July 29, 2011

Ukraine projected a sharp rise in 2011 grain harvest while Russia announced record grain exports for July, putting the Black Sea producers back on the forefront after last year's severe drought.

The worst drought in decades prompted Russia to close its borders to grain exports last summer and Ukraine to introduce a quota system, but favourable weather this year means the export powerhouses appear poised to return to world markets in force with cheap grain and plentiful supply.

The record July Russian export figure included 1.8 million tonnes of wheat, analysts said. Russia produced 97 million tonnes of grain in 2009 and a bumper 108 million in 2008, a level which at the time seemed to cement its ambitions to become a major long-term player on the grain export markets.

Russia has raised the upper end of its forecast range for the 2011-12 season to 90 million tonnes, of which as much as 20 million could be exported, the government believes.

Ukraine said it would harvest 51 million tonnes of grain this year against 39.2 million in 2010, updating the previous official forecast of 46 million tonnes.

The country's farm minister Mykola Prysyazhnyuk said last week the 2011 grain harvest would total 'no less than 47 million tonnes', while exports could total 23 million tonnes after roughly 12 million in the previous season.

Analysts said Russian sellers won export business by sharply undercutting their international competitors, but low export prices also indicated a potential glut of grain, especially in southern exporting regions where harvesting is under way.

Much of Russia, whose government re-opened the border to exports on July 1 after an embargo imposed last August, is seeing high yields after a hot, damp July, while Ukraine's weather has favoured corn growers in particular.

While US corn yields are falling because of scorching heat during the pollination period in the top world exporter's main growing regions, the bulk of Ukraine's harvest upgrade is likely to be attributable to rising corn yields.

Corn is a key export for Ukraine, if not for Russia. In the first 11 months of the 2010-11 season Ukraine exported 4.46 million tonnes of corn and is expected to export 7.7 million tonnes this year.