Transport subsidies and 2 million tons of purchases: What’s needed to export the record wheat grain harvest
Kazakhstan’s record grain harvest of 26.7 million tons faces export challenges, as the government seeks to diversify markets and enhance supply chains. Although exports to Central Asia and traditional markets remain steady, accessing distant regions like the Middle East, North Africa, and Europe requires overcoming high transport costs and fierce competition. To support farmers and stabilize prices, Kazakhstan plans transport subsidies and direct grain purchases.
Kazakhstan has achieved its largest grain harvest in the past decade. The government is now working to enhance its marketing strategies to boost the export of Kazakh wheat. Can the country tap into distant markets, support farmers in turning a profit, and position itself as a leading agricultural nation? Kazinform News Agency correspondent provides in-depth forecasts on the prospects of this record harvest, along with insights from top experts.
This year, Kazakhstan achieved a record grain harvest, with the Ministry of Agriculture reporting a total of 26.7 million tons. For comparison, 17.1 million tons were harvested in 2023, 22.03 million tons in 2022, and 16.3 million tons in 2021.
Where will the record harvest go?
At a government meeting on grain export potential, Kairat Torebayev, Vice Minister of Trade and Integration, identified priority export markets, including China, Central Asia, Türkiye, Afghanistan, the Middle East, as well as Italy, Latvia, and Spain. The Ministry of Trade estimates that Kazakhstan’s grain export potential this year is 12 million tons, consisting of 7–7.5 million tons of wheat, 1.3–1.4 million tons of barley, and 300,000 tons of corn. Oilseed export potential exceeds 1 million tons.
Speaking at the first Forum of Agricultural Workers, President Kassym-Jomart Tokayev emphasized the need to maintain traditional sales markets while diversifying exports by developing flexible supply chains tailored to different countries’ needs. Currently, scheduled grain deliveries have commenced to Uzbekistan, Azerbaijan, Turkmenistan, Kyrgyzstan, and Afghanistan. Additionally, Kazakhstan has regained access to the Iranian market, shipping 250,000 tons of barley.
The President also highlighted plans to ship grain to China, the European Union, and North Africa. To enhance sea transport capacity, a new grain terminal has been launched at the port of Kuryk, with increased use of international corridors such as the North-South and Trans-Caspian routes.
According to Akpar Maulenov, Deputy Chairman of the Board of the Association of Farmers of Kazakhstan, the forecasted grain export potential includes 2 million tons each to Western Europe, Africa, the Middle East, and neighboring Uzbekistan. However, establishing these export routes will require formal agreements with the target markets.
“Targeting other markets, China, which often imposes restrictions anyway, may refuse wheat. We must first conclude agreements with all the countries where we plan to export grain. We can deliver it, but if they refuse to accept the grain, then there will be a problem. In addition, the government is asking farmers to repay loans by December 15, 2024. This means all farmers will sell the grain stored in barns, and with a simultaneous increase in supply, the market price will drop. Neighboring Uzbekistan and Tajikistan have taken advantage of this situation in the past, persuading farmers, who are in a hurry to sell, to part with their grain at low prices, taking the bulk of the harvest. As a result, farmers’ losses may turn out to be unjustified,” comments Maulenov.
Challenges to export growth
Grain experts acknowledge the complexity of the current situation, warning that achieving the desired export potential may prove difficult.
Yevgeny Karabanov, an official representative of the Grain Union of Kazakhstan, emphasized that Kazakhstan’s grain market is relatively limited. Most of the grain will continue to be exported to traditional markets, such as Central Asian countries (Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan) and Afghanistan, whose demand is well-established.
“The export potential to these markets matches last year’s figures—5.2 million tons of grain and 1.8 million tons of flour. Together, 7.7 million tons of flour and grain were exported last year. This year’s large harvest necessitates finding new sales markets. However, additional markets are far from Kazakhstan, requiring grain to transit through other countries, mainly via Russia’s sea ports, which significantly increases transportation costs,” notes Karabanov.
He added that the Grain Union estimates the export potential for wheat to be approximately 11.5 million tons. However, existing markets are unlikely to absorb more than 8 million tons from Kazakhstan, leaving 3.5 million tons to be directed to additional export markets.
“Our record export in recent years was during the 2022/23 marketing year (from September to August), when we exported 10.7 million tons of grain and flour in grain equivalent. For Kazakhstan, this should be the target figure, rather than the lower figures of the previous season, which had a weak base. Overall, any growth in grain exports will depend on the coordinated efforts of government agencies,” believes an official representative of the Grain Union of Kazakhstan.
