Highlights

FAS/Astana estimates wheat production in Kazakhstan in MY2016/2017 at 15.0 MMT. This estimate is based on Kazakhstani Statistical data released on February 2, 2017. Similarly, barley production in MY2016/2017 is estimated at 3.2 MMT. Total grain production in MY 2016/2017 is estimated at 20.6 million metric tons (MMT), 10 percent higher than in 2015 and total wheat production is estimated at 15 MMT, 9 percent higher than last year. Barley production in 2016 is estimated at 3.2 MMT, 21 percent higher than last year.

PRODUCTION

FAS/Astana estimates wheat production in Kazakhstan in MY2016/2017 at 15.0 MMT. This estimate is based on Kazakhstani Statistical data released on February 2, 2017. Similarly, barley production in MY2016/2017 is estimated at 3.2 MMT. The Kazakhstani Statistical Agency released grain production data for Kazakhstan for 2016, with total grain production at 20.6 million metric tons (MMT), 10 percent higher than in 2015. Total wheat production for MY 2016/2017, including both winter and spring wheat, is reported at 14.985 MMT, 9 percent higher production in 2015, and barley production is 3.231 MMT, 11 percent more than barley production in 2015. The lost area in 2016 for spring wheat is reported at 42,426 hectares, which is only 0.4 percent of the planted area.

The Statistical Service reports that production increased in CY 2016 for nearly all crops. The increase in production over CY 2015 ranged from 5 to 20 percent. Also reported yields show growth for all crops, except cotton.

CONSUMPTION

MY 2016/2017 wheat consumption is estimated to increase 6 percent over the previous year. This is largely due to the poor quality wheat crop experienced this year and the resulting increasing use of wheat for feed. Wheat FSI consumption remains flat at 4.8 MMT as no major projects for industrial wheat processing were announced over the last year.

As of January 1, 2017, barley consumption is up 30 percent. This increase is primarily due to an increased use of barley for both feeding and food. MY 2016/2017 barley FSI consumption remains flat at 0.3 MMT as no major projects for barley industrial processing were announced. Post’s Feed and Residual estimate for barley is 100,000 MT higher than the previous year as the sector is experiencing a lack of good quality barley available on the market.

STOCKS

Kazakhstan’s grain stocks, as of January 1, 2017, were at 14.8 MMT, including 11.9 MMT of wheat. The 2017 stocks are slightly higher than in 2016. Similarly the three-year trend shows slight and steady growth of stocks for both wheat and barley since 2015.

The media has reported on new grain storage projects in northern Kazakhstan, including a grain storage facility in Pavlodar region valued at $2.5 million. The elevator is planned for commissioning in late 2017. The capacity of the facility is 60 tons of grain per hour and the storage capacity is 30,000 tons of grain. Another grain storage facility is reportedly under construction in Kostanai and is scheduled for completion in October 2017. The cost of the project is reported at $79 million and it will have a capacity of 8,000 tons.

TRADE

FAS/Astana estimates wheat exports in MY 2016/2017 at 7 MMT due to lower production levels. MY 2016/2017 barley exports are estimated at 1 MMT based on a larger production estimate. In MY 2016/2017, Kazakhstan’s grain exports were primarily destined for Central Asian counties, particularly Iran and Afghanistan. Anecdotally, in CY 2016 a grain terminal on the Caspian Sea, exported 523,000 tons of grain through the Aktau seaport, an increase of 4.3 percent year-on-year. In 2015, the terminal handled over 501,400 tons of grain.

Kazakhstan’s exports to China continue to grow and Italy and Switzerland have resumed purchases of Kazakhstani wheat this season. In October 2016, Italy purchased 34,300 tons of durum wheat. Uzbekistan has continued its purchases of Kazakhstani wheat under an agreement which allows for indefinite postponement of up to 80 percent of the contract. In general traders have noted the lack of good quality wheat from both Russia and Kazakhstan.

Moreover, they note that of Kazakhstan’s grain trading partners, only Afghanistan has available financing, enabling them to dictate prices. Other Central Asian buyers who lack cash are forced to follow the prices set by deals between Kazakhstan and Afghanistan.

