Kazakhstan. Grain and Feed Update. July 15, 2016 July 15, 2016
FAS/Astana forecasts Kazakhstan's wheat production in MY 2016/17 at 13.0 MMT, at the same level as in the previous estimate and significantly down from the record 22.7 MMT in 2011. This MY 201/17 estimate is based on Kazakhstan's observations of the planting in 2016 and favorable weather conditions during planting season. Barley production is estimated at 2.7 MMT. The New Minister of Agriculture reinstated the per hectare subsidies, which had been previously cancelled.
FAS/Astana forecasts Kazakhstan's wheat production in MY 2016/17 at 13.0 MMT, same as the previous estimate. MY 2016/17 production is down significantly from the record 22.7 MMT in 2011. While weather was favorable during the 2016 planting, the crop is still in its early growth stages. The level of rains in August will ultimately determine the size of production.
FAS/Astana forecasts barley production at 2.7 MMT in MY 2016/2017, only slightly higher than in MY 2015/16 (2.6 MMT). This increase is based on projected higher sown and harvested area.
Favorable conditions (sufficient soil moisture, good weather with minimal rains and timely preparations) during the 2016 sowing resulted in a larger sown crop than in 2015. Traditionally the largest planted areas for spring grain crops are in the Akmola region (4.2 million hectares), the Kostanay region (4.1 million hectares) and the North-Kazakhstan region (3.2 million hectares). The total planned area for spring grain crops was declared by the Kazakhstani Ministry of Agriculture as 14.4 million hectares; however actual planted area was 14.5 million hectares.
The Ministry of Agriculture reported in its Final Sowing Report, that as of June 15, 2016 spring sowing works totaled 14,496 thousand hectares for spring grain crops and 1,922 thousand hectares for oilseeds crops.
Spring 2016 oilseeds planting was efficient, outpacing the 2015 planting progress. Total planted area in 2016 is 1.9 million hectares, which is 210,000 hectares or 10% less, than in 2015. Two factors significantly influenced farmers' decision to decreasing the oilseed planting area: the cancellation of the per-hectare subsidy which was higher for oilseeds and the 2015 cabbage moth infestation which significantly increased the cost of production for oilseeds. The largest areas for oilseeds in Kazakhstan are the North-Kazakhstan region (469,700 hectares), the East-Kazakhstan region (377,600 hectares) and the Kostanay region (270,000 hectares).
The Kazakhstani Ministry of Agriculture, at their traditional planting briefing stated, that it expects MY 2016/2017 grain production at the same level as in MY 2015/2016. However this production estimate depends on the climatic conditions during the vegetation and harvesting periods. The Ministry also noted that the traditional grain export markets, Iran and other Central Asian counties, remain open and Kazakhstan will continue to export to those countries. Additionally, Kazakhstan continues to pursue grain export opportunities with China.
The 2016 spring climatic conditions have been favorable. Following a plentiful winter snowfall, the soil moisture content was sufficient, but not excessive, similar to 2015. Many farmers confirm that the spring planting weather allowed them to work on planting through the end of May. Such a favorable environment has not existed in the last few years.
The FAS/Astana April 2016 Grain And Feed Report, the per hectare subsidies (by specific crop) in Kazakhstan were cancelled as of January 1, 2016. This Government decision affected farmer's 2016 planting decisions. Experts have noticed that in the grain producing regions in Kazakhstan the area planted to oilseeds decreased, while the area planted to spring wheat has increased. Previously, the exact opposite was true – area planted to oilseeds was increasing while area planted to spring wheat was declining.
Food, seed, and industrial (FSI) consumption for wheat is expected to remain unchanged at 4.8 MMT in marketing year MY 2016/2017. Flour consumption is expected to grow in tandem with population growth.
Feed use of wheat in MY 2016/2017, is forecast flat. 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 because of the government's strategy to increase area to these crops.
In MY 2016/17, feed use of barley is forecast at 1.75 MMT based on the increasing demand for barley and the new feed mill projects recently launched in Kazakhstan.
As of June 1, 2016, nearly 85% of wheat is used for food consumption, 10% for seed and 5% for feed. A year ago wheat consumption was nearly identical to the 2016 data, showing 80% for food, 15% for seeds and 5% for feed.
Barley consumption includes 33% for food, 24% for seed and 42% for feed. The barley consumption structure remains mainly unchanged, compared to June 1, 2015. However, the 2016 stocks are down 249,000 tons compared to 2015 stocks at the same time.
Flour Mill Industry Update
During May 2016 wheat prices increased between 18 and 24 percent, largely because of decreasing stocks. As a reaction to this price increase, millers increased prices for wheat flour. The price for premium class wheat flour increased 15% and 1st class wheat flour increased 16%. A number of factors led to the increase in wheat prices: a) the US Dollar/Russian Ruble/Kazakhstani Tenge exchange rate fluctuations, b) decreasing supply of wheat in the market along with a decrease in mill stocks, and c) higher international prices in Europe and Russia for wheat.
