By Colin Packham
SYDNEY (Reuters) - An outbreak of a feared disease affecting banana plants has been confirmed on an Australian farm, raising worries over the outlook for the country's A$550 million ($420 million) industry.
The so-called Tropical Race 4 strain of Panama disease was confirmed at a farm in Tully in the country's northeast after tests last week, said the government of Queensland.
"These positive test results remove any doubt that we are dealing with Queensland's first case of Panama disease Tropical Race 4 on a banana farm," said Dr Jim Thompson, chief biosecurity officer in the state's agriculture department.
Panama disease hits banana plant roots, with Race 4 considered particularly destructive.
While the farm has been quarantined, analysts said the disease could be spread through contaminated water - a big concern due to heavy rains in the region in the last few days.
Australia does not typically export bananas, but lower domestic production could push local prices higher, stoking inflation.
That happened in 2011 when Cyclone Yasi destroyed more than 20 percent of Australia's crop, driving up banana prices by more than 400 percent over the first half of the year.
Panama disease can have a significant impact on production. Banana plantations in Central and South America were destroyed by an outbreak in the 1950s.
Australia also has a history with Panama Disease TR4, which was detected in the Northern Territory in 1997, nearly destroying the commercial banana industry there.
Australian banana production is expected to hit 321,000 tonnes during the 2014/15 season, the country's official commodity forecaster said on March 3.
Queensland is expected to account for more than 90 percent of that.
Meanwhile, the Australian Banana Growers' Council said Tropical Cyclone Olwyn in Western Australia last week destroyed the crop of 30 farmers directly in the path of the storm.
($1 = 1.3091 Australian dollars)
(Reporting by Colin Packham; Editing by Joseph Radford)