Cargill raised its forecast for Australian wheat prices amid reviving concerns over the impact of poor weather, with Rabobank warning that officials have overestimated the crop by 2.5m tonnes.
Cargill's Australian grain handler, AWB, lifted by up to Aus$20 a tonne its forecast for returns to farmers from its wheat pools in 2013-14, taking the estimate for benchmark top-grade Australian premium white wheat (APW1) to Aus$325 a tonne in the east of the country.
The upgrade - to only Aus$8 a tonne short of that achieved in 2012-13, when prices were buoyed by the poor US corn harvest – reflected "isolated dry conditions in parts of New South Wales and Western Australia", Australia's top two grain producing states.
AWB also highlighted firmer Chicago prices and a weaker Australian dollar as spurring its upgrade.
'Large downgrade ahead'
Separately, Luke Mathews at Commonwealth Bank of Australia highlighted "mounting crop concerns across northern New South Wales and Queensland" for lifting wheat prices, which on Sydney's futures market on Thursday hit Aus$290.00 a tonne for January delivery, an eight-month high.
"Prices are up Aus$22 a tonne in the past three weeks," Mr Mathews noted, adding that "the eight-day forecast offers no relief for dryness in New South Wales and Queensland".
And Rabobank forecast that Abares, the official Australian commodities bureau, would "likely" cut by "up to 2.5m tonnes" its forecast for the domestic wheat harvest, currently pegged at 25.4m tonnes.
"Dry conditions continue in the northern and eastern cropping belts of Western Australia," while New South Wales prospects have been hurt by frost, Rabobank said, lifting its forecasts for Chicago wheat futures prices.
"The spring finish will be critical to the final volume and quality profile of the crop."
The comments come amid ideas of a strong global wheat harvest this year, with SovEcon on Thursday lifting by 1.3m tonnes to 51.7m tonnes its forecast for Russian production, while Canada's crop has been pegged by officials at a 22-year high of 30.5m tonnes.
However, demand ideas have improved too, with China's import needs supported by damage from late rains to its crop, and Egypt's by the run-down of inventories in 2012-13.
"Egypt claims to have wheat coverage until mid-Jan, which isn't likely," Brian Henry at Benson Quinn Commodities said.
Doubts have been raised over quality too, in comments from farm operators such as Agrokultura and Black Earth Farming, and in North America, where soft red winter wheat has been shown to have reduced specifications, and protein in spring wheat is proving relatively low too.
"There is talk that Canadian producers are finding some pockets of better protein as the harvest expands, but it's likely too early to tell," Mr Henry said.
"Given generally favourable growing conditions for the North American spring wheat crop, the general feeling is protein levels will stay below average for most areas."
* More on world wheat will be known later, with the International Grains Council's release of monthly grain supply and demand forecasts at 1500 UK time.