Kazakh grain looks beyond drought to new markets

Sept 2. Reuters. BIRLIK, KAZAKHSTAN

BY ROBIN PAXTON

Kazakh grain looks beyond drought to new marketsAnatoly Samoilov crumbles a lump of dry soil through fingers that have tended the wheat fields of Kazakhstan for three decades.

“There’s no such thing as a bad crop here,” said the 55-year-old chief agronomist at the Alibi-Ishim farm. “But this has been a major drought.”

Kazakhstan, the world’s seventh-largest wheat exporter, forecasts its 2010 grain harvest will decline by as much as 35%. Sun-scorched crops have been destroyed in parts of the Central Asian country, while yields have fallen in others.

But while Russia, its neighbor, rushed to ban grain exports after its worst heatwave on record, Kazakhstan has other ideas. It declined the Kremlin’s request to stop exports in solidarity with its partner in a new customs union.

With enough grain stockpiled after last year’s record harvest, Kazakhstan’s exports will be virtually unchanged in the current season. Global wheat prices near two-year highs should bring in more than the $680 million earned from exports in 2009.

Land is not a problem in Kazakhstan, a country five times the size of France with a population of only 16 million. Moving its grain to port, however, has always been an obstacle.

Kazakhstan has invested heavily in recent years to expand its infrastructure, building a grain terminal on the Caspian Sea that offers it an alternative to costly rail cargoes via Russia.

The drought has been a setback to its plans to break into the world’s top five wheat exporters. Exports of eight million tons will not be enough to plug the gap left by Russia’s ban.

Neither will Kazakh grain find its way to 60 countries this year, as it did three seasons ago during a global shortage that drove wheat prices to a record high. US wheat is outgunning rivals in a race to supply North Africa and the Middle East.

Asylzhan Mamytbekov, chairman of state-run agricultural holding Kazagro, takes a longer term view.

“The [Canadian] province of Saskatchewan produces twice as much grain from the same amount of land,” he told Reuters.

“Further intensification of our farming methods will allow us to grow much more grain. We need to know where to sell it.”

Quality wheat

Spring wheat dominates Kazakhstan’s fields. Yields are traditionally much lower than those for winter wheat, but high protein content gives it the advantage of quality.

Kazakh wheat demands higher prices than much of the grain shipped from Black Sea ports and millers often use it to supplement purchases from elsewhere, improving flour quality.

“Not everyone drives a Toyota or a Volkswagen. Some people only drive a Lexus or a Mercedes,” said Kazybek Omarov, director of the commercial department at the Food Contract Corp.

“Kazakh wheat has its buyers. People buy it for the quality.”

The country has sown 16.6 million hectares to grains this year, an area into which both England and Wales could fit. Three of the country’s 14 provinces – Akmola, Kostanai and North Kazakhstan – account for 75% of the entire sown area.

The privately owned Alibi-Ishim farm lies near where these three provinces meet, 500 km northwest of the capital Astana.

Two bursts of summer rain ensured the drought here was not as severe as in western Kazakhstan, where crops were destroyed on more than half of the sown area, but yields are nonetheless lower than usual.

The Agriculture Ministry forecasts Kazakhstan’s 2010 grain crop at between 13.5 million and 14.5 million tons, down from 20.8 million tons last year. Mr. Mamytbekov says technological advances have saved the country from more serious consequences.

“By virtue of technological advances, the harshest year in terms of drought will still deliver a crop to match the average of the last 10 years,” he said.

US agricultural giant Deere & Co supplied the five combine harvesters that sweep together across the 20,000 hectares of sown land at Alibi-Ishim. Ten new storage bins allow the farm to store up to 20,000 tons of grain at any one time.

From there, the grain is driven 50 km (30 miles) to a 1970s-built elevator that towers over the surrounding steppe.

“The elevator will be full again this year,” said Berik Baimukhanov, its director. A day earlier, the 33-year-old law graduate oversaw loading of 20 rail wagons bound for Azerbaijan.

Export markets

Azerbaijan is a growing market for Kazakh grain. A quarter of Kazakhstan’s exports this year will be aimed at the Caucasus region.

Some of it will be unloaded at a new terminal in Baku built by the Food Contract Corporation and Azeri investors.

The corporation, which acts as the state’s main trader and regulates domestic supply by buying and selling grain, is the driver behind several such projects, including a new terminal in the Iranian port of Amirabad, which officially opened in June.

Iran was the largest importer of Kazakh wheat last season.

Among its future plans, said Omarov, is a rail terminal on the border with China, which would open up a potential new route to South Korea, Japan and the markets of southeast Asia.

Kazakhstan, the world’s largest flour exporter, also plans to process more grain at home. Kazagro wants to have 20 plants nationwide, each processing 100,000 tons of wheat every year. One of these, a pasta factory in Kostanai, opened in August.

“We should be selling the equivalent of 2 million tons in a different form, as a value-added product,” Mr. Mamytbekov said.

For Matvei Skornyakov, director of the Alibi-Ishim farm, the job is simply to grow enough grain to meet all these demands.

“Our task is to get more from every hectare,” he said. “We already have the equipment. We have the people, and we pay their wages.

Now it’s up to the human factor.”

He pauses. A tractor kicks up a dust cloud on the horizon.

“And the weather, of course.”

http://www.bworldonline.com/weekender/content.php?id=17062

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