Russian Grain Crops Decline, Export Ban Likely

Jul 19, 2012 06:36 AM EDT | By Sriranjini

Russian grain crops are likely to fall in 2012-13 as a result of drought.

Last year, Russia saw a record crop of 94.2 million tons, out of which 27.6 million tonne was exported. However, this year, the grain crop may decline to around 82 million tonnes.

Russia is the third biggest exporter of wheat this is likely to drop from last year's 56.2 million tonnes to somewhere between 47 and 49 million tonnes.

"Russia's grain exports have slowed this year due to drought in the south and a rail disruption in the Black Sea port of Novorossiysk area because of flash floods", says Oleg Rogachev, first deputy chief executive officer of Rusagotrans, a transport company. July shipments are expected to be 1.2 million tons, Rusagrotrans estimates. That compares with 2.4 million tons in 2011, according to state statistics data.

A top grain analyst predicts that the grain exports could be even lower than expected.

"The outlook for the harvest is worsening," says Andrei Sizov Sr., CEO of SovEcon.  In all the key producing regions, except the Central Federal District, production is expected below last year's."

Many now believe that Russia may ban grain exports to maintain domestic supply, like it did in the year 2010. But, government officials have refuted this belief.

"There will be a meeting on the grain market," said Arkady Dvorkovich, Deputy Prime Minister of Russia, to Reuters Tuesday. "I see no basis for limiting exports."

Since the export ban in 2010, Russia has been trying to assure markets that such a thing is unlikely to happen again.

But, flash floods in the south and a drought in the Black Sea region has destroyed about 3.4 percent of the grain crop. This, along with a Goldman Sachs report, has prompted the belief that a ban is inevitable.

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