Australia cuts wheat harvest forecast to 10-yr low on drought

* Australia sees wheat production at less than 17 mln tonnes

* Drought across east coast crimps crop

* New South Wales wheat production to be lowest since 1995

SYDNEY, Dec 4 (Reuters) - Australia on Tuesday lowered its wheat production forecast by 11 percent to the smallest in a decade amid a crippling drought across the country’s east coast that may cut exports from the world’s fourth biggest supplier.

Wheat production during the 2018/19 season will total 16.95 million tonnes, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). That was below ABARES’ September estimate of 19.1 million tonnes, which was on course to be the lowest since 2008 when output hit just 13.6 million tonnes.

Lower wheat production will reduce Australia’s wheat export capacity, supporting global benchmark prices that rose to their highest in more than two months on Monday.

Australia typically exports two-thirds of its wheat but, with dry weather hampering local production, demand from domestic millers will supplant major customers such as Indonesia.

The outlook also casts a shadow over Australia’s economy and its largest listed bulk grain handler, GrainCorp Ltd, which earns most of its revenues from trading wheat.

GrainCorp on Monday said it received an unsolicited A$2.38 billion ($1.75 billion) takeover approach from a little-known asset manager.

Analysts say the timing of the offer was opportunistic as the unfavourable weather limits the bulk grain handler’s ability to earn revenue.

Production in Australia’s east coast has been particularly hampered with the entire state of New South Wales, the second largest producing region, hit by drought earlier this year.

ABARES said production from New Wales will reach 1.98 million tonnes, the lowest since 1995.

“I’ve just finished harvesting a bit of seed but that is about it, certainly no wheat this year,” said Dan Cooper, a farmer in Caragabal, New South Wales, located 400 km (250 miles) west of Sydney.

While the dry weather is unlikely to wilt Australia’s wheat crop any further just weeks before harvest begins, the country’s weather bureau said the drought is expected to continue until early next year.

Australia’s Bureau of Meteorology sees an 80 percent chance of warmer-than-average temperatures between Dec. 1 and Feb. 28.

$1 = 1.3581 Australian dollars Reporting by Colin Packham Editing by Manolo Serapio Jr.