By Blair Speedy
The drought has pushed wheat prices to 10-year highs and forced exporter AWB to cut its forecast for this year's harvest to between 12 million and 15 million tonnes.
The forecast, down from 24million tonnes for the last crop, came as the US Department of Agriculture warned that global stocks of the grain were at their lowest levels since 1981.
AWB spokesman Peter McBride conceded yesterday the harvest would be closer to the bottom end of the forecast range, while private sector analysts were tipping an even bigger reduction.
Australian Crop Forecasters earlier this month forecast the wheat crop would yield just 11.5million tonnes this year. Managing director Ron Storey said extreme heat over the past 10 days was likely to have wiped out another million tonnes.
This would lead to the smallest harvest since the summer of 2002-03, when drought resulted in a crop of just 10 million tonnes. The smallest crop on record was 8.8 million tonnes during the drought of 1982-83, the summer of the Ash Wednesday bushfire.
Mr McBride said wheat earmarked for export was now being diverted for domestic consumption and stockfeed for farm animals that had run out of pasture.
The price of stockfeed-grade wheat hit $320 a tonne in Melbourne this week, up 71 per cent from $187 just 12 months ago.
The USDA's October World Agricultural Supply and Demand Estimates report forecast global wheat production would fall by 11million tonnes to 585.1 million tonnes, leaving global stockpiles at just 119.3 million tonnes - their lowest level in 25 years.
News of the tightening supply conditions pushed wheat futures on the Chicago Board of Trade to a 10-year high of $US5.51 a bushel ($252 a tonne) this week, 48 per cent higher than it was 12 months ago and up 18 per cent from the previous Friday.
A spokesman for farmers body the Grains Council said growers in some parts of Queensland, NSW and western Victoria still had not recovered from the 2002-03 drought.
But for those able to raise a decent crop in areas such as southern Western Australia, the higher prices that have resulted from the shortage represented a massive potential boon.
Federal Treasurer Peter Costello yesterday ruled out an offer of additional assistance to drought-stricken farmers, saying existing interest rate subsidies for producers in areas declared to be suffering from exceptional circumstances were sufficient.
"We have got the situation for drought-affected farmers being met by existing programs," Mr Costello said.