The Kazakhstani grain stocks reached 5 MMT, 33% less than in 2015 mainly due to a decline in wheat stocks, which are 2.2 MMT (or 33%) less than wheat stocks on June 1, 2015 (6.5 MMT).
Barley stocks also decreased 40% since June 1, 2015 because of decease in food, seed and feed use, on average between 36 to 48%.
Kazakhstani grain exports analysis show a number of regional markets developments that have affected the end of the previous marketing year and the current marketing year:
- Iran and Kazakhstan signed a Memorandum of Understanding for a grain terminal project. The project is to be built in 2016-2017 on the border between Turkmenistan and Iran on the Inche-Burun railway station. It is projected to have a 10,000 ton storage capacity. This infrastructural project will help Kazakhstan continue to export to Iran and the Persian Gulf countries.
- During the period February to May 2016, experts noticed a trend of declining Kazakhstani exports in wheat and a growth in Kazakhstani wheat flour exports by rail. However in June 2016, the situation may change with a decline in consumption during the month of Ramadan and a start of the harvesting season in the importing countries.
- Stable exports to China during the last four months could be an indication of further development of the Chinese market.
- Wheat flour exports to Central Asian counties continue to grow, however import duties affect millers' margins.
- Kazakhstan's exports to Iran dropped significantly, most notably as transshipments through the Caspian Sea grain terminal decreased approximately 80 percent.
- Kazakhstan's wheat exports to Afghanistan decreased during May-June 2016, mainly because of Afghanistan's shift to wheat flour imports instead of wheat imports.
During the period January to April 2016, Kazakhstan exported 275,779 tons of wheat, 1,500 tons of barley and 17,385 tons of wheat flour within the Eurasian Economic Union countries Kazakhstani grain exports within EAEU, MT.
Wheat prices increased slightly in May 2016 due to decreasing stocks, active sowing works and US dollar/Russian ruble/Kazakh Tenge exchange fluctuations. In particular, 3rd class wheat prices increased in average for 18%, 4th class wheat increased 24%, 2nd class barley increased 13%.
Agricultural land privatization legislation discussions in Kazakhstan have been very much on the forefront. Early in May 2016, the Minister of Agriculture of the Republic of Kazakhstan resigned his position following a number of public protests over proposed land reform in Kazakhstan. Mr. Askar Myrzakhmetov was appointed as the new Minister of Agriculture.
While both private and state land ownership are mentioned in Article 6 of the Kazakhstani Constitution, only 1% of agricultural lands in Kazakhstan are privately held. Today there are 100.8 million hectares of agricultural land in Kazakhstan, including 1.3 million hectares which are privately held by Kazakhstani citizens and 99.5 million hectares rented under 49-year rental agreements. This includes 68.4 million hectares of pasture lands. Foreign citizens are only permitted to rent land in Kazakhstan. Currently, 65,000 hectares of agricultural land in Kazakhstan, which includes 45,000 hectares for Kazakh-American joint venture “KazBeef". Total area for state land reserve makes 100.1 million hectares, which includes lion portion of 78.5 million hectares of unwatered pastures.
The per hectare subsidies (by specific crop) in Kazakhstan were cancelled as of January 1, 2016. This Government decision affected farmer's 2016 planting decisions. One of the new Agricultural Minister's first decisions was to reinstitute the per hectare subsidies. This decision was announced during the planting season and therefore had no impact on 2016 crop decisions. Prior to 2016 area planted to oilseeds was increasing, largely due to the higher per hectare subsidies for oilseeds and higher oilseeds market prices. In 2016, the elimination of per hectare subsidies saw a reversal in this trend with more area planted to wheat. It is uncertain whether the decision to reinstate per hectare subsidies will change next year's planting decisions.
During April 26-28, 2016 Astana hosted the 7th Ministerial Conference of The Organization of Islamic Cooperation (OIC) on Food Security. Discussions at the conference focused on the current state of agricultural and food security in the Member States and the establishment of the Islamic Organization for Food Security (IOFS) in Kazakhstan. The new organization will be tackling: population provisions in Islamic countries, achieving more affordable food, based on their climatic conditions and geographical location, creating favorable transport and logistics routes to minimize the cost of food supplies to OIC member-countries, and the stabilization of food prices through formation and management of shared food funds.
Kazakhstani President Nursultan Nazarbayev, first initiated the establishment of IOFS in 2011 at the 38th session of OIC Foreign Ministers' Council. Two years later, at the meeting in Astana of 30 OIC member states' experts, the draft charter document was agreed upon. The IOFS HQ will be in Astana. Its office will provide the expertise and technical know-how to member states on the various aspects of effective development of agriculture, rural areas, food security and the development of biotechnology.