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August 2, 2012


Dry weather in Black Sea grain region pressures wheat prices



Dry weather in the Black Sea grain-producing countries, which normally supply a quarter of world wheat export volumes, has hurt grain crops in Russia, Ukraine and Kazakhstan this year and has lent support to global wheat prices, which soared this summer.


Wheat prices have jumped about 50% since mid-June amid a severe drought in the US Midwest, dry conditions in Russia, Ukraine and Kazakhstan, excessively wet weather in Europe and a below average start to the Indian monsoon season. The USDA is expected to cut wheat crop estimates for Black Sea exporters as bad weather takes a toll, while it continues a trend of lowering figures for US corn and soy production, Barclays bank said on Tuesday (July 31).


Temperatures will be higher than usual in Russia during August, putting pressure on crops, Russia's state forecaster said on Tuesday (July 31). Most of the wheat has been harvested in the key southern exporting regions but spring wheat is still maturing to the north, and the outlook for corn is under threat from renewed hot weather in the breadbasket regions just north of the Black Sea coast.


All key grain regions including Russia's South, Urals, Siberia and Volga, will see temperatures above normal levels, a map published by the State Hydrometeorology Agency showed. A shortage of rains is likely in Russia's southern, Volga regions and in the Urals, while Siberia and a part of Kazakhstan will see an average level of precipitation.


Russia, hit by severe drought first in the southern breadbasket regions and then in Siberia and Urals, could see a grains harvest of 75-80 million tonnes this year, down from last year's 94 million tonnes, top government officials said on Tuesday (July 31).


Its 2012-13 exportable surplus of wheat is seen in a range of 11 million tonnes to 15 million tonnes depending on the final 2012 crop, a government source told Reuters on Wednesday (Aug 1). Uncertainties over whether Russia will impose export constraints, as it did after a disastrous drought in 2010, have been another factor supporting grain prices in recent sessions.


Ukraine, which faced a record drought during the 2011 winter grain sowing, is likely to face searing temperatures of up to 42 degrees Celsius (107.6 Fahrenheit) in parts of the country in early August, which will hit its corn production, a state weather forecaster said on Wednesday (Aug 1).


"At the very best, the corn harvest (this year) will be 20 million tonnes," said Tetyana Adamenko, head of the state weather forecasting centre's agriculture department, indicating a revision downwards from the centre's previous 21 million tonne estimate.


Adamenko told Reuters that virtually the whole country would see increasingly high temperatures up to August 11, though the situation was particularly critical in southern corn-growing areas where temperatures of up to 42 degrees were expected by August 6.


"There is a lot of corn in these regions. The effect will be that the plants will prematurely dry out and the grain will not develop properly. Simply put - it will lead to a lower harvest," she said.


Agricultural Minister Mykiola Prysyazhnyuk said on Tuesday (July 31) that the ministry stood by its overall grain harvest forecast for the year of 45 million tonnes, which also includes wheat, barley and other crops. But Adamenko said, "Analysts this year are agreed that the overall harvest could be around 43 million tonnes. I also believe that it will be about 43 million tonnes".


Kazakhstan, the Black Sea region's top producer of hard wheat, it expected to restore a part of yields thanks to rainy weather in August.


"The agriculture ministry has published their forecast - 12.8 million tonnes (of grain) by clean weight, but it is raining heavily across all of northern Kazakhstan now," Evgeniy Gan, president of League of Kazakhstani grain processors, told Reuters on Wednesday (Aug 1).


"And there are competent views that these rains will be very favourable for the areas that were last to be sown. Of course, those areas sown at the start or in the middle of the sowing campaign can hardly be rehabilitated now. But as for those sown later, we can expect their recovery," he added. He hopes that the forecast for the crop can be raised.


"It is clear that we won't get a crop anywhere closer to last year's, but the general picture may somewhat improve," Gan said.


A Kazakh agriculture ministry official, who requested not to be named, told Reuters that the country is not revising its current forecast of 12.8 million tonnes of grain as it expects more rains than average in the main northern grain belt and just about average in the south in August.


"This is very important for ripening ears of grain. This will somewhat rectify the situation - if not only psychologically, because this July heat has driven all of us into despair. Our next task now is to reap the harvest without losses," the official said.

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