India facing inflationary pressure

India has suspended futures trading of soy oil, potato, chick pea and rubber until September of this year due to soaring prices in commodity markets. Along with reduced exports and lowering of costs on import tariffs, the domestic market has been unable to keep various commodity prices from making multi-year highs.

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India suspends 4 commodity futures on price worries

By Sourav Mishra

Thursday May 8, 08:28 PM

MUMBAI (Reuters) - India has suspended futures trading in four commodities with immediate effect in its latest move to rein in soaring inflation, but industry officials said the step would not ease price pressures.

India has taken a series of fiscal measures to bring down prices recently, and the commodities market regulator said trading in futures contracts in soyoil, potato, chana or chick pea, and rubber had been suspended for four months.

The government, facing state and national elections in the next 12 months, is keen to show it is tackling rising food prices, which contributed to a surge in annual inflation to 7.57 percent in mid-April, its highest in more than three years.

Soybean, rapeseed or mustard seed, guar seed and turmeric prices and volumes picked up as investors switched out of the suspended contracts. India banned futures trading in rice, wheat and two pulses in early 2007. Its decision to suspend four more commodities was not a total surprise to the market as inflation accelerated, stoked by oil, food and metals prices worldwide.

In recent months, New Delhi has also banned some exports and lowered duties on some imports to tame prices and the central bank has tightened policy to curb excess cash in circulation.

FMC Chairman Khatua said the suspended and banned futures would be reviewed in September and were likely to resume then.

Inflation squeeze on Europe's middle class

An interesting article from IHT.com regarding inflationary effects on Europe's middle class.

Inflation Squeezes Middle-class Europe; Anxiety About the Future

Carter Dougherty and Katrin Bennhold

Tuesday, April 29, 2008
www.IHT.com

LES ULIS, France: When the local bakery increased the price of a baguette for the third time in six months last year, Anne-Laure Renard and Guy Talpot invested in a bread-baking machine. When gasoline became their single biggest monthly expense in January, they decided to sell one of their two cars.

Now, as everything from baby milk to chocolate desserts drives up their living costs, Renard, a teacher, and Talpot, a mailman, are planning their most radical lifestyle change yet: They are getting married to reduce their tax bill.

Across Europe, people in the middle layer of the labor force - from office workers, civil servants and skilled laborers to low-level managers - are coping with a growing sense that they are being pushed to the margins like never before, as a combination of rising costs and stagnant wages erodes their purchasing power.

Prices for basic goods from gas to milk are rising sharply, outpacing pay rises linked to official rates of inflation. Families that once maintained pleasant lifestyles afforded by two incomes find the rise in costs - which have accelerated worldwide in the past year - has pushed them to the tipping point. Many Europeans are pinching pennies on food and everyday items, while cutting back on a range of extras, from movie tickets to vacations abroad.

More worrisome, a generation of European workers is grappling with a rising sense of injustice as they face the reality that they may be becoming worse, not better, off than their parents. Even holding classic middle-class professions with a university degree has become less of a guarantee against economic hardship. That, in turn, is igniting concerns of an even more uncertain future for their own children.

To be sure, the middle class in Europe is still more prosperous than the disturbingly large group of citizens who are at risk of poverty. According to the European Commission, 16 percent of the population of Europe falls into this category. Policy makers are concerned that could worsen as the economy feels the sting of a U.S. slowdown, while inflation spirals around the globe.

Yet these same forces are also widening the pool of middle-class Europeans who see themselves on the edge of impoverishment. That concern boiled over to anger last week in Britain, when teachers closed the country's schools for the first time in two decades to protest pay deals that are not keeping up with the soaring cost of living. Especially for those who were not lifted by the latest financial market bubble before it started to collapse last summer, there is fear that proposed pay rises of about 2.5 percent are too meager to absorb food and oil costs that have surged in Britain by about 7 percent and 20 percent, respectively, from a year ago.

Their rallying cry is the latest to echo across Europe. German workers in several industries last month waged a series of strikes to demand a greater piece of the economic pie after years of being asked to make do with stagnant wages.

In France, a range of professions from teachers to factory workers have taken to the streets to urge politicians to counter a decline in purchasing power. This month, thousands of European workers protested on the same theme in Ljubljana, the capital of Slovenia, which currently holds the EU's rotating presidency.

Bowing to public concern, some European governments are promising relief, though their powers to curb inflation or raise pay are limited. In France, where the erosion of purchasing power has overtaken unemployment as the No. 1 public concern, the administration of President Nicolas Sarkozy is, among other things, looking into alleged "abuses" of pricing by food merchants. Neighboring Germany is mulling lower social insurance taxes to offset higher prices.

