Kazakhstan’s wheat flour export ban amid pandemic opposed by millers as unnecessary hoarding

Kazakhstan’s wheat flour export ban amid pandemic opposed by millers as unnecessary hoarding
Not for export. Kazakhstan's response to the coronavirus turmoil includes a decision to hoard wheat flour.
By bne IntelIiNews March 27, 2020

Millers in Kazakhstan have reportedly said they will commit to meeting all domestic flour supply needs if the government lifts its blanket ban on wheat flour exports.

The Kazakh move early this week to forbid the export of wheat flour, as well as carrots, sugar and potatoes, has sparked some concerns that the economic crisis brought about by the coronavirus (COVID-19) pandemic could spark a wave of food nationalism and protectionism, with certain countries left short of certain products in the face of hoarding by states.

Kazakhstan is one of the world’s biggest shippers of wheat flour and is a key supplier to Central Asian neighbours including Uzbekistan and some countries further away such as Afghanistan. The export ban, which officials said was introduced to guarantee a steady supply of food during the coronavirus emergency, is to last until April 15.

However, Yevgeniy Gan, president of the Kazakh millers’ union, said on March 26 that he hoped the ban would be lifted within two to three days, pointing out that there were no flour shortages on the local market. Reuters quoted Gan as saying it made little sense to restrict wheat flour exports without regulating trade in wheat as well, which Kazakhstan continues to export freely, including through Black Sea ports.

Unsettled officials

Officials in oil-export-dependent Kazakhstan have been unsettled by the world oil price collapse that has occurred in tandem with the coronavirus outbreak’s impact on industrial production. The Kazakhstani tenge (KZT) this week depreciated to an all-time low against the dollar.

During the pandemic to date, few examples of countries hoarding food products usually dispatched for export have yet emerged, though Serbia has stopped shipments of sunflower oil and Russia, the world’s top wheat exporter, has said it is assessing potential foodstuff export bans on a weekly basis. Before its move with wheat flour, Kazakhstan had already forbidden the export of buckwheat and onions.

As the initial panic and turbulence over the pandemic subsides there is the prospect that such bans will be withdrawn and the situation will stabilise, but as Tim Benton, research director in emerging risks at think tank Chatham House in London, told Bloomberg on March 25: “If governments are not working collectively and cooperatively to ensure there is a global supply [of food staples], if they're just putting their nations first, you can end up in a situation where things get worse."

Frenzied shopping coupled with protectionist policies could eventually lead to higher food prices, a cycle that could end up perpetuating itself, he warned, saying: "If you're panic buying on the market for next year's harvest, then prices will go up, and as prices go up, policy makers will panic more."

Bread prices have historically caused much unrest and political instability, with the food price spikes of 2011 and 2008 triggering food riots in more than 30 nations across Africa, Asia and the Middle East, Bloomberg noted.

"Without the food supply, societies just totally break," Benton said.

Meanwhile, the surge in the dollar against emerging market currencies brought about by the coronavirus upheaval means less purchasing power for countries that import commodities, which are usually priced in USD.