Azerbaijani bread from Kazakh grain

Analysis Materials 31 August 2010 12:10 (UTC +04:00)

The Azerbaijani government takes urgent measures to prevent the rise in bread prices in the country. The Deputy Agriculture Minister of Azerbaijan Aslan Aslanov said that the Ministry provided additional authorization to import 250,000 tons of grain. "We have sufficient grain reserves, so I can say surely that there will be no problems with the grain, despite the reduction in crop yields," said Aslanov.

This year Azerbaijan increases the volume of grain imports due to the disaster in the Aran (central) parts of the country where the crop area were flooded, so the grain need in the country is expected to be covered due to grain imports. Presumably, the harvest in the country will not exceed 2.1 million tons, including about 1.3 million tons of wheat, while the need totals 3 million tons.

Monthly Azerbaijan imports 87,000 tons of grain, part of which is provided by Kazakhstan. About 520,000 tons of grain have been imported to Azerbaiajn since early 2010, 15 percent - from Russia, and the remaining volumes fall on Kazakh grain.

The Azerbaijani Ministry of Agriculture submitted a proposal to abolish the value-added tax on imports of grain products to the government, the Ministry of Agriculture department for production and processing of plant products head Sabir Veliyev said. "The country's needs in wheat hit 1.5 million tons. We plan to cover additional volumes at the expense of grain import, particularly from Kazakhstan", Veliyev said.

According to the press service of the Agriculture Ministry of Kazakhstan, in the first half year, volume of Kazakh grain supplied to Azerbaijan totaled 547,800 tons, almost twice more than the amount for the whole last year (256,600 tons).

The Kazakh side explains the causes of doubling supplies of Kazakh grain to Azerbaijan through the fact that Azerbaijan prefers to Kazakh grain due to its high quality. Since autumn last year, the Government of Azerbaijan has decided to fill the state grain fund only with high quality grain. According to the results of inspections, only Kazakh grain meet these requirements.

The grain company of Kazakhstan "Food Contract Corporation" believes that the deliveries of Kazakh grain to Azerbaijan could be even more if there would not be customs duty on imported grain in amount of $100 imposed by Azerbaijan. As know, since the beginning of 2010 Azerbaijan has introduced VAT on imports of grain: one ton of grain amounting to $480 is taxed at 18 percent, that is $86.4 per ton of imported grain.

Situation regarding grain in Kazakhstan

According to the Kazakh Agriculture Ministry, Kazakhstan expects grain harvest at 13.5 million tons and even it is the pessimistic forecast, when the harvesting of grain will take place under very unfavorable weather conditions. Grain harvest is forecasted at about 15 million tons under favorable weather conditions during the flowering and forming period. Such a harvest within 14-15 million tons of grain will be completely meet Kazakhstan's domestic needs. Export potential is eight million tons. 

According to the Ministry, today in the light of winter and spring grain sowing area was 16.7 million hectares. Harvesting is carried out in Almaty, Aktobe, Zhambyl, West Kazakhstan, Kyzylorda and South Kazakhstan regions. As of Aug. 2 450,000 hectares have been harvested. During the reported period the average crop yield for Kazakhstan in net weight amounted to 9.4 tons per hectare.

As of July in the whole country 13.9 million hectares or 83.1 per cent of grain crops were in good and satisfactory condition. Due to drought and hot weather in Kazakhstan only a part of the grain crop in West Kazakhstan and Aktobe regions has suffered.

Republics of Central Asia and South Caucasus will be key markets for Kazakh grain this year. Due to the ban on the export of the Russian wheat Kazakhstan can increase its grain supply to the South Caucasus from 800,000 to two million tons. Thus, in 2010 Kazakhstan will wage wide-scale "attack" on the grain markets of neighboring countries. Traditionally, the annual amount of supplies from Kazakhstan in the direction to Baku was about 800,000 tons for Azerbaijan and Georgia. And this year Azerbaijan's needs in grain are 1.2-1.3 million tons, Georgia's needs - about 800,000 tons. Kazakhstan can easily cover these amounts if supplies from Russia and Ukraine are restricted. The Kazakh side believes that if Kazakhstan doesn't take advantage of this situation, then South Caucasus republics will look for other suppliers. Kazakhstan's grain exports to the Central Asian republics in the current marketing year will be around two million tons.

Kazakhstan also entered the world grain markets. Thus, Kazakhstan supplied 591,000 tons of its grain to Iran over six months. In 2009, the total amount of supplies was 988,000 tons. The Kazakh grain leads on the amount of supplies to the Egyptian market.

As is known, Kazakhstan managed to persuade the Azerbaijani Government to agree to build a grain terminal in the Hovsany settlement five years ago. Now Kazakhstan is in talks with potential partners from China to establish joint venture to build a grain terminal at the Dostyk-Alashankou border-crossing point.

                                                  Prices for bread and grain

In connection with recent increase in prices for grain on the world markets the State Service for Antimonopoly Policy and Consumer Protection under the Azerbaijani Ministry of Economic Development held daily monitoring of bread and grain prices. The main purpose of monitoring is to prevent possible artificial increase in prices for cereals in the country. As a result of monitoring changes in bread prices were not observed.

Although these measures didn't reveal any cases of increase in wholesale prices at the flour producing enterprises, in some retail markets an increase worth two manats was observed in the cost of a 50 kg bag of flour of superior quality.

In connection with this fact the State Service started monitoring of the cost of flour in the markets. In the case of revealing the facts of artificial price increases actions will be taken in accordance with the legislation towards the business entities committing such violations.

Over recent period, the price for flour increased 25-40 percent on average in Kazakhstan. Manufacturers of bakery products account it for a rise in price of wheat due to drought.