Capturing the squeeze felt by the European middle class in statistics and across national boundaries is tricky because this grouping has no universal definition. National authorities calculate purchasing power differently, making cross-border comparisons difficult.

Much of the story of declining purchasing power can be traced to policy decisions and economic developments that have taken place within the last decade, when the forces of globalization began to reshape the European and global landscapes.

Governments and employers, especially in industrial sectors, have kept pay rises modest, a trend that was manageable as long as inflation did not accelerate in a surprisingly sharp manner. In addition, more of each country's income has gone to the wealthiest individuals, underpinning the acute feelings of inequality across the broad middle class.

In Germany, the largest European economy, purchasing power had already been declining since 2000, when employers were able to wrest wage concessions or simply shift jobs away as Eastern Europe and China emerged as centers of low-cost labor. Inflation-adjusted incomes rose between 1 percent and 2 percent in the late 1990s, but in 2006 they rose only 0.5 percent and then declined by the same amount last year.

In France, the introduction of a shortened, 35-hour workweek in 2000 has kept average annual pay increases small. Spain, which generated thousands of new jobs for Spaniards and migrant workers by pumping up the housing market, has seen joblessness jump since the bubble burst, while wages are eaten by an inflation rate that is more than double the 2 percent level that most economists consider stable.

Stagnant pay and soaring food and energy prices have curbed consumption in Italy more than any of the other 14 countries that share the euro, sharpening fears that the country cannot escape decline. Since 1999, consumer prices in the EU's 27 member states have risen 22.5 percent, and are up 18.8 percent among the 15 countries that use the euro.

But some pushback is emerging, as the demonstrations in Britain suggest.

Employers and economists in Germany drummed into public discourse the point that labor costs had spun out of control, costing manufacturers much of their market share. But with purchasing power eroding, unions are trying to reverse the trend, drawing a tougher line in wage talks - with some success.

(Carter Dougherty reported from Frankfurt. Victoria Burnett contributed reporting from Madrid and Elisabetta Povoledo from Rome.)

Peter Schiff and Food Inflation

Peter Shciff's article this morning continues on the theme of inflation he has been concerned about for several years. Peter Schiff, dubbed "Doctor Doom" by the likes of CNBC and Fox News, has been incorrectly considered a perma-bear with the likes of Stephen Roach. I disagree with this assessment as Mr. Schiff has seen solid returns from investments in precious metals and equities outside North America which haven't eroded due to the currency devaluation occurring in The United States.

Food inflation is a page 1 story at the moment, but consider analysts like Peter Schiff, Don Coxe and Nouriel Roubini have been calling for this since wheat and rice prices were less than half of their current value only a few years ago.

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Why Not Let the Market Set Prices?

Peter Schiff
Apr 25, 2008

Those unfamiliar with marketplace dynamics may not recognize how government activity has created price distortions across our economy. But when these chains fail to restrain the market, the underlying forces become easier to see.

Much as government mandated easy credit propelled home prices to bubble levels, similar forces pushed college tuition's up to the stratosphere. Both systems are currently breaking down along similar lines.

In light of the staggering cost of college education today, it may seem unbelievable that my father in the early 1950s was able to finance his own education with a summer job waiting tables. Like most in his generation, eight weeks of work per year allowed him to graduate debt free. In contrast, the debt burden now heaped on today's college graduates is so oppressive that the financial challenges are becoming a palpable psychological strain on an entire generation.

The irony is that without easy access to student loans, which have been touted as a means to ease college affordability, tuition's never could have risen so high in the first place. Sadly, it is not students who have benefited, but the educational establishment that receives the proceeds. Colleges collect huge sums of money up front while students get saddled with staggering balances.

Now that repaying loans has become increasingly difficult for home buyers and students (especially since the home equity well has run dry and the employment market has cooled), more debtors are defaulting. As a result, the market for securitized loans, which has completely dried up in the mortgage market, is now equally desolate for student loans. Here again, the government is being asked to pick up the slack by buying existing student loans and issuing new loans directly to students.

In so doing, the government is helping to sustain high tuition's just as similar actions are working to prop up real estate prices. If the government stayed out of the student loan market, students would not be denied educations. Colleges and universities would simply be forced to offer affordable tuition's or go out of business --just the way they used to back in my father's day. Similarly, if the government allowed real estate prices to collapse, Americans would not have to take on so much debt to buy houses.

