The devastating flooding suffered by the Australian states of Victoria, Queensland and New South Wales in recent weeks constituted, in economic terms, the country’s worst ever natural disaster with rebuilding expected to cost over A$20 billion, or the equivalent of 1.5% of gross domestic product, according to government ministers.

Many farms and mills and supporting road and rail networks suffered damage from rain and floodwater, and large swathes of Brisbane, Australia’s third largest city, were swamped. With floodwaters still a localized threat, the death toll from the flooding has grown to more than 30, with many more still missing.

The crisis was prompted by a prolonged period of heavy rains on the eastern seaboard which analysts attributed to a low pressure La Nina event in the Pacific Ocean. Australia suffered its wettest July-December on record, despite the persistence of drought in parts of Western Australia.

The implications for the grain and milling industries are likely to be two-fold. First, in the short term, there is transport chaos and diminished returns from eastern Australia. Secondly, there is the potential in the next planting season — barring any further “100-year” weather events — for record production of grains fueled by high soil moisture levels and well stocked dams.

In January, the Australian Bureau of Agricultural and Resource Economics (ABARE) reduced its estimate for the country’s 2010-11 wheat harvest by nearly 7% to 25.1 million tonnes, down from its estimate of 26.8 million tonnes made in early December.

The next estimate is due Feb. 15, and ABARE will make its 2011-12 forecast on March 1. Much will depend on rain patterns in the meantime. While Western Australia’s farmers are hoping that forecast heavy rains through April materialize, eastern grain producers would welcome a drier period to allow damaged infrastructure to be repaired.

In late January, the short-term picture was changing rapidly with local circumstances highly variable. In Queensland, numerous roads remained closed or were subject to poor conditions and/or weight restrictions, but conditions were improving. Rail systems were starting to recommence operations but mostly at reduced speeds, while the freight line serving the grain elevator at Fisherman Island at the Port of Brisbane from grain-producing areas westward was expected to be closed for up to three months.

According to ABARE, road and rail systems were also affected in northern and western Victoria in late January, but it was unclear how long it would take for repairs to be completed once flood waters had receded.

A spokesman for bulk logistics giant GrainCorp, which has a strong presence on the eastern seaboard, said rail operations into the Port of Gladstone were due to recommence in the final week of January. In Victoria, broad gauge rail operations into the Port of Geelong were disrupted, and the impact of flooding on grain storage was being examined but was not expected to be major. Growers were encouraged to have samples of grain assessed before delivery into the storage network.

The spokesman also reported that the overall impact of the downpours had not been as destructive to operations as might have been expected given the scale of flooding in GrainCorp’s areas of operations.

“Site access has been disrupted, but grain is getting to the domestic market and the export schedule is progressing without major delays and cancellations,” he said. “If you look at our shipping stem, this is only affecting small tonnages. The time taken to repair rail infrastructure will vary from a week to four months.”

In terms of grain quality, most of the rain damage was done before Christmas in terms of downgrading from milling to non-milling grades. “Recent rain will further downgrade some grain, but if test weight was OK prior to the rain, not a lot of weight will be lost,” he added. “It’s the amount of sprouting that is important.”

A spokesman for AWB, now part of Agrium, agreed that most of the wheat in Queensland that had not been harvested before the floods had already been downgraded by rains in November and December, so flooding had had no further effect on milling supply.

“In Victoria, the picture is less clear,” he explained. “Plenty of grain had already been downgraded from the rains in November-December, but harvest had been at full speed for three weeks in the better quality milling wheat areas, and most of the good quality crop was probably in.

“There will still be some loss in the later districts, but until harvest is done, there won’t be good estimates on tonnage. All our sites are well situated and have not suffered damage to stored grain, although clearly there will be some transport challenges.”

However, Chris Kochanski, general manager, trading, at Emerald Group, a leading grain marketing company, said that grain supplies had been disrupted across the eastern seaboard and damage to rail infrastructure had forced most of the company’s transport needs to be shifted on to road.

“It has been suggested it could take weeks before transport systems are back in a condition to be able to deliver grain in some areas,” he said. “Having said that, work is under way to ensure these issues are rectified as soon as possible. Roads will be fixed to a usable condition more easily in the short term, with the rail infrastructure damage to take a significantly longer period to resolve.”

Kochanski said that while most of the harvest was now complete, sizeable areas of crops were still to be stripped.

“The areas where harvesting remained to be completed include South Australia, southern New South Wales and Victoria, with remaining summer crops in Queensland now being abandoned,” he said.

“The remaining crops that have received further rain and are yet to be harvested will now most certainly be downgraded from milling to feed quality, with even the feed quality having issues in some instances.”

Rosemary Richards, executive officer of the Australian Grain Exporters Association (AGEA), said the full extent of the impact on grain quality due to flooding and heavy rain had not been fully determined but supplies of milling wheat would be limited, although the situation was not as bad as initially forecast.

“While harvest was delayed and interrupted by rain events, causing farmers’ frustration, the bulk of the northern crop was off prior to the floods in Queensland,” she added. “While there were still some areas of crop unstripped in Victoria, the harvest was well under way before the recent inundation of rain.

“However, any grain harvested from herein is likely to be downgraded to feed. The area of crop abandoned is unclear but may not be quite as much as first expected and has been offset by the average to better-than-average yields.”

Away from regions most impacted by extended downpours, the outlook is bright for grain producers, as are forecasts for next season’s harvest. A spokesperson for Viterra said the company was currently in the process of harvesting a potential record crop in South Australia.

“The harvest is now approximately 80 percent complete,” she said. “Our main market region is in South Australia, and the State has not been impacted by flooding. We have had rains in some areas and some quality has been affected. It is too early to be more specific.”

Most of those contacted said the soil profiles and healthy dam levels across eastern states boded well for crop production in the next season, with planting due to start around April. Certainly, the Murray-Darling Basin had its wettest 12 months in 2010, boosting water stores from 26% at the end of 2009 to more than 80% by Jan. 31, 2010. As one farmer said, “One person’s flood is another person’s full-moisture profile.”

Richards predicted the benefits of heavy rain for next season’s crop would be significant. “Virtually all regions on the east coast have full water profiles which will enable growers to plant at the optimum time and reduce dependence on in-crop rainfall.

“Similarly, most river systems are at full capacity, and this should see water allocations for irrigation restored. Early expectations for the 2011-12 winter crop would be for an average to above average crop.”

The AWB spokesman said that to start a winter cropping season with so much moisture in the soil was very rare and should help crop sowing to occur at ideal times in much of eastern Australia.

“After that we shall see what the rest of the season brings,” the spokesman said.

Emerald said the rain that damaged crops this season would also provide moisture for the next wheat-growing season and raise dam levels for irrigation.

“The good subsoil moisture and increased allocations bode well for next season, especially when considering that storage levels for many dams stood at around 20 percent this time last year,” said Kochanski. “The current high-priced environment together with the moisture profile should increase plantings, this then flowing on to increased exports for next season.”

However, the GrainCorp spokesman warned that while the rain received would be beneficial to crop establishment, it was too early for accurate forecasts. “It’s nonsense to be talking about a bumper year for the harvest at the end of 2011,” he said. “We are three to five months from planting, so it is way too early to speculate.”