Why Uzbekistan doesn’t go against the grain

 

 

As a regional economy grows, complex production often migrates from the more developed areas of the region to less developed ones. Exhibit A: Central Asian agriculture.  For years, southern Kazakhstan exported flour to Uzbekistan, Tajikistan and especially Afghanistan; Kazakhstan has had hundreds of flour mills.  Now Uzbekistan imports less flour than before from Kazakhstan – and more wheat, which it mills into flour in Shimkent and sells to Afghanistan, elbowing Kazakhstan out of the global flour market.  In fact, by 2019, Uzbekistan had become the biggest importer of Kazakhstani wheat.

 

One reason that countries buy less flour from Kazakhstan these days is that they have imposed barriers on flour imports in order to build up their own mills. In Shimkent, for example, 70% of the flour mills were idle in 2019; so the Uzbek government sought ways to put them to work.  It taxed flour imports but not grain imports; Kazakhstani grain shipping through Uzbekistan was also taxed. True, the high cost of rail transport from Kazakhstan has also cut Kazakhstani exports.  In any case, flour mills in Kazakhstan were unprofitable last year, although planned quotas on wheat exports this year may lower wheat prices for mills in the country.    

 

Wheat exports from Kazakhstan have increased over the long term despite occasional bad weather.  For instance, recent drought withered the harvest in Kostanay Oblast’, pushing up wheat prices in 2019.  Nevertheless, wheat exports from Kazakhstan to Uzbekistan more than doubled from 2014 to 2018, to 2.3 million tons, reports a Kazakhstani business weekly, Kursiv. Over the same period, Kazakhstani exports of flour to Uzbekistan dropped by more than a fourth, to 658 thousand tons. This year Nur-Sultan limited grain and wheat exports to ensure cheap bread for Kazakhstanis during lockdowns.

 

Kazakhstan can offset part of the lost Afghan market by selling to China, but it will face a severe quota. Might the next step be retaliatory tariffs in Kazakhstan on imports from Uzbekistan?

--Leon Taylor tayloralmaty@gmail.com

 

 

Good reading

Laura Kopzhasarova.  Importery nastupaiut na pyatki.  Kursyv. September 12, 2019.  The main source for this post.

 

References

Yevgeny Gan. Mneniy. Kursyv. September 12, 2019. 

Interfax Kazakhstan. President of Kazakhstan’s Union of Grain Milling Companies Yevgeny Gan:

We need to find a new transport route for grain exports to Afghanistan.  September 2018.

Almaz Kumenov.  Kazakhstan introduces wheat, flour export quotas.  Eurasianet.org. March 3, 2020.

Miller Magazine.  Grain and flour market in Kazakhstan.  Undated.