Russia loses quarter of crops in heatwave: Medvedev

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One quarter of Russia's crops have been lost in a record heatwave, President Dmitry Medvedev said on Thursday, warning that many farms were on the verge on bankruptcy.

"We have a very complicated situation because, as a whole in the country, around a quarter of the grain crops have been burned," Russian news agencies quoted him as saying in the southern town of Taganrog.

"Unfortunately many farms are on the verge of bankruptcy on account of the death of the harvest."

Russian Prime Minister Vladimir Putin earlier this month shocked markets by announcing that from August 15 Russia would ban exports to keep prices down at home and ensure there was enough feed grain for its cattle herd.

He has also sliced the grain harvest forecast for Russia, one of the world's top wheat producers, saying it would produce 10 million tonnes less grain than planned at 60-65 million tonnes.

Putin has announced a 35 billion ruble (1.1 billion dollar) financial aid package for the agriculture industry. "The government understands this (situation), and I hope, is controlling it," said Medvedev.

The agriculture ministry said in a statement on Thursday that Russia would in the light of the export ban export only 2-4.5 million tonnes of grain in 2010, compared to 21.4 million tonnes last year.

It said that the regions worst affected by the drought estimated their total losses at 37 billion rubles (1.2 billion dollars). However the ministry's own expert analysis put this slightly lower at 26 billion rubles (850 million dollars).

Analysts have warned that the export ban risks seriously hurting Russian producers at a time when the country had been moving to drastically increase its international market share.

Medvedev acknowledged the difficulties and said producers should be helped so they can prove there was no alternative to the ban and thus avoid hefty fines for contravening contracts.

"We have put producers involved in exports into a difficult position. Having done this we must help them and have the legal proof that was a force majeure and it was not possible to fulfill deliveries."

"I want the government to give this the clearest attention."

Force majeure is an international legal concept which may, under specified circumstances, protect parties to a contract from legal action and claims if they have been unable to fulfil the terms because of exceptional forces beyond their control.

Putin's shock export ban announcement last week catapulted global wheat prices to two-year high points and sparked worries that consumers could see price rises in the most basic food items such as bread and beer.

The prime minister has said that despite the drought Russia would be able to fulfill its own needs this year.

Russia requires 78 million tonnes of grain for its domestic needs and can cover the shortfall with 9.5 million tonnes from a state fund and 21 million tonnes left over from last year's harvest, the government has said.

© 2010 AFP

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