THERE IS NEVER TOO MUCH BREAD

Against a backdrop of attempts by the governments of the world's leading countries to consolidate efforts to ensure global food security, international analysts again predict a rise in price for the most important food - bread. Rather, they are talking about the increasing market value of wheat because of forecasts of a significant fall in production of the grain this year. In addition, the main exporting countries are facing higher storage costs, as selling the product at current prices is unprofitable. 

By the way, in 2010 Azerbaijan will also reduce its production of wheat - as proved by a sizeable reduction in winter wheat acreage.

World trend

The recent drop in prices for grain and wheat, experts believe, does not mean that the global food crisis has been overcome. Low grain prices are a temporary phenomenon and they are due, firstly, to better-than-expected yields, secondly, to a mass influx of investment capital into the commodity-producing sector, thirdly, to fears that the global recession will reduce demand and fourthly, to the falling costs of hydrocarbon fuels.

According to analysts, wheat acreage will decrease by one per cent around the world this year. The "culprits" are lower market prices for wheat and the high cost of production. According to revised forecasts by experts of the International Grains Council, the area under wheat crops worldwide for the 2010 harvest will amount to 222 million ha, which is 1.5 million ha lower than the figure for last season, but is 2 per cent above the average area under the same crops over the past 5 years. In particular, the area under wheat in the EU will remain at last year's level, while in the US it is expected to fall by 2.5 per cent per year. The key role in the development of this trend will be played by a decline in the profitability of this business. In addition, due to delays, the area under soft red-grained winter wheat in the United States will decline.

High grain yields in Russia and Ukraine, which are natural rivals of Kazakhstan in grain production, impede Kazakh grain exports and limit their access to Russian and Ukrainian grain terminals on the Baltic and Black Seas, despite the fact that the quality of Kazakh grain is higher than that of its neighbours. The domestic food market in Kazakhstan is rather limited and is not in a position to provide an alternative to the foreign market in the near future.

According to preliminary forecasts, Kazakhstan will export about 7 million tonnes of wheat in the season 2009/2010. The main consumers will be the traditional markets - Central Asia, Iran and Russia.

It must be said that, according to analysts, the volume of world trade in wheat (including flour) will grow by 22 million tonnes (18 per cent) over the next 10 years and will reach 141.6 million tonnes. The five traditionally biggest exporting countries (the US, Australia, the EU, Argentina and Canada) will account for about 70 per cent of the world's wheat exports, which is lower than a decade ago - the season of 1997/1998 - when these countries supplied 89 per cent. As experts explain, the reduction is mainly due to growing supply from the Black Sea countries.

Ukraine, Russia and Kazakhstan will continue to strengthen their positions among the leading exporters of agricultural produce due to low costs of production, new investment in the agricultural sector and generally favourable weather conditions. Over the past three years, the share of these three countries in the world market has risen to 20 per cent.

In general, in the long-run, grain prices will be higher than in previous years by 2018.

Below the record

Global trends will also affect Azerbaijan. According to the country's Ministry of Agriculture, the area of grain fields has shrunk by almost 150,000 ha. This means that grain production will be much lower than in 2009.

Thus, according to the country's State Statistics Committee, farmers in rural areas sowed a total of 980,700 hectares of grain fields during the sowing campaign, which is 147,500 ha fewer than in 2007. New crops of wheat are ripening on an area of 659,300 ha, while barley has been sown only on an area of 249,100 ha. It should be noted that Azerbaijani farmers collected about 3 million tonnes of grain from more than 1 million hectares in the grain harvest season of summer 2009, and the new wheat harvest totalled 2.14 million tonnes. These were record levels.

In the same year, the sowing campaign dragged on and ended almost in the third week of December. It was reported that private and public seed farms produced 177 tonnes of high reproduction wheat. This is enough to carry out the sowing campaign quickly and successfully. However, the presence of seed does not mean that planting will be completed on the same area and timing as in the past year.

When comparing the schedules of the previous year's sowing campaign with 2009, a gap appears of tens of thousands of hectares. Analyzing the sowing campaign, we can conclude that our farmers have lost interest in the production of crops. The situation was affected by low purchase prices (10-13 qapiks per kilogram of wheat), as well as by the lack of silos - farmers are at a loss as to what they should do with a plentiful harvest which is perishing before their eyes. There are already farms that suffered losses last season. Naturally, farmers are changing their crop strategy, preferring the more profitable branches of agriculture, although the state continues to lend assistance. According to the head of the economic department at the Ministry of Agriculture, Islam Ibrahimov, subsidies are issued to farmers over 58 districts and villagers will receive approximately 60 million manats. They receive 80 manats per hectare of crops; half of this is for fuel and lubricants. However, in some places, subsidies were not allocated in a timely manner, causing delays in the sowing campaign. By the way, this was noted by Agriculture Minister Ismat Abbasov who also pointed out that in many areas where grain-growing was popularized, there were unwarranted audits which took several months and "ultimately, did not produce any results". In his view, these factors also played a role in the shrinking of the area under crops.

But this shrinkage does not give cause for concern. Firstly, there is a grain fund in the country and, at the end of last year, in order to meet the demand for grain in emergency situations form public stocks and, if necessary, to prevent significant price hikes on the domestic grain market, the Cabinet of Ministers adopted a decision to exempt from VAT and customs duties those grain products imported for storage in the State Grain Fund. And secondly, importers continue to import grain, which will also insure the local market.

Anyway, the fact that this year will not see record wheat production in Azerbaijan is a phenomenon which does not endanger food security, but requires the attention of the relevant bodies.