To buy up all of these loans, the Fed is running the printing presses non-stop. As a result, prices of other goods, such as food and energy, are spiraling out of control.

Of course, mainstream Wall Street firms and the conventional financial media do not see this obvious connection. While CNBC searches the world for clues to this "mystery", no one sees the evidence "hiding" in plain sight. Higher prices simply result from all the money printing, both by the Fed and foreign central banks trying to maintain currency pegs to a sinking dollar.

It is amazing how those who were completely blindsided by the surge in food prices are now so quick to come up with ridiculous reasons to explain the phenomenon. However, for those of us who actually understand what inflation is, predicting the current surge in food prices was a no brainer. Read one of my commentaries from Oct. of 2006 and see for yourself.

Similarly, analysts are blaming $120 oil on the hidden machinations of greedy speculators. They buttress these claims by noting that absent a bona fide oil shortage, current prices are not justified by fundamentals. This overlooks that while there is no shortage, there is also no surplus. The market is in perfect equilibrium at today's price, and recent spikes merely reflect the substantial increase in global money supply. If today's prices really were artificially high, like house prices, they would be a glut of oil in storage facilities while users, priced out of an inflated market, cut back on their consumption (This is precisely what is happening in the real estate market).

As consumers are getting wise to inflation, they are beginning to stock up on those products showing the most rapid price increases. This week, Cosco and Sam's Club began to limit bulk purchases of rice. After all, if you have the cash why not by the things you know you will need in the future now, before the prices go any higher. My guess is that if home storage were possible, consumers would be buying as much gasoline and home heating oil as they could currently afford...they might even load up their credit cards to do so. After airfares (which unfortunately cannot be stockpiled), apparel may be next major category of goods that will experience rapid price increases. Why not buy a few extra pairs of socks while they are still cheap?

As the government creates more inflation, and prices for all sorts of consumer goods spiral upward, the authorities, as they always have, will institute price controls and other forms of rationing of consumer staples. My advice is to stock up now, before you end up having to spend hours waiting in line.

Yuan continues rise against the dollar

This aritcle on the Yuan's steady appreciation against the US dollar appeared in yesterday's IHT. Domestic inflation in China is rising steadily, while the it's central bank is being pressured to allow further appreciation. The rising Yuan's effect on the US dollar coulpled with the ECB's recent decision to freeze interest rates portends further weakness for the US dollar.



Dollar falls below 7 yuan for first time since 1993

By Lu JianxinReuters
Thursday, April 10, 2008


SHANGHAI: The dollar weakened and slipped below 7.00 yuan on Thursday for the first time in over a decade, underlining China's growing economic strength and its increasing use of the currency as a policy tool.

The central bank, which tightly controls the foreign exchange market, paved the way for the rise by fixing the yuan's daily mid-point, or reference rate, at a fresh high of 6.9920 before trade began. The yuan opened at 6.9920 against the dollar compared to 7.0017 at Wednesday's close. It was the first trade above 7.00 since China devalued the yuan to 8.7 from 5.8 at the start of 1994, creating a modern foreign exchange market.

"China is now under both international and domestic pressure for the yuan to appreciate at a fast pace," said Liu Dongliang, currency analyst at China Merchants Bank in Shenzhen. The Chinese central bank tightly controls the market through regulations and indirect intervention, and has limited the pace of yuan appreciation to support growth in China's exports.

But since July 2005, when the yuan was revalued and its peg to the dollar scrapped, its rise against the dollar has gained pace each year, from 2.6 percent in 2005 to 3.4 percent in 2006 and 6.9 percent in 2007. So far this year, it is up 4.5 percent. The acceleration is partly due to the weakness of the dollar in global markets, and to diplomatic pressure by China's major trading partners for faster appreciation to cut the huge Chinese trade surplus.

Last November, the central bank declared for the first time that it would use the exchange rate actively to fight inflation, which hit an 11-year high of 8.7 percent in February this year. That suggests China is gradually shifting toward managing its currency in the same way as developed economies, allowing big swings to cool the economy when it overheats and to stimulate it during slowdowns, analysts said.

"There now appears to be a clear understanding among the top leadership that sticking to a devalued currency is not good for the Chinese economy, including inflation," said a dealer at a top Chinese state-owned bank in Beijing. He declined to be named because he was not authorized to speak publicly to media.

Yuan appreciation has become especially important to restrain inflation since the start of this year as the central bank has partially loosened domestic monetary policy, flooding the money market with funds to ease financing problems at small companies.

