(Reuters) — Up to half of Australia’s current wheat harvest could be downgraded to animal feed or low-grade milling grain, raising concerns for a severe global shortage of higher-quality wheat and marring the nation’s biggest crop in eight years.

Crop analysts and farmers told Reuters that up to 50 per cent of the 2010-11 crop would be downgraded to general purpose wheat or various grades of feed wheat.

“I’ve been reasonably lucky, getting around 90 per cent (harvested) in time, but the rest will be rubbish that won’t be worth harvesting,” said Richard Clark, a grain grower in northern New South Wales state, about 50 km south of the flooded state of Queensland.

Clark said most of the grain he had harvested would make good milling quality but he only expected to harvest around 2,000 tonnes out of 4,000 to 5,000 tonnes he had expected at the start of the season.

Australia’s 2010-11 harvest is around 75 per cent complete but is running up to five weeks late because of above-average rain across many eastern wheat-growing regions. The Queensland floods have also disrupted the harvest, though this state only accounts for less than five per cent of national exports.

“There’s going to be a severe shortage of milling wheat around the world because of problems here, dry weather in Argentina and a potential winter wheat kill in the United States,” Clark said.

U.S. high-protein wheat futures in Kansas City and Minneapolis held close to two-year highs on Tuesday as the Queensland floods reinforced concerns of a global shortage of milling wheat.

Wheat for March delivery touched US$8.25 per bushel on Monday, the highest price since drought hit the Black Sea region last year, forcing Russia to ban grain exports. It last traded at $8.02 in Asian trade on Tuesday.

Supply up, demand weak

“Downgrades are commonplace, with large amounts of feed wheat entering the system, bolstering already burgeoning domestic feed-grain supply expectations into a domestically weak demand scenario,” said Wayne Gordon, a grains analyst at Rabobank in Sydney.

Gordon estimates the country is likely to reap 22.6 million tonnes in the current harvest, of which 14.3 million tonnes of various quality will be exported by Sept. 30.

He expects 30 to 40 per cent will be downgraded to below milling wheat compared with five to 10 per cent in a normal season.

Last year, Australia harvested 21.7 million tonnes and exported around 16.9 million tonnes.

The largest grain handler in eastern Australia, GrainCorp, said Tuesday that 10.7 million tonnes of wheat had been received at its east coast terminals to date, including 1.3 million tonnes in Queensland.

But it said flooding had stopped all rail transport of grain to its Queensland export terminals with rail shipments not likely to resume for up to two weeks.

In northern New South Wales, about 95 per cent of the harvest had been completed. Further south, the harvest was about 80 per cent complete.

About 75 percent had been completed in southern New South Wales regions, while in Victoria state, the big grain-producing Malee region had reaped abut 80 per cent of its crop while 50 per cent had been harvested in the Wimmera region.

Southeast Victoria had gathered 50 per cent of its crop while in South Australia, the pace has also picked up.

Western Australia, which suffered from dryness during the growing season, has completed its harvest. About four million tonnes were reaped, less than half the previous season.

— Bruce Hextall reports for Reuters from Sydney, Australia.