Kazakhstan will definitely not be left without bread, but the scale of losses has yet to be calculated, the Grain Union states.
Incessant rains in the northern part of the country, which is a grain granary, have caused concern among the population. Fearing being left without a harvest and anticipating a surge in prices for bakery products, Kazakhstanis began to gradually buy bags of flour. What is the situation against this background and is it worth worrying when stocking up? Evgeniy Karabanov, an expert and representative of the Grain Union of Kazakhstan, shared his opinion with inbusiness.kz.
– Evgeniy Aleksandrovich, it has been raining continuously for two weeks, which has already negatively affected the quality of the harvest. What should the population expect? Is the concern justified?
“The situation is really difficult, and the year has been difficult, farmers have suffered greatly. As they say, out of the seven plagues of Egypt, we have already received four. First, locusts in the Kostanay and Akmola regions, then the saigas also profited, then drought. And to top it off, it poured with rain. The most affected by this situation are, of course, the farmers themselves. Why? Because the wheat that they will harvest after the rains, which lasted almost continuously for 2.5 weeks, began to germinate not only when mown, but also on the root, which is standing in the ear.
– Do you have data on how much time farmers had to harvest before the rains?
– The preliminary forecast for a wheat harvest of 14 million tons did not materialize due to prolonged rains during the period of mass harvesting. The rains occurred just at the stage of complete ripeness of the wheat - the amount of precipitation and its duration had an impact. Some of the wheat was harvested before the rains.
Thus, the total harvested before the rains was: grain crops - 4.8 million hectares, of which about 800 thousand hectares were winter crops, 1.5 million hectares were spring crops. Accordingly, 2.5 million hectares of wheat were harvested. About 18% of wheat has been harvested from the sown area. This is good quality, conditioned wheat, which is suitable for seeds, for processing into flour, and for export.
According to Comstat estimates, as of August 1, 4.2 million tons were left over, and according to our estimates, the carryover balance is 3.5 million tons. This is also good quality wheat that meets all the requirements for milling qualities. In total there are about 6 million tons of high-quality conditioned grain.
Based on the consumption standards for bakery products approved by the Ministry of Economy, 1.7 million tons are the needs of the population, 2 million tons are needed for seeds. The total demand is 3.7 million tons. The rest of the sprouted crop will be used for fodder purposes, for the needs of livestock, poultry farming and technical processing - primarily alcohol.
Last year we fed the chickens high-quality food wheat because there was no feed grain. This year, the opposite happened; accordingly, the fodder should be used for its intended purpose.
– Can you give a forecast on demand from buyers and the formation of purchase prices?
– Under current conditions, we can expect the following structure of the wheat harvest: 25% of the total volume is 2nd and 3rd classes, 45% is 4th class, 30% is 5th class and non-class wheat. The main demand from buyers will be for the 2nd, 3rd and 4th classes of wheat. Purchase prices for them will be formed taking into account the difference, approximately 3-5 thousand tenge, depending on quality indicators. Feed wheat from the new harvest, according to preliminary calculations, may amount to about 3 million tons, and demand for it in the domestic market will be formed mainly by poultry farmers.
On the other hand, poultry farmers are given the opportunity to import Russian wheat. So far, there is price parity for Kazakh and Russian wheat (at an exchange rate of 4.8 tenge per ruble and current domestic prices for wheat in the Russian Federation). The situation could worsen for Kazakh grain producers if this parity is violated and Russian feed wheat becomes cheaper than Kazakh wheat.
The VAT refund procedure in force since April 2023 forces exporters of grain and its processed products to reduce purchase prices, which is an additional factor of pressure on domestic prices and, accordingly, a reduction in the income of grain producers.
– What will happen to wheat exports, given the difficult harvest year? Will the volumes be enough to meet the domestic needs of the population?
– We do not yet have active exports due to the fact that Kazakhstan Temir Zholy does not approve transportation requests. Nearby is the neighboring Russian Federation with a very good harvest of choice and any quality of wheat. For example, last year we imported about 2.8 million tons of wheat from Russia. Therefore, fears that we will be left without wheat and our population will be left without flour and bread are too premature and unfounded.
In any case, the government has taken care of this and is working on ways to resolve the situation. Now it is necessary, first of all, to support farmers so that they can survive this year, extend their obligations, or buy low-quality wheat from them. This is already a matter for the government, so that farmers can survive, save and sow next year.
– Is there already information on how much crop loss was due to sprouted wheat?
