Dry weather eats into wheat harvest

The Australian Bureau of Agricultural and Resource Economics and Science expects wheat production of 22.5 million tonnes in the 2012-13 financial year, down from the previous year's record output.

The overall winter crop production is projected at 36.2 million tonnes, which would be about 20 per cent below last year's record but still 17 per cent higher than the five-year average to financial 2010-11.

The downgraded forecast was widely expected. But the lower production could provide further support to global wheat prices, which have surged almost 40 per cent since June as the US farmbelt was hit by drought.

The ABARES executive director, Paul Morris, said the lower production forecasts reflected dry conditions in Western Australia and some parts of south-eastern Australia.

"In contrast, conditions have been more positive in northern NSW and Queensland, where crops are forecast to achieve above-average yields," he said.

Mr Morris said while wheat production was forecast to fall this season, wheat available for export would remain high, reflecting higher production of the past two seasons.

Wheat stocks held by bulk handlers at the start of August were about 11.5 million tonnes.

World wheat prices fell this week, snapping three straight sessions of gains, buoyed by expectation of lower yields in Australia and worries in Russia, the world's No. 4 supplier, would cut exports.

ABARES is also forecasting barley production in 2012-13 to fall by 19 per cent to about 7 million tonnes, while canola production is expected to drop 2 per cent to about 2.8 million tonnes.