A “war” between processors and farmers

International conference Asia Grains & Oils Conference 2022 turned into a real "war". After the speech of a representative of the Grain Union of Kazakhstan Yevgeny Karabanov, processors and farmers entered the debate. The outcome of the fierce dispute can be found in the World of NAN article.

"Despite the active demand from our southern neighbors for sunflower seeds, in the last 6 months the export of crops was sadly low," began Yevgeny Karabanov. - This is primarily due to restrictions in the form of quotas imposed in Kazakhstan since the fall. Initially, quotas were ridiculous - from 6 thousand tons, but then they were increased. But it still led to a steady decline in the cost of sunflower seeds. Moreover, on other markets, prices are rising, only our market is falling. Why? It is very simple, we have no export of sunflower seeds and our processors are not able to assimilate the offered volume. At the same time they have increased imports of seeds from Russia". 

According to a representative of the Grain Union, the price of sunflower seeds fell from 250,000 tenge (per tonne with VAT), to 180,000 tenge. Therefore, a large volume remained in the warehouses of farmers.

"We hoped for a breakthrough processing, but the breakthrough did not happen. We are standing still and the sunflower is in the warehouses. We seem to have increased production of unrefined oil compared to last year, but imports have not changed. The question is, where is the oil? Kazakhstan exported almost 15 thousand tons of oil in five months. In previous years, in the 19-20 season, the maximum was 100 tons. No need to comment... Why did it happen? Because oil was not subject to quotas," Karabanov said indignantly. 

According to his data, buyers of Kazakhstani raw materials were reoriented. They have bought up foodstuffs in Russia and covered their needs. Farmers have taken a deficit in prices. The Grain Union estimated the loss of farmers at 70 billion tenge. 

"This is what such methods of market regulation lead to. When they wanted to help somebody, others suffered losses", - Yevgeny Karabanov summarized. 

His speech was very emotional and could not help but hit a nerve. Indeed, if we are to believe the expert, the losses of the farmers are enormous. This is especially true taking into account the fact that this year is expected to bring the most expensive and difficult sowing campaign. The speaker's words also touched the PROCESSORS, who were sitting in the hall and dared to take the floor. 

They started by asking Karabanov where he had seen a seed for 180 thousand. Karabanov replied that it was on the farms. The processor said that the seed now costs around 250-260 thousand and his information is incorrect. 

"This is the first time farmers have had sunflower seed export restrictions imposed on them. And we were the ones who received so much negativity," the processor began from the audience. - We are subject to more control. If we buy seeds at a price of 250-260, produce fats and spreads, no one will want them. Farmers' warehouses keep sunflower seeds not because processors don't want to buy them, but because the price is exorbitant". 

Processors have also expressed their surprise at the difference in the price of sunflower seeds in the Russian Federation. According to their data the price is much more attractive there. And they asked a reasonable question - why? 

Later, the farmers would answer, "we have different climate and different yields. 

"Farmers asked for a fair price for the seed, and the food company helped, setting a price of 270 thousand. In the Russian Federation, the price of the seed was lower. And when we were faced with a farmer waiting for a better price, we continued to buy seed in Russia. And we were competitive in the market. Today, the balance sheet is tough all over the world. The supply chains are broken. Although they say that there is a road across the Caspian Sea, I do not believe in it. So it is not possible to enter the market through the Black Sea and give a fair price to farmers", - said the processors.

Processors also added that they have the same difficult situation as flour millers. Today there are oil extraction plants, which have faced the fact that they have shut down exports. The domestic market does not consume the amount produced, and the cost of production does not allow the price to go down. 

Alexander Malov, head of the trade committee of the Grain Union, did not avoid the dispute and addressed to the processors: "Here you are saying that all this is inefficient. Why should the farmer have to bear your problems at his own expense? Farmers should have a free price. It's a market relationship." 

The processors agreed to the arguments. It is worth noting that during the dispute they repeatedly noted that the quota system for oilseeds was not well thought out to the end. 

Kintal Islamov, Farmer, Chairman of the Board of Atameken-Agro JSC was the last to enter the dispute: "Yes, we sold the seed at 250, because we were cornered. Last year we sold the same seed for 380. Oil prices were on the shelves, today we sold for 250, and somehow I didn't see any change. Where is your concern for the population? We should have taken 50% off. We gave your industry about 2 billion tenge. This is a lot for us. We keep hearing that things are bad for the processors. Then don't go into this business! It's not like I'm claiming your added value. We are all in a market that should be free. 

DISPUTE OUTCOME.

In the course of the long dispute, its participants came to the general conclusion that the state was to blame for the current situation. The officials have objectively failed to calculate the quota norm and continue to use completely non-market and unconventional ways to curb prices. Businessmen suggested that they focus their work on supporting the population by providing targeted social assistance. But when have our rulers ever listened to entrepreneurs? So whether you like it or not, businessmen are ought to be patient.