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Coronavirus slowed Kazakhstani flour production

28 July 20202 min reading

COVID-related wheat and wheat flour export restrictions, which were imposed and subsequently lifted in spring this year slowed Kazakhstani wheat flour production. During January-May 2020, wheat flour production dropped twelve percent, compared to last year’s production, the United States Department of Agriculture (USDA) said in its Kazakhstan Grain and Feed Update.

“Kazakhstan’s Millers Union estimates that this slowdown will continue until the new harvest in September. However, experts believe that the milling industry will reach its usual production level by the end of the calendar year 2020”. This slowdown primarily impacts flour for export, so domestic wheat consumption is not expected to decline. USDA estimates MY 2020/21 wheat exports at 6.2 MMT.

USDA forecasts Kazakhstan’s wheat production for MY 2020/21 at 12.8 MMT, a twelve percent increase compared to the previous MY (11.452 MMT). In order to support domestic grain producers, the Food Contracting Corporation – a government agency responsible for grain purchases announced the forward purchases of 365,000 tons of grain crops on the domestic market on May 19, 2020.

The wheat grain export restrictions and subsequent milling slowdown continue to impact the Kazakhstani market. Significant competition from Russian shippers, which also faced export restrictions for some products, has caused a reduction in Kazakhstan’s grain shipments. Kazakhstani wheat prices remain higher than Russian wheat, slowing down exports from Kazakhstan. Traditionally, Kazakhstani wheat was competitive at $10 cheaper per metric ton than Russian wheat. However, this is not the case in the current marketing year. The Millers Union of Kazakhstan explains that while export quotas were in place, Russian traders took advantage and started to ship to Central Asian countries that are traditionally supplied by Kazakhstan. Similarly, Ukrainian suppliers started to ship to Afghanistan.

Similarly, wheat flour exports have recovered very slowly since restrictions were lifted, due to competition from Russian and Ukrainian exports. Similarly, wheat exporters report a slowdown due to lower demand from traditional buyers. Overall, available trade data through May 2020 indicates that MY 19/20 exports have fallen by over 20 percent.

The unrecorded grain trade between Russia and Kazakhstan remains problematic. The Russian Ministry of Agriculture is considering designing an approach to control the movement of grain between Kazakhstan and Russia to prevent illegal trade at the border. However, no details of the program have been released. The Russian Ministry estimates that illegal imports from Kazakhstan may reach 1 million metric tons.

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