Drought-devastated Russia could extend a grain export ban into next year and may cut its 2010 beet sugar output, reflecting the dimming prospects for crops in the scorched Black Sea bread basket region.

Russia, the world's No. 3 wheat producer in 2009/10, said last week it would halt grain exports until the end of 2010 as the country's worst heatwave on record destroyed vast tracts of wheat and barley crops.

But Prime Minister Vladimir Putin said on Monday the export ban may be extended into 2011, warning the fall in this year's crop could be worse than expected.

If someone is waiting for December 31, he is waiting in vain, Putin told a government meeting. A decision may be taken only after the harvesting campaign results are clear.

Firefighters are still battling wildfires covering 1,740 square km (672 sq miles) in what the state weather forecaster said was Russia's worst heat wave for a millennium.

The drought and the wildfires have sent wheat prices soaring, and the grain export ban is likely to squeeze supplies and lead to a scramble for grains from other producers like Australia.

Wheat prices fell on Monday before retracing to remain within striking distance of last week's two-year highs.

Analysts SovEcon estimated on Monday that Russia's wheat crop could fall by nearly a third to 43.5 million tons. This is well below the consensus in a Reuters snap poll on August 5 of 46.5 million tons and is likely to take a big chunk out of the global wheat crop in the new 2010/11 season.

Wheat exports in 2010/11 may be around 3 million tons, SovEcon forecast, plunging from the 18 million tons the International Grains Council estimate were shipped in 2009/10.

In neighboring Ukraine, the world's sixth-largest wheat exporter in the 2009/10 season, bad weather has also forced analysts and officials to cut crop and export forecasts.

A senior Ukrainian Farm Ministry official said this year's wheat harvest could fall to about 17 million tons, below the consensus in a Reuters poll last week of 18.1 million and down from 20.9 million in 2009.

Grain exports from Ukraine are also facing delays after the introduction of a new system of customs controls last week.

CONTRACTS CANCELED

The ban in Russia has already forced some exporters to cancel major contracts of Black Sea wheat to Bangladesh.

We see more deals being canceled as nothing can be done about it, said one Singapore-based trading manager. People have no choice but to go for Australian wheat as the U.S. is still more expensive due to higher freight costs.

The drought could also force Russia to cut beet sugar output to 3.2-3.5 million tons from an earlier expected record 4 million, Andrei Bodin, chairman of lobby group the Russian Sugar Producers' Union, told Reuters Insider in an interview.

Russia is a net importer of sugar, although it has bought less in recent years, as increased domestic production and variable import tariffs pushed it down to the world's number three sugar buyer from the top spot.

(Writing by Nigel Hunt; editing by Sue Thomas)

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