Eastern Australia, rather than the west, may end up being the centre of concern over Australian wheat prospects, after official meteorologists raised chances of dry weather in states such as New South Wales.

Western Australia, Australia's top grain-growing state, has been the focus of crop fears so far, after the driest July on record, which prompted a caution from Australia & New Zealand Bank that wheat production may near-halve this year from last season's bumper levels.

However, weather forecasts from the Bureau of Meteorology on Wednesday "suggest cop conditions in three months could be quite different to those observed today", Commonwealth Bank of Australia analyst Luke Mathews said.

While the bank cut by 1m tonnes, to 24m tonnes, its forecast for the Australian 2011-12 wheat harvest, putting a 19% decline from last season on the cards, the downgrade was spread between east coast states and Western Australia.

 Rain outlook

The bureau forecast a 60-75% chance of below-normal rainfall over most of southern South Australia, southern New South Wales and Victoria over the next three months, besides in parts of Queensland, where dryness will be welcomed as a help for the sugar cane harvest.

However, for Western Australia, where El Nino correlations are looser, the bureau forecast a 70% chance of above-normal rains.

"The outlook implies yield prospects in Western Australia may improve, while east coast and South Australia crops may deteriorate," Mr Mathews said.

Western Australia wheat crops "still have the potential to achieve average-to-above average yields. However, perfect seasonal conditions are required for the remainder of the season."

'Wheat stocks will decline'

The cut to hopes for Australia's harvest – which the US Department of Agriculture pegs at 26.0m tonnes – will further speed Australia's erosion wheat stocks which, thanks to rapid exports, now look set to fall over 2011-12 from record levels.

"The rapid disposal of wheat suggests local wheat stocks will decline this season," Mr Mathews said, forecasting a drop of 1.6m tonnes to 6.7m tonnes in carryout stocks for the current season, which ends next month.

Coupled with a weaker harvest, that suggests total Australian supplies in 2012-13 of 30.7m tonnes, down 7.1m tonnes from last season's record, and below levels the season before too.