This week, the Kazakh market of major grains and oilseeds was forced to take a break amid trade uncertainty due to the Russian invasion of Ukraine. We discussed further market prospects with Evgeny Karabanov, expert of the Kazakh Grain Union.
“Currently, market operators in Kazakhstan are not concluding any deals. Everyone wants to understand how the situation will develop and what prices will be. For example, buyers expect prices to drop in the short term. Kazakh farmers decided to wait and see, that is risky and can lead to a “bottom of the ladder”. It is unlikely that we will see price increase due to high competition and the depreciation of the ruble and tenge. The current stocks of Kazakh wheat are very large compared to the last year. I want to emphasize that high volatility and political instability make it impossible to predict anything in detail”, – the expert noted.
“In addition to the current sanctions, in many EU countries the civic position is also very strong, and society is radically against Russian aggression. For example, I was recently informed that a ship with Russian flaxseed arrived and the buyer refused to accept and pay for it, not so much because of the sanctions, as for ideological reasons. Therefore, in the light of recent events, it will be quite problematic for Russia to trade on global markets.
Moreover, freight brokers do not want to put ships in Russian ports and insurance companies do not want to issue insurance for Russians. This means that after the loading, Russian sellers will not be able to conclude new contracts. In addition, the EU may impose sanctions to ban the supply of any agricultural products from Russia, including grain. This will mean that Russia will not be able to ship 7-8 mln tonnes of wheat planned for export before the start of the new season, and there are free volumes of wheat in the market in the amount of 5-6 mln tonnes. That is, about 12 mln tonnes of wheat will stay in the country, which will have a negative impact on the Russian domestic market, especially ahead of the new harvest. Such stocks will raise a problem for storing a new crop, and traditional markets (Kazakhstan, Tajikistan, Uzbekistan, Kyrgyzstan, Turkmenistan, etc.) are not ready to absorb such a large volume of Russian grain supply, taking into account the conversion and exchange rates”, – E. Karabanov said.
“Regarding the new season, it is absolutely impossible to predict who will export wheat – Russia or Ukraine. Moreover, if prices continue to rise on the world market, Kazakh wheat will become competitive on the European market. It can be delivered through Georgian ports to the world market. Perhaps, Kazakhstan will be able to ship up to 0.5 mln tonnes of wheat by the end of the season (the quality of Kazakh grain this year is very good) from Georgian ports to Turkey and the EU.
At the moment, there is talk that Russian banks will finance the banks of Tajikistan, Uzbekistan and Kyrgyzstan with ruble liquidity for purchase, but these measures are very doubtful in the current situation. Most likely, this grain can be exported to Iran, Afghanistan and the countries of Central Asia. Probably, Russia will try to ship some volumes to China by land (if they let it through). In addition, Russian flour, which is not subject to any duties or quotas, will be quite competitive on the markets of Tajikistan, Uzbekistan or Kyrgyzstan, despite the expensive transit tariff. Thus, we expect prices for Russian wheat to fall due to the high supply”, – the expert emphasized.
By Polina Kalaida
