Russia's grain output forecast cut to 71-72.5 million tonnes--down from previous forecast of 70-74 million tonnes--as drought in eastern regions hurts crop prospects, SovEcon says; wheat output seen at 39-41 million tonnes

LOS ANGELES , August 21, 2012 () – Russia's grain forecast was reduced to 71 million-72.5 million tonnes, down from a previous forecast of 70 million-74 million tonnes, following the collection of data from the beginning of the harvesting period in Siberia and the Urals, both of which have weak harvest prospects, SovEcon said, Reuters reported Aug. 20.

The Institute for Agricultural Market Studies (IKAR) reduced its grain forecast for 2012 to 73 million tonnes, down from an earlier forecast of 75.4 million tonnes, said IKAR CEO Dmitry Rylko. He added that he could see the Russia’s expected grain harvest falling further.

SovEcon also lowered its Russian wheat forecast to 39-41 million tonnes, down from an earlier prediction of 40.5-42.5 million tonnes.

The Russian government expects that the nation’s total grain harvest will amount to 75 million-80 million tonnes, 45 million tonnes of which could potentially be wheat. The government added that the current season’s exportable surplus will likely be between 10-12 million tonnes, a level that traders view as an informal export cap.

While the government has indicated that it does not intend to make sudden decisions to ban grain exports, as it did in August 2010, government officials indicated that it may impose protective tariffs no earlier than the beginning of 2013.

Traders expect that some form of export restrictions will be imposed, potentially as soon as July, following heavy exports earlier in the season that lead to Russian exports reaching 10 million-12 million tonnes before the end of 2012.

Export restrictions could be unnecessary if domestic grain prices increase, lowering the profitability of Russian exports, analysts say. SovEcon noted this could potentially happen soon despite, driven by the strength of rouble.

Russian grain exports during the first half of August hit a total of 1.26 million tonnes, including 1.05 million tonnes of wheat, according to Russian analyst firm Prozerno. The nation’s exports for the entire month of August may rise month-over-month to between 2.5 million-3.5 million tonnes, up from 2.1 million tonnes the previous month, analysts predict.

The primary source of this article is Reuters, London, England, on Aug. 20, 2012.

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