Kazakhstan’s summer harvest lags behind

Once more, Kazakh authorities have proven to cherish a sound dose of over-optimism in their expectations on grain harvests for this year. There seems to be a connection between lower-than-expected outputs of cereals and higher-than-expected fuel prices – resulting in a temporary ban on fuel exportation imposed by the government in early September. With little to be shocked by on world grain markets, shifts in the geography of grain production and trade seem to matter more and more.

by Charles van der Leeuw, KZW senior contributor

Kazakhstan’s summer harvest lags behind According to the Kiev-based specialist news agency Agrimarket, Kazakh farmers had only collected 25 per cent of this summer’s grain harvest’s expected yield as of September 7. Close to 5 million tonne had been harvested in all, the agency quoted agriculture minister Akulbek Kyrishbayev as stating – adding that productivity was up from summer last year by one centner per hectare. The most behind are the provinces of Northern Kazakhstan and Akmolinsk (in the latter the capital Astana is located), with 11 and 12 per cent of the fields having been harvested.

According to the minister as quoted in the news report, Kazakhstan’s cereal productivity was up from summer last year by one centner per hectare. In a separate report dated September 3, Agrimarket wrote that the average yield in Kazakhstan stood at 11.8 centner per hectare as to date – an increase of 1.4 centner in comparison with the full year of 2008. By comparison: Kyrgyzstan, which as of September 3 had collected its harvests on 70 per cent of its 528,800 hectare of farmland, including 292,200 hectare of wheat crop and 91,500 hectare of barley. As to date, the country had harvested 1.13 million tonne of cereals as compared to 827,700 tonne on the same date in 2008.

As usual, the low predictability level of weather forecasts dramatically affects preliminary harvest estimations to considerable extents. Not that long ago, officials on the spot tended to be more upbeat about grain harvest expectations than over the month of August. “Kazakhstan expects a 14.8 percent increase in exports of grain, including flour, in the 2009-10 marketing year after a bigger harvest this year, a trade news wire service by the name of Ali Baba reported on August 25. “The Food Contract Corporation, a major state-controlled grain exporter, expects Kazakhstan to ship 7.0 million tonnes of grain in the forthcoming marketing year, compared with 6.1 million tonnes in the current season, which ends in the autumn. “

The agency quoted Alexander Solyulev, first deputy CEO of the FCC, as putting his estimate for the summer harvest in 2009 harvest at between 17.0 million and 17.3 million tonne, an increase from 15.6 million tonnes last year. “The Food Contract Corporation plans to increase purchases of milling wheat from the 2009 crop to 3.0 million tonnes from 1.6 million tonnes in 2008. It exported only 177,000 tonnes of grain from last year’s crop and supplied the rest to the domestic market,” the agency reported further.

But into the month of September, predictions have become more cautious – in line with those made earlier by western authorities concerning Kazakhstan. Thus, the Chicago Board of Trade on September 9 reported that “…worldwide yields are expected to increase this year. According to the US Department of Agriculture (USDA), a world authority on agricultural supply and demand, worldwide wheat production will grow by 2.8 million tonne during the 2009/10 marketing year. The latest USDA report (12 August) expects increases in production in several key grain-growing countries such as the US and Ukraine while yields will fall considerably in others, particularly Russia, Canada and Argentina. Wheat production in Ukraine, currently the focus of intense foreign investment in agricultural land, will go up by 1 million tonne this year.”

Roughly speaking, setbacks in certain parts of the world appear to be offset by better-than-expected results elsewhere. “The 2009/10 projection for world wheat production is increased by 2.8 million tonnes this month, to 659.3 million,” the same report from the USDA quoted by the CBOT reads. “Considerable production increases for India, EU-27, China, Ukraine, and several other countries are largely offset by substantial drops in production for Russia, Argentina, Canada, Kazakhstan, and South Africa. […]The biggest drop in wheat production occurred in Russia, where the month-on-month decrease in production reached 4.5 million tonnes, lowering output to 55.5 million. In July, the increase in the wheat production estimate by 1 million tonnes was driven by revisions in wheat area that appeared to be 1.2 million hectares higher than previously expected.

The publication points at the central-eastern parts of Russia’s traditional grain belt which stretches from the Crimea all the way to the western slopes of the Ural mountains, just north of the border with Kazakhstan. Especially the region of Stavropol north of the Caucasus and the lower Volga basin appear to have been hit hard. “The drought that has spread across those districts has harmed an estimated 3.6 million hectares of grains, mainly by hurting winter wheat during its filling period, and resulted in substantial damage to winter wheat and corn, while also affecting spring wheat yield potential,” the USDA report reads.

The Americans give worrying figures in their report. “Harvest reports as of early August indicate grain yields on average 20% lower than in 2008,” the text reveals. “Some rain in the south at the end of July came too late to improve grain conditions. […] A combination of better-than-average rain and an increase in spring grain area in Siberia, to some degree, counterbalances the unfavourable situation in the drought-affected regions in the rest of the country, and mitigates the drop in the Russian aggregate wheat production number. […] Wheat production also has been decreased for Kazakhstan by 0.5 million tonnes to 14.0 million. The decrease reflects dry weather conditions in the western part of the country (bordering the drought-hit southern part of Russia), as well as in the northern part of the country (Kostanai), where wheat in many regions received little or no rain during the moisture critical period.”

Delays in output and concerns about lower-than-foreseen harvest volumes have prompted the government of Kazakhstan to put a temporary ban on transportation fuel exports, Reuters reported – thereby suggesting that the sluggish harvest cannot only be blamed on the weather. Prices of fuel, diesel in particular, tend to go up along with those of cereals, tempted by the outlook of higher production cost margins driven by higher grain prices on world markets. Through the summer of this year, however, there have been only minor fluctuations on both markets. It is therefore that if in Kazakhstan there is a particular friction in this domain, it must probably be sought closer to home.

(all prices in US dollar cent unless otherwise indicated)

date 31/12’08 30/06’09 31/08’09
wheat/LIFFE (p/tonne) 10575 9750 10000
wheat/CBT (c/bushel) 610.75 511.25 471.00
maize/CBT (c/bushel) 407.00 347.75 326.25
soyabeans (c/bushel) 972.25 1226.25 1100.00
cotton/NYBOT (c/lbs) 49.02 53.30 57.76
ethanol/spot (p/tonne) 163000 164000 161300
diesel/spot (c/tonne) 47250 57525 58550

source: FT/Reuters