Agritel flagged "clearly bullish" prospects for grain prices, even as futures fell on major markets, cautioning that hopes for Ukrainian crops were being inflated by a reliance on unrealistic official data.

The consultancy, forecasting a halving in barley and wheat exports from the three main former Soviet Union producers in 2012-13, acknowledged that prospects for Ukraine's drought-hit grain harvests had recovered somewhat, helped by timely rains in some areas.

However, official Ukrainian farm ministry estimates for grains, including a wheat production figure of 15.9m tonnes, appeared to be based on "overstated" yield and acreage data.

Information from its sources suggested that the official numbers "does not quite match the reality in the field", Agritel, which is based in Paris but operates a Kiev office, said.

"Given the magnitude of the drought," farm ministry yield forecasts set at about six-year average levels "seem somewhat optimistic", Agritel said.

Crop losses in southern and eastern areas "will be significant" with, in corn, some farmers scrapping fields "as the production potential was insignificant".

Harvest revisions

Agritel raised its estimate for Ukraine's wheat harvest from 12.9m tonnes. But, at 14.0m tonnes, its revised forecast was well below the official figure, besides a US Department of Agriculture forecast upgraded on Friday to 15.0m tonnes.

USDA staff in Kiev, quoting Ukraine government data, noted in a separate report that "the main Ukrainian winter crops - wheat, barley, and rye – enjoyed quite favourable spring weather conditions so that a good share of winter plantings were able to recover after the harsh fall planting and winter seasons".

For corn, Agritel lowered its production forecast to 19.5m tonnes, well below the USDA forecast of 21.0m tonnes, and below the range of estimates from most other commentators, centred around 20m-23m tonnes.

"Over 30% of corn area is located in the southern part of the country where [drought] concerns are concentrated," Agritel said.

'Clearly bullish'

For Russia too, the consultancy lowered its estimate for the wheat harvest, to 41.3m tonnes, signalling weaker output than in the drought year of 2010, results from the early harvest were "disappointing", and noting that "average yields decline with the progress of the harvest".

And, with the forecast for the Kazakh harvests cut too, to 11.0m tonnes for wheat, "the volumes available for export" from the three big former Soviet Union producers "are greatly reduced".

Barley and wheat shipments were seen halving, to 3.1m tonnes and 18.0m tonnes respectively.

"The market are clearly bullish, as they haven't fully priced these elements," Agritel said, even as wheat for November lost 2.8% in Paris to stand at E256.75 a tonne in late deals, while Chicago's benchmark September lot shed 2.0% to $8.66 ¾ a bushel.

'Important role'

The group, however, sounded a relatively upbeat note on Ukraine corn shipments, saying that, despite being on course for a 16% drop to 12.8m tonnes, the country would "retain an important role in world trade", and could eventually crack the Chinese market.

Separately, the USDA staff in Kiev said that "it is possible that some corn from Ukraine may find its export market in China as some negotiations have been in progress between the two governments.

"No final agreement has been reported reached. However, major market players from Ukraine have already visited China in lieu of these talks and have confirmed their interest in trade."

Furthermore, "some traditionally US corn destinations like Northern Africa may become the customers of Ukrainian corn this season".