Australia sees agriculture output boost as El Nino fades

By Colin Packham

By Colin Packham

SYDNEY (Reuters) - Australia's agriculture production is set to rebound as the strongest El Nino in nearly 20 years that wilted crops and triggered bush fires subsides, the country's chief commodity forecaster said on Tuesday.

Production of staples such as wheat, cotton and milk are all set to rise during the 2016/17 season, according to the Australian Bureau of Agriculture, Resource Economics and Rural Sciences (ABARES), although beef output in the world's third-largest exporter is set to fall due to low supplies.

Australian farmers are expected to sow a near record amount of wheat in the next few months, the bureau said, with global production set to remain at high levels despite benchmark prices falling to a more than 5-1/2 year low last week.

Increased plantings and an expected improvement in seasonal conditions are forecast to produce a crop of 24.5 million tonnes, which would be a three-year high. Australia, the world's fourth-largest wheat exporter, produced 24.2 million tonnes in 2015/16.

"Farmers in Australia have been insulated by the fall in [Australian] dollar, while the depreciation of South American currencies will also incentivize farmers to boost production," said Phin Ziebell, agribusiness economist, National Australia Bank.

Elsewhere, Australian canola production is set to rise 11 percent to 3.27 million tonnes in the 2016/17 season, ABARES said.

The increased production will meet firmer European demand, the bureau said, which comes as China pushes for tougher standards on canola imports from Australia that could curb shipments to that country.

Australian cotton production is set to rise 50 percent, it said. Production will hit 816,000 tonnes in 2016/17, up from 546,000 tonnes a year earlier when drought deprived farmers of much needed irrigation.

Sugar production is also set to benefit from the improved weather. ABARES pegged output in the world's third largest raw sugar exporter at 5.08 million tonnes in 2016/17, up 6 percent.

Milk production will rise to 9.82 million litres, ABARES said, up from 9.6 million litres in 2015/16.

However, Australian beef production is set to fall to a three-year low as farmers rebuild their stocks after the size of national herd fell to at least a two-decade low.

Output surged in the last two years as farmers sent stock for slaughter after drought wilted pasture and dried out dams.

ABARES put beef exports at 2.16 million tonnes in 2015/16, down 10 percent from the previous year.

(Reporting by Colin Packham; Editing by Richard Pullin)