The revival of sheep farming, weak grain prices and a stronger currency will drive Australian plantings lower – but not by enough to depress production far and avoid a huge jump in stocks, US Department of Agriculture officials have said.

The USDA's Canberra staff estimated that plantings for the 2010-11 crop, due to start next month, would slide by 800,000 hectares to 13.0m hectares.

"A turnaround in the decline of sheep numbers, low wheat price and a need for growers to rotate land... into break crops, following successive years of high plantings, will place significant downward pressure on the area planted to wheat," a report from the bureau said.

However, the briefing assumed further improvement in yields, which have been improving in particular in crops sown on poorer land. Last year's crop was also hurt by late frosts, then hot weather.

The higher productivity would limit the fall in the harvest to 500,000 tonnes from 2009-10, leaving it at 22.0m tonnes.

"If achieved, this would represent the eighth largest crop on record, and above the 10-year average," the report said.

Two views

The estimate leaves the bureau among the more optimistic of the two camps which have emerged over Australian wheat forecasts.

However, both Commonwealth Bank of Australia and Rabobank have pegged Australia's wheat production falling to about 20m tonnes, citing the attraction of other crops.

"A lack of clear price direction, higher carry‐over stock levels and improved pricing for alternate crops such as cotton and pulses will weigh on wheat plantings for this year," Rabobank said in a report earlier this month.

Soaring stocks

Australia's wheat inventories are poised to jump a further 23% to 4.5m tonnes over 2010-11 as the stronger Australian dollar takes its toll, the USDA attache report said.

"Furthermore, returns for intensive livestock have also fallen, and this has placed downwards pressure on the price for domestically traded feed grain," the briefing added.

Barley production will fall by 8.4% to 7.6m tonnes, in 2010-11, as low prices deter farmers from plantings.