8 million tonnes, he said, through private and state investment in new elevators. Asked for his forecast for the 2012 grain harvest, Mamytbekov said the crop would be "average".

 

"The USDA says 15 million-16 million tonnes. They rarely make a mistake," he said.

 

Kazakh farmers have also cut the area sown to wheat by 300,000 hectares this year, with growing poultry and cattle numbers encouraging growth of a feed grain industry. Among other projects, Kazakhstan plans to increase annual beef exports to 60,000 tonnes by 2016 from practically nil today, a project targeted at the Russian and Asian markets that requires significant investment in cattle breeding. While too early to call this a trend, Mamybekov said farmers should be looking to vary the crops they grow because surrounding markets will not be able to buy excess Kazakh wheat in the near future.

 

"We are now producing grain for domestic consumption and our traditional markets, plus prospective new markets that we'll see in 10 or 15 years. But people don't buy grain 15 years in advance," he said.

 

"When China comes to the market, they will buy more from us. Sometime in the future, we will supply more to Afghanistan and Uzbekistan. But it doesn't mean we should be doing that right now."

 

The challenge for his ministry, he said, was to create the conditions whereby farmers would choose to invest in the technology and seeds required to diversify their crops.

 

"If we can create the conditions whereby farmers want to change - leasing of technology, loans for storage and seeds, marketing advice - many farmers will make the change on their own," he said.