Russian grain forecasts deepen on crop uncertainty

 

 

Analysts deepened the uncertainty over Russia's grain harvest by cutting its production hopes just as other observers are standing by forecasts of a bumper crop.

 

Moscow-based group SovEcon cut estimates to 84-89 million tonnes, from 87-92 million tonnes, its forecast for the country's grain production this year.

 

The revision, which implies that Russia faces a slide of up to 13 million tonnes in production, reflected worsening estimates for the damage caused by a cold winter, which had destroyed 30-40% of crops in some regions, and the impact of a late spring on plantings.

 

However, the estimate deepens the division between SovEcon and some other observers, such as Russia's farm ministry, which has pegged the harvest at 97 million tonnes.

 

The Russian Grain Union, an industry group, earlier this week restated a forecast that, with fair weather, the crop could exceed last year's, and potentially top 100m tonnes.

 

Meanwhile, the USDA has estimated Russia's wheat crop, which accounts for the bulk of grain production, sliding by 2.7 million tonnes to 58.0 million tonnes.

 

Analysts have a history of diverging forecasts for a Russian crop which, spread over a huge area, can be difficult to assess, although typically the government has issued the most pessimistic forecasts.

 

Winterkill had been particularly high in more northerly and easterly wheat-growing areas, such as Voronezh, Volgograd and Tatarstan, with southern regions, such as Krasnodar, Rostov and Stavropol, "doing pretty well".

 

Indeed, with these areas accounting for a big chunk of the country's wheat exports, the weaker national harvest should not translate into a slide in shipments, and provide relief to rivals, such as the US, which have lost considerable market share to Russia over the past decade.

 

The lower harvest is likely to translate into lower inventories, which SovEcon believes will end 2009-10 at 21 million tonnes.