Asia Grains & Oils Conference 2023: Summing Up Results and Outlining Development Vectors for Kazakhstan's Agricultural Market
On December 5, the international conference Asia Grains&Oils Conference: Results of 2023 was held in Almaty. At the event, which concludes the cycle of agricultural events from APK-Inform in the current year, leading participants and experts summed up the work of the grain and oilseed markets of Kazakhstan and Central Asia in 2022/23 MY, and also discussed the problems, challenges and prospects of the new season-2023/24. After all, the season promises to be difficult…
The event was supported by sponsors: MYANDE GROUP (Gold sponsor), FAMSUN (General sponsor), SELVIT (Exclusive sponsor), AGRIWELL, Build Pro Work.
About 150 delegates from 14 countries of the world took part in the conference, including leading participants of Kazakhstan's agricultural market — agricultural producers, traders, processors (flour mills, oil mills, deep grain processing enterprises), suppliers of technological solutions and equipment, experts and media representatives.
The agenda of the one-day conference was very rich. The key topics of the conference were:
- Grain and oilseed market in 2023/24 my: the first results of the season, expectations from the SH of the agricultural year (trends in the global and Kazakhstan grain markets, issues of export, state support, quality and safety of the 2023 grain harvest, prospects for deep grain processing).
- Agro-industrial complex of Kazakhstan: awaiting transformations (state support and regulation of the agricultural sector in Kazakhstan, development of foreign economic cooperation, investment attractiveness of the agricultural sector, logistics – the soft spot of Kazakh agricultural exports).
- Development of grain processing in Kazakhstan (prospects, problematic issues of the industry, development of interaction between business and state bodies, prospects for the development of deep grain processing).
- Market trends for oilseeds and processed products. Technological aspects (production and profitability of oilseeds in Kazakhstan, trends in the flaxseed market, trends in the sunflower oil market of the Republic of Kazakhstan – domestic and foreign, the situation in the meal (cake) market.
Both businessmen and representatives of state bodies and state companies took part in the conference.
The Deputy Minister of Agriculture of the Republic of Kazakhstan Azat Sultanov spoke at the event. He said that, despite the criticism, the Ministry of Agriculture is actively working within the mandate of the head of state to support agricultural producers affected by weather conditions this year. This year, for the first time, such a significant amount of additional state support was allocated — 90 billion tenge.
The vice-minister emphasized that one of the main tasks of the state today is to help agricultural producers adapt to new working conditions on the market, to become more competitive.
«We do not compare our producers with the farmers of southern Russia, but we are talking about the nearest neighboring regions of the Russian Federation. Why do they get many times higher yields?» A. Sultanov asked the question.
In the face of evolving geopolitical dynamics, the vice minister asserts the necessity for the state to establish conducive conditions for a competitive landscape. This involves providing support to Kazakh agricultural producers, facilitating an increase in both the production volume of grains and oilseeds, as well as enhancing overall yields.
Also, for the first time at the Asia Grains&Oils Conference, the head of JSC NC Prodcorporation Asilkhan Zhuvashev spoke about the activities of the state-owned company in the difficult conditions of the current year.
As per his statement, adverse weather conditions led to the realization of the worst-case scenario. In response, Prodcorporation is compelled to deploy both stabilizing measures concurrently: executing commodity interventions through the sale of high-quality wheat to mitigate the surge in prices for flour and social bread, along with interventional purchases to address the surplus of feed grain.
At the same time, according to agricultural producers, Kazakhstan's agro-industrial complex needs more state support than at the moment.
«Despite the stable growth trend of allocated budget funds for development (in 2020 — 363.4 billion tenge, in 2021 — 374.8 billion tenge and in 2022 — 451 billion tenge), the agricultural sector is underfunded by more than 100 billion tenge annually», - said the Director of the Union of Organic Products Producers of Kazakhstan Arsen Kerimbekov.
He noted that the multiple increase in prices for PPP, equipment, feed, etc. does not cover the industry's need for financial resources.
«Over the past 10 years, the Ministry of Agriculture has adopted several development programs, according to which more than 2 trillion tenge were directed to subsidize the agricultural sector alone. Despite this, the share of agriculture in the economy does not exceed 5%,» the expert emphasized.
