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By Landvista, September 1, 2010 11:37 am

By Rudy Ruitenberg and Luzi Ann Javier

(Updates with FAO comment in fourth paragraph, stocks-to- use data in ninth.)

Sept. 1 (Bloomberg) — World wheat production will fall more than forecast last month after drought slashed output in Russia, the United Nations’ Food and Agriculture Organization said. The outlook for overall grain production was also cut.

The wheat crop will fall 5.1 percent to 646 million metric tons this year from 681 million tons in 2009, the Rome-based UN agency said in a statement on its website. The FAO raised its outlook for wheat use in Russia as local barley output slumps.

Russia’s drought wiped out grain crops across 27 percent of the planted area this year, the agriculture ministry said Aug. 27. The country has banned grain exports until the end of the year to curb domestic prices.

“Wheat markets remain tight but supplies are adequate,” the FAO said. “Among the major cereals, wheat accounts for most of the cut in this latest forecast.”

Global cereal production will fall to 2.238 billion tons from 2.257 billion tons in 2009, the FAO said, reversing a June forecast that overall output of wheat, rice and coarse grains would rise to 2.28 million tons.

The FAO had already cut its outlook for wheat production last month from 677 million tons in June. In the latest report, the outlook for Russia’s wheat crop was cut to 43 million tons from 48 million tons in August.

The agency reduced its global rice output forecast to 467 million tons this year, from 472 million tons in June. Flooding in Pakistan and drought in the Philippines cut rice harvests there, helping push food prices higher, the FAO said.

Coarse Grains

Production of coarse grains, which includes corn and barley, is forecast to rise to 1.125 billion tons from 1.121 billion tons last year, less than an increase to 1.131 billion tons forecast in June.

World cereal stocks at the end of the 2010-2011 crop year are forecast to slip 2.4 percent to 527 million tons from an eight-year high of 540 million tons, according to the report. The stocks-to-use ratio will slip to 23 percent from 24 percent, the FAO said.

Wheat use is expected to rise in Russia on feed demand, as the country’s barley harvest slumps 50 percent, according to the report. The wheat stocks-to-use ratio at the end of 2010-2011 is forecast to fall to 27 percent from 30 percent a year earlier. The FAO has lowered the outlook for wheat’s stock-to-use ratio twice from 28 percent in August and 29 percent in June.

World trade in wheat is expected to slip to 119 million tons, down by 3 million tons from the previous forecast and compared with 126 million tons in 2009-2010. Wheat is the most- widely traded grain on international markets.

“The forecast for world wheat trade has also been lowered this month, mostly on higher international prices which may curb imports of wheat, especially for animal feeding,” the UN agency said.

–With assistance from Ilya Khrennikov in Moscow. Editors: John Deane, Stuart Wallace.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net; Matthew Oakley at moakley@bloomberg.net.