Farm officials flagged the extent of the threat to Australia's sorghum crop, which have kept prices unexpectedly high, even as Cargill cautioned that values of the country's wheat may be too high.

Sorghum futures for May closed at Aus$276.00 a tonne in Sydney on Thursday - showing strength beyond that expected by some analysts, in remaining only Aus$12.00 below a December top which represented the highest price since June 2008.

Luke Mathews at Commonwealth Bank of Australia said: "Despite some modest softening, we have been surprised at the relative resilience in sorghum prices given last week's beneficial rainfall," which appeared to have improved prospects for a crop tested by early-season dryness.

However, the extent to which sorghum harvest prospects have already been damaged by highlighted by farm officials in New South Wales, who slashed by 35% to 101,070 hectares their estimate for the state's sowings of the grain, with the planting window now firmly closed.

New South Wales is, with Queensland, one of Australia's two sorghum-growing states.

'Generally patchy'

The downgrades was "due to the very dry conditions and a lack of planting opportunities from October through to early January", the officials said in a report.

And even much of what had been seeded remained in poor condition.

"The unseasonal high temperatures have quickly drained what stored soil moisture reserves growers had, with the bulk of the dryland crop across New South Wales under moisture stress for much of the December and January period."

Sorghum crops were "generally patchy, and yield potential is below average because of the dry summer with high temperatures affecting pollination in many crops".

'Becoming uncompetitive'

The report stopped short of commenting on prospects for the state's important wheat crop, for which soil dryness has provoked some concerns over seedings too, but which remains some three months away from planting.

Indeed, separately AWB, Cargill's Australian grain handling business, cautioned farmers and investors against pushing wheat prices too high for now, when the market was more interested in weather affecting crops in northern hemisphere producers such as Europe, Russia and the US.

"Australian domestic wheat prices are very strong at present, to the point where some international customers are concerned that Australian wheat is becoming uncompetitive on paper," AWB spokesman Richard Williams said.

 "We have witnessed discounting to the export consumers, particularly in Western Australia, to secure sales.

"Our view is that the current high Australian wheat prices, relative to competing origins, are unlikely to be maintained, and we are attempting to take advantage of today's high prices where possible."