Kazakhstan. Grain and Feed Annual. Apr 2014 April 11, 2014
FAS/Astana forecasts Kazakhstan’s wheat production in 2014 at 14.5 MMT, up from 13.9 MMT in 2013. Wheat sown area is expected to fall in 2014 for the 5th consecutive year, and this will also reduce harvested area. However, a return to trend yields in 2014 (2013 yields were below trend) would allow for a small increase in production from last year. Kazakh wheat exports are forecast to fall slightly in MY 2014/15 to 7.0 MMT, from 7.5 MMT in MY 2013/14, as smaller carry-in stocks reduce exportable supplies. The Kazakh Ministry of Agriculture released a Master Plan for "The stabilization of the grain market" which sets out goals and projections for grain production, consumption, and trade to 2020.
FAS/Astana forecasts Kazakhstan’s wheat production in 2014 at 14.5 MMT, up from 13.9 MMT in 2013. Wheat sown area is expected to fall in 2014 for the 5th consecutive year, and this will also reduce harvested area. However, a return to trend yields in 2014 (2013 yields were below trend) would allow for a small increase in production from last year.
FAS/Astana forecasts Kazakhstan barley production at 2.6 MMT in 2014, only slightly higher than in 2013 (2.5 MMT). This higher production is expected because of higher sown and harvested area.
The trend of land shifting from wheat to other grains and to oilseeds is expected to continue in 2014. The government has a long term plan to encourage this diversification (recently wheat accounted for over 80 percent of total grain area, and over 60 percent of total crop area). The primary stated reasons for this shift is the difficulty in getting wheat to export markets due to Kazakhstan’s landlocked status, and the desire to increase domestic consumption of grain in Kazakhstan. This increased consumption is primarily for livestock feeding, as the Government has a goal to turn Kazakhstan into an exporter of meat products. The Kazakh Ministry of Agriculture recently estimated that for 2014, wheat sown area will fall to 12.8 million hectares, compared to 13.1 million in 2013; oilseed area will remain largely unchanged at 2.0 million hectares; and feed crops sown area will increase to 3.4 million hectares from 3.1 million hectares in 2013.
In order to support this diversification strategy, subsidies for “priority” crops such as oilseeds and feed grains (including barley) will increase at the expense of subsides for wheat. In a recent presentation the Minister of Agriculture stated that the per hectare subsidies for barley, corn for grain, rapeseed, soybeans, pasture grasses, and corn for silage would rise dramatically in 2014. These subsidies are typically in the form of fuel subsidies, fertilizer and herbicide subsidies, and other items for spring sowing and harvesting, as well continued lower interest rates for leasing of agricultural machinery.
Although still a month before spring planting begins, the official Kazakh weather service, Kazhydromat, has stated that as a result of sufficient fall and winter precipitation, it is expected that by the start of the sowing season soil moisture reserves will be sufficient and “optimal”.
Long-term production trends
In 2013, the Kazakh Ministry of Agriculture released a Master Plan for “The stabilization of the grain market”. This Plan is in support of their Agribusiness – 2020 program and in it the Ministry sets goals and projections for grain production, consumption and exports between 2013-2020. A few key trends shown in these projections include:
--The Ministry projects sown area for all grains to stay relatively steady over this period, falling only slightly.
--There is projected to be a sizeable shift from wheat, with wheat area projected to fall 2 million hectares (14 percent) from 13.5 million hectares in 2012 to 11.5 million hectares in 2020.
--Most of that reduced area is expected to be replaced with so called “feed crops” primarily feed grains, which are projected to increase 1.5 million hectares (53 percent) from 2.8 million hectares to 4.3 million hectares in 2020.
Overall, the Master Plan projects that the drop in wheat area will be largely compensated by increased yields, and that wheat production between 2014-2020 will fall slightly to a projected 14.4 MMT in 2020. The Plan also forecasts increases in the use of moisture saving technologies in Kazakhstan (including no-till), in the purchase of agricultural equipment, and an increase in the use of mineral fertilizers.
Although biotech crop cultivation is not currently allowed in Kazakhstan, in January 2014 Kazakh President Nursultan Nazarbayev instructed the Government to adjust the agricultural development plans to include the use of biotech crops. In his remarks he stressed the dramatic spread of biotech crop cultivation throughout the world, and that Kazakhstan needed to “keep up with the times”.
Food, seed, and industrial (FSI) consumption for wheat is expected to remain unchanged in marketing year (MY) 2014/15 at 4.8 MMT. Although flour consumption is expected to expand in-line with population growth, seed use is forecast to continue to shrink as planted area shifts from wheat. Industrial use (primarily for spirit production) is expected to remain steady.
Feed use of wheat in MY 2014/15 is forecast to be flat, while feed use of barley is expected to rise from 1.8 MMT to 2.0 MMT. Although wheat remains the most fed grain in Kazakhstan for livestock, most of the increase in feeding in future years is expected to be in barley and other feed grains and grasses due to the government’s strategy to increase area dedicated to these crops.
The Government of Kazakhstan has stated it is committed to keeping bread prices stable in Kazakhstan, and the Kazakh Ministry of Agriculture, regional administrations and the Food Contract Corporation signed memoranda aimed to stabilize bread prices for the rest of MY 2013/14. This was in response to the devaluation of the tenge. According to the memorandums, the Food Corporation will provide over 500,000 tons of grain at a reduced price of 30,000 tenge, including VAT per ton (approximately $163 per ton with the new exchange rate, compared to market prices more than $20 higher than this). The grain will be sold and transported from February 17, 2014 to August 2014.