Apart from the shortage of budgetary funds, A. Kerimbekov identifies the uncertainty surrounding state support measures as a systemic challenge impeding the development of Kazakhstan's agro-industrial complex. Over the past five years, industry regulations have undergone more than 50 changes, lacking a consistent state policy in the agro-industrial sector and creating discontinuity in this regard. Additionally, restrictive actions in the last three years have seen the government hastily imposing export limitations on 15 types of agricultural products without adequate calculations and risk forecasting. Major problems also include insufficient financial resources, poor interdepartmental coordination, and challenges in sales.
According to the speaker, in order to solve systemic problems in the agricultural industry, the state should first of all put statistics in order, and in addition, create a closed cycle of production on a national scale. Biologization of agriculture is also an important task.
Saule Sabir, Deputy Director of the Projects Department of JSC NK KAZAKH INVEST, spoke at the panel session «Agricultural Industry of Kazakhstan: Awaiting Transformations», who spoke about the activities of JSC NK KAZAKH INVEST, measures of state support, investment opportunities, and the growing investment potential of the agribusiness sector .
She highlighted several focal points within the agriculture sector that demand special attention, including the deep processing of grains, the processing of fruits and vegetables, and the production of baby food. These industries are deemed highly lucrative and serve as the cornerstone of the country's food security.
Kirill Pavlov, a member of the board of directors of NAREC, independent director, journalist and agrarian analyst, was the moderator and speaker of the business talk «Kazakhstan's Agricultural Industry: Awaiting Transformations».
He emphasized the significance of using satellite data in agriculture, citing its ability to monitor vast areas and provide real-time information on soil conditions, moisture levels, plant growth dynamics, and more. Utilizing satellite data allows for informed decision-making in agricultural production, including process optimization. This enables the adaptation of agricultural technologies by selecting specific varieties, crops, and adjusting planting dates, among other factors. This technological approach is particularly crucial for Kazakh farmers who, unfortunately, face significant dependence on weather conditions, resulting in lower yields compared to neighboring regions. Addressing this technology gap becomes imperative to enhance competitiveness in foreign markets and mitigate threats to the country's food security.
A huge problem this season is the sale of low-quality wheat. However, according to traders, even low-quality grain can be sold on foreign markets.
«Chinese importers can import sprouted wheat, which can be used not only for biofuel and alcohol. Depending on the specific quality characteristics, such wheat is used for the production of cereals, compound feed, whole grain flour, flour for specialized products, flour for quick cooking products (such as porridge, bread, etc.), food additives and other products with lower quality requirements. Even from lower-quality wheat, it is feasible to manufacture not only safe but also beneficial food and feed products», - believes Daulet Uvashev, Director of «Harvest Kazakhstan» LLC.
In his opinion, the export of Kazakh wheat will significantly increase in the next 2 months.
According to his projections, Kazakhstan is anticipated to export approximately 9.4 mln tonnes of wheat to foreign markets in 2023/24 MY. While this forecast represents a decrease from the previous season's 10.63 mln tonnes, it surpasses the levels observed in the preceding three seasons (2021/22 MY — 8.16 mln tonnes, 2020/21 MY — 8.25 mln tonnes, 2019/20 MY — 6.9 mln tonnes). The expected export includes 6 mln tonnes of soft wheat, 0.6 mln tonnes of durum wheat, and a record-breaking 2.8 mln tonnes of flour in grain equivalent, marking the highest figure in the last five seasons.
The conference delved into trends not only within regional markets but also on a global scale. Of particular interest was the insightful presentation by Andrey Sizov, the esteemed analyst and General Director of the analytical center «Sovekon».
He said that, despite the optimism of some Russian officials and loud statements about the intention to conclude large contracts, China is not yet in a hurry to open its market to Russian wheat.
«While we often hear about the strong partnership between Russia and China, the reality is that negotiations and significant trade volumes progress at a sluggish pace, lacking a breakthrough in substantial supplies. China acquires soybeans and corn from the Far East, a region of strategic importance for the Russian Federation, yet the quantities for the People's Republic of China remain relatively small. It is evident that China is in no rush to fully open its grain market, leveraging it as a clear and actively employed lever in their trade dynamics,» the analyst believes.
According to him, contrary to the geographical proximity of the Russian Federation and China, which seems to be the case, China favors sea deliveries of grain over railway transport. After all, the ports and main centers of grain consumption are located in the east of China.
Furthermore, a noteworthy trend is the increased intensity of China's wheat imports from the USA. China made a substantial purchase of American wheat, acquiring 440.000 tonnes in early December—marking a notable shift in their import patterns.
