The drought may reduce Russia’s grain harvest by 23 percent to 75 million metric tons this year, according to the Grain Union. Russian wheat prices increased as much as 19 percent last week, research group SovEcon said.
Kirill Podolsky, chief executive officer of Valars Group, Russia’s third-biggest trader, said some farmers are revoking even pre-paid grain contracts, speculating that prices will rise further.
Russian wheat prices are rising faster than at the peak of global food crisis in 2008, the Grain Union said.
Wheat futures surged to a 22-month high in Chicago on speculation that dry, hot weather may force Russia to curb exports, squeezing global supplies.
Russia’s grain exports may fall to 14 million metric tons in the marketing year that began July 1 from 21.5 million tons in the previous period because of the record drought, said Anton Shaparin, a spokesman for the Grain Union.
The impact of the drought on output, food prices and inflation remains unclear, Evgeny Gavrilenkov and Anton Stroutchenevski, economists at Troika Dialog in Moscow, wrote in a research report.
“Unsurprisingly, inflation expectations are high, opinion polls suggesting that more than 70 percent of Russians expect prices to rise,” they wrote.
Not all agricultural products will be negatively affected by the heat wave, the Troika economists said, citing corn and rice as crops that may benefit.