October 31, 2013


Kazakhstan becomes anchor of Central Asia's grain security



Contrary to earlier fears of drought and other obstacles due to Mother Nature, Kazakhstan has become a main player in ensuring Central Asia's grain security.


As of October 18, Kazakhstan harvested 96.1% of its farmland, with close to 20 million tonnes of cereals having been collected and has become the region's main grain security provider. The improvement has been mainly due to a much higher yield of 1.32 tonnes per hectare on average as compared with 0.84 tonnes last year.


According to Kazakh ministry of agriculture official Zhanna Baytemirova, Kazakhstan is able to put up eight million tonnes of grain (almost exclusively wheat) on the export market, along with up to 1.8 million tonnes of flour. Of these volumes, 26% are due to be sold to Uzbekistan (against 22% in the previous marketing year ending on June 30), 15% to Tajikistan (against 10% previously), and 6% to Kyrgyzstan (against 5% last season).


Wheat prices in the global market arena have remained by and large stable in the course of the summer harvest campaigns. According to data from the World Bank in its monthly update, average grain prices through the month dropped from US$228.2 in July to US$190.3 in September, which does not exceed usual seasonal price fluctuations. But the breakdown in various core crops gives a different picture. Average wheat prices in the market place stood at US$307.50/tonne in September this year, up from US$304.60 in July. The price drop was therefore mainly due to losses in sales value of second-tier crops such as corn, which fell from US$279.50 to US$207.50 - in sharp contrast to soy which saw their sales price increase from US$509 to US$566 through the period.


A further stabilisation of its main players on the export market, namely Russia, Kazakhstan and Ukraine, is in view for next year and beyond. In practice, the three countries have worked together in terms of logistics and trade organisation in the agricultural sector for many years. But on October 15 this year, the three countries agreed to formalise their cooperation. Over the upcoming winter, a Black Sea Grain Committee will be installed, which regulates and oversees offers and bids on a common Black Sea Grain Exchange.


Other former Soviet republics, all of which are net grain importers but do export certain types of cereals, as well as third parties are invited to become members of the exchange. Dictated by the Chicago Board of Trade, the overall aim is to make prices less dependent on international benchmark rates, which in turn should make ex-Soviet cereals more competitive on the market while shielding the market against sudden sharp price fluctuations, due to over-speculation across the Atlantic. Another common aim is to regulate supplies to the Black Sea terminals in order to put an end to the current irregular use of transportation lines and storage facilities, which causes alternations between bottlenecks and supply gaps under the regime in practice so far.


Russia expects its grain harvest this year to come close to 100 million tonnes. As of October 21 the amount of cereals collected stood at 88 million tonnes, up from 71.9 million on the same date last year, on a surface of 39.7 million hectares - meaning an average yield of 2.22 tonnes/hectare. As for Ukraine, grain collection volumes stood at a record-high 47.102 million tonnes, with 13.264 million hectares or 84% of the country's entire farmlands having been harvested - up from 39.709 million tonnes on 13.409 million hectares on the same date last year. Yield/hectare so far this year stands at 3.55 tonnes/hectare, up from last year's 2.96 tonnes. This year's total harvest could well push the former Soviet grain troika's export capacity for the current marketing year up to 40 million tonnes without affecting carryover stocks.


Among the former USSR's net grain importers, Belarus saw its harvest down by 1.48 million tonnes to 8.5 million as of October 22. Kyrgyzstan noted that its grain harvest grew by 421,900 tonnes to 1.2 million tonnes on-year as of October 9 with up to 99.5% of the harvest completed, according to the country's agriculture ministry.

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