Long-term consumption trends
The Master Plan projects that in the next 7 years, per capita grain (primarily wheat) consumption for food will not show any growth, and will remain at an estimated 167 kg per person annually. As a result, the only expected growth in food consumption between 2013 and 2020 will be due to population growth, and both the Kazakh population and total food consumption of grain are projected to increase 10 percent over this period. Meanwhile, seed use of grain is expected to remain unchanged during this period as grain area remains flat. Industrial production is forecast to increase by 10 percent, entirely due to more use for making spirits, as grain use for making beer is not expected to grow.
Feed consumption of grain is expected to see the strongest increase in this period, as Kazakhstan tries to boost its livestock sector and turn into a major exporter of beef. Overall grain consumption is forecast to increase by 36 percent by 2020, and this is directly attributable to expected higher livestock numbers. Trade
Kazakh wheat exports are forecast to fall slightly in MY 2014/15 to 7.0 MMT, from 7.5 MMT in MY 2013/14, as a result of tighter exportable supplies. Although production is forecast to rise slightly, lower carry-in stocks are expected to result in total supplies still being below last year’s level. The difficulty and high costs of getting Kazakh wheat to external markets will continue to constrain exports, and the lion’s share of these exports are expected to continue to be sold to nearby regional buyers.
MY 2013/14 wheat exports are estimated at 7.5 MMT, up 20 percent from MY 2012/13. Kazakh exports in recent months have been supported by the devaluation of the tenge, which went from 155 tenge/US$ to 185 tenge/US$ in mid-February in an abrupt change. Kazakhstan has also seen larger sales of wheat to Iran and China this marketing year, as well as continued strong sales to Russia. Despite larger harvests in the Urals and Siberia (the main markets for Kazakh wheat in Russia) in 2013, Russia’s major railway transportation company, Rusagrotrans, has reported that Kazakh shipments to Russia are actually higher this marketing year than last.
The Ministry of Agriculture continues to have a strategy of building export infrastructure to support grain and flour shipments. The Ministry in their 2013 Master Plan reported on the progress of these infrastructure projects, and explained that grain terminals in the ports of Aktau (Kazakhstan), Baku (Azerbaijan), and Amirabad (Iran) are already functioning (wholly or partially financed by the Food Contracting Corporation). In addition, in order to increase grain exports to Central Asia, Afghanistan and Iran, an elevator complex and flour mill was built in Bainey station, in Southern Kazakhstan. The Ministry also reported that two new railroad links were completed, one between South Kazakhstan and the Turkmenistan-Iranian border, and the other between East Kazakhstan and the Chinese border. They also announced future plans for the eventual construction of grain terminals on both the Iranian and on the Chinese borders.
Long term trend in grain and flour trade
The Kazakh Ministry of Agriculture in their Master Plan forecasts grain exports (including flour) to rise by 17 percent between 2014 and 2020, to 9.1 MMT. However, they forecast all of the increase will be in flour exports, and the Ministry foresees no long-term growth in non-flour grain exports.
In terms of export destinations, the Ministry projects the following trends to 2020:
--Historically traditional buyers of Kazakh grain and flour (Afghanistan, Azerbaijan, Iran, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) are forecast to account for 72 percent of Kazakhstan’s exports, unchanged from the average of 2008-2012.
--China, and to a lesser extent, Southeast Asia, are projected to become larger buyers of Kazakh grains, growing from less than 1 percent of Kazakh grain and flour exports to 12 percent in 2020 (to 800,000 MT and 300,000 MT of exports, respectively).
--Exports to all other markets are expected to shrink from 27 percent in 2008-2012 to 16 percent of total grain and flour exports by 2020.
MY 2014/15 wheat carry-in stocks are expected to be at 3.0 MMT, nearly 1 MMT lower than MY 2013/14 carry-in stocks. Grain stocks in Kazakhstan as reported by the Kazakhstan Statistical Agency of March 1st, were lower than in the previous two years, and were at 11.0 MMT, down from 11.4 MMT last year. Stocks of wheat were down to 9.2 MMT compared to 10.3 MMT on March 1st last year, while barley stocks were double last year’s level at 1.2 MMT, compared to 0.6 MMT.
Long term trend in storage capacity
Currently, the Ministry estimates grain storage capacity in Kazakhstan at 24.1 MMT, including 13.9 MMT in elevators and 10.2 MMT on-farm. Although this capacity would be sufficient for “average” production years, the Ministry estimates that in years of bumper harvests, this capacity is nearly 3 MMT less than necessary, hence the need to increase capacity.
In order to cover this storage deficit, the Ministry of Agriculture’s goal and projection in its Master Plan is to increase total grain storage in Kazakhstan by 3.5 MMT by 2020, including an increase of 350,000 tons of capacity owned by the Food Contracting Corporation (FCC) in border regions to help facilitate exports.
Grain export prices in Kazakhstan have shown relatively little change over the past few months, with prices for 3rd class wheat at the Russian border at $195 per MT on average, and prices for barley at the Caspian port of Akatu around $225 per MT on average