SovEcon analysts lowered the bar further on Russia's grain hopes in a report which warned that barley production would fall its lowest in 40 years.

The Moscow-based group, raising fears for a spread of drought damage east into Siberia, said that Russia's grain harvest could fall below the 60m tonnes that prime minister Vladimir Putin raised last week as a possibility.

While its central forecast was for a 61.5m tonne-crop, compared with a previous 72.5m tonnes in the middle of the estimate range, Russia's worst drought on record was still taking a toll, and threatening to spread crop damage beyond the 7.6m hectares so far seen affected.

"The area on which the grains have been lost may prove to be larger, as the first 10 days in August were extremely hot and dry, killing crops in the regions where the harvesting had just started," SovEcon said.

"Average yields, which are already lower than a year ago may fall further and not only in the centre and along the Volga river, but also in the Urals and in Siberia."

SovEcon's bottom-of-the-range forecast of 59.5m tonnes compares with a 97m-tonne harvest last year.

Barley woes

Furthermore, the group highlighted the prospect of domestic demand for wheat being raised significantly by a fall to a 40-year low of 8.7m-9.3m tonnes in the country's barley harvest.

"The availability of barley for domestic consumption may fall by around 6m tonnes from 2009-10, which will raise substantially the demand for other types of feed grain, mainly wheat, from animal breeders and animal feed makers," SovEcon said.

Meanwhile, brewers faced the need for raised imports of malting barley, with the domestic crop especially badly hit.

"Barley sown initially for malting may lose its malting qualities because of the drought."