What was the effect of banning the import of wheat by road transport?

An analyst of the World of NAN editorial board examined the impact of Russia on the price of wheat. In particular, he analyzed the effect of the ban on the import of wheat by road.

The ban was introduced on April 10, 2023. Since then, official wheat imports from Russia have not decreased as dramatically as the local producers probably wanted. While in March imports amounted to 234 thousand tons, in April they fell to 204 thousand, and in May to 165 thousand tons.

165 thousand tons is certainly less than it was in March, but if, for example, compared to the second half of 2022, it is almost equal to the average monthly value of this period. That is, in general, there was no significant drop in imports, thanks to railroad deliveries.

It turns out that the volume of wheat imported by rail has increased, if earlier some market participants said that the amount transported by road is five times more than by rail. This became possible due to the increase/maintenance of the discount of the price in Russia to the price in Kazakhstan. That is, importers are willing to pay extra for transportation by rail because of the large difference in price. Despite ruble prices in Russia remaining at the same levels, ruble weakening increased the discount from KZT16,000 per ton to KZT20,000 in May and KZT31,000 in June, when the average ruble exchange rate fell even lower.

The only thing that saves Kazakhstan from a complete collapse of prices is the limited capacity of railroads and grain carriers. We are unlikely to see a sharp increase in official imports during the ban on imports by road. Nevertheless, further increase in the difference will attract smugglers more, which will also negatively affect prices. Earlier we wrote that prices for 3rd class wheat according to Grain Commerce have already fallen to 75.3 thousand tenge per ton, although in June the price was 10-12 thousand tenge higher. Apparently, we are already seeing the effect of ruble weakening. In addition, the cancelation of the grain deal will entail the restriction of Russian wheat exports to world markets, and this may also put pressure on domestic prices in Russia.

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