Russia's heatwave looks set to prompt a "significant drop" in its barley exports, raising the prospect of the European Union shifting its huge stocks of the grain, a leading analyst has said.

Andrey Sizov, the managing director of SovEcon, the analysis group which last week revealed the extent of the threat that drought causes Russia's grain crop, said that the country's barley harvest was likely to fall below 15m tonnes.

A crop at that level would be some 20% lower year on year, and the weakest since 2000, before Russia began its recovery as a global force in grain.

Yet the country faces growing domestic demand for barley as a geed grain, to fuel ambitions for ramping up its livestock industry, besides its desire to remain a force in the export markets.

Furthermore, it has a dwindling supply of inventories to rely on, at some 2.2m tonnes, to bolster supplies.

Russia vs EU

"We are going to have a pretty low crop and our stocks are low too," Mr Sizov told Agrimoney.com, adding that as a further twist, 1.4m tonnes of inventories were held in government hands.

These were less likely to be released, for fear of crystallising a loss.

"The major part were purchased in 2008 at prices significantly higher than they are now, so is not so easy to sell into the market," he said.

"Russia is likely to have a significant drop in its exports, and to lose market share."

The EU looked a probably candidate to pick up this share, with the retreat of Russia, usually the world's third biggest exporter, providing an opportunity for the European Commission to sell down its large intervention stocks.

The EU was offered 5.7m tonnes of the grain for intervention buying in 2009-10, the last season the programme will run for barley, with total stocks in the region estimated at nearly 15m tonnes.

'High domestic prices'

Russia's barley squeeze looked likely to prompt a jump in domestic prices, whose weakness earlier in the season discouraged plantings, adding to the pressure on production, Mr Sizov said.

"Competition between domestic traders and export merchants for supplies might be pretty high. That will result in high domestic prices," he said.

However, as for wheat, the decline in exports might only become apparent later in the year, after a strong harvest in north Caucasus provinces gives way to weaker yields in areas further north, which have suffered from persistent heat.

"At the beginning, Russia is likely to export at a pretty good pace. But afterwards, they may drop quite significantly."