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AgroGeneration adds to cautions on Russia, Ukraine autumn crops

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A recovery in shares in AgroGeneration faltered after the Ukraine farm producer flagged a setback, particularly to sunflowers, from dry weather, tallying with ideas of a somewhat disappointing finish to a strong year for former Soviet Union crops.

AgroGeneration shares, which are listed in Paris, tumbled 6% at one point before clawing back some ground to stand at E0.44 in lunchtime deals, down 4.4% on the day.

The decline followed the group's unveiling of results which showed a return to half-year loss, and a caution that "the current dry weather in the eastern part of Ukraine is a matter of concern, notably for sunflower".

AgroGeneration, which said it has about 47,000 hectares of corn, soybeans and sunflowers yet to harvest underlined that "drought conditions continue to persist particularly in the eastern part of Ukraine".

The setback "could influence" the group's ability to meet a target of this year matching the 390,000 tonnes in grain and oilseed output it achieved in 2016.

'Drop in soil moisture'

The comments are the latest in a series of more downbeat assessments on prospects for autumn-harvested crops in the former Soviet Union –a region which, in Russia particularly, achieved strong results from the summer harvest.

Moscow-based SovEcon this week cut its forecast for Russia's sunseed output by 1.1m tonnes to 10.4m tonnes, citing a setback from the dry August weather which had proved a help to wheat growers.

In corn, rival consultancy Ikar has reportedly cut by 1.5m tonnes to 13.9m tonnes its forecast for the country's harvest, which the International Grains Council downgraded last week by 500,000 tonnes to 15.2m tonnes "citing a drop in soil moisture during the key development phase".

The IGC also slashed by 1.5m tonnes to 27.0m tonnes its estimate of the Ukraine grains harvest, citing "persistently dry conditions across southern and eastern Ukraine in recent months".

Other former Soviet Union farm producers flagging crop setbacks include Ekosem-Agrar, which said that its yields of corn, soybeans and sunflowers were "likely to fall short of expectations", but blamed a "cool summer [which] was rather detrimental for heat-loving crops".

Wheat yield rises

By contrast, in summer-harvested grains, AgroGeneration – which expects to harvest 105,000 hectares of crops overall this year – trumpeted "good" results particularly for wheat, which it expected to end up showing a yield of 5.2 tonnes per hectare, up 0.8 tonnes per hectare year on year.

The group's average rapeseed yield, at 2.6 tonnes per hectare, was also seen higher that last year, by 0.6 tonnes per hectare, with the result for barley flat, and those for peas and chickpeas declining.

The group reported a loss of E305m for the first half of 2017, compared with earnings of E233m a year before.

While revenues tripled to E11.4m, the fall into the red reflected a current hit on a 3,800-hectare farm near Kharkiv, in north east Ukraine sold earlier this year, AgroGeneration said.

Earnings before interest, tax, depreciation and amortisation (ebitda) for the period, at E5.95m, were up 2.6% year on year.

By Mike Verdin

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