UPDATE 2-Australia sees live cattle exports climbing 25 pct
* Change in Indonesia beef policy to boost Aus cattle exports
* Slaughtered beef export f'cast unchanged, but China demand seen higher
* Sugar production outlook drops by around 6.5 pct
* Flood damage, crop disease curb cane output
(Recasts on live cattle exports; adds comment, detail)
SYDNEY, Sept 17 (Reuters) - Australia has boosted its projection for live cattle exports by 25 percent, after key market Indonesia abandoned a quota system.
Australia, the world's third-biggest beef exporter, relies heavily on Indonesian demand, and had been hit hard by the tightening of quotas in its largest live cattle market in 2012 and 2013.
The Australian Bureau of Agriculture and Resource Economics and Sciences said in a report on Tuesday that total live exports would stand at 590,000 head of cattle in the 2013/14 season that begins in October, up from the 470,000 touted earlier.
"You'd expect that (Indonesia) would take more than half of the total live cattle exports - so at least 300,000 head of cattle is the least I would expect," ABARES chief economist Paul Morris told Reuters.
Indonesia aborted its quota system in July, allowing the unlimited importation of live cattle in an effort to curb domestic beef prices.
Strong growth in Indonesian demand will offer a helping hand to Australian cattle farmers, who have also been hurt by arid weather.
The benchmark Eastern Young Cattle Indicator rose on Monday, but remained close to a three-month low as dry weather weighed on prices for young cattle and cows.
Indonesia took 266,000 head of cattle from Australia in 2012/13, way below 700,000 in 2010/11.
Australian live exports totalled 513,000 head of cattle in the 2012/13 season.
While increasing its outlook for live cattle exports, ABARES kept its forecast for slaughtered beef exports in the marketing year that starts in October unchanged at a record 1.07 million tonnes.
It raised its Chinese demand estimate to 130,000 tonnes from 120,000 tonnes, but said that was offset by increased competition from U.S. beef in other markets.
Elsewhere, ABARES lowered its forecast sugar output in the 2013/14 marketing season by around 6.5 percent due to flood damage and crop disease.
Sugar production in the 2013/14 season in the world's No. 3 raw sugar exporter will total 4.25 million tonnes, ABARES said, down from its June prediction of 4.54 million tonnes.
"The forecast decline reflects flood damage to new plantings in early 2013 and lower average sugar yields, due in part to (yellow) canopy syndrome ... in the Bundaberg and Isis regions," ABARES said in its report.
The forecaster was referring to a disease that affects the roots of sugar cane and has hit parts of Queensland, the country's largest sugar producing state.
ABARES said sugar exports during the season will total 3 million tonnes, down from its previous forecast of 3.2 million tonnes.
Declining exports from Australia would help buoy global prices that plunged to a three-year low in July on the prospect of a bumper crop in Brazil.
Prices rallied to a 30-year high around 36 U.S. cents a pound in February 2011 on damage to the crop in Australia from a cyclone. They stood around 17 U.S. cents on Tuesday.
Morris also said that recent heavy rains across Australia had eased fears over potential yield losses in the world's No. 2 wheat exporter.
"The rainfall we have had in the last few days across the southern parts of the eastern states and Western Australia actually puts us in a pretty good position," said Morris.
ABARES last week trimmed its forecast wheat production for the 2013/14 season by more than 3 percent to 24.467 million tonnes, but output is still expected to be its sixth largest on record.
"We are pretty confident about that number at the moment," Morris said.
(Additional reporting by Lewa Pardomuan; Editing by Joseph Radford)