Agro Perspectiva

KazAgro shifts grain export focus to more local markets

01.09.2010 12:56 "Agro Perspectiva" (Kyiv) — The head of Kazakhstan’s giant KazAgro agricultural conglomerate, Asylzhan Mamytbekov, has announced that Kazakhstan will — at least temporarily — shift its grain export focus from the world market to the immediate region and Caucasus. «The volume that the countries (in the region) previously planned to purchase in Russia, they can purchase on Kazakh market,» he said, acknowledging that these countries were the «traditional markets» for Russia and other former Soviet republics. This means Kazakhstan will step in to feed the 12 nations of the Russia-led Commonwealth of Independent States (CIS), including Russia, by replacing the tons of wheat lost as a result of the record heat wave and drought now ravaging Central Asia, Russia and Ukraine. The local focus represents a shift from recent Kazakh efforts to establish itself on the global agro market. It will also allow Kazakhstan to become the emergency «swing» or «last resort» food producer for CIS countries after Russia announced that it was suspending all food exports to both the other CIS countries and to the global markets. The shift in Kazakhstan’s agricultural export strategy, at least in the short term, appears to be a reaction to Russian pressure to keep Kazakh wheat resources focused on CIS countries. It also is a natural consequence of Kazakhstan’s membership of the new Customs Union with Russia and Belarus, which started operating in mid-July. For much of the Soviet period until 1991, Kazakhstan was the main granary, or food-growing area, for the Soviet Union. But Kazakhstan’s agricultural sector contracted sharply, following the loss of its Soviet-era internal markets. However, under Astana’s 2030 development strategy, the country is investing at least $20 billion in the agricultural sector to become a global food-growing and exporting power comparable to Argentina, Canada and Australia. Yet with this year’s regional drought, the collapse of Russia’s harvest and the commitments imposed by membership in the new Russian-led Customs Union, the Kazakh government is being forced to redirect its agricultural surplus to CIS markets only. Mamytbekov took care to avoid angering Russia during his comments by saying Kazakhstan has no ambitions to permanently supplant Russia in the Kremlin’s traditional «near abroad» markets. Allowing Russia to regain its traditional grain markets when its agriculture recovers serves Kazakhstan’s own long-term economic strategy as well. It will allow the Kazakhs to return to their preferred priority of exporting their grain and meat onto the more lucrative global market. Last year, Kazakhstan produced a record grain harvest of 20.5 million tons. This year, because of the drought, it is expected to total at most 13.5 million tons. However, this will still leave a surplus of 6.5 million to 7 million tons of grain that can be exported to other CIS nations, including those of the Caucasus and Russia. APK currently projects that 50 percent of this year’s expected grain exports will go to new markets in the Middle East and Afghanistan and 25 percent would be set aside to be exported to the South Caucasus, Russia, Iran and other countries. Kazakhstan is not expected to try exploit the situation to maximize profits. It is more likely to charge market prices to help purchasing countries avoid food shortages and maintain stability in the region.