HOT and dry weather this week prompted Australia's 2008-09 wheat harvest to get underway in central, western and northern parts of New South Wales.

Market Check grain marketing manager Brett Stevenson says the onset of harvest is weighing on futures prices.

"The weather has been very conducive over the past week, and the hot and dry late spring in Southern NSW and Southern Victoria means that this time, the harvest is actually moving south to north, contrary to normal," Mr Stevenson said.

Growers seeking to sell wheat - the first time in an unregulated market that no longer requires growers to sell to the Australian Wheat Board, for export under the single desk scheme - are putting downside pressure on ASX wheat futures, he said.

At 0446 GMT, the most active, ASX January 2009, was down A$3 at A$277 a metric ton, down from a peak of A$283/ton this week, also partly in reaction to a weaker Australian dollar and higher prices in the U.S. wheat futures market.

"As a result of the deregulation of the market, we have a lot of growers wanting to sell their wheat during harvest all at the same time, so the ASX is under pressure," Mr Stevenson said.

Several areas harvesting at the same time also pose some problems of labor and equipment availability, he added.

First reports from Northern NSW pointed to "excellent quality and quantity of wheat and barley."

Still, soil conditions are too wet in Western Australia, the largest wheat producing region in the country, which has started to affect barley quality, said Mark Martin, risk management adviser and director at commodity manager MarketAg.

Hot and dry weather in the southeast grain belt this week prompted Australian Crop Forecaster, or ACP, to trim its wheat harvest expectation by 2.5% to 19.5 million tons, but other market watchers were still confident of a crop totaling around 21 million tons, down from initial expectations of 24-25 million tons.

During last year's drought-affected harvest, Australia, the world's sixth-largest wheat exporter, only produced 13 million tons.

Dow Jones Newswires