CANBERRA, Sept 5 (Reuters) - Australia on Tuesday downgraded its forecast for winter wheat production by 800,000 metric tons to 25.4 million tons as dry weather reduces yields, squeezing global supply at a time when other major producers are also suffering poor harvests.

However, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) in a quarterly crop report also said barley and canola production would be higher than it expected three months ago.

Australia is a major agricultural exporter, supplying grain to importers such as China, Indonesia and Japan.

Plentiful rainfall delivered record harvests in recent years but a strengthening El Nino weather phenomenon means conditions are forecast to remain drier than normal after the warmest winter on record.

Winter wheat production is expected to fall 36% this year to 25.4 million tons, 4% below the 10-year average, ABARES said, having forecast output of 26.2 million tons in June.

Barley production will fall 26% to 10.5 million tons, 6% below the 10-year average, the agency said, after forecasting a 9.9 million ton harvest three months ago.

Production of canola will fall 38% to 5.2 million tons but remain well above the 10-year average, ABARES said.

The bureau said dry conditions in northern cropping regions would likely result in below-average yields but southern regions were faring better due to better-than-expected winter rainfall.

The forecasts come as Canada lowers its production forecast, adverse weather hits crops in Argentina and heavy rain has curbed wheat output in China.

ABARES said the area planted to summer crops in 2023–24 would likely fall 15% to 1.3 million hectares (3.2 million acres).

It said sorghum production would likely decrease by 39% to 1.5 million tons in 2023–24 and cotton lint output by 8% to 1.2 million tons but rice production should rise 26% to 656,000 tons.

Drier conditions also mean livestock producers will need to send more animals to slaughter, ABARES said, pushing down prices for cattle and sheep.

"Production and prices outcomes will also weigh on export performance, with the value of agricultural exports expected to decrease by 17% to $65 billion," ABARES executive director Jared Greenville said in a statement.

(Reporting by Peter Hobson Editing by Tomasz Janowski)