One of the world's biggest grain sellers warned over prices, saying that lower-grade wheat values faced "intense pressure" thanks to rain damage to Australia's harvest, and of ominous signs for the corn market too.

The Canadian Wheat Board said that the impact of a record world wheat harvest in 2011-12, leaving stocks set to end the season at a comfortable 30.6% of use, would be felt especially on prices of mid and lower-grade grain, thanks to the compromised quality of the Australian harvest.

With "a proportion" of the Australian crop downgraded from the higher milling specifications, the country "will have a limited export program for higher-quality and higher-protein wheat", the board said.

"This provides some support to quality and protein spreads, but puts intense pressure on the mid- and lower-grade wheat markets going forward."

'Unwelcome rain'

The comments came as Australian farmers braced for more moisture which, on ripe wheat, promotes sprouting, which uses up starch and moisture reserves and lowers grain quality.

"Rain forecasts over the next eight days are for the Australian eastern and South Australia wheat belts to receive 15mm-25mm of rain," Australia & New Zealand Bank analyst Paul Deane said.

"This is unwelcome considering the amount of grain still to be harvested," with farmers in parts of New South Wales and Victoria states still to reap half their crop, as of early this week, if with others nearing completion.

At Commonwealth Bank of Australia, Luke Mathews also highlighted "harvest delays" in Western Australia, the top grain-growing state.

Official data on Wednesday confirmed that nearly half of Australia's wheat stocks as of the end of October, before the current harvest had begun in earnest, were of feed grade, a reflection of the rain damage to the 2010 crop too.

'Negative implications'

The CWB also warned on corn values, flagging "definite signs that corn prices could face additional pressure as the world moves towards the 2012-13 marketing year".

The imminent South American harvests will bring extra corn supplies onto export markets, curbing  hopes for any uptick in US trade prospects.

Furthermore, historically high prices look set to encourage corn sowing in the US, the top producer, next year, with some observers forecasting sowings at around their highest levels since World War II.

"The US is forecast to produce approximately 13.8bn bushels in 2012-13 and, as a result, faces the prospect of almost doubling ending stocks with all the negative implications to the price structure that infers."

Malting barley question

The outlook for barley values is also gloomy, with prices to "remain under pressure as Australia and Argentina ramp up their export programmes and the world moves towards a larger barley crop in 2012-13", the CWB said.

One hope for malting barley growers was some specification setbacks in Australian supplies.

"With only 25% of the crop remaining at risk, the overall quality breakdown of the 2011 Australian barley crop will be decent, but higher yields have resulted in very low protein levels across the country, which can be a detriment in some markets."

The comments come as the farmer-controlled CWB is battling laws to strip it of its monopoly over marketing barley and wheat from western Canada, which is responsible for the great bulk of the country's harvest.

The board is taking to court legislation passed by Canada's parliament on Thursday to take the board under government control.