Black Sea farm operator Trigon Agri followed peer Ros Agro in revealing it was withholding grain sales in expectation of higher prices after revealing its farms had fallen prey to the drought which has sent Russian harvest expectations tumbling.

Trigon Agri, which aims to cultivate 200,000 hectares by 2015, said its harvest area for this year had likely been curtailed to a below-target 87,000 hectares by the "exceptionally difficult weather conditions" in parts of Ukraine and Russia.

"Some of our southern areas in both Russia and Ukraine have been very hard hit by drought," Joakim Helenius, the Trigon Agri chairman, said.

"As much as 38% of the cultivated land area has seen extreme drought conditions, which has led to the harvest from these land areas largely being written off."

Yields tumble

And even on many fields that made it to harvest, yields tumbled, with "severe drought and extreme heat conditions" at the group's Stavropol farms in Russia, slumping to 0.46 tonnes per hectare from 3.34 tonnes per hectare in 2011, Trigon Agri said.

At the Nikolaev operations in Ukraine yields fell to 1.01 tonnes per hectare from 3.57 tonnes per hectare.

"Based on the actual harvesting results to date and given the current conditions in the fields, the group expects the total gross harvest to be 14% lower compared to previous year," falling a little below 250,000 tonnes.

The data were based on mid-August data showing completion of the wheat harvest, with 73% of the rapeseed crop in the barn, and 37% of barley.

'Plan to hold on to inventory'

However, Trigon Agri said the impact of the shortfall on its results would depend on the path of grain prices, and a strategy of withholding sales in expectation of higher values ahead.

"Fears of export restrictions have stopped Russian and Ukrainian prices from rising anywhere near as much as international prices," Mr Helenius said, speaking shortly before a key meeting of Russian official decided against grain export curbs.

"Over the last three and a half months, the wheat price in Chicago has increased by 47% compared to an increase in Ukraine of 9% and in Russia of 25%.

"We plan to hold on to inventory in particular in Ukraine, where we feel that the risk of export restrictions is much lower than in Russia, in order to take advantage of the price rises we expect to see."

On Thursday, Ros Agro, which farms over more than 400,000 hectares, said it was also delaying sales in expectation that strong exports would create grains deficit in central Russian areas where it farms, prompting prices to rise by at least the costs of importing replacement supplies, likely from Kazakhstan.

Profits drop

Trigon Agri's comments came as it unveiled a halving to E7.71m in earnings for the first half of 2012.

While revenues rose 4.8% to E47.4m, higher costs of seeds, chemicals and fertilizers and grain storage, and an increase in land rental costs in Ukraine, lifted operating expenses.

Trigon Agri shares, which are listed in Stockholm, closed 0.8% higher at SEK 6.45.