UPDATE 3-Australia sees record wheat harvest, pressures prices

Tue Feb 14, 2012 3:28am EST

* Australia set for record winter wheat crop

* Forecaster ABARES sees wheat crop at 29.5 mln/t

* To pressure prices in amply supplied market

* Most growers complete harvest before rains (Recasts with quotes, details)

By James Regan

SYDNEY, Feb 14 (Reuters) - Australia forecast a record-high wheat output on Tuesday, boosting competition in an amply supplied world market which analysts said is likely to add more pressure on benchmark U.S. prices, down almost 5 percent this month.

Australia lifted its estimate for wheat production this year by 4.2 percent to a record 29.5 million tonnes, saying key growing regions completed harvesting before the onset of heavy rains.

Chicago Board of Trade wheat slid nearly 1 percent on Tueday, falling for a fifth time in six sessions, as forecasts of crop-friendly weather in the U.S. Plains and Australia's estimate of a record large harvest weighed on the market.

"Australia will be competing in the world market through the end of the year even when the other origins come in," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne, referring to Australia's wheat production forecast.

"It is going to stretch Australian export infrastructure, prices are already reacting to high global prices."

Australia's higher output forecast follows a U.S. Department of Agriculture (USDA) estimate of a rise in global supplies.

A USDA report last week showed the world ending stocks at 213.10 million tonnes in the 2011/12 crop year, up from the January outlook of 210.02 million tonnes and above analysts' expectations for 208.963 million tonnes.

Exports of wheat from Australia, the world's fourth largest supplier, were also revised up by 3.2 percent to 22.3 million tonnes from the previous forecast, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said in its latest crop report.

"Harvesting of this season's winter crop is now virtually complete with only a small number of southern areas still to complete harvest," ABARES said. The winter-planted crops are normally harvested early in the new calendar year.

Some downgrading of cereal crops occurred in Queensland, New South Wales and Western Australia states because of wet conditions during the harvest.

In New South Wales, the second-largest wheat-growing state, winter crop production is estimated to have fallen by 26 percent versus the previous harvest to just over 7.9 million tonnes.

Rainfall in November and early December delayed the harvest and resulted in some crop losses due to flooding in the north, according to ABARES.

In Western Australia state, wheat production exceeded early expectations and is estimated by ABARES to be up by 135 percent in 2011-12 to a record of around 11.7 million tonnes.

"Yields were assisted by above average rainfall in October and are estimated to be around 2.3 tonnes a hectare, the highest average wheat yield on record for Western Australia," ABARES said.

However, the winter crop harvest in southern Queensland and northern New South Wales was completed before recent flooding, ABARES said.

It estimates 75 percent of the wheat crop is milling grade.

Still, some analysts doubted ABARES's estimates.

"The (Australian) report today is perhaps a little higher than expectations," Jonathan Barratt, an independent agricultural analyst in Sydney, said.

"On the eastern seaboard, we had major concerns on the yield and the quality of the wheat," Barratt said.

SUMMER CROPS

Turning to summer crops, ABARES said generally favourable growing conditions are forecast to drive higher yields and production.

The upbeat forecasts come despite some eastern Australian agricultural belts being inundated with flood rains for a second year running, with at least two more months of the summer wet season to go.

The Bureau of Meteorology's seasonal rainfall outlook for February to April 2012 favours wetter-than-average conditions across western Australia and generally average conditions for much of southern and eastern Australia.

But La Nina, a weather phenomenon usually linked to heavy rains and flooding, in Australia showed further signs of weakening over the past two weeks as the tropical Pacific Ocean warmed, according to the bureau.

The total summer crop area is estimated to be largely unchanged in 2011-12 at 1.6 million hectares versus the previous year.

Cotton and grain sorghum production is forecast to increase by 20 percent and 13 percent to around 1.1 million tonnes and 2.3 million tonnes, respectively versus last year's yields. Rice production is forecast to increase by 27 percent to 923,000 tonnes, ABARES figures showed.

ABARES said some producers of summer crops in southern Queensland and northern New South Wales had faced untimely heavy rainfall and flooding.

"There is likely to be downgrading in crop quality and crop losses for these producers, however until the flood water recedes, the full extent of crop damage will be unclear," it said.

(Additional reporting by Pauline Askin, writing by Naveen Thukral; Editing by Sugita Katyal)