February 25 2003, 14:50

Kazakhstan's grain exporter struggles with quality problems

In March last year Kazakhstan's government made the state-controlled CJSC Food Contract Corporation the main exporter of grain in the country. Along with state grain purchases, this structure started commercial purchases of grain.

The account of the Corporation's activities was published in the newspaper "Kazakhstanskaya Pravda".

Being commissioned by Kazakhstan's President last autumn, the Corporation bought 973,000 tonnes of grain from producers and has exported by now nearly 700,000 tonnes of it. More than half of this amount has gone to the new for the Kazakh grain markets of Jordan, Italy, Tunisia, Sudan, Belgium and Turkey. The grain shipments are to be completed till March.

According to the specialists of agriculture ministry, the commercial purchases, made by the Corporation, have favourably influenced domestic prices. After the purchases were announced, the wheat price increased from $45-47 per tonne to $60-65. However, an important price-forming issue was grain quality. Difference in prices between ordinary wheat Class 3 and high-protein one was more than $20 per tonne. A part of high-quality wheat, bought by the Corporation, was put into state grain reserve as a replacement for poorer-quality stocks. Nevertheless, quality of grain remains to be one of the gravest problems of the country's grain industry. 80 percent of Kazakhstan's wheat has gluten content not exceeding 24 percent. Such grain is out of demand in export markets.

In this year the country's grain balance will be characterised by more peculiarities. The market now is being pressed by carryover stocks from previous rich seasons. Now in winter the country's exportable surplus is estimated in some 6 to 7 million tonnes. Besides, the neighbouring Russia, Uzbekistan, Turkmenistan, Ukraine and Kyrgyzstan have also harvested a good crop. According to grain market analysts, the main consumers of Kazakh grain in nearest years will be such countries as Afghanistan, Azerbaijan, Iran, Tajikistan and China. Some EU countries are also viewed as potential importers, but the trouble is that European countries will by only high-quality wheat. The Corporations estimates that the maximal import to all these countries could not exceed 5 million tonnes.

Stiff competition in the world grain markets forces the state exporter to put corrections into the existing system of state grain purchases. According to the Corporation's President, it will need to refuse from outdated State Standards for grains, existing since the Soviet Union, and to establish ISO standards.

Another problem is grain transportation. The Corporation intends to lease a grain terminal in the Lithuanian port Klaipeda. There are also projects to facilitate transits through the Black Sea ports and a project to start shipments to Iran through Caspian port Aktau. To minimise its transportation costs, the Corporation has established an affiliated forwarder company. However, its endeavours are being troubled by high domestic and transit rail tariffs.

"To provide balance between domestic production and export" the corporation is to perform a state purchase of grain from farmers in 2003 in the amount of 510,000 tonnes. It will be made in two stages: advance payment for 245,000 tonnes of wheat will be made in spring. Another 265,000 tonnes of grain will be purchased in autumn. There is also planned a 1.5-million tonne commercial purchase of grain, which sums up into a total of about 2 million tonnes of grain. According to the President of Corporation, this is the amount for which it has already concluded export contracts.