WHEAT production is forecast to be about 24 per cent lower this year, with the industry facing mixed prospects.
The Australian Bureau of Agricultural and Resource Economics and Science expects wheat production will be 22.5 million tonnes this 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 lower than last's year record, but still 17 per cent higher than the five-year average to 2010-11.
The downgraded forecast was widely expected, but lower production in the world's second-biggest wheat exporter could provide further support to global prices that have surged almost 40 per cent since early June as the worst drought in half a century gripped the US farm belt.
ABARES executive director Paul Morris said the lower production forecasts reflected relatively dry seasonal conditions in Western Australia and some parts of south-eastern Australia.
"In contrast, conditions have been more positive in northern New South Wales 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 the significantly higher production of the past two seasons.
Wheat stocks held by bulk handlers last month were about 11.5 million tonnes, double the level at the same time in 2009.
Chicago Board of Trade wheat prices fell this week, snapping three straight sessions of gains, buoyed by expectation of lower yields in Australia and worries that Russia would limit exports.
ABARES is also forecasting barley production this financial year to fall by 19 per cent to about 7 million tonnes, while canola production is expected to decline 2 per cent to about 2.8 million tonnes.
Total summer crop production is forecast to rise by 5 per cent to about 5.7 million tonnes.