Kazakhstan has extended the capping of bread prices until the end of October to avert social discontent caused by rising food prices.
The original memoranda on grain prices were signed by the Agriculture Ministry, local administrations and the Food Contract Corporation national grain operator in February following a 19% devaluation of the tenge. The extension of the memoranda will help maintain the price of bread until the grain of the new harvest hits the market.
"The State Commission for Modernising the Kazakh Economy adopted a resolution on September 10 to extend the duration of memoranda on measures to stabilise the price of a loaf made of wheat flour grade 2 and [the price of] flour grade 2," the grain operator said in a press release on September 30. "In order to avoid a sharp rise in the price of the cheapest bread until satiating the domestic market with flour of the new grain harvest, the state commission decided to extend the duration of the aforementioned memoranda,” the press release explained.
Food Contract Corporation purchases grain to build up state and commercial reserves at a set price in order to prevent the sale of grain at a dumping price. It plans to purchase 280,000 tonnes for a state reserve and buy up 1m tonnes for commercial reserves this year.
Under the memoranda, Food Contract Corporation set aside 518,000 tonnes of grain - 182,000 tonnes from state reserves and 336,000 from commercial reserves - to release it to the market between February and August 2014. The national operator plans to supply 100,000 tonnes of grain in September and October. As of September 1, the regions received 401,200 tonnes of grain. The plan envisages supplying wheat to mills chosen by local administration at a set price of KZT30,000 (some $165) per tonne. The average price of the "social" loaf, i.e. bread made of wheat grade 2, is around KZT60 ($0.33) in the country's largest city, Almaty. A kilo of flour grade 2 costs about KZT120 ($0.66).
The harvest is underway in the country's main grain-growing regions in the north. According to the Agriculture Ministry, grain farmers reaped 12.9m tonnes of grain from 11.1m ha of land as of September 29. The total area sown under grain is 15.9m ha.
In order to help farmers successfully conduct the grain-harvesting campaign the Kazakh government provides subsidies for fuel, and it also regulates the prices of diesel fuel and octane 80 and 92 petrols in the country to keep food prices under control. Ahead of the harvest, the Oil and Gas Ministry pledged that the country's oil refineries would supply 410,000 tonnes of diesel fuel at a reduced price of KZT95 per litre. With transport and other costs borne by fuel distributors, diesel fuel is estimated to cost KZT108 per litre for farmers against KZT115 per litre on the market. As of September 29 the refineries delivered 354,600 tonnes of diesel fuel to farmers.
Grain exports soar to Iran and China
The government expects the grain harvest to total 17m tonnes this year, of which 6m tonnes will be consumed domestically and 7m tonnes will be exported. Last year the country harvested 18.9m tonnes of grain, and 14.7m tonnes in 2012. In September Saktash Khasenov, chairman of the Agriculture Ministry's Committee for State Agricultural Inspection, said that the country had exported 8.7m tonnes of grain in the 2013-2014 marketing year, including 5m tonnes since the beginning of 2014. Iran, Turkey, Azerbaijan, Russia, Uzbekistan, Kyrgyzstan and Tajikistan are the main export destinations for Kazakh grain.
In April Nurbek Dairbekov, commercial director of Food Contract Corporation, said that Iran was set to import 1.2m tonnes of grain from Kazakhstan this year against around 0.5m in the previous years. He linked the increase in the Iranian imports to the construction of a Kazakhstan-Turkmenistan-Iran railway line which is expected to start operations this November. Dairbekov also suggested that China would increase purchases of Kazakh grain to about 370,000 tonnes this year, double the amount it purchased in the previous two years.
With the aim of increasing grain deliveries to Iran and China and further to the Gulf and Asia-Pacific, the Kazakh government has announced it will build grain terminals on the Turkmen-Iranian and Kazakh-Chinese borders.
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