Black Earth yields raise doubts over Russia grains

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Black Earth Farming heightened doubts over rosy expectations for Russia’s grain harvest by revealing "disappointing" yields, after dry weather which, for much of the season, "was tracking the drought conditions seen last year".

Shares in the farm operator, which has a landbank of 326,000 hectares, an area bigger than Luxembourg or most English counties, tumbled 8%.

Black Earth said that its yield of summer-harvested crops had fallen "below targets", recovering only some ground surrendered to last year’s drought.

For winter wheat, the company’s biggest crop, the yield has, with most of the area harvested, come in 19% higher year on year at 2.5 tonnes per hectare.

However, the figure was below the Russian average of 2.8 tonnes per hectare so far, besides falling short of the group’s pre-drought, 2009 result of 2.5 tonnes per hectare.

For spring wheat and spring barley too, Black Earth’s results from early harvest have come in below 2009 levels.

‘Virtually no rain’

"The results to date are of course disappointing," Richard Warbuton, the Black Earth chief executive, said.

Black Earth crop results, per hectare, in 2011, 2010 and (2009)

Winter wheat: 2.5 tonnes, 1.9 tonnes, (3.5 tonnes)

Spring wheat: 2.0 tonnes, 1.4 tonnes, (2.3 tonnes)

Spring barley: 2.1 tonnes, 1.4 tonnes, (3.0 tonnes)

Data after harvesting of 89% of winter wheat area, 17% of spring wheat area, and 66% of spring barley area

Mr Warburton, who took the helm in an unexpected reshuffle two months ago, attributed the results to dry weather in the region, with most of its crops receiving "virtually no rain from mid-may to late June, and in some regions, mid-July".

The group, which cut its estimate for winter wheat harvest by 3,000 hectares, said that "average cumulative rainfall was tracking the drought conditions seen last year up until the end of June", affecting a "sensitive" stage of barley and wheat development.

It also highlighted some company specific yield "constraints", in areas such as soil acidity and compaction and weed management, revealed by an agronomic audit.

‘Yields are declining’

The comments come amid mounting doubts over upbeat estimates for the Russian grain harvest which some analysts have forecast rebounding as high as 95m tonnes from last year’s drought-hit result of 61m tonnes.

SovEcon, the Moscow-based analysis group, on Wednesday trimmed its forecast for a second time in 10 days, this time to 87m-88m tonnes, from 87m-90m tonnes.

"As the harvesting campaign moves to the Urals and Siberia, the yields are declining and average yields may prove to be close to those in 2009," Andrey Sizov, the SovEcon managing director, told a conference in Moscow.

"Estimates of above 90m tonnes are overoptimistic."

Profits slip

Black Earth revealed its harvest results as it unveiled a 64% slide to $543,000 in earnings for the April-to-June quarter.

Revenues rose 26% to $8.14m, with higher prices making up for a 31% fall to 42,700 tonnes in crop sold. The remaining 65,000 tonnes of inventory, as of the end of June, has been "sold and moving out", Mr Warburton said.

Black Earth shares closed down 7.8% to SKr20.20 in Stockholm.

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