February 1, 2006

Russia faces potential 30 percent fall in grain harvest this year

Russia could face a 30-percent fall in this year's harvest from winter grain following the unusually cold spell that gripped the country earlier this month, said some analysts on Jan 30.

The fall in supply could remove Russia from its position as being among the top five global grain exporters. The supply shortage will also drive up prices.

Alexei Sosnitsky, spokesman for the Razgulvai agriculture group said the situation will become clear in February or March. He observed that the price for third-class wheat has increased by RUB 90 over the past week.

Third-class wheat prices have increased by more than RUB 300 to RUB3,300 per tonne since the beginning of this year, confirmed Igor Pavensky, a grain expert at the Institute for Agricultural Market Studies. He predicts that grain production will drop from last year's 78 million tonnes to 66-72 million tonnes for 2006.

Temperatures fell to as low as minus 30 degree C in mid-January. In addition, there was an unusually dry fall when up to 70 percent of grain was sown in dry land.

The expected shortfall could make Russian grain less competitive on the world market. Each year, Russia exports around 10 million tonnes of grain.