Wheat woes will hit Kazakhstan during the second half of 2024. A projected overabundance of the country's chief agricultural export commodity is expected to keep prices down. Compounding the challenges, Kazakhstan has suspended wheat exports to China for an undetermined period following unilateral tariff changes by Beijing.
The Kazakh Ministry of Agriculture reported that "more wheat was sown than expected" this spring, meaning that the coming weeks should yield "a high harvest, and, consequently, low prices." In the same statement, the ministry announced the suspension of wheat exports to one of Kazakhstan's major markets, China, due to "unilaterally changed import rules."
"It will take time and effort for traders to resume trade" to China, the ministry statement added.
China apparently has not provided Kazakh officials with an explanation for the sudden tariff change. On August 2, the agricultural news portal Eldala.kz, citing on-the-ground sources, provided the first hint of trouble for wheat exports, reporting that "Chinese customs had completely banned wheat imports for factories" in a special economic zone (SEZ) in China's western Xinjiang Province, which borders Kazakhstan.
Previously, Chinese companies registered in this SEZ imported wheat without paying a 65 percent duty that is applied in other regions of China. Now, this trade advantage appears to have been canceled. Grain can now only be imported duty-free according to quotas distributed among Chinese enterprises by a state-controlled regulatory agency.
The changes in the tariff regime seem to have caught Chinese traders in Xinjiang flat-footed. Facing a huge, unexpected surge in costs, Chinese traders have reportedly told their Kazakh counterparts that "they will not be able to accept wheat cargoes from Kazakhstan, even if they are already on the way," according to the Eldala.kz report. The outlet also reported that the tightening measures affect only wheat, while tariff rules for other grain products, such as barley, bran and flax, are unchanged.
The export suspension to China, combined with the projected bumper crop, is already causing wheat prices to plunge in Kazakhstan. Kazakh farmers now expect to be left holding large wheat surpluses.
China's tightening of tariff rules occurred a little over one month after a meeting between Kazakh President Kassym-Jomart Tokayev and Chinese leader Xi Jinping in Astana. Upon his arrival in the Kazakh capital, Xi described Chinese-Kazakh relations as "a unique, permanent, comprehensive strategic partnership."
At a July 3 news conference with his Chinese counterpart, Tokayev optimistically described the future of agricultural cooperation with China, noting the strong expansion in China-bound exports in 2023 and predicting that joint endeavors would produce further growth. "I would like to express my gratitude to Mr. Xi Jinping for supporting these measures," Tokayev told the assembled journalists.
By Almaz Kumenov via Eurasianet.org
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