The golden route of flax: how Kazakhstan earns more on processing and export to China than on the sale of raw materials

The global oilseed market is undergoing a period of profound transformation. Against the backdrop of growing demand for vegetable oils, feed and deep-processed products, more and more countries are seeking to abandon the export of raw materials and move to the creation of products with high added value. One of the most illustrative examples of such a strategy is the flax market in Kazakhstan.

Today, Kazakhstan not only exports flax, but actively develops its processing, supplying China with not only raw materials, but also flaxseed oil, cake, as well as additional processing products. This model can significantly increase profits and reduce dependence on fluctuations in world prices for agricultural raw materials.

Kazakhstan becomes the largest flax processor for the Chinese market

In recent years, Kazakhstan has become one of the world's largest producers and exporters of oil flax. A significant part of the crop is sent for domestic processing, after which the products are exported mainly to China.

The main scheme of work is as follows:

flax → processing for oil → allocation of cake → additional processing → export to China.

This approach allows market participants to receive income in several directions at once.

Why flax is more profitable to process than to sell raw materials

Export of raw flax has a number of restrictions:

• high dependence on world quotations;
• limited margins;
• High competition among suppliers;
• Dependence on logistics costs.

When processing, the economy becomes much more interesting.

One ton of flax is obtained from:

• flaxseed oil;
• flaxseed;
• products of deep processing;
• feed components.

Each of these products has its own market and its own value.

Flaxseed oil is the main source of profit

The main product of processing is flaxseed oil.

In the Chinese market, it is in demand in several segments:

Food industry

Flaxseed oil is actively used as a healthy food product due to its high content of omega-3 acids.

cosmetics industry

The oil is used in the production of cosmetics, care products and pharmaceutical products.

Chemical industry

Technical varieties of oil are used in the production of paints and special industrial compositions.

That is why processed flax brings much more income than the export of raw grain.

What's going on with the cake?

After pressing the oil, flaxseed cake remains - a product that also has a high market value.

Today, Kazakh companies use two main implementation options:

Domestic sales

Cake is actively purchased:

• livestock enterprises;
• poultry farms;
• feed producers;
• farms.

Due to the high content of protein and nutrients, flax cake is considered a valuable feed component.

Exports to China

The Chinese market is one of the largest consumers of feed ingredients.

Chinese companies buy flax cake for:

• livestock;
• feed production;
• deep processing;
• food industry.

Exports of cake allow producers to make additional profits by actually monetizing all processed products.

Additional heat treatment increases profitability

Of particular interest is the further processing of linen cake.

After heat treatment, roasting and preparation of the product, its cost can significantly increase.

Advantages of additional processing:

• increasing the storage period;
• improvement of feed characteristics;
• increasing the content of digestible components;
• Opportunity to enter more expensive market segments;
• Compliance with the requirements of individual Chinese buyers.

That is why many processors invest in additional equipment to increase the added value of products.

Why China is actively buying recycled products

China remains the world’s largest consumer of oilseeds and their processed products.

The main reasons for high demand:

Increased consumption of healthy food

The Chinese market is actively developing the functional food segment.

Livestock development

The world’s largest livestock industry requires a huge amount of feed components.

In-house resource constraints

China cannot fully meet domestic demand with its own oilseed production.

State policy of food security

Beijing is actively diversifying its agricultural suppliers.

Kazakhstan gets strategic advantage

Kazakhstan has a number of advantages over other exporters:

• geographical proximity to China;
• developed railway crossings;
• the presence of large processing capacities;
• relatively low cost of production;
• favorable conditions for the cultivation of flax.

In fact, the country is gradually turning from an exporter of raw materials to an exporter of processed products.

What conclusions can be made by Russian business

The experience of Kazakhstan shows an important trend of the modern agricultural market: the maximum profit is formed not on the sale of raw materials, but on its processing.

For Russian oilseed producers, this means several strategic areas of development:

• creation of own processing capacities;
• oil production;
• release of feed products;
• development of deep processing;
• Focus on exports to China and Asian countries.

Value added is now the main source of competitiveness.

Flax is gradually being transformed from a conventional crop into a high-margin export product. Kazakhstan demonstrates a successful model in which raw materials are processed domestically and products with higher added value are supplied to foreign markets.

The sale of flaxseed oil, the sale of cake and its additional processing can significantly increase business profitability and reduce dependence on fluctuations in world commodity prices.

For the countries of Eurasia, this is becoming not just an export strategy, but a new economic model for the development of the agro-industrial complex.