Monday, April 7, 2008

Wheat prices causing export suspensions

Kazakhstan is the largest grower of wheat in central Asia. Double digit inflation on various commodities has caused them to reduce and consider freezing grain exports. This can only exacerbate the grain inflation gripping again at the moment, especially as rice shortages and hoarding have caused people to shift to other more available staples.

These kinds of stories are far from front page news, the price of wheat and rice hitting record highs fail to garner the attention that $100 oil and $1000 gold do, but their impact to billions of people could be just as serious when food supplies tighten.


Kazakhstan considers suspending grain exports

By Raushan Nurshayeva

ASTANA, April 7 (Reuters) - Kazakhstan will examine proposals to suspend grain exports or introduce export duties to tame domestic inflation, the country's prime minister said on Monday, reversing a previous decision not to curb exports. Kazakhstan, central Asia's top wheat grower and a country with ambitions of becoming the world's fifth-largest grain exporter this season, has long threatened export limits to rein in double-digit inflation.

Similar tactics have been used by ex-Soviet countries Russia and Ukraine, leading to a drastic decline in grain exports from the Black Sea region at a time of high world demand and prices. Kazakh grain traders, wary that exports could soon be forbidden or limited, said they were shipping as much as possible now as the country aims for a seasonal export record of 10 million tonnes.

"I have ordered the Agriculture Ministry, together with the Industry Ministry, to look into the possibility of introducing a grain export duty or suspending exports altogether," Kazakh Prime Minister Karim Masimov told a government meeting. "Either this or that. Please submit your proposals by the end of the week."

Officials reassured exporters last month that Kazakhstan would not limit exports following a deal with local producers and traders to ensure at least 1.2 million tonnes of wheat are supplied to the domestic market at fixed prices. But a rise in global prices has alarmed Kazakh policymakers, concerned with booming bread prices and a threat of possible shortages across the steppe nation of 15 million people.

"The global trend is quite alarming. Global prices are rising relentlessly," Masimov said.


Masimov said Kazakhstan had performed well in limiting first-quarter 2008 inflation to 2.5 percent, largely unchanged from 2.6 percent recorded in the same period of last year, state statistics show. "But we should not relax, because there are global trends to which we should pay attention," Masimov said. "Curbing prices for bread and basic goods ... should be kept under constant control."

High world prices have made exports more profitable than domestic sales, making it tougher for millers to secure wheat. A rise in grain prices and temporary shortages of bread last year helped propel Kazakh inflation to double digits.

Annual consumer price inflation in central Asia's biggest economy was 18.8 percent in 2007, compared with 8.4 percent in 2006. Kazakhstan harvested a record 20.1 million tonnes of grain last year and had planned to export about 10 million tonnes in the current season -- 7 million of which had already been shipped by the end of February.

"We're loading in April and we're making plans for May," said a major grain trader in Almaty, Kazakhstan's largest city. "We are trying to export as much as we can as quickly as possible, because the situation could change at any moment. Bread could get more expensive."

Russia introduced a prohibitive export tariff on wheat from Jan. 29, which has been extended until at least July 1. Ukraine has also banned or limited exports through a series of quotas in the last two seasons. While Kazakhstan may follow suit, traders said other measures were also open to the government. These could include a certificate system allowing only selected firms to export, or limits on wagon allocations by the state-owned rail operator.

Railway wagons are crucial in facilitating exports due to Kazakhstan's limited port capacity and distances to sea.

(Additional reporting by Robin Paxton in Moscow, writing by Maria Golovnina) ((; +7 727 250 85 00; Reuters Messaging:

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