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UPDATE 2-Kazakh drought sounds alarm for grain crop
* Kazakhstan forecasts 2012 grain crop of 14 mln tonnes
* Drought situation "alarming", says deputy minister
* Carryover stocks, higher prices to offset losses
* 2012-13 grain exports forecast at 10 mln tonnes (Adds exports, carryover stocks, China)
By Raushan Nurshayeva
YESIL-AGRO FARM, Kazakhstan, July 17 (Reuters) - Kazakhstan expects a below-average crop this year due to an "alarming" drought across its northern grain belt, although carryover stocks from last year's record harvest should allow the country to remain a top-10 global wheat exporter.
Deputy Agriculture Minister Muslim Umiryayev forecast on Tuesday that hot and dry weather would cut Kazakhstan's grain crop to 14 million tonnes this year, a decline of 48 percent on last year's post-Soviet record and undershooting the average of 17 million tonnes over the last nine years.
"The situation is alarming," Umiryayev told reporters at the Yesil-Agro farm in Akmola region, north of the capital Astana. "Our main grain-growing regions will not have the record crop of last year."
Kazakhstan's 16.7 million people consume about 2.5 million tonnes of grain per year and domestic food supplies are not threatened by the drought, although the country will have to dig into its reserves to maintain its status as a major world exporter.
Kazakhstan, Central Asia's largest economy, harvested 27 million tonnes of grain last year, its biggest crop in 20 years of independence from the Soviet Union. The country is a major supplier to neighbouring former Soviet Central Asian states, as well as Afghanistan and Iran.
The country has sown 16.2 million hectares to grain this year, an area about the size of Tunisia. Crops have been damaged or are in poor condition on nearly 10 percent of this area, the Agriculture Ministry said in a statement.
The ministry's latest data show that 36.5 percent of the total sown area was in "good condition" as of July 12 and 53.7 percent was in "satisfactory condition".
Three northern provinces - Akmola, Kostanai and North Kazakhstan - account for around three quarters of the sown area. In Kostanai region alone, crops are in poor condition on nearly a quarter of the sown area.
"The situation in the fields is worsening every day," Nuraly Saduakasov, governor of the Kostanai region, said in comments reported on Monday on local government website www.kostanay.gov.
"Weather forecasters say the drought will affect not only Kostanai, but also North Kazakhstan and Akmola regions," said Umiryayev. "We will be able to make a more detailed forecast within the first 10 days of August."
But as he spoke, a few spots of rain fell on the wheat fields. He said more rain was forecast by the end of this week.
The deputy minister said carryover stocks from the record crop of 2011, as well as higher global grain prices, would help to offset any losses from a shortfall in production.
European milling wheat futures hit new contract highs when markets opened on Tuesday, as U.S. markets extended their rise on weather concerns. Benchmark November on the Paris-based milling wheat futures <0#BL2:> briefly hit a contract high of 269.00 euros per tonne.
Umiryayev forecast Kazakh grain exports in the marketing year to June 30, 2013, at 10 million tonnes. The country exported 12.1 million tonnes of grain, including grain in flour equivalent, in the marketing year to June 30, 2012.
Kazakhstan's grain export potential in the season just ended had been around 15 million tonnes, Umiryayev said. The ministry said Kazakhstan's elevators held 8.2 million tonnes of grain as of July 1, using nearly 58 percent of their capacity.
"Whatever we lose in yield will be balanced in part by prices," Umiryayev said. "When we add the forecast crop to carryover stocks, then grain availability will balance itself out this year."
The ministry said domestic prices for third-grade milling wheat averaged $155 per tonne in the first 10 days of July, up from $124 per tonne in January.
With prices rising, the ministry said it would consider removing from Aug. 1 an export subsidy of 4,000 tenge ($26.7) per tonne toward the cost of delivering grain by rail to ports on the Black Sea and Baltic Sea.
Umiryayev said Kazakhstan also planned to supply more grain by rail across its eastern border to China. The country exported 160,000 tonnes to China in the marketing year just ended, compared with a meagre 4,000 tonnes in the previous 12 months.
"We have had negotiations with Beijing on the basic question of quarantine requirements and have taken some steps forward in this direction," he said. "We hope to preserve this dynamic, because our Chinese partners are showing interest in our grain."
Asylbek Ismagambetov, general director of the privately owned Yesil-Agro farm, said Chinese buyers had contacted him via the Internet and travelled from Beijing to his farm.
"We signed a contract for 10,000 tonnes. They saw our elevator. They saw the quality of our flour and we sent a test shipment," he said. (Writing by Robin Paxton; editing by Alison Birrane and Keiron Henderson)
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