On March 22, 2020, the Ministry of Agriculture of Kazakhstan banned the exports of some food products, including wheat flour, sunflower seed and sunflower oil. APK-Inform Agency asked the CEO at LLP Firm Dikanshy, Dmitriy Pampur, about the possible consequences of this decision, the future difficulties for millers, and how to adjust to the dynamic market changes.
— Kazakhstan has implemented the ban on exports of wheat flour during the state of emergency in the country. How in Your opinion this situation can influence the work of the milling industry? Is this decision justified, or this restriction was not necessary?
As a representative of the milling company I’m totally against the restriction of the wheat flour exports from Kazakhstan. Moreover, this measure is not understandable for me, because first of all it is necessary to restrict or limit the exports of wheat, and only after this to limit the exports of the finished products.
For the last several seasons, the milling industry has been passing through a difficult period and the restriction of the exports can lead to its final fall. Currently nearly 30% of the processing plants in the country are experiencing financial difficulties or are on the verge of bankruptcy. At the same time, the ban of flour exports in this period of the season can cause the milling plants shutdown until at least autumn, which in turn will lead not only to the job losses, but also to the loss of the high qualified specialists.
Herewith, these 30% of the currently operating milling enterprises can provide the domestic demand on wheat flour. However, that’s not even the problem. If in the current circumstances we close the exports of flour but continue exporting wheat, the milling wheat will be quickly delivered from the country to Uzbekistan and Tajikistan. Moreover, Uzbekistan, Tajikistan and Afghanistan despite increased milling capacities still fully depend on Kazakh market, especially in spring period when the stocks of wheat in these countries are exhausted. Our milling enterprises can provide the demand on flour on the domestic market as well as on the markets of Uzbekistan, Tajikistan and Afghanistan, moreover wheat flour is the product with the higher added value, which is profitable for the economy of our country.
By restricting the exports of flour from Kazakhstan, we in fact shutdown the mills and the exports all milling wheat from the country, leaving inside the wheat with the poorer quality parameters.
I believe that of course it is necessary to either partially limit the exports of flour and wheat, or limit the exports of raw materials only. Herewith, the stocks of grain of Food Contract Corporation should be kept in reserve for summer period in case of deficit of milling wheat. Then the purpose grain can be given to mills, as is was done in the past, and it should be controlled that mills which received the grain sell the flour on the domestic market at the guaranteed price. This will support both the domestic production of flour and the economy of the country in general. Unfortunately, what is happening now seems more like support of the economies of Uzbekistan and Tajikistan.
Today, I have signed the petition of the millers of Kazakhstan about our disagreement with these measures and we demand to cancel this decision.
— How are the previously signed contracts for the delivery of flour fulfilled?
The flour, which has been contracted earlier and prepared for exporting during the holidays (Nowruz), must be send if we provide the numbers of rail cars for verification. However, I don’t have the exact information, and we are waiting for the decision on this issue.
Later we will not have the possibility to fulfill the contract obligations, and we will have to return the advanced payments received from importers.
— Did the prices of wheat flour increase on the domestic market, taking into account the increased demand following the difficult situation in the country and the further development of coronavirus?
The prices of wheat flour on the domestic market did not change. The only change was the fact that we are receiving more inquiries for prices of finished products. We do not observe the price rise yet.
I would like to add that currently the food supply security of Kazakhstan must be our number one concern. Our government during the decision making must prioritize the interests of the country and not only of the economy and in favor of “grain lobby”. My position in this issue will coincide with the opinions of other millers of Kazakhstan, and I believe that the good sense will win and the ban on flour exports will be cancelled in the near term perspective.
Interviewed by Polina Kalaida, APK-Inform Agency