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The Iranian grain import market seems to be reopening to Kazakhstan’s wheat

Recently it became known that officials representing Iran, Kazakhstan and Russia had concluded a tripartite memorandum of understanding, setting the stage for broader wheat trading.

The agreement was reached at a meeting in Moscow between deputy agriculture ministers from the three countries. Negotiations were led by the Eurasian Economic Commission.
During a February interview with the RIA Novosti, Iranian ambassador to Russia Mehdi Sanai said that the Russian Federation and the Republic of Kazakhstan were holding talks with the Islamic Republic of Iran with view to exporting wheat via its territory to third-party countries.

Source: Kazakhstan Statistics ServiceSource: Kazakhstan Statistics Service
Source: Kazakhstan Statistics Service

«There is another issue regarding the Eurasian Union, whose solution is of interest to both Russia and Kazakhstan. I refer to the question of wheat. Separate talks on this issue are currently being held between Iran, Russia and Kazakhstan. Of course, there is a need for special agreement. Generally speaking, I am inclined to think that most of the work has been done. Minor details remain to be discussed, and I hope that they too, so to speak, will soon be resolved», said him.
Considering the question, whether there will be any purchases of wheat this year, Mehdi Sanai told the RIA Novosti following: «You know, that’s a very complicated issue. In general terms, it should be stressed that Iran has achieved self-sufficiency in wheat in the last two years and no longer imports it. Yet there are ongoing negotiations between Iran, Russia and Kazakhstan in order to reach common ground with regard to exporting wheat via Iranian territory to third countries».
Kazakhstan, a major wheat producer in the Black Sea region, produced 14.802 million tons of wheat in the 2017, slightly below the high level of previous year. The decline in production has been mainly due to the reduction in area planted following the enactment of the Kazakh government’s program for 2017-2021 which intends to reduce the wheat area planted from 12.4 to 10.1 million hectares in favor of more profitable oil crops. According to the program, the government has stopped issuing subsidized credits for wheat production.
Previously, Kazakhstani aggregate cereal exports were awaited to be at about 8.3 million tons in the 2017/18 marketing year (July/June), down 3 percent from the 2016/17 season due to expectations of smaller demand for wheat outside of the CIS Asia sub-region and increasing competition with grains from the Russian Federation, which gathered a record crop in 2017.
Yet now UkrAgroConsult forecasts Kazakhstan’s 2017/18 grain export potential may hit a six-year high. What does provide the basis for such an optimistic prognosis? According to preliminary information from KTZ, national railways company, Kazakhstan exported 830 thousand tons of grain in January 2018, i.e. the largest volume since 2012. Overall, Kazakhstan supplied 4.9 million tons of grain, including flour in grain equivalent, to foreign markets in September-January 2017/18, 26% more than for the same period of the previous marketing year. The following can be stated in addition to this: Kazakhstan has exported 5,000 tons of wheat to Vietnam since the beginning of 2018.
Not long ago, Iran was one of the main destinations for Kazakhstan’s wheat (900 thousand tons). But the situation has changed dramatically in just a few years. Iran has closed its market to wheat imports by introducing a ban on the import. It has achieved self-sufficiency in wheat in the last two years.

Source: Kazakhstan Statistics Service
Source: Kazakhstan Statistics Service

Reportedly Teheran has been encou­raging flour exports, with the state go­vernment targeting more sales to places like Iraq and Afghanistan, but at the same time Iranian private millers are not allowed to use domestic wheat for flour exports. It is needed to learn what this would mean to Kazakhstan’s grain exporting cause. By the way, something just came up. According to a statement issued by Tehran Chamber of Commerce, Industries, Mines and Agriculture and disseminated by Iran’s news outlets, the second largest country in the Middle East has agreed to buy the grain from Russia and Kazakhstan, and total shipments may reach as much as 1 million tons a year over the next five years. Bloomberg quoted Kaveh Zargaran, chairman of the Agriculture Committee at the Iranian trade organization, as saying: «There is unused capacity at Iran’s flour mills. Shipments may start at the end of next month, if Iran’s private millers can obtain loans to buy the grain». The Eurasian Economic Commission expects sales to Iran to reach 1.5 million tons a year. But it is understood that the agreement leaves in place a ban on imports of wheat for domestic use, which is designed to support Iranian farmers. And the wheat from Russia and Kazakhstan can only be used to make flour for export.
Stratégie Grains anticipates 2018-19 Kazakhstan wheat production will reach 13.7 million metric tons, down 2 percent year over year, if realized. Wheat planted area is expected to decrease slightly in 2018-19 to 11.7 million hectares (28.9 million acres) due to lower prices. Nearly all of Kazakhstan production is spring wheat.

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