El Nino unlikely to hurt wheat prices - Rabobank

SYDNEY, July 6 (Reuters) - A developing El Nino weather pattern is a major risk to wheat production in Australia, a private bank report said on Monday, but is unlikely to have a material impact on global wheat prices.

Rabobank, a specialist in agribusiness, said strong northern hemisphere production would help to make up for any shortfall from Australia in the event of El Nino reducing the harvest in the world's fourth-largest exporter.

"In 2009/10 world wheat stocks are more than likely going to increase for the second successive season, limiting the potential impact of an El Nino development this season," the bank said.

An El Nino event, which is caused by an abnormal warming of sea temperatures in the eastern Pacific, is associated with below -normal rainfall across southern Australia, including some of the country's key grain-growing regions.

Rabobank is currently forecasting Australian wheat production at 22.8 million tonnes for 2009/10, up from 21.4 million tonnes harvested in 2008/09, thanks to widespread rain at planting time.

Prior to that, Australia's wheat farmers had suffered in the worst drought in more than 100 years, with the annual harvest just 10.6 million tonnes in 2006/07.

Rabobank's warning comes two days ahead of an Australian Bureau of Meteorology update on the likelihood of an El Nino forming.

Last week the bureau said such a weather pattern appeared almost certain, raising the risk of drought in Australia.

Still, Rabobank said wheat demand was softening as crop production prospects had improved in a number of importing regions such as North Africa and the Middle East.