Australia is on track for another year of bumper grains and oilseed harvests with ideal growing condition forecast to boost production this year, which could add pressure on global prices.     

Even though Australian farmers will reduce wheat plantings in 2012/13 in response to lower global prices, the world's fourth-largest exporter is expected to produce an above average crop after two straight years of record output, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).     

'It is already clear at the outset that seasonal conditions so far in 2012 should help set our agriculture sector on track for another strong year,' Australian Agriculture minister Joe Ludwig said on Tuesday.     

'For the first time in more than 30 years the survey data shows both strong average farm business profits and positive rates of return for broadacre farms in all states and all broadacre industries.'    

Australia's wheat output is expected to drop 13 per cent in 2012/13 from all-time high production of 29.5 million tonnes, while canola output during the year is expected to rise 5 per cent to 2.9 million tonnes and cotton harvest to a near record of around 1.1 million tonnes.     

Planting conditions in Australia, typically the world's third largest sugar exporter and number four cotton supplier, are favourable ahead of sowing, thanks to widespread late summer rains, Paul Morris, executive director of ABARES said in an interview.     

The benchmark US wheat futures are little changed so far in March, after finishing lower last month due to plentiful supplies. Last year prices fell 21.7 per cent.     

US live cattle futures kicked off the month by posting an all-time high last week on fund buying that was prompted in part by hopes for stronger cash cattle prices due to drought-reduced supplies.     

The lead April Chicago Mercantile Exchange live cattle contract posted a record of 131.200 cents per lb, topping the previous high of 129.775 cents set on February 22.        

'We are seeing areas likely to come down simply for the relative returns for canola and barley compared to wheat,' said Morrison on the sidelines of an ABARES conference. 'We are also seeing some movement back into sheep as well.'       

'World prices are pretty high at the moment and so are meat prices, so that is a bit of incentive to move back into livestock as well.'        

According to a Reuters survey of 10 analysts, Australia's wheat output is likely to slide more than 15 per cent in 2012/13 from a bumper crop this year as lower global prices may prompt farmers to shift to other crops such as canola and barley.

Wheat output is expected to fall to 25 million tonnes in the year to June 2013, down from an all-time high of 29.5 million tonnes, which is estimated to have been produced this year.       

Morris said the planted area for wheat in 2012/14 is likely to fall to 13.7 million hectares compared with 14 million last year.           

'While we are forecasting a bit of reduction from 14 million-odd hectares for this year from historical terms we are still expecting a pretty big wheat area going in.'       

World wheat stocks at the end of the 2011/12 season look set to eclipse the previous record set more than a decade ago, according to the International Grains Council (IGC), raising its forecast for production to an all-time high.       

The IGC, in a monthly update, increased its forecast for world wheat production by five million tonnes to a record 695 million tonnes, partly reflecting higher estimates for Kazakhstan, India and Australia.      

Global crop prices will retreat sharply this year as farmers around the world expand production to bring stability back to commodity markets and ease fears of food inflation, the US government has forecast.      

After two years of razor thin stocks, world crop supplies, led by wheat, are recovering.           

Morris said cotton prices were likely to be under pressure despite India banning exports.     

'There is still quite strong production coming for many countries,' he said.      

Even sugar prices are likely to face increasing pressure on high global supplies.       

'There is strong production response to high prices, so we are starting to see that impact in the market,' Morris said. 'We think the stocks situation and high production overseas are going to keep downward pressure on prices.'     

Sugar futures rallied to a 30-year peak of around 36 cents in February 2011 after a cyclone hit Australia, but have since fallen back.     

'The relatively high commodity prices internationally even though they have come off a bit are providing a buffering effect for Australian farmers against the high Australian dollar.

That's fine in a short term, but if commodity prices soften significantly and at the same time the dollar was to stay high that it a risk for farmers.'  

The Australian dollar hit a seven-month high of $1.0857 against the US currency this week. – Reuters