Australia wheat downgrades may worsen as rains spread

Australia's wheat harvest faces further quality downgrades with torrential rains forecast to hit southern wheat crops, threatening to worsen a global shortage of premium-grade grain.

So far, downgrades have been concentrated in Australia's northeastern grain belts, which have taken the brunt of persistent downpours, but now analysts are worried that southern crops may also be damaged by the wettest summer for decades.

"Whatever is out there will end up as feed grade," Malcolm Bartholomaeus, market analyst for Callum Downs Commodity News, said on Tuesday.

But he added that a reasonable amount of milling-grade wheat had already been reaped in the south before the rains struck.

More heavy rain is forecast later in the week for parts of South Australia, Victoria and New South Wales states which so far have escaped the brunt of the storms that have destroyed crops in Queensland state and northern New South Wales.

"There's definitely going to be an exportable surplus of feed wheat...," said Bartholomaeus.

Most of the southern crop has already been harvested but the forecast rains could delay completion until February .

Australian Crop Forecasters (ACF) director Ron Storey said much of the unharvested wheat might just end up a seed for next season.

A Reuters poll of analysts last week showed that almost 10 million tonnes, or around 40 per cent, of the national crop could be unfit for millers in Australia's quality-conscious markets.

Storey said about 60 percent of the crop in Victoria state's Wimmera region had been harvested while in the western districts of Victoria only 30 to 40 per cent had been reaped.

Wimmera and the western districts are expected to harvest a total of 1.5 million tonnes, Storey said.

The big Victorian Mallee wheat region was nearly complete and was also likely to produce 1.5 million tonnes, he added.

Of the southern grain belts, only South Australia state is likely to suffer light downgrades.

"South Australia has had a better run of harvest states," said Storey who estimated the state would reap a record 5.2 million tonnes. "Certainly around 80 per cent will be milling wheat," he said.