Expert: Prodcorporation should buy 4 million tons of grain from peasants to stabilize the market.

The state corporation should buy all excess grain production from farmers – about 4 million tons. Such a proposal was made by the agro-expert and former Minister of Agriculture of Kazakhstan, Asylzhan Mamytbekov. He believes that this action will help restore the balance of supply and demand, as well as increase the market price for grain, according to the "APK News" agency.

"Currently, the harvest is in progress. There is an excellent crop in the fields. This year, abundant precipitation followed the drought, and the important grain regions of the country had favorable conditions during the summer. Even in the south, where mainly grain crops are sown, there was a snowy winter and a wet spring, which led to a significant improvement in soil fertility. As a result, the overall grain harvest level is expected to be above average. After several unsuccessful years, it is time for our agriculture to breathe," the expert Asylzhan Mamytbekov shared on his social media account.

However, the autumn weather turned out to be unpredictable: rains do not allow harvesting the ripe crop on time, precipitation removes the gluten, making it difficult for combines to work in the fields. During the brief periods when the rain stops, even the most modern machines cannot handle the wet ears. All this leads to delays in crop harvesting, and each delay of almost 10 days results in a loss of almost 10% of the crop.

The grain harvested in a damp condition requires drying. Especially wet grain requires several stages of drying, which incur additional costs. Farmers lack their drying equipment, which leads to long queues at the elevators. Transportation, reception, drying – all of this requires additional expenses. Farmers do not have money in the autumn, as all funds are already invested in the land and the future harvest. At this time, creditors put pressure: fuel, spare parts, salaries need to be paid.

"In such situations, various middlemen appear on the market. But they are not in a hurry to make purchases, fearing to make a mistake with the price and relying on major players. The state corporation also does not rush to set its prices. As a result, the demand outweighs the supply in the market. Farmers, wanting to make some profit and competing among themselves for a few buyers, start lowering prices. And grain buyers, understanding the desperation of farmers, start taking advantage of the situation by hiking the prices. As a result, grain prices in the autumn are lower than usual," noted Asylzhan Mamytbekov.

However, returning to the previous conclusion, this year's harvest is above average.

In addition to the negative impact, there are positive aspects:

1. Imbalance of supply and demand in the grain market.
2. Imbalance in production of grain and drying and storage capabilities.
3. Imbalance in transportation capabilities (shortage of railway wagons primarily) and grain transportation.

"Only government agencies can address these imbalances (including mismatches between market demand and supply volumes). Neither the market nor its private participants can do this without harming grain producers (without lowering prices)," believes the expert.

So what measures are necessary from the government?

There is a need to timely and sufficiently purchase grain through the state corporation. Moreover, the purchase should exceed the annual volume of forward financing and should be equal to the excess volume of grain, based on the expected above-average crop.

"An approximate calculation is as follows: if a wheat harvest of 17 million tons is expected, domestic demand is 6 million tons, the average export volume (including flour) is 7-8 million tons (excluding Russian re-exports), then 3-4 million tons will remain on the market (rough estimate)," believes Asylzhan Mamytbekov.

When the grain surplus is removed from the market, the expert noted, supply and demand will be restored, and prices will stabilize. In addition, the State Corporation has very little grain in stock.

According to "APK News," the grain reserves of the State Corporation today amount to more than one million tons. The projected balance taking into account the current harvest will be more than 2.5 million tons.

"Of course, managers will say that the company does not have such funds, the budget does not provide financing. But the company has substantial assets, a good reputation, and could raise funds from the market considering its reputation. Currently, the leaders of the national company claim that to establish a 'fair price,' they need compensation for possible losses from the budget. Therefore, if these compensations are not provided, does it mean the price is 'unfair'? In reality, it must be understood that if the grain surplus is removed from the market by the national company, it will help the producers who suffer from low prices," emphasized Asylzhan Mamytbekov.

However, this is not all. Purchasing such a volume of grain will allow having a reserve in case of drought and possible export restrictions. Over the past 7-8 years, this has happened repeatedly.

"The countercyclical policy of the State Corporation from 2009 to 2016 prevented grain export restrictions (which allowed our farmers to compensate for losses with high prices within the country during dry years – high prices arise due to the absence of export bans). At the same time, our northern neighbor, fearing a bread shortage in the domestic market, repeatedly had to restrict the export of its product. This is not surprising: the memory of food riots is still fresh," noted Asylzhan Mamytbekov.

Secondly, since the purchase price will significantly increase - traders and other participants in the grain market will be forced to set prices higher than those of the State Corporation - the national company itself will be able to make a high profit.

"This will happen even considering the expenses for servicing the loan, storing grain, and other costs. Therefore, the purchase price can be set considering the future market price increase. This is where the assistance lies!" the expert believes.

Thirdly, in the conditions of unstable global political situation, the state's purchase of such a volume of wheat will ensure a high level of food security for the country.

There will also be a sufficient reserve in case of drought and possible export restrictions. After all, over the past 7-8 years, this has happened repeatedly.

"In such climatic conditions, considering the fertile soils and high level of agriculture, we have and will have significant fluctuations in grain production volumes. However, domestic consumption and export volumes remain almost unchanged. This leads to an imbalance of supply and demand in the market and sharp price fluctuations. These changes contradict grain production volumes. With a high harvest level, prices decrease (due to surplus), and in case of drought and low harvest, prices rise (if export is not restricted)," believes Asylzhan Mamytbekov.

"Therefore, the industry's state body should carry