Wheat, barley and wheat flour continues within EAEU showing mainly Kazakh exports to Russia and Kyrgyzstan as well as 17,780 tons imports of wheat from Russia and 1,897 tons of wheat flour.

Some of the grain expeditor companies notice the following problems during the last five years when they inspect grains exports:

• The average gluten content has decreased from 26-28 percent in MY 2012/2013 to 18-22 percent in MY 2016/2017;

• The average protein content has also decreased from 13-14 percent in MY 2012/2013 to 11.5-12 percent;

• Nature weight has decreased from 780-800 grams per liter in MY2012/2013 to 680-740 grams in MY 2016/2017;

• The falling number has decreased from 350-400 seconds to 200-220 seconds;

• The volume of grain affected with fungous diseases, like Septoria spot, seedling disease, and Smut has increased; and

• During MY 2016/2017, the share of area in Kazakhstan affected with Russian knapweed (Centaurea picris) has increased.

Expeditor companies note the following explanations for the above mentioned problems:

• Climate change in the grain producing areas;

• Issues related to climate change require immediate adjustments each season;

• Climate change changes favors winter crop production; and

• Farmers lack good quality meteorological data.

Additionally, expeditors note farmer-dependent reasons for the above mentioned problems:

• Lack of good seeds and seeds selection;

• Development of new varieties is almost non-existent;

• In the best of circumstances, farmers use second reproduction seeds, but more often they use seeds from last season’s wheat crop;

• Seeds are not treated before planting because no subsidy is provided to support the practice;

• Where sowing time is delayed (sharp continental areas), farmers should use crop varieties with a shorter vegetation period;

• Generally farmers don’t follow crop rotation recommendations or utilize newer technology,

damaging soil fertility;

• The Government has decreased the quality and quantity of subsidies.

The 2016 spring planting season was delayed, which resulted poor mature of the grains and all the quality characteristics, like gluten content, falling number, nature weight have decreased dramatically. The 2016 harvest was affected with the carry-over stocks from the previous years on the storages and this resulted outside smell and storage pests. At the same time grain storages mix all kinds of grain, which makes the whole exporting party unacceptable.

At the same time the importing countries require their own quality standards, which don’t match Kazakh and EAEU ones. For instance, Iran, Europe and China does not accept oatgrass, Russian knapweed (Centaurea picris), Artemisia, Fusarium blight, grain affected with Eurygaster, tick. And those countries pay more attention to protein, gluten, nature weight, falling number and bakery power. Meanwhile Central Asian counties pay more attention to bakery qualities of the wheat, which sometimes exceed Kazakhstani standards for class 3 wheat. Also grain storages accept grain according to Kazakh system of grain classes and they could not ship properly the required quality of grain. Grain storages supposed to make fumigation of their facilities through the licensed companies; however they do it by their own resulting presence of storage pests.

PRICES

The Kazakhstani government established the price for grain supplied to state reserves. In MY 2016/2017, the Food Contracting Corporation (FCC), the state-run operator of grain procurement, announced plans to procure sunflower, flax, rapeseed and soybeans, in addition to wheat and barley. Historically, the FCC has only procured wheat and barley.

POLICY

The New Draft Agricultural Development Program for 2017-2021 will keep crop diversification as the main strategy and envisages a resulting drop in the wheat crop of 20 percent, from 12.4 million hectares in 2016 to 10.0 million hectares in 2021. Area not planted with wheat will be used for barley, oats, corn for grain, oilseeds and other crops in order to supply more feedstuff for the livestock sector. To encourage this, the Ministry of Agriculture is setting target indicators for area by crop and by region.

The Ministry recognizes that crop diversification will move slowly and that the share of crop for industrial processing is also very low. Additionally, the livestock sector lacks a sufficient supply of good feedstuff. Starting in 2017, loans for spring sowing works will be less expensive for agricultural producers and will be available through agricultural financial institutions at a percentage rate of 3 percent. In previous years, loans were only available at a 7.4 percent interest rate. The Ministry of Agriculture maintains that the overall agricultural support program budget will remain flat and will not require additional funds.