“It’s hard to calculate now, but only at the end of the cleaning can you understand.” But it is clear that there are losses. The losses are not only in quality, but also in quantity. Any rain leads to partial shedding of wheat.
No one can now say how much the losses will be. If before the rains we said that we would collect about 14 million tons of wheat, now it is clear that we will collect less. How much less is difficult to say. But we assume that 50% of the wheat will be of feed wheat quality, the remaining 50% will be food and seed wheat. This is our guess for now.
– People are interested in whether prices for flour and bakery products will increase? Should I buy flour in future for household needs?
– If you look at the national statistics data, the prices for flour were formed last year, in the summer, when the cost of wheat rose to 160-170 thousand tenge per ton, and almost during this time by the summer of this year it fell by half - to 85 thousand. tenge At the same time, the cost of flour fell very slightly, by 6-8%. Therefore, I think that there is a decent margin in order not to raise prices. And then it will depend on control by the government agencies themselves.
From the point of view of objective figures, there is no reason yet to increase the cost. But, even if for some reason we do not have enough of our food grain, Russia is nearby with its good, large harvest, where we can always collect the missing volumes.
– An invasion of locusts, saigas, drought, and now rains... Can we say that this year was a lean year in Kazakhstan?
– There is no crop failure in Kazakhstan, the problem is expressed in the quality of wheat. The last time a similar situation with sprouted wheat was in 2005. Many years have passed since then. However, despite the difficulties, all this negativity has one positive aspect - the land received good moisture recharge for the next year. The land was dry, now it has received moisture; in winter snow will fall, which will cover this moisture, and with it, farmers will be able to get a decent harvest next year.
– What problems will a grain producer have amid all these difficulties with harvesting?
– In the current season, the attention of government agencies, in our opinion, should be paid primarily to the needs of domestic grain producers. Against the backdrop of emerging low prices, as well as high grain costs and with a small amount of marketable products from the new harvest, it will be almost impossible for domestic grain producers to timely and fully fulfill their obligations to financial institutions for loans and leasing, to counterparties for forward purchases, to suppliers of plant protection products and other production resources received on deferred payment terms.
This, in turn, will have a negative impact on the grain producer’s counterparties, since they also at one time attracted loans to supply production resources to the grain producer. Thus, the insolvency of grain producers can lead to a further multiplier effect, as well as seriously limit their preparation for the next sowing campaign. Therefore, now the authorities need to support farmers.
– How does the Grain Union propose to support farmers?
– To support domestic grain producers, we consider it necessary to quickly hold a government meeting to take emergency measures to respond to the current situation. In particular:
As soon as possible, pay grain producers all subsidies that have the status “on standby” and “in reserve” in the GosAgro system, and expedite the consideration of submitted but not considered applications.
State financial organizations must decide to extend the deadlines for fulfilling the obligations of grain producers for all types of loans and leasing until December 31, 2026.
For loans and leasing obtained from second-tier banks, transfer the debt of grain producers to state financial organizations and also extend their repayment terms until December 31, 2026.
State financial organizations to repay the current obligations of grain producers to suppliers of plant protection products and other production resources.
Extend the repayment terms for grain producers of such debt to state financial institutions until December 31, 2026.
Food corporations will revise the final settlement prices for forward purchases upward, but not less than 100 thousand tenge per ton.
Provide grain producers with a deferment in fulfilling their obligations on taxes and other obligatory payments to the budget.
Simplify the VAT refund procedure for exporters of grain and its processed products, including by reviewing the formation of the supplier pyramid.
Limit the import of wheat, barley and sunflower seeds only to processors, poultry farmers and livestock farmers by introducing an import quota for them - no more than 15% of their production capacity. They must purchase the remaining volumes on the domestic market, ensuring effective demand and the formation of a fair (market) price for domestic grain producers.
The Ministry of Trade should not take measures that create restrictions on the sale of grain at fair (market) prices. There should remain two categories of buyers on the market - processors and grain traders, and also abandon price fixing for grain processing products and related food products. Take measures to stabilize domestic prices in accordance with the instructions of the head of state, voiced in his message.
Some couch bloggers are already writing that they are asking and begging again. But farmers are asking for a loan, asking for an extension, so that they have the opportunity to sow and pay off their obligations, and not write off debts. This really needs to be done, and, as far as we know, the government is now working on this and studying the situation on the ground. It has already been announced that state financial institutions will be ready to consider farmers’ applications for extension.