Wheat prices revived most of the ground lost in the three previous trading days, as Ukraine downgraded its hopes for grain exports and early harvest results from heat-struck Russia opened up government inventories to help out domestic buyers.

The farm ministry said it would release 3m tonnes of grain, approaching one-third of its inventories, to sell to consumers such as livestock farmers, for whom feed prices have soared thanks to the drought beseting this year's crop.

The release by Russia, which is attempting to become self-sufficient in pork and poultry was viewed by many investors as a bullish sign. The stockpiles were built up largely in 2008 when prices were high, the prospect of swallowing big losses has limited the government's efforts to sell them down.

"If it is willing to sell off stocks, that looks a sign of how tight the domestic market has become," a London trader told Agrimoney.com.

"And we are still only in July. We still have nearly the whole [2010-11] crop year to get through."

Harvest results

Russia also released harvest results for the first 7.5m hectares, or 17%, of grain harvested had come in at 2.81 tonnes per hectare, down nearly 10% year on year.

Although the decline is lower than the headline figure that investors are factoring in, Russian analysts are expecting average yield performances to worsen as the crop continues, with the early harvest including the north Caucasus region which has been unaffected by the country's extreme weather.

The ministry said that a state of emergency had now been imposed in 23 Russian regions because of the drought, the country's most severe in 130 years.

Ukraine downgrade 

Separately, Ukraine's farm ministry cut its export forecast for 2010-11 by 2m tonnes to 16m tonnes, blaming the lack of rain which has been seen as a greater threat to Black Sea neighbours Russia and Kazakhstan.

However, farm officials said that wheat exports, which topped 9m tonnes last year, would fall to 6.7m tonnes.

The decrease offers a potential fillip for rival exporters, who have lost trade over the last decade, and seen prices curbed, by growing competition from the Black Sea states.

'Relatively positive' 

Much of this trade is expected to divert to the European Union, as a close geographic rival.

However, US Department of Agriculture staff in Europe curbed expectations over a jump in the region's prospects by revising their estimate for wheat exports only 500,000 tonnes higher to 21.5m tonnes, below Washington's latest forecast.

They also downplayed fears for weather damage, saying that expectations for the harvest were "relatively positive", and flagging that flooding in eastern countries had missed prime grain areas.

Chicago wheat for September delivery closed up 2.0% at $5.88 ¼ a bushel.

In Europe, Paris wheat for November soared 4.3% to E175.00 a tonne, with its London peer closing up 3.2% at its day high of £129.50 a tonne