Change in Export Policy of Kazakhstan may Cause Rise in Price of Bread in Azerbaijan: Expert May Rise Bread Price

Business Materials 16 April 2008 17:58 (UTC +04:00)
Change in Export Policy of  Kazakhstan may Cause Rise in Price of Bread in Azerbaijan: Expert  May  Rise Bread Price

Azerbaijan, Baku, 16 April / Trend corr. U.Ismayilova / Eyyub Huseynov, head of Free Consumers Union of Azerbaijan, believes that the ban imposed on the grain export by Kazakhstan will lead to 15% increase in prices of bread till the harvest in Sep 2008.

"The reason for such vigorous affect of export on the prices is unfavorable conditions for agricultural activities in Azerbaijan," Huseynov stated.

According to Huseynov, after the decision of Tariff Council of Azerbaijan in Jan 2007, on increase of prices for energy carriers, one-third of farmers refused from cultivation which resulted in increase in prices of bread and bread products.

Since summer 2007, the increase in prices of bread has been observed in Azerbaijan. According to experts, increase in prices occurred, particularly, because of increase in prices of grains by exporting countries - Russia, Kazakhstan, Turkey and Ukraine, as well as low harvest.

The newly changed export policy of Kazakhstan will again affect the prices. Kazakhstan is the biggest grain exporter to Azerbaijan.

In August 2007, the new Bill came into force in Kazakhstan. As pre the Bill, grain exporting should pass the obligatory license.

By banning wheat export, Kazakhstan, the largest wheat producer in the Central Asia, is trying to protect its own domestic market on the background of price rise in wheat worldwide. Earlier, Kazakhstan planned to restrict wheat export from 1 March 2008, however the government decided to wait a little with this plan

Lack of grains in the markets led to significant increase in prices. This happened because of grain export envisages special customs or prohibition will be put on these goods. Argentina and Russia did follow this procedure. So, the countries consider delaying growth rate of prices in domestic markets. Drought in the north of China became on of the reasons for increasing in prices.

"The prices for bread had already increased double and its weight was decreased to 300gr or 500gr," Huseynov said.

The cost for one loaf of bread increased from AZN0.2 to AZN 0.3 since Aug 2007.

The yearly grain demand comprises of about 3mln tons, out of which 1mln is exported in Azerbaijan.

The ban by Kazakhstan, on the export of wheat until the new harvest in Sept 2008, is not a problem for Azerbaijan who imports wheat from this country, said Sabir Valiyev on 16 April, head of Department for Production and Processing of Crops and State Control on Food Reserves of the Ministry of Agriculture of Azerbaijan.

"At present, we have enough wheat reserves - 573,000 tons which can meet the demands for five months if necessary," he said.

According to Valiyev, the demand will be met by the home -produced wheat, in case the current wheat reserves in Azerbaijan gets exhausted. The harvest of grain-crops in the country will begin in June and the forecast for harvest for 2008 is placed at 2.3-2.4mln tons

The representative of Ministry of Agriculture said that, if there is a need, the government can began the talks on purchase of wheat with other countries - Ukraine and Canada.

Heydar Babayev, the minister of economic development of Azerbaijan said on 15 April that the Azerbaijan government is obliged to increase the volume of subsides for agriculture to secure food security. The new mechanism of financing will be more effective than the current one.

According to him, it can be carried out by means of additional tax breaks. From 2009, the moratoriums on the tax payments carried by the agricultural products producers are planed to be prolonged by exempting them from all the taxes (excluding land tax). According to the minister, the extension of exemption from VAT on wheat import is also the issue of the day (VAT was canceled for a year). In addition, there can be other tax breaks on the production of cereals.

"We are going to consider the introduction of more complicated forms of subsidies and new mechanism of compensation of fuel purchases in detail," minister said.

In this regard he believes that measures must be taken to establish Wheat Fund, as lot of farms has difficulties in purchasing seeds.

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