Russian drought devours world wheat supplies: US

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The US government on Thursday cut its forecasts for global wheat production as Russia suffers its worst drought in decades.

The US Department of Agriculture slashed its 2010-11 supply forecasts by around 2.5 percent from last month's estimates, on lower production from Russia, and the former Soviet Union.

Worldwide wheat supplies are expected to drop by more than 15 million tons, with more than half of the reduction coming from Russia.

Russia has seen 10 million hectares (25 million acres), or a quarter of arable land destroyed in its worst drought on record.

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

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

The Agriculture Department said Russia would likely supply eight million tons less than expected "as continued extreme drought and record heat during July and early August have further reduced summer crop prospects."

Crop production in Ukraine and Kazakhstan would also fall by three million and 2.5 million tons respectively. In Ukraine crops have also been damaged by heavy summer rains.

But heat was also taking its toll in the European Union, with the 27-member-bloc expected to lower wheat production by 4.3 million tons.

The losses were expected to be partially offset by rising crops in India, the United States, Australia and Uzbekistan.

Analysts expect other countries to step in to fill the gap.

"We would expect to see a shift in the composition of wheat exports, with higher US wheat export numbers offsetting a lowering in Black Sea exports,"said analysts at Barclays Capital.

Wheat prices rose in US trade after the report was published.

© 2010 AFP

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