Providing a broad overview of the global wheat market, the expert anticipates that the price bottom has likely already been reached. Barring unforeseen shocks, the expert suggests that the peak in global wheat prices could be attained in the Q1 of 2024.
«Guideline for fundamentally justified prices in the current season — $250 FOB Black Sea/$6.0 CBOT... Price jumps are possible (weather in South America, escalation of hostilities between Ukraine and Russia in the Black Sea, weather in the Northern Hemisphere), but prerequisites for significantly high prices for a long period ($300+ Black Sea) is not yet visible,» - believes A. Sizov.
Addressing one of the season's most pertinent issues, the conference focused on the quality and safety of Kazakh grain from the 2023 harvest. Saltanat Orazova, the head of the laboratory at the Department of Agriculture of SGS Kazakhstan Ltd, emphasized the critical significance of adhering to norms and requirements for export supplies.
The 2023 growing season's weather conditions exerted a detrimental influence on the yield and quality of grain crops in Kazakhstan. An expert presented the outcomes of testing fundamental quality parameters for spring wheat and barley grain samples from the current harvest, gathered in the key regions of Kazakhstan. This year, over 200 samples of soft wheat and approximately 100 samples of barley underwent testing as part of the global SGS Quality Map project.
«Upon analyzing the results, it is evident that the quality of the 2023 grain harvest in the republic was notably inferior to that of the previous year. Prolonged rains during the harvest period resulted in grain germination, significantly impacting the falling number value. With a substantial presence of germinated grain reaching 80-85%, the alpha-amylase activity measured at 61 s characterizes such batches as low-grade wheat. The elevated grain humidity fosters the development of pathogenic microflora, necessitating a thorough examination for indicators such as mycotoxin content and the presence of pathogenic microorganisms, including mold,» stated S. Orazova.
During the discussion session on grain processing, Evgeniy Gan, Chairman of the board of founders of the Association «Union of Grain Processors of Kazakhstan», Mukan Abdiev, Chairman of the supervisory board of the Union of Grain Processors of Kazakhstan, Almaz Zaripov, President of the Agrarian and Industrial Union of Kazakhstan, and Zhomart Motyshev, acting President of the Association «Union of Grain Processors of Kazakhstan» expressed their vision of the situation and prospects of the industry.
According to flour millers, the import of Russian wheat for the production of Kazakh flour remains an urgent issue. Only high-quality imported raw materials can maintain the prices of socially significant food products, and also help not to lose the position of flour from the Republic of Kazakhstan in foreign markets.
In light of these challenges, Zh. Motyshev suggested amending the Ministry of Agriculture's regulations to permit the transportation of imported wheat exclusively by road to processors, poultry farmers, and licensed elevators. He also recommended discontinuing the practice of monthly submission of lists of grain processing enterprises to KTZ (Kazakhstan Temir Zholy). He emphasized that no normative legal act imposes quantitative restrictions on the import of wheat, rendering such monthly submissions unnecessary.
«Whether we like it or not, the market for Kazakh grain and its processing products primarily encompasses the countries of Central Asia and Afghanistan. Without Russian grain, we cannot fully meet the demand for flour in these markets due to a shortage of our own grain supply. While Kazakhstan felt confident in these markets five years ago, the landscape has shifted, and both Uzbekistan and Russia have emerged as formidable competitors,» emphasized Evgeniy Gan.
The topic of deep processing of grain, which is extremely relevant in the current year, when a large crop of low-quality wheat has been harvested, was raised by Evheniy Pushchik, a consultant of APK-Inform Asia LLC. He has more than 30 years of experience in the oil and gas and petrochemical industries. Implemented a number of projects in the field of biofuels in Ukraine, Uzbekistan, Kazakhstan.
E. Pushchyk highlighted that there are currently 5 inactive distilleries in Kazakhstan that could potentially be repurposed for the production of technical alcohols, specifically ethyl acetate. This strategic move could facilitate the processing of significant volumes of substandard grain. Moreover, it presents a promising business niche with potential for growth and development.
«The Central Asian market for these products is currently wide open. It is essential to invest in the production of items that have a demand on the global market. Given the circumstances of Russia flooding the market with grain and flour, focusing on the products of deep processing such as lysine, glucose, amino acids, and bioethanol represents promising markets that we should strategically pursue,» emphasized the speaker.
