KazGrain 2018 — grain trends
On March 16, more than 280 representatives of the grain and logistics business from 17 countries banded together in Radisson Hotel Astana within frames of the international conference KazGrain 2018 to discuss the major trends on the global and Kazakh markets of grains and flour, and the current condition of the export market of Kazakhstan, as well as the prospects of development of new directions in the grain sector of the country, and further sales market expansion.
APK-Inform Agency and AgroIndustria KZ became the conference organizers. The association of legal entities "Grain Union of Kazakhstan" was the General Partner.
The conference was held under official support of the Food and Agriculture Organization of the United Nations (FAO, Italy).
Experts of the large-scale international organizations and companies with high experience in the grain sector and high professional level became speakers of the conference. Also, representatives of the leading Kazakh organizations and companies shared their experience and opinions. At the same time, the event included the specialized issue-related session "Market of grains and by-products in Kazakhstan: relationships with the Central Asian region". The session was organized by the Union of Grain Processors and Bakers of Kazakhstan and the Union "Millers of Ukraine", under support of the Food and Agriculture Organization of the United Nations (FAO). Within the reporting session, its participants discussed the global tendencies of the grain market in 2017/18 MY, including medium- and long-term prospects of the grain and flour market of the Central Asian region. Also, they considered the issues of competition of Kazakhstan and Russia on the grain and flour markets; the prospects for development of the flour milling market of one of the main buyers of Black Sea grains — Turkey; and many other important issues of the agricultural market segment.
Major speakers of the conference
Trends and challenges of the grain market of Kazakhstan
Nurlan Ospanov, Chairman, the association of legal entities "Grain Union of Kazakhstan"
Traditionally, soft wheat and durum (hard wheat), barley, rice and lentils are the main export position among grains and pulses in Kazakhstan. The general exports of the reporting crops cover more than 98% of the whole exports of grains and pulses.
Kazakhstan supplies of grains to neighbouring countries-participants of the CIS, European countries, as well as Iran, using the seaports of the Azov, Black and Baltic Seas. Also, the country started supplying grains to countries of North Africa and Southeast Asia, because the traditional routes somewhat limit the current capacities.
As for the general volumes of grain exports, in 2016/17 MY the figures totaled more than 8.126 mln tonnes of wheat including flour in grain equivalent, or 88% of the export structure of grains and pulses from the country (grains — nearly 98%, and pulses — 2% only). As for the export geography: Kazakhstan exports 68% of grain volumes to the CIS countries. While the general volume of grain exports to the region totaled 4.8 mln tonnes without flour (24% of grain production in Kazakhstan), and pulses — more than 129 thsd tonnes (95%). It is worth noting that Kazakhstan exports 80% of produced pulses to other countries, except for the CIS.
Experts estimated the exports of hard wheat at 384.9 thsd tonnes. Italy is the main buyer of hard wheat — 51% of the export structure, followed by Russia — 25%, Turkey — 8%, and Tunisia — 5%. Tunisia became a new market for Kazakhstan, as well as other countries of North Africa (Algeria, Morocco, etc.).
Kintal Islamov, Chairman, Atameken-Agro JSC
For 10 years, the trends of changes in wheat planted areas in Russia, Ukraine and Kazakhstan significantly vary from each other. In particular, in the reporting period in Russia the general planted areas under wheat increased by 14% — from 24.38 mln ha in 2007, to 27.89 mln ha in 2017. In Ukraine, the planted area also increased, but much less — up 1% only, from 6.29 mln ha, to 6.36 mln ha.
As for Kazakhstan, the upward trend started developing in the beginning of the reporting period only, while the maximum rate was recorded in 2009 — 14.75 mln ha. In the following years, the planted areas under Kazakh wheat gradually declined, and in 2017 they totaled 11.98 mln ha, as opposed to 12.89 mln ha in 2007. In many ways, the reporting dynamics developed, due to changes in the general structure of crops planted areas, caused by the country's policy of diversification, and increasing of the cultivation areas of pulses and oilseed crops.
Also, for 10 recent years the yield figures of Russian, Ukrainian and Kazakh wheat demonstrated the same upward dynamics. The most dynamic growth of yield was fixed in Ukraine — from 2.34 t/ha in 2007, to 4.11 t/ha in 2017. As for Russia, the growth rates were slightly less — from 2.1 t/ha, to 3.12 t/ha. At the same time, last year in Kazakhstan the average yield of wheat totaled 1.24 t/ha, against 1.3 t/ha in 2007.
Kazakhstan will be able to compete with Russia and Ukraine by increasing of wheat yield figures only, however transportation expenses serve as the major limitation, which are more significant compared with the costs for Ukrainian and Russian grain producers. If Russia and Ukraine increase the yield figures of wheat every year, then the capacities of Kazakhstan will start declining. Taking into account the soil depletion condition, it will be impossible to increase the yield without application of nutritional chemicals.
