Kazakhstan has become an important supplier of wheat flour, supplying much of the needs of its two neighbors, Afghanistan and Uzbekistan. The government’s response to the coronavirus (COVID-19) crisis, which involved limiting exports, was not welcomed by the country’s millers. However, the country’s state of emergency ended on May 11, and restrictions slowly are being lifted.
The International Grains Council (IGC) forecasts Kazakhstan’s total grains production in 2020-21 at 18.3 million tonnes, up from 16.5 million the year before. About 12.9 million tonnes of the 2020-21 total is wheat, up from 11.5 million the year before.
Production of barley is put at 4 million tonnes, compared with 3.8 million in 2019-20.
The IGC forecasts the country’s total grains exports in 2020-21 at 8.9 million tonnes, up from 7.5 million the year before. The figure includes exports of wheat in 2020-21 of 7.5 million tonnes, up from 5.9 million tonnes in the previous year. Exports of barley are forecast at 1.4 million tonnes in 2020-21, compared with 1.5 million the year before. The IGC also forecasts that Kazakhstan will export an unchanged 100,000 tonnes of rapeseed.
Global power in flour
Kazakhstan is a major exporter of wheat flour, second only to Turkey. The IGC forecasts its 2020-21 exports of wheat flour at 2.5 million tonnes, up from 2 million in 2019-20. Kazakhstan is a major supplier of flour to Afghanistan and Uzbekistan.
The USDA attaché, in an annual report on the sector dated April 27, forecast the country’s wheat production at 13.5 million tonnes in 2020-21, compared with 11.4 million in the previous year, explaining that the 2019-20 crop was affected by drought.
“Though wheat area continues to fall, higher precipitation last fall and during the winter have increased soil moisture, which is expected to lead to more average yields for MY 2020-21,” the report said.
The USDA said its forecast of a small rise in barley production, to 3.9 million tonnes from 3.8 million, reflects higher expected yields that will compensate for a small reduction in area.
“However, spring sowing will not begin for a number of weeks, and as a result, yield forecasts are extremely preliminary,” the report said.
There is a trend to increase oilseed area, which the attaché expects to reach 1 million hectares, up 122,000 in 2020-21.
“As a reminder, the bumper wheat harvest in 2012 caused a collapse in Kazakhstan, as insufficient storage capacity caused large grain losses,” the attaché said. “As a result, the government began to promote planting of alternate higher value crops (oilseeds) to diversify farmers’ incomes and to vary exports.”
This initially led to higher subsidies for oilseeds than wheat.
“Though crop-specific subsidies have now been eliminated, this program contributed to the significant increase in oilseed production in Kazakhstan in the last 10 years, as well as the consequent decline in wheat area,” the attaché said.
The country’s government responded to the COVID-19 pandemic by announcing export restrictions and bans for a range of food commodities. For wheat grain, there was an export quota for April of 200,000 tonnes a month, while for wheat flour the limit was 70,000 tonnes a month. A plan to ban their exports altogether was dropped amid protests from the flour milling sector. However, exports of buckwheat, buckwheat grains, and sunflower seed and oil, among other products, are not allowed.
“Millers are concerned about the wheat flour restrictions,” the attaché said in an annual report on the sector, pointing out that the number of active mills in Kazakhstan fell from 350 in 2018 to 260 in 2019. “Average wheat flour exports were previously around 2.8 million tonnes, but last year exports reached just 1.4 million tonnes.”
The report explains that the fall was partly due to increased milling of wheat from Kazakhstan in Uzbekistan, drawing calls from millers for limits on wheat exports.
“Millers claim that export restrictions will create an excess supply of both grain and flour, and that increased demand for food in other countries amid the spread of COVID-19 could have helped the companies recapture losses incurred last autumn and allowed mills to stay afloat,” the attaché said.
The Ministry of Agriculture increased the export quota for May to 150,000 tonnes of flour and 257,000 tonnes of wheat, including 230,000 of food grade wheat, 20,000 of feed wheat and 7,000 of organic wheat.
In an article published by Forbes on March 26, Dos-Mukasan Taukebaev, director of the Mutlu milling company, commented on the fall in mill numbers between 2018 and 2019, when 90 mills had closed.
“On average, 150 people worked for each,” he said. “That is, 13,500 Kazakhstanis were left without work.”
The industry has been plagued over the last 10 years by the development of milling sectors in neighboring countries and by increased freight costs.
A further effect of the COVID-19 crisis has been a sharp fall in the value of Kazakhstan’s currency, the tenge, against the US dollar. According to the attaché, the tenge declined by 16% in March 2020.
“The US dollar exchange rate to Kazakhstani tenge had increased from 382.05 tenge per $1 on March 16, 2020, to 444.80 tenge per $1 by March 26, 2020, and it continued to grow,” the report said. “The last major depreciation happened in 2015. The exchange rate fluctuations may impact the affordability of imported inputs such as fertilizer and seeds.”
The attaché reported on May 15 that the Kazakhstani Ministry of Agriculture has announced plans to remove export quotas for staple products, with effect from June 1.
“Despite some hiccups related to quarantine restrictions, spring planting efforts appear to be proceeding normally,” the latest report said. “The government, including President Tokayev, has consistently stressed the importance of ensuring a successful planting season.”
The report also explained that Kazakhstan has long controlled prices of certain stable food items, such as basic loaves of bread.
“As part of its COVID-19 response, the government created a panel to create ceiling prices for products, including flour, bread, pasta, buckwheat, rice, beef, eggs and sunflower oil,” the report added. “To help control prices, the Ministry of Finance ordered that food products face reduced VAT (from 12% to 8%) and eliminated certain customs duties through October 2020.
“Kazakhstan also maintains a system of Stabilization Funds in each region, which purchase staple items and re-sell them to supermarkets to guarantee supplies and avoid significant price changes. No significant shortages have to date been reported in Kazakhstan’s major cities, though some Stabilization Funds reported depletion of their existing stocks during the quarantine.”
GM not embraced
Genetically modified crops have not been adopted in the country.
“Despite success by Kazakhstani researchers in developing new GE varieties, the government of Kazakhstan shows little interest in developing new regulations more favorable to biotechnology at this time,” the attaché said in a report on the technology. “Since Kazakhstan withdrew draft biotechnology legislation in May 2016, essentially all progress on biotechnology issues has stopped. Without this law in place, development of agricultural biotechnology will remain constrained in Kazakhstan.”
The subject is not a major public issue.
“Since Kazakhstan produces few crops for which GE varieties exist, this issue is not of great importance to farmers groups or the Ministry of Agriculture in general,” the attaché said.
Kazakhstan enforces Eurasian Economic Union (EAEU) labeling rules for GM products.
According to the attaché, “Kazakhstan imports only small amounts of corn or soybeans,” although they add that January-August 2019 soybean imports were at a record high of 19,201 tonnes.
“Most soybeans are imported from Russia,” the report said.