Kazakhstan: China Accepts Wheat Transport by Grain Hopper Cars
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Kazakhstan’s dry weather and favorable temperatures helped produce high-protein Wheat in MY 2022/2023, averaging 14.9 percent, and gluten at 31 percent in the three northern Grain-producing regions. The testing showed that, on average, 2.5 percent of Wheat was impure, 1.5 percent was broken, 1.2 percent had weed matter, pests damaged 0.6 percent, and 0.3 percent was corroded. On average, the Wheat produced from the three northern Grain production regions was considered high quality in MY 2022/2023.
According to local analysts, domestic Grain consumption is stable and is not expected to increase in the next few years. They reported that the Grain export restrictions Kazakhstan imposed in MY 2021/2022 led to higher domestic stocks. Two additional factors leading to higher domestic stocks included under-recorded Russian Wheat imports and limited rail infrastructure to export Grain.
FAS Astana estimates Wheat production at 16.4 million metric tons (MMT) in marketing year (MY) 2022/2023, the most significant production volume since MY 2017/2018. Barley production in the current year is forecast at 3.3 MMT, an increase of 30 percent from MY 2021/2022. Wheat exports in MY 2022/2023 are estimated at 10.5 million metric tons. Producers and exporters noted increasing exports in MY 2022/2023 were challenged by limited rail capacity, outdated infrastructure, under-recorded Grain imports from Russia, and delayed Value Added Tax (VAT) reimbursements. The VAT reimbursements were reported to take up to ten months and include $87 million in outstanding reimbursements.
Grain market analysts reported that Russian Wheat exports to Kazakhstan were registered at approximately 1.6 MMT during July-December 2022. However, actual exports reached 2.0 MMT due to the underreported weights of rail shipments. Three regions that border Russia, consisting of Pavlodar, Aktobe, and West-Kazakhstan, are not large Grain-producing regions but have become leading Grain-importing regions by truck. To address this issue, the tax authority required that all Grain imports from Eurasian Economic Union (EAEU) members to Kazakhstan must be accompanied by a fully detailed invoice.
On average, Russian Wheat imported to Kazakhstan is $10-15 per metric ton cheaper than local Wheat. Kazakh mills imported Russian Wheat of the 4th class and blended it with local, high-quality Wheat to produce compatible quality Wheat flour at a lower cost. Additionally, local poultry farms imported feed-quality Wheat at lower prices than domestic products. Since July 2022, Wheat prices dropped precipitously from $402 to $184. To combat underreported Grain trade, the government plans to restrict Wheat imports (excluding seeds) by truck for six months.
Kazakhstan – China Wheat Trade
After only accepting Kazakh Wheat in containers, China recently agreed to take Wheat transported by Grain hopper cars. This policy change may increase the share of Wheat exports to China in MY 2023/2024. According to news reports, an initial shipment of 50,000 MT will be transported in Grain hopper cars to a new Grain terminal at the Chinese border station of Alashankou.
Exports to China are occurring through Dostyk-Alashankou and Altynkol stations. The Chinese Alashankou station has a laboratory allowing phytosanitary testing to be completed in 2-3 days, while Altynkol has no laboratory facilities. Samples of product transported through Altynkol are sent to Urumqi, and which results can take up to 14 days to clear.
Containers that wait too long for results may incur a $ 50-day fine. Transport costs through Altynkol to the destination point in China are about $135 more per container. Transportation costs from Grain-producing areas (e.g., Kostanay) to Altynkol are $35 to $40 more expensive. Dostyk and Altynkol reported three times more container shipments in 2022 than the prior year.
Other sources: USDA
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