Western Australia, the country's biggest wheat exporting state, is poised for near-record harvests of the crop after August rains in the region, even as the eastern grain belt grapples with its second year of punishing drought.
Wheat yields in the state, a key supplier to world No.1 importer Indonesia, are expected to be better than average in most areas, analysts and traders said.
"Western Australia had very good rains in August and even if it does not rain much in September, the crop is pretty much made," said Phin Ziebell, an agribusiness economist with National Australia Bank.
"We are looking at above-average yields and half of Australia's production or more will come from Western Australia this year."
Higher output in the state could help temper worries about overall supply from Australia, historically the world's fourth largest exporting nation, where fields in the east have been hit hard by another year of scorching conditions.
Australia's latest dry spell overlapped with a lack of rains in other key exporting countries in the northern hemisphere, including the world's biggest exporter Russia, stoking global supply concerns.
Benchmark Chicago Board of Trade wheat futures have gained more than a fifth this year in the face of tighter supply, after enjoying five consecutive years of record production and lower prices.
Wheat output in Western Australia, which has a short voyage of five-to-seven days to Indonesia, is expected to reach close to an all-time high of 11 million tonnes compared with an average of 8.4 million tonnes in the last decade, according to the analysts and traders.
They said that overall Australian production would come in at around 20 million tonnes this year, down from last year's 21.2 million tonnes and well below a record 31.8 million tonnes in 2016/17.
The country exported 15.99 million tonnes last year.
However, despite the larger overall crop size in Western Australia, grain quality is expected to be below average.
"For higher quality wheat, buyers will have to look at Canadian or US spring wheat," said a Singapore-based trader at an international trading company, declining to be identified as he was not authorised to speak with media.
In Victoria and South Australia, wheat production is expected to be average or below average.
The drought across Australia's east coast has recently intensified.
Final exports will depend on how much wheat eastern states ship in from Western Australian to meet local demand.
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