Sayat Shortan, National consultant, Food and Agriculture Organization of the United Nations (FAO)
Kazakhstan has good launch environment for development of organic crops production, which will potentially allow the country to become one of the major players in the reporting segment of the global market. To date, the rates of demand growth for organic products in the world are notably higher than the rates of supply growth. And it makes good conditions for Kazakhstan to consolidate in the reporting market segment.
At the same time, Kazakhstan already has the required resources, which many potential competitors do not have at all — relatively "clean" soils, absence of GM crops in production, relatively small dependence on agricultural chemistry, etc. Reduction of the logistics costs and adaptation of production technologies are the main issues that Kazakhstan needs to solve for development of the market of organic products.
The developed countries — the USA, the EU-28, as well as China, Canada and Switzerland — are potential importers of Kazakh organic products.
Nurlan Ospanov, Chairman, the association of legal entities "Grain Union of Kazakhstan"
To date, Kazakhstan realizes a number of measures to develop its logistics routes. The country already built a new grain terminal in the Aktau port, and a railway branch towards countries of Southeast Asia, founded a transit corridor through the port of Lianyungang (China) in the destination of Turkey, launched a new route from the Kazakh port Kuryk by the railway corridor Baku-Tbilisi-Kars with the access to the Turkish port Mersin with further access to the markets of Europe, North Africa, the Middle East and Southeast Asia. As for all above-mentioned projects, realization of the project of the grain terminal in the Aktau port became the most successful, because it is actively used.
Ivan Karamanov, General Director, TransBulkInspection LLC (Russia)
Development of the deep-sea shipments through the Russian Black Sea ports, especially through the port of Novorossiysk, will become one of the ways to solve the existing infrastructural problems with the exports of Kazakh grains.
The seaport of Novorossiysk provides grain loading by the direct variant "railway car - vessel". In the current grain season, Kazakhstan already exported over 100 thsd tonnes of grains by the reporting method, but the potential is still very large. The capacity of the reporting method of grain shipment is estimated at 1 mln tonnes per year.
Also, container shipments of grain cargoes will become another way for Kazakh grains deliveries through the port of Novorossiysk. It is a good opportunity of opening new markets, in particular in Southeast Asia as the largest and booming consumer market of grains and oilseeds.
Gulmira Abisheva, General Director, Baltic Control Kazakhstan LLP
For several recent years, solution of the qualitative issues in the exports of grain and oilseed crops from Kazakhstan became increasingly important for the complete and timely fulfillment of the export contract.
In order to provide the reporting requirement, first of all it is necessary to receive the most complete and exact information regarding the qualitative requirements, safety requirements, conditions of cargo acceptance in the recipient country, as well as information about the elevator, which makes the shipment, before signing the export contract.
In addition, it is required to complete formation of crop export batches at the elevator, after acceptance of the crop, because to date agricultural producers usually perform, as owner of the elevator and trader. The elevators can already form such batches as durum wheat, alternate products (oilseeds and pulses), beginning from the planting campaign, because it is rather narrow market, where everyone basically has his buyer. To date, market participants usually work with futures, invest or finance, starting from the planting campaign, so it is absolutely possible to form export batches at that stage.
Yerzhan Nurpeissov, Business Development Manager, Department of the agro-industrial complex, SGS Kazakhstan Ltd.
In 2018, high-quality of domestic products allowed to Kazakh producers to return on the traditional markets. Kazakhstan usually uses commercial grains for planting works. However, such grains do not always give the required results. Also, it is important to control the content of mineral fertilizers in the soil, so there is such measure as agrochemical survey of agricultural lands, providing application of essential nutrients to the soil to ensure a good harvest.
So, the EU provides hard requirements for the safety index. China has more than 20 quarantine objects + requirements for pesticides, heavy metals, mycotoxins. Iran has more than 50 requirements for pesticides usage. And every year the requirements get more stringent.
Filippo Bertuzzi, Senior Consultant, Aretè Research & Consulting in Economics
During 4 recent years, Kazakhstan increased its supplies of durum wheat on the global market – from 170 thsd tonnes in 2014, to 450 thsd tonnes in 2017. The upward trend developed, due to increasing of the shipment volumes to Italy and Turkey, which managed to somewhat compensate the reduction of Kazakh durum purchases by Russia.
However, there were no structural changes in the geography of the grain exports and trade patterns. Therefore, a longer term strategy is pivotal, to support and improve the current trend for Kazakh durum exports and expand the sales markets for Kazakh producers and exporters, as well as a deep understanding of the demand features and market positioning and continuous analysis of the market situation.
Of course, the current article doe not demonstrate all interesting speaking notes. The conference audience covered highly professional representatives of the grain business, as well as foreign companies, who discussed many topics and important issues not only in the conference hall, but also on the sidelines...
We should note the global reach of delegates, which once again confirms the high significance of Kazakhstan as supplier of agricultural products on the global market. The conference KazGrain is another important step contributing to development of the grain business of the country.