Flour mills are undercover. Who insures the industry risks in a crisis?
Flour and macaroni products are one of the brands of our country, the products of Kazakhstan flour mills are always popular among consumers in neighboring countries.
But this popularity also causes problems: neighbors are trying to close their markets to Kazakhstan. So government support for the milling industry is indispensable.
In January-September 2020, flour mills in Kazakhstan produced 2.4 million tons of flour, according to energyprom.kz data. They fully met the demand in domestic market and actively supplied products to foreign markets. Kazakhstan flour mills exported 47.7% of their products (44.9% last year). This is 948.9 thousand tons of flour in the amount of $264.6 million (in monetary terms, increase of 29.2% over the year).
Just a couple of years ago, Kazakhstan millers were deservedly proud of the fact that they have increased the volume of flour exports by more than 13 times over 15 years. Kazakhstan has been among the top three world exporters in this industry for more than 10 years.
However, this success has a second side: Kazakhstan millers are trying to push out of the markets of other countries or limit their supplies. It is cheaper for importers to buy grain in Kazakhstan and grind it in their own country than to buy a finished product, even if it is of better quality. And flour mills are raising the alarm – volume of deliveries abroad is falling and factories are idle.
Competition in this market is very tough, and therefore state support for Kazakhstan enterprises is extremely necessary. Especially in this difficult year, when there are risks of non-payment from foreign buyers and established relationships are collapsing due to the pandemic.
In this situation, state support through "KazakhExport" Export Insurance Company JSC (subsidiary of Baiterek NMH JSC, a subordinate organization of the Ministry of Trade and Integration of the Republic of Kazakhstan) was important.
– We export macaroni products to Kyrgyzstan and other countries in the region – says Aslan Aldabergenov, lawyer at "Ai-Aru" LLP, a leading enterprise in macaroni and flour industry in Semey, East Kazakhstan region. - KazakhExport provided us with an export payment insurance service. This means that if the buyer does not pay for our deliveries, KazakhExport will reimburse us up to 80% of the payment amount and will collect money from non-payers. The very fact that this is possible allows us to look forward to the future with optimism.
It is worth to note that flour production is not the most profitable business, and if the buyer delays payment, it damages the company a lot. So the export payment insurance service is in high demand.
KazakhExport also received such support from the country's largest enterprises like the Novo-Aljan milling plant (Aktobe). Finished products are exported to Tajikistan, Uzbekistan, Kyrgyzstan, Turkmenistan and Afghanistan.
No less important support is an insurance of loans of the millers themselves. Price of grain has been growing in recent years, and millers are forced to take loans for the purchase of grain in order not to be left without raw materials – otherwise it will simply be outbid by competitors from other countries. KazakhExport provides loan insurance for Kazakh millers, which makes it much easier for them to get loans to replenish working capital.
This support was used by Best Kostanay LLP, the amount of insurance coverage is KZT 720 million. This will allow the company, which exports its products to a number of CIS countries and Afghanistan, to purchase enough raw materials for smooth operation.
In total, amount of obligations assumed by KazakhExport under export contracts amounted to KZT 63 billion since the beginning of the year.
Another essential service for the industry is a search for new markets.
KazakhExport has representative offices in different countries, and they help us find new clients – says Artyom Yaremchuk, Senior Sales Manager at Tsesna-Astyk Concern LLP. – We supply our products to many CIS countries, but new markets are needed for development as well. Of course, export credit insurance has become a very valuable tool. It helped us a lot this year, and we had a sense of confidence and stability, which is very important during the pandemic.
It is profitable for each country to support its processing and sell the finished product on foreign markets. For comparison, a ton of flour for export is about one and half times more expensive than a ton of grain.
This is not counting the fact that local flour mills still have very valuable processed products that are added to animal feed.
So the effect of state support for the flour industry is obvious.
https://informburo.kz/stati/mukomoly-pod-prikrytiem-kto-strahuet-riski-otrasli-v-krizis.html