Some foreign investment banks speculate that to prevent inflows into China of funds betting on continuous yuan appreciation, authorities may resort to another large, immediate revaluation of the currency.
But Chinese leaders have publicly ruled out such a step, and the onshore foreign exchange market believes it is highly unlikely because of the instability it could cause.

Instead, dealers said yuan appreciation will slow in the second half of this year as inflation eases and the central bank guards the economy against a slowdown in U.S. and global growth. While the strong yuan helps Chinese firms such as airlines and oil importers to reduce their overseas procurement costs, it is already hurting lower-end exporters such as clothing makers.

Reflecting expectations for yuan appreciation to slow later in 2008, one-year appreciation against the dollar implied by offshore forwards has dropped in recent weeks, to 11.2 percent on Thursday from a record 13.8 percent in mid-March.

Onshore dealers generally have predicted the yuan will appreciate 8.5 to 10 percent for all of this year. The yuan's strength is gradually making it an attractive store of value around the region. Yuan bank accounts in Hong Kong are expanding rapidly, and Chinese businessmen and tourists informally exchange the yuan around southeast Asia.

But for the yuan to become a major traded currency on the scale of the dollar or euro, China will need to remove capital controls and allow much greater market volatility- steps which remain many years away, analysts said.

Global Inflation continues

This story from the New York Times continues to on build the food inflation theme from yesterday's post regarding food riots breaking out across the globe.

Asian Inflation Begins to Sting US shoppers - NY Times

By KEITH BRADSHER

April 8th, 2008

BAT TRANG, Vietnam — The free ride for American consumers is ending. For two generations, Americans have imported goods produced ever more cheaply from a succession of low-wage countries — first Japan and Korea, then China, and now increasingly places like Vietnam and India.

But mounting inflation in the developing world, especially Asia, is threatening that arrangement, and not just in China, where rising energy and labor costs have already made exports to the United States more expensive, but in the lower-cost alternatives to China, too.

“Inflation is the major threat to Asian countries,” said Jong-Wha Lee, the head of the Asian Development Bank’s office of regional economic integration. It is also a threat to Western consumers because Asian exporters, even in very poor countries, are passing their rising costs on to customers.

First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar. That puts American consumers in a double bind, paying at least some of producers’ higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries.

The cost of American imports from less industrialized countries as a group is rising. A Bureau of Labor Statistics index of average prices for imports of manufactured goods from such countries fell gradually through early 2004, but is now rising briskly and was up 5.6 percent in February from the same month last year. That contributes to rising inflation in the United States; in the 12 months through February 2008, the prices of goods for sale in the United States increased by 4 percent, according to the government’s Consumer Price Index.

But so far, Asian exporters have passed along only a portion of their costs. In China, for instance, prices are now rising almost 9 percent a year, triple the pace of a year ago. Workers in the developing world facing higher prices have been increasingly vocal in demanding higher wages, with protests erupting in recent days in Vietnam, Cambodia and Egypt.

At the same time, inflation keeps rising: the Philippines announced that its inflation at the consumer level had doubled in the last five months, showing a 6.4 percent increase in March over the same month a year ago. And weekly inflation at the wholesale level has accelerated in India, reaching an annual rate of 7 percent in the week ended March 22, up from 3.1 percent as recently as last October.

Not long ago, it would have been unlikely for a poor country with high inflation to see its money strengthen in value against the mighty dollar. But the dollar is not quite as mighty as it once was. Large American trade deficits and other problems have weakened its appeal. And there are signs that the dollar could fall further if developing countries’ central banks stopped supporting it, particularly in Asia.

Vietnam’s central bank even had to order the country’s commercial banks late last month to resume buying dollars within the tight range of exchange rates set by the government. Many banks had started betting on dollar depreciation and refusing to accept large sums in dollars, to the point that multinationals and exporters had trouble wiring money into the country to pay their employees’ salaries.

Inflation in Taiwan has started to creep up partly because the government waited until this year to allow the currency, the New Taiwan dollar, to appreciate. Taiwan imports all its oil, and only now is the slightly strengthening New Taiwan dollar starting to hold down the cost for consumers in filling up their gas tanks.

Keeping the dong inexpensive in dollar terms helped Vietnam increase its exports by 24.1 percent last year, but also lured a flood of investment. Bank loans rose more than 50 percent last year, Breeding a real estate frenzy that has not yet abated.

In addition to the weak dollar, economists say that countries like Vietnam, Egypt, China and Brazil are inherently more vulnerable to inflation when, as now, rising prices are led by increasingly expensive commodities.

