* Russia's Grain Union sees grain exports at 4 mln T in July-Aug
* Says Egypt's wheat imports likely to fall to 7-8 mln T
* Russia to boost wheat crop by 42 pct after drought (Adds Russia's wheat price forecast, stocks data)
MOSCOW, July 4 (Reuters) - Russia is likely to increase its exports of wheat to Egypt in the marketing year that started on July 1, despite political upheaval in the world's largest wheat importer that may slash its overall purchases, Russia's Grain Union said on Thursday.
Egypt will swear in an interim leader on Thursday after the army ousted President Mohamed Mursi and crowds celebrated in Cairo and Alexandria, following clashes that killed 14 people.
Bread has been a sensitive issue for Egypt. State grain buyer the General Authority for Supply Commodities (GASC), together with private importers, usually obtains around 10 million tonnes of wheat a year.
"Due to political instability, Egypt is likely to slash imports to between 7 and 8 million tonnes this year," Arkady Zlochevsky, head of the Union, told a briefing in Moscow.
"Russia will account for half of Egypt's imports subject to its (Russia's) falling domestic wheat prices," he added. Russia supplied around 2.7 million tonnes of wheat to Egypt in 2012/13.
WHEAT PRICE FALL TO CONTINUE
Egypt's GASC on Tuesday bought 180,000 tonnes of Romanian and Ukrainian wheat in its first purchase since February, its longest absence from the world market in years.
The price for GASC's deal was between $249.83 and $253.88 per tonne with freight costs in a band of $10.50 and $14.69.
Russian domestic wheat prices are set to fall and become more competitive by the autumn because of the prospect of a good harvest and significant carryover grain stocks, seen at 12 million tonnes as of July 1, according to Zlochevsky.
Russia is expected to boost its wheat harvest this year by 42 percent to 54 million tonnes after last year's drought, according to the latest Reuters poll. It had threshed 7.7 million tonnes of wheat as of July 3.
Russia's domestic prices for third class wheat may decline to 6,000 roubles ($180) per tonne by September, Zlochevsky added. SovEcon agriculture analysts pegged prices for third class wheat in the European part of the country at 7,825 roubles ($240) per tonne last week.
Export prices for wheat supplies with 12.5 percent protein content were down $8 at $256 per tonne in the Black Sea on a free-on-board (FOB) basis and down $3 at $232 per tonne in the Azov Sea last week, according to the Institute for Agricultural Market Studies (IKAR).
Zlochevsky also said he expected all grain exports from Russia to total 2.5 million tonnes in August, up from 1.5 million tonnes in July.
($1 = 33.1725 Russian roubles) (Reporting by Polina Devitt; Editing by Megan Davies and Jeff Coelho)