As Akpar Maulenov notes, the current transportation tariff ranges between $120 and $140 per ton. As a result, the cost of delivering grain to new markets will be significant, leaving farmers facing the likelihood of losses.
According to the Grain Union, distant export markets in the Middle East, North, and Central Africa are highly competitive, with suppliers like Russia, Ukraine, EU countries, Argentina, the USA, and Australia vying for market share. For Kazakhstan to export grain to these regions, it must incur significant expenses.
“It is for these markets that we need transport subsidies. Our traditional markets do not require subsidies, but distant markets cannot do without them. In order for us to be competitive in the global grain market, we need transport subsidies similar to those in 2011. This year, we asked the government to introduce the same subsidies for grain transportation,” emphasizes Karabanov.
As the expert explained, in 2011, transport subsidies were set at $40 per ton, enabling Kazakhstan to export over 1 million tons of grain to North Africa and the Middle East.
Storage and carryover stocks
Despite this year’s record harvest, there is a risk that some of the grain may become unusable. Grain trading typically occurs throughout the year, with the marketing season for exports running from September to August. However, most of the harvest is usually exported during the first half of the season, up until February.
If Kazakhstan fails to achieve its grain export forecast of 11–12 million tons, the harvested crop will add to carryover stocks (unsold goods from the previous season). This surplus of unsold grain would exert downward pressure on domestic market prices and could also affect prices for future harvests. Additionally, grain owners would face increased costs for storage, further impacting their profitability.
Deputy Chairman of the Board of the Atameken National Chamber of Entrepreneurs, Erbol Yesseneyev, is confident that despite the record harvest, farmers will suffer large losses.
“According to our calculations, farmers spent an average of 100 thousand tenge on 1 hectare of crops, as well as cultivation and harvesting of wheat, 55-60 thousand tenge were spent on 15-18 centners of products. This means a loss of 40,000–45,000 tenge per hectare,” says Yesseneyev.
He noted that if the government subsidizes transportation costs, farmers would have the chance to generate income. Currently, the price of 1 ton of wheat is no more than $100. A single wagon can carry about 60 tons of wheat, meaning the total value of a wagon of wheat is just $6,000, notes Yesseneyev.
According to Yevgeny Karabanov, to prevent a collapse in domestic wheat prices and ensure stable demand, the Food Corporation needs to purchase at least 2 million tons of wheat from farmers. Additionally, government agencies should work with Chinese and Russian authorities to lift restrictions on the import and transit of Kazakh grain.
The government of Kazakhstan intends to provide special transport subsidies for export. If successful, this will greatly help farmers. At the moment, 10 billion tenge have been allocated from the reserve for the purchase of grain from farmers through the Food Corporation. On November 18, in accordance with the instructions of Kassym-Jomart Tokayev, applications from agricultural producers for participation in the direct grain purchase program began to be accepted.
However, farmers argue that the allocated budget of 10 billion tenge will only cover 150,000 tons. Given the record wheat harvest of 17 million tons in net weight, this is an extremely small volume.
“Grain will be purchased from farmers through the Food Corporation to stabilize market prices, but only 150,000 tons. I believe this is a very small amount. When tens of millions of tons of grain are sitting in storage, this has absolutely no beneficial effect. We proposed purchasing at least 3 million tons. I hope this will be implemented in the near future,” comments Maulenov, Deputy Chairman of the Board of the Association of Farmers of Kazakhstan.
In addition, another challenge will be the sale of regular wheat, which we have in abundance this year.
“There is a problem with the quality of the grain. Besides 3rd-grade wheat, most of this year’s harvest consists of 4th- or 5th-grade wheat. In developed countries, wheat of this grade is typically used as animal feed. While some countries in the Middle East still accept wheat of this quality, farmers underestimated the fertility of the land, and the excessive rainfall negatively affected the harvest,” notes Yesseneyev.
An interesting fact is that most Kazakhstani farmers lack specialized warehouses and grain elevators for storage. If a portion of the harvest remains unsold, it could result in significant losses for both the country and local farmers.
Let us recall that during the Forum of Agricultural Workers, President Kassym-Jomart Tokayev set a priority task for the government: to provide comprehensive support to farmers in selling their products in foreign markets. The President also emphasized the importance of developing infrastructure for storing agricultural products, including grain elevators and storage facilities for vegetables and fruits.
He noted that Kazakhstan has adopted a Comprehensive Plan for the construction and modernization of storage facilities, which will add an additional 700,000 tons of capacity.
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