By Clancy Yeates
TORRENTIAL rain has prompted the government's chief forecaster to slash its predictions for wheat exports and warn that farmers' remaining crops will be damaged significantly by the extreme weather.
As commodity markets fretted over a global wheat shortage, the Australian Bureau of Agricultural and Resource Economics downgraded its forecast for 2010-11 wheat exports to 16 million tonnes. This is 2.4 million tonnes fewer than it forecast in September.
Although the bureau remained upbeat on total production, it said crop quality had been ''significantly lowered'' in key rural regions of New South Wales and Queensland.
The damage caused by the floods comes as a big blow to the $3.7 billion export wheat industry.
Because of the extreme weather, some crops will be destroyed and more farmers will be forced to sell their damaged product as feed for livestock rather than in the lucrative
export trade. This has dashed hopes of cashing in on windfall prices on global markets - fears of a shortage have pushed the wheat price above $US8 a bushel, its highest in more than two years.
"Up until recently, many cropping regions in eastern Australia have had near-ideal growing conditions and this has boosted crop yields to record levels," ABARE's acting executive director, Paul Morris, said. "However, untimely heavy rainfall around harvest time has significantly lowered crop quality in Queensland and many parts of NSW.''
The forecast came as the Australian Agricultural Company said a small number of its properties had suffered from flooding, though the impact would not be great. Its shares fell 3 per cent to $1.46.
GrainCorp has also been downgraded by analysts, who say its harvest will suffer, though its shares yesterday rallied by 3.5 per cent to $6.45.
Despite the setback, ABARE said that total winter crop production would hit a record 43.2 million tonnes, a 22 per cent increase on last year.
The forecast - which assumed rain would ease and allow crops to be harvested - was driven by a surge in NSW grain production to 17.1 million tonnes. An analyst at Commonwealth Bank, Luke Mathews, said this was too optimistic, amid farmers' concerns that cuts to production were the worst in a lifetime.
''ABARE, from a production point of view, are extremely bullish. To me, the numbers seem a little high on the east coast,'' Mr Mathews said.
He estimated that at least 6 million tonnes of wheat would be downgraded in quality, and said the harvest was already a month behind schedule.
But the Australian Wheat Board said there was still ''significant interest'' in feedstock from buyers in Asia and the Pacific.
The high rainfall could also lay the foundation for a productive summer crop, with soil moisture improving and high water storage levels.