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Kazakhstan's agricultural export sector is facing a major setback following new import regulations imposed by China. The restrictions effectively ban the export of flour produced from Russian grain, leading to substantial financial losses for numerous Kazakh companies whose products are now stranded.

New Barriers to Flour Exports

Chinese authorities have abruptly changed export rules, causing significant financial damage to Kazakh businesses, particularly those that were actively supplying the Chinese market. Under the new regulations, the use of Russian grain in the production of feed flour is strictly prohibited. Additionally, manufacturers are forbidden from adding supplementary raw materials, such as oilseed meal or cake, to the flour. These changes limit the technological flexibility of producers and intensify administrative oversight.

Challenges in Obtaining Export Codes

The most severe impact has been on the logistics chain. China now requires that the supplier of feed flour must be the direct manufacturing company, a decision that removes intermediaries and traders, placing full responsibility on the producer. While China frames this as an effort to enhance oversight and transparency, Kazakh businesses view it as the elimination of a crucial part of their export activities.

To identify compliant products, China's customs administration mandated a special export code. However, only 27 flour-producing companies managed to obtain this essential code in a timely manner. The products of other businesses remain in warehouses or loaded onto ready-to-ship railcars. The approaching warm spring weather poses a risk to the quality of feed flour if stored for extended periods, potentially spoiling the product. Consequently, the stability of many flour-producing enterprises, not just current shipments, is now at risk.

Government Measures and Future Plans

The Ministry of Agriculture of the Republic of Kazakhstan has convened meetings with market participants to seek solutions. The ministry has submitted a list of 39 additional feed flour-producing companies to China, urging expedited review. A third list is being compiled for those not included in the first two. A separate list is also being prepared for intermediaries who previously supplied products to China, though this would require convincing the Chinese side to reconsider its stance against allowing intermediaries.

Currently, only the 27 companies that have received the code are included in the plan for shipping feed flour to China. Previously, the Grain Union of Kazakhstan had projected the volume of feed flour exports to China to be around 3 million tons by 2026, double the figure for 2025. These projections now hinge on the successful outcome of ongoing negotiations.

Biosecurity and Trade Policy

Reports of China prohibiting the use of Russian grain in feed flour production had surfaced earlier. This situation is also linked to biosecurity concerns. Following outbreaks of animal diseases in Russia, animal illnesses were detected in China's border regions. Chinese specialists identified previously unencountered strains and cited the ineffectiveness of existing vaccines, prompting China to strengthen border security.

The Chinese side suspects that Russian grain may be illegally entering the Kazakh flour supply chain. These suspicions have led to stricter export requirements. Kazakh specialists question the official diagnoses of animal diseases in Russia, suggesting the potential presence of foot-and-mouth disease. This highlights the critical need for effective veterinary control between the two countries.

There have been prior instances of railcar echelons carrying feed flour to China being turned back, with Chinese customs citing non-compliance with standards. Thus, under the guise of sanitary security and supply chain transparency, a structural restructuring of the market is underway.

Export Growth and Economic Policy

Experts suggest that a primary reason for China's restrictions on feed flour imports is the excessive increase in product volume from Kazakhstan. Cheap Kazakh feed flour could impact China's domestic market and pressure local producers, contradicting the Chinese government's policy of supporting its own farmers.

The rapid growth of feed flour production in Kazakhstan began in the last two years, serving as a tool to stabilize domestic prices. While exporting feed flour to China incurs no customs duties compared to higher tariffs on food-grade flour, the high yield in 2024 had further spurred the sector's development. However, China's new regulations have now obstructed this growth.

Previously, Kazakh producers and traders obtained separate codes from Chinese certification bodies. Now, a unified code for feed flour has been introduced, causing a sharp halt in shipments. Some companies previously spent up to a year and a half obtaining a code, and the process for the new code has presented significant difficulties for many enterprises.

These new requirements also raise the issue of VAT refunds. If producers are forced to export themselves, they may not be able to reclaim VAT, potentially increasing the price of Kazakh feed flour in China. There are also speculations that China may be interested in conducting flour production in Kazakhstan through companies under its control, potentially leading to a gradual transfer of Kazakhstan's grain processing industry to Chinese businesses.