Kazakhstan Struggles With Quality Issues

KIEV - Feb 25/03 - APK -- In March last year Kazakhstan's government made the state-controlled CJSC Food Contract Corporation the main exporter of grain in the country. Along with state grain purchases, this structure started commercial purchases of grain.

The account of the Corporation's activities was published in the newspaper "Kazakhstanskaya Pravda".

Being commissioned by Kazakhstan's President last autumn, the Corporation bought 973,000 metric tons (MT) of grain from producers and has exported by now nearly 700,000 MT of it. More than half of this amount has gone to the new for the Kazakh grain markets of Jordan, Italy, Tunisia, Sudan, Belgium and Turkey. The grain shipments are to be completed till March.

According to the specialists of agriculture ministry, the commercial purchases, made by the Corporation, have favorably influenced domestic prices. After the purchases were announced, the domestic wheat prices increased from $45-47 MT to $60-65 depending on grade.

However, an important price-forming issue was grain quality. Difference in prices between ordinary wheat Class 3 and high-protein one was more than $20 MT. A part of high-quality wheat, bought by the Corporation, was put into state grain reserve as a replacement for poorer-quality stocks. Nevertheless, quality of grain remains to be one of the gravest problems of the country's grain industry. Roughly 80% of Kazakhstan's wheat contains less than 24% gluten. Such grain is not demanded by export markets.

This season's grain balance will be characterized by more peculiarities. The market is now being pressed by carryover stocks from previous seasons. The country's exportable surplus is estimated between 6 to 7 million MT at a time when neighboring countries such as Russia, Uzbekistan, Turkmenistan, Ukraine and Kyrgyzstan have also harvested a good crop.

According to grain market analysts, the main consumers of Kazakh grain in nearest years will be such countries as Afghanistan, Azerbaijan, Iran, Tajikistan and China. Some EU countries are also viewed as potential importers, but only for high-quality wheat. The Corporations doubts exports to these countries will exceed 5 million MT.

Stiff competition in the world grain markets forces the state exporter to change the quality parameters used to buy grain. According to the Corporation's President, the country needs to adopt ISO standards instead of using outmoded quality standards developed during the time of the Soviet Union.

Another problem is grain transportation. The Corporation intends to lease a grain terminal in the Lithuanian port Klaipeda. There are also projects to facilitate transits through the Black Sea ports and a project to start shipments to Iran through Caspian port Aktau. To minimize its transportation costs, the Corporation has established an affiliated forwarder company. However, its endeavors are being troubled by high domestic and transit rail tariffs.

"To provide balance between domestic production and export" the corporation is to perform a state purchase of grain from farmers in 2003 in the amount of 510,000 MT. It will be made in two stages: advance payment for 245,000 MT of wheat will be made in spring. Another 265,000 MT of grain will be purchased in autumn. There is also planned a 1.5-million tonne commercial purchase of grain, which sums up into a total of about 2 million MT of grain. According to the President of Corporation, this is the amount for which it has already concluded export contracts.

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