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. Last Updated: 07/27/2016

Cold Cuts Into Grain Harvest

Itar-TassSome grain is being held back for sowing, putting pressure on supplies.
This year's harvest from winter grain in Russia could fall by as much as 30 percent following the unusually cold spell that hit the country earlier this month, some market players said Monday.

The anticipated fall in supply, which is pushing up prices, could soon knock Russia from its spot among the top five global grain exporters, experts said.

"It would not be correct to talk about a super-critical situation," said Alexander Korbut, vice president of the Russian Grain Union. "But it is already obvious that we will have additional losses."

The grain union, a 400-member lobby group, accounts for 60 percent of grain production and 75 percent of grain exports.

"The situation with crops will become clear in February or March, but we already see that the price for third-class wheat has grown by 90 rubles [$3] over the past week," said Alexei Sosnitsky, spokesman for the Razgulyai agriculture group, which sold 1.7 million tons of grain in 2004. Third-class wheat is one of Russia's main exports.

Since the beginning of this year, third-class wheat prices have jumped by more than 300 rubles to 3,300 rubles ($118) per ton, said Igor Pavensky, a grain expert at the Institute for Agricultural Market Studies.

The price of rye is up by 150 rubles to 2,600 rubles per ton, he added, not specifying if the prices were for immediate or future delivery.

Pavensky forecasts that grain production will fall from last year's 78 million tons to between 66 million and 72 million tons in 2006.

While prices are being driven by the recent drop in temperatures, which fell to as low as minus 30 degrees Celsius in mid-January, the situation was exacerbated by an unusually dry fall, when as much as 70 percent of grain was sown in dry land, experts said.

The fact that some grain is being held back for additional sowing in the country's grain-producing areas -- including the Volga region, Bashkortostan and Tatarstan -- is also putting pressure on supplies.

The potential shortage could make Russian grain less competitive on the world market. Russia exports around 10 million tons of grain annually.

Vladimir Zalogin, general director of agricultural trader Agros Khleboprodukt, said the shortfall could push prices up by as much as 30 percent, reaching a price of $130 per ton for wheat.

"At that price, exports will stall. Export prices cannot exceed $110; it's beyond economic feasibility," Zalogin said.

"This will be a hard year for both producers and consumers."

The Agriculture Ministry did not return repeated requests for comment.

The London-based International Grains Council said last week that world wheat production would total 595 million tons in 2006-07, down 20 million tons from the previous season, in part due to the possible damage to the Russian crop from the cold.