Soaring food and energy costs have a far greater effect on developing countries like Vietnam, because of their large agricultural and energy-hungry manufacturing sectors, than on industrialized countries, which tend to have larger service sectors than manufacturing sectors.

But many developing countries, led by China and India, have blunted the full impact of inflation so far through a combination of price controls and subsidies, and more countries are joining them — Vietnam has imposed price controls on transportation and gasoline over the past week, for instance.

As businesses figure out ways around price controls, like charging the same while shrinking the quantities in each package, and as the cost of subsidies may become unsustainably high, inflation may worsen.

food riots breaking out across the globe

The Toronto Star is reporting on food riots breaking out across the globe. I recently posted a story regarding wheat export suspensions in Kazakhstan here. In what could become the front-page story for many months to come, food riots are an extremely power destabilizing force in already unstable central Asian and African states. Haiti has considerble problems and staggering poverty, but if people cannot afford to eat, no measure of law can prevent an outright war over basic resources.

UN: Food riots 'warning sign'

REUTERS/ EDUARDO MUNOZ

Demonstrators form a barricade in the town of Les Cayes, Haiti April 7, 2008 during demonstrations over rising food prices. High food prices could bring unrest and instability around the world, official says.

DUBAI, United Arab Emirates –

The recent outbreak of food riots is a warning sign that rising food prices could cause unrest and instability across the world, the UN's top humanitarian official said Tuesday. Combined with the negative impact of climate change and soaring fuel prices, a "perfect storm" is brewing for much of the world's population, said John Holmes, undersecretary general for humanitarian affairs and emergency relief co-ordinator.

"The security implications (of the food crisis) should also not be underestimated as food riots are already being reported across the globe," Holmes told a conference in Dubai, addressing challenges facing humanitarian work. His comments came after two days of rioting in Egypt, where the prices for many staples has doubled in the past year. And violent food protests were continuing for a second day in the capital of Haiti.

"Current food price trends are likely to increase sharply both the incidence and depth of food insecurity," Holmes said, noting a 40-per-cent average rise in prices worldwide since the middle of last year. Holmes said that the biggest challenge to humanitarian work is the effects of climate change and the resulting "extreme weather" that has doubled the number of recorded disasters – from an average of 200 a year to 400 per year in the past two decades.

Adding food scarcity and expensive fuel to the mix have made for a very volatile situation, he said. "Compounding the challenges of climate change in what some have labelled the perfect storm are the recent dramatic trends in soaring food and fuel prices," he said. One of the factors pushing food prices higher and sparking protests all over the world is more expensive diesel fuel, which is used to transport most of the world's food.

Along with the riots over food scarcity in Haiti and clashes with police over high prices in northern Egypt, UN employees in Jordan staged a day-long strike for pay raises due to a 50-per-cent rise in prices there. A teenager injured in the clashes in the northern Egyptian city of Mahalla al-Kobra has died from his wounds.

In Port-au-Prince, the Haitian capital, UN peacekeepers fired rubber bullets and tear gas into a crowd outside the presidential palace Tuesday on the second day of protests over soaring food prices. Some protesters were trying to break down the palace gates before the UN troops established a security perimeter around the building. ``We are trying to deal with the situation," said Fritz Longchamp, chief of staff to President Rene Preval who was at work inside the palace. The food unrest began last week when Haitians burned cars and attacked a UN police base in the southern city of Les Cayes. At least five people were killed there. The demonstrations reached the capital Monday as thousands marched past the National Palace, some of them crying out: "We're hungry!"

John Powell, the deputy executive director of The United Nation's World Food Program, emphasized the need for developed countries to help governments in the developing world. Developing countries experiencing unrest over high food prices need help in developing "social safety net programs," he said. "Riots today mean you need a solution tomorrow," Powell said. Governments with no "policy space" and under pressure from organized discontent in urban centres "is not likely to be the best decision" in trying to solve the problem, he said.

Powell said the planet is getting hungrier with four million people added to the list of those in most dire need for food to survive. The rise of fuel and food prices is unlikely to stop soon and it affects everyone, Powell said. In the past, natural disasters, wars and ethnic conflict made the rural areas most vulnerable to poverty and hunger. Now, the most vulnerable live in the cities, Powell said.

"They see food on the shelves but they cannot afford to buy it," said Powell. He called urban poverty the "new face of hunger."

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.

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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.

NO ROOM TO RELAX

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) ((maria.golovnina@reuters.com; +7 727 250 85 00; Reuters Messaging: maria.golovnina.reuters.com@reuters.net))