Russia and Ukraine, the biggest Black Sea grain exporters, face stiff competition in the 2014/15 marketing year that should see lower prices for their main customers, analysts and industry insiders said on Wednesday.
Russia, one of the world's major grain exporters, is expected to increase its grain crop by 5 percent in 2014 to 97 million tonnes, according to its Agriculture Ministry.
Ukraine may outdo last year's record output of 63 million tonnes despite political turmoil and violence, according to its state weather forecaster.
"This year's large harvest in Ukraine and the high crop in Russia will inevitably lead to greater competition in the region and add to pressure on global prices," Alexander Korbut, deputy head of Russia's Grain Union, told a conference in Gelendzhik, a town on Russia's Black Sea coast.
Both countries supply grain mainly to North Africa and the Middle East, competing with exporters including France and the United States. The 2014/2015 marketing year begins on July 1.
Prices for new crop wheat - harvesting of which is expected to begin in Russia during the last ten days of June - are already slipping in the region with further losses expected, according to traders.
Russian futures prices for the new wheat crop with 12.5 percent protein content are currently quoted at $252 per tonne on a free-on-board (FOB) basis in the Black Sea, according to a Moscow-based trader, who asked not to be named.
Ukrainian new crop wheat is priced at $255 per tonne on the same basis and for the same protein content, a Kiev-based trader, Andrey Druzyaka, told the conference. "There is a very clear trend: prices are going down," he said.
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While traders say not a single shipment of Ukrainian grain has been affected by fighting and political turmoil in the country so far, risks related to the upheaval remain one of the key concerns for global grain prices in the coming marketing year, according to the Food and Agriculture Organization (FAO).
"It is not yet clear what will happen with the hryvnia (currency) and how all this will develop," Natalia Merkusheva, trade and markets economist at FAO, told the conference.
For Russia, high debt and a lack of machinery and fertilisers remain the main problems for farmers and their crops, Deputy Agriculture Minister Andrey Volkov told the conference. He did not say whether these factors had been taken into account in his crop forecast.
"The high debt burden is the number one illness now," Volkov said. "If it were possible to extend the debt for 30 years, then that would be a break." He did not state an overall figure for farmers' current debts but said the sector did not have enough money to buy fertilisers.
The technological weakness of Russia's agriculture sector makes it more dependent on weather conditions, according to the head of Russia's Grain Union, Arkady Zlochevsky.
"This year we were lucky with the weather, but when we are not lucky, there will be a sharp decline (in the crop). We have not simply stopped developing technology, we are rolling backwards," Zlochevsky told the conference.
Rains in Ukraine are currently increasing risks for maize, Druzyaka said, while a Reuters poll in May found that the crop could be almost 20 percent smaller this year.
There is also uncertainty about the level of wheat protein content, Kiev-based consultancy UkrAgroConsult said in a note, adding that the share of feed wheat in the whole wheat crop may increase to 40 percent this year from 20-30 percent in the previous two seasons.
"The only worrying thing is rains, they can worsen the quality (of wheat). But it is not critical yet," a Kiev-based trader told Reuters. "In general everything looks very good. The mood is optimistic."
