Amendments to the Tax Code of the Republic of Kazakhstan, which provide for an 80% reduction in the VAT credit for agricultural exports, have significantly shaken the domestic and export markets for grain and oilseeds. Last week, domestic grain prices fell. Exporters are reloading volumes under previously concluded contracts, offering higher prices for new contracts. This was reported by Yevgeny Karabanov, head of the analytical committee of the Grain Union of Kazakhstan.
"In accordance with the requirements of the Tax Code, for zero-rated agricultural exports, the VAT amount previously credited for purchased goods is subject to an 80% reduction. Moreover, the reversal of VAT is not deductible for tax purposes and is written off against the exporter's net profit (after tax). Therefore, exporters' losses will amount to 12.8%. This has already led to price adjustments in both domestic and foreign markets. "Exporters are carefully announcing new prices, but the market is not yet ready to work under the new conditions," said Evgeny Karabanov.
According to him, after numerous appeals from market participants to government agencies and the Atameken National Chamber of Entrepreneurs, consultations were organized with the participation of all interested parties. Meanwhile, the market is in the process of adapting to the new conditions. Stagnation continues, so prices are nominal.
According to the Grain Union, over the past week, wheat prices have fallen by 1,000 to 6,000 tenge per ton, depending on quality. At the beginning of this week, prices were (EXW elevator terms, including 16% VAT, tenge/ton):
Class 3 wheat (23-24% gluten) - 90,000-94,000 (-2,000 tenge/ton per week)
Class 3 wheat (25-26% gluten) - 93,000-96,000 (-2,000)
Class 3 wheat (27% gluten) - 105,000-109,000 (-4,000)
Class 3 wheat (28-29% gluten) - 110,000-114,000 (-6,000)
Class 3 wheat (30+ gluten) - 125,000-129,000 (-6,000)
Class 4 wheat - 87,000-91,000 (-2,000)
Class 5 wheat - 86,000-90,000 (-1,000)
Domestic barley prices fell by 2,000 tenge per ton, to 87,000-91,000 tenge, while flaxseed prices fell by 5,000 tenge per ton, to 220,000-230,000 tenge.
Yevgeny Karabanov also reported that grain shipment rates have begun to slow. Many exporters are completing previously concluded contracts and offering importers new prices. However, according to the expert, deals concluded at the new higher prices are still isolated.
Export bid prices for wheat have increased significantly, ranging from USD 20 per ton for grade 3 wheat with gluten levels of 28-29 and 30+, to USD 25 per ton for grade 3 wheat with gluten levels of 23-24 and 25-26. Offer prices for grades 4 and 5 wheat increased by USD 22/t compared to the week before last.
Export prices were (USD/ton):
Class 3 wheat (gluten 23-24%) - 265-270 DAP Saryagash (+25)
Class 3 wheat (gluten 25-26%) - 268-273 DAP Saryagash (+25)
Class 3 wheat (gluten 27%) - 280-285 DAP Saryagash (+20)
Class 3 wheat (gluten 28-29%) - 300-305 DAP Saryagash (+20)
Class 3 wheat (gluten 30+) - 315-320 (+20)
Class 4 wheat - 255-260 DAP Saryagash (+22)
Class 5 wheat - 245-250 DAP Saryagash (+22)
Barley - 255-260 DAP Saryagash (+25)
Barley - 250-255 FOB - Aktau (+15)
Barley - 235-240 DAP Dostyk/Altynkol (+20)
The domestic price of flaxseed (EXW) decreased by 5,000 tenge/tonne to 220-230,000 tenge/tonne (approximately 445-465 USD/tonne). The export price on FCA Kazakhstan terms increased by 15 USD/tonne to 505-510 USD/tonne. The price of Kazakh brown flax (97% purity) on DAP Poland terms increased by 5 EUR/tonne to 525-530 EUR/tonne. The price of Kazakhstani flaxseed on C&F ARAG terms remained unchanged at USD 685/t after last week's increase, with shipments in March.
On the Chinese market, activity dropped sharply due to the New Year holidays, and flaxseed prices in yuan remained unchanged:
domestic prices in China: CNY 4,700–5,100/t (USD 680–738/t);
C&F Tianjin port: up to CNY 3,750–4,100/t (USD 543–593/t).