Crop Subsidies

The new Agricultural Development Program for 2017-2021, designed at the end of 2016 has restructured the subsidies and now more support will be provided to crops industrial processing sector, mainly to process the oilseeds crops. Specifically:

• Per-hectare subsidies have remained only for the production of sugar beets, cotton, rice and feed crops;

• Subsidies for seed breeding will continue;

• Per-hectare subsidies for all other crops (wheat, oilseeds, barley, potatoes, vegetables etc.) have been cancelled; and

• Oilseeds, sugar beets and rice will only enjoy a per-ton subsidy for industrial processing.

The Ministry of Agriculture has reported that the main reason for discontinuing per-hectare subsidies was because they found them to be ineffective in encouraging crop diversification. For example, at its height, wheat production reached 60 percent of Kazakhstan’s total crop production, while scientists recommended that the maximum beneficial level would be 45 percent.

As a result, the Ministry of Agriculture restructured the crop subsidy program away from a per-hectare subsidy to a subsidy based on the volume of crops produced for industrial processing. The Ministry of Agriculture has reported that the new subsidy program is designed to encourage production and processing of feedstuffs, rice, oilseeds, sugar, molasses and raw cotton. The Ministry anticipates that with this approach oil crushing facilities will process domestically produced crops and will increase Kazakhstani vegetable oil production from 283,000 tons in 2015 to 460,000 tons in 2021. For example, in 2015 oil produced from the crushing of domestically produced crops reached only 29 percent of Kazakhstan’s total oil production. The Ministry expects that with the new subsidy regime, by 2021 the level of oil produced from crushing of domestically produced crops will reach 60 percent of total Kazakhstani oil production. For instance, oilseeds (sunflower and oilseeds) processing plant worth $2.7 million was placed into operation in December 2016. The plant will produce bottled vegetable oil and rapeseed oil and meal to be used as feed in the Kazakhstani poultry and livestock sector. The plant will process 120 tons of seeds per day to make 40-50 tons of oil. Such a result is expected to decrease Kazakhstan’s vegetable oil imports from 40 percent to 19 percent.

FCC plans to expand its procurement function to include oilseeds and oilseed processed products in its exports portfolio, a new activity for the FCC. Therefore, in the near future the FCC plans to promote exports of not only wheat and barley, but also oilseeds.

Wheat

2014/2015

2015/2016

2016/2017

Sep 2014

Sep 2015

Sep 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

11923

11923

11571

11571

12000

12437

Beginning Stocks

1988

1988

3245

3245

2559

2631

Production

12996

12996

13748

13748

16500

15000

MY Imports

600

600

66

138

60

60

TY Imports

600

600

66

138

60

60

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

15584

15584

17059

17131

19119

17691

MY Exports

5539

5539

7600

7600

8500

7000

TY Exports

5507

5507

7600

7600

8500

7000

Feed and Residual

2000

2000

2100

2100

2200

2100

FSI Consumption

4800

4800

4800

4800

4800

4800

Total Consumption

6800

6800

6900

6900

7000

6900

Ending Stocks

3245

3245

2559

2631

3619

3791

Total Distribution

15584

15584

17059

17131

19119

17691

Barley

Kazakhstan

2014/2015

2015/2016

2016/2017

Jul 2014

Jul 2015

Jul 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

1909

1909

2038

2038

1850

1894

Beginning Stocks

282

282

238

238

109

109

Production

2412

2412

2675

2675

2700

3231

MY Imports

27

27

0

0

10

10

TY Imports

28

28

0

0

10

10

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

2721

2721

2913

2913

2819

3350

MY Exports

483

483

804

804

700

1000

TY Exports

476

476

776

776

700

1000

Feed and Residual

1700

1700

1700

1700

1700

1800

FSI Consumption

300

300

300

300

300

300

Total Consumption

2000

2000

2000

2000

2000

2100

Ending Stocks

238

238

109

109

119

250

Total Distribution

2721

2721

2913

2913

2819

3350