Ill-conceived state intervention in the oilseed market is preventing farmers from receiving a fair price for their sunflower seeds. The issue concerns an export duty of 100 euros per ton introduced at the beginning of the year. Furthermore, despite initial promises, the Ministry of Trade refused to implement an export quota alongside the duty, which would have allowed for the unrestricted export of 250,000–300,000 tons of sunflower seeds. This matter was raised again at the EURASIAN AGRICOM conference, held on September 27–28 at the Hilton Astana hotel.
“For us, a fair price is the export price. This means that currently on the domestic market, we receive exactly 100 euros less per ton of sunflower seeds than we would by selling abroad. Thus, we are simply losing this money. Yes, we agree that supporting domestic processing is necessary. But we have only one question: why must this be done at our expense, at the expense of the farmers?” said Natalya Pak, a representative of «Sodruzhestvo».
The Grain Union of Kazakhstan has repeatedly called for the Ministry of Trade to fulfill its promises regarding the introduction of a tariff quota. However, the government continues to lobby for the interests of oilseed processors, who claim they would lack sufficient raw materials without export restrictions.
Farmers point to an opposite risk: if export restrictions remain and they cannot secure a fair price, it will inevitably lead to a reduction in sown areas. Consequently, the issue of raw material supply for processors will become even more critical. The figures are as follows: the capacity of Kazakhstan’s oil extraction plants is 3 million tons per year, while sunflower production last season was 1 million tons. This season, only 850,000 tons are expected. Processors import some raw materials from Russia (150,000–200,000 tons per year); however, logistical constraints cause issues with railcar supplies. Therefore, growth can only be expected through domestic production. Experts say it is realistic to increase sunflower yields by 20–30%, but this requires investment, which farmers working without sufficient profitability simply do not have. The circle has closed.
As Nurlan Ospanov, Chairman of the Grain Union of Kazakhstan, noted, the export quota promised by Serik Zhumangarin (former head of the Ministry of Trade, now Vice-Premier) was intended to be a tool for selling Kazakh sunflower seeds abroad to help form a fair price on the domestic market. The absence of this tool breaks the entire market structure.
“Taking into account the drop in global sunflower prices, a duty of 100 euros is too high. Currently, the optimal move would be to reduce it to 10,000 tenge. This level would allow us to revitalize the market. It is time for us—producers and processors—to agree on mutually acceptable working principles and propose these tools to the government,” said Nurlan Ospanov.
There is another nuance raising questions: approximately 50 oil extraction plants operate in Kazakhstan, all in dire need of raw materials. However, for some reason, they do not compete on price; none of them attempt to outbid the others to secure volumes from farmers. This raises a question: why? Is this a result of non-market mechanisms like the export duty, or is it a matter of price collusion? This is something for the anti-monopoly agency to consider and investigate.
Meanwhile, Grain Union expert Evgeny Karabanov compared the sunflower market situation to that of the flax market. Flax production in Kazakhstan has dropped by more than 50% compared to last year, from 845,000 tons to 515,000 tons. This was a direct result of the decreased profitability of flax cultivation. The same will happen in the sunflower market if the government continues to lobby for processors’ interests at the expense of farmers.