The speaker underscored that deep processing of grain stands out as a promising avenue within the grain industry. Annually, the demand for products derived from the deep processing of grain is on the rise, both in domestic and international markets. This trend is closely linked to developments in import substitution within the livestock industry domestically, and globally, it aligns with the growing consumption of biodegradable plastics derived from lactic acid. Raw materials and agricultural waste serve as an excellent foundation for the production of biofuels, organic fertilizers, and SAF (sustainable aviation fuel).
According to the expert, implementing a classic cluster for the deep processing of grain, a model that has proven successful in many countries, is crucial for Kazakhstan. The only missing component in the Kazakhstan's portfolio, as highlighted by the expert, is the production of SAF, contributing to the environmentally conscious development of the sector.
Kazakhstan's crop production is not solely reliant on grain, as emphasized by Farid Abitaev, the general director of "Experimental Farming of oilseeds." He expressed the view that agricultural producers in Kazakhstan are poised to boost the production of oilseeds due to their higher profit margins and increased resilience to drought compared to grain crops.
According to the expert's forecasts, the planting area of sunflower seed in Kazakhstan may increase to 2 mln ha by 2028 (against 1.17 mln ha last year), soybean – to about 500 thsd ha, flaxseed – from 1 mln ha to 1.5 mln ha.
Andrey Antonov, Executive director for strategic development of the National Oilseed Processors Association, who also spoke at the Asia Grains&Oils Conference: Results of 2023, confirmed that the market is ready for an increase in the production of oilseeds.
A. Antonov stated, "Over the next 3-5 years, the export potential of oil from Kazakhstan alone is estimated to be around 500.000 tonnes. Furthermore, domestic consumption is projected to increase to approximately 290.000 tonnes. To meet these volumes of oil production, processors will require about 1.7-1.9 mln tonnes of sunflower seed."
He added that in the current season, China has the potential to emerge as the primary importer of Kazakh sunflower oil, potentially displacing Uzbekistan, which has traditionally been the main buyer of this product.
The conference also placed a spotlight on the flaxseed market, and this emphasis is unsurprising given that Kazakhstan is one of the three largest global exporters of this product.
Evgeny Karabanov, the founder of Severnoye Zerno LLC, said that a unique situation has developed in the world oilseed market - the demand for raw materials for processing this season far exceeds the level of supply.
"If in previous years we witnessed a considerable surplus of supply over processing, the current situation is distinct—supply is not merely balanced, but it is approximately 100.000 tonnes lower than the required processing volume. Only the remaining stocks, which are quite minimal, are preventing a more critical scenario," stated the spokesman.
According to his estimates, in Kazakhstan, the flaxseed stocks are only about 30.000 tonnes, up to 50.000 tonnes, and in Canada - up to 180.000 tonnes.
Currently, this situation is already impacting the market, leading to a surge in prices across all bases.
During the oilseed session, the technological aspects of the fat and oil industry were also discussed: the sponsors of the event presented their products and services.
Regional sales manager of Myande Group Co. LTD (Gold sponsor) Nastya Jiang spoke about the best practice of the implementation of the oil extraction plant project (processing of oilseeds).
Victor Nesterov, a technical consultant of Build Pro Work LLC, delivered a report focusing on the optimization of processes related to the reception, storage, and shipment of cake, meal, and grain, along with modern trends in the meal market. During his presentation, the expert highlighted two predominant trends that have been gaining traction in the meal and cake market in recent years. One of these trends is the production of high-protein sunflower cake/meal with a protein content of at least 45%, coupled with the storage of products in honeycomb elevators.
The topic of the presentation by the General sponsor FAMSUN CO. was "Solvent Extraction and Refining: European Technologies from China». Denys Ivanov, the director of oil and fat sales at FAMSUN CO., served as the speaker representing the company.
The conference took place in a warm and friendly atmosphere, although the discussions were sometimes heated. Participants had the opportunity to obtain direct answers to their questions from representatives of state bodies and industry colleagues. The event facilitated the creation of new valuable contacts, conversations with friends and colleagues, and provided a source of energy for a productive start to the upcoming season.
We are grateful to all the guests who found the opportunity to attend the event despite the difficult working conditions this year, as well as to the partners and sponsors who helped to hold the Asia Grains&Oils Conference: Results of 2023 at a high level.
Another highly eventful conference season in Central Asia has come to an end. We eagerly anticipate our upcoming events in 2024—stay tuned for updates and announcements on the APK-Inform website news feed!
