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Ukraine benefits from slow start to Russia's wheat export season

* Ukraine wheat exports up 55% so far this season

* Slow pace of farmers' sales hampering Russian exports

By Polina Devitt and Pavel Polityuk

MOSCOW/KIEV, Aug 29 (Reuters) - Russian wheat exports have been slow so far this season, to the benefit of Ukraine which has seen a surge in its shipments of the grain, traders said.

Russia and Ukraine, along with Romania and Kazakhstan, compete with each other in wheat markets in North Africa and the Middle East, which they supply via the Black Sea.

Russia, as the largest producer in the region and the world's largest wheat exporter, usually dominates these markets in August-November when it actively ships its new crop to customers.

However, the country has exported 6.3 million tonnes of wheat since the 2019/20 marketing year began on July 1, down 1.4% from the same period a year earlier.

The drop is due to a number of factors including forecasts for a smaller Russian crop this year which has prompted some Russian farmers to hold off sales in the hope of getting higher prices later.

In contrast, Ukraine has exported 4.1 million tonnes of wheat so far this season, up 55% from a year ago, and its wheat crop is expected to rise this year.

"Some of the demand has been covered by Ukrainian wheat as the Russians did not want to sell," a Ukraine-focused trader said.

Profit margins for exporters of Russian grain have also been declining as competition intensifies. Russian bank VTB has been expanding its business actively.

The squeeze on margins has been particularly tough for traders who - unlike VTB - do not own grain export infrastructure assets.

The sluggish wheat export data seems to have prompted Russian officials to act as some traders have found it easier to obtain their export certificates from state services after months of on/off difficulties, the trader added.

The Russian government has been a proponent of boosting Russia's grain export potential but is also keen of keeping domestic prices relatively stable.

"I think there is a love-hate view of grain exports by the Russian government," a European trader said. "The government likes the economic activity and foreign exchange earnings but does not like the wheat price rises successful exports can bring."

Russia's wheat exports in August are expected at 4.0 million tonnes, according to SovEcon consultancy, compared with 2.9 million tonnes in the previous month and 4.7 million tonnes in August of 2018. (Reporting by Polina Devitt and Olga Popova in Moscow, Pavel Polityuk in Kiev, Gus Trompiz in Paris and Michael Hogan in Hamburg; Editing by Susan Fenton)

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