Kazakhstan is considering a complete ban on Russian wheat imports and imposing an export duty on its own grain

The Kazakh government is studying the possibility of closing a loophole for re-exporting Russian wheat to Central Asia through Kazakhstan. Currently, this channel for smugglers is the permission to import wheat by rail to flour mills and poultry farmers.

This relaxation for flour mills and poultry farmers remained in force after a complete ban on Russian wheat shipments by truck was imposed last year. It was supposed that working on cheaper Russian grain would allow Kazakhstani companies to remain competitive due to favorable raw material base.

However, the analysis of the situation on export shipments and internal balances made by KTZ showed that 4-5 million tons of Russian wheat under the guise of Kazakhstani wheat went to Central Asia in a “gray” way during the current marketing year. Naturally, without paying transit railway tariff in Kazakhstan and export duty in Russia.

This year Kazakhstan expects a high grain harvest, according to some preliminary estimates of experts – at a record level, above 25 million tons (with an average for the country of 15 million tons). That is, to realize this volume, the load on Kazakhstan’s transport infrastructure will already grow twice as much, and taking into account the continuation of Russian re-export – even higher.

This volume of grain threatens several problems for the domestic market at once: collapse of the railroads (which is a problem for “white” traders), drop in domestic prices (which is a problem for farmers).

To somehow stabilize the situation, the government of Kazakhstan (Ministry of Trade, Ministry of Agriculture) is studying the issue of a complete ban on supplies of Russian wheat for six months. That is, tentatively, from September 1, 2024 to March 1, 2025. This will enable both KTZ and traders of the country to work more freely.

At the same time, everyone realizes that the cessation of the inflow of Russian grain will put the country’s flour millers and poultry farmers at a disadvantage. Without cheap raw material base they will become uncompetitive not only on external markets, but even on internal Kazakhstani market. To avoid a rise in prices for Kazakhstani grain after the Russian ban, it is proposed to introduce export duties on a whole list of agricultural products.

In Russia, export duties apply to wheat, barley and corn.

The consequences of such a decision for Kazakhstan are clear on the example of the export duty on sunflower introduced in 2023: the cost of sunflower seeds on the domestic market decreased by the amount of the duty – 100 euros per ton (50 thousand tenge).

The only question is what size of the duty on wheat will be set. Most likely, it will be calculated taking into account the existing price on the market after the beginning of harvesting, as well as taking into account what the price of wheat in Russia will be.

Tags: Russia, Kazakhstan, wheat, restrictions