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  Yahoo News 25 Oct 06
Drought forces 40 pct production cut: Australia wheat exporter
by Marc Lavine

SYDNEY (AFP) - Australia's worst drought in at least a century is likely to slash wheat production by the world's third largest exporter by up to 40 percent, wheat export monopoly AWB Ltd said.

With a long, dry summer predicted for what is already the driest continent on earth, AWB Ltd cut its wheat production forecast to nine to 11 million metric tonnes from the 12-15 million forecast last month.

"The worsening weather conditions across most of the wheat belt has resulted in a reduction in the area harvested," AWB chief executive Gordon Davis said in a brief statement, cutting production forecasts for the third time this year.

AWB in September sharply cut its wheat production forecast to 12-15 million tonnes from an earlier estimate of 18-20 million because of dry conditions in eastern and south Australia.

As dry conditions with no sign of a let-up decimated crops across the Australian continent, global wheat prices surged to 10-year highs of more than 300-a-tonne earlier this month on fears of massive crop shortfalls.

Australian Crop Forecasters this month lowered wheat production estimates for 2006-7 to 11.5 million tonnes, from 25 million a year earlier as the 'big dry" spread its tentacles cross the parched country.

After six years of below average rainfall, Australia's prime minister and finance minister conceded this month that the worsening drought could take the lustre off the country's stellar economic growth.

More than half of Australia's farmland is now parched and eligible for financial help, as desperate farmers are driven to suicide and Australia's cherished agricultural tradition comes under threat.

Treasurer Peter Costello warned less than two weeks ago that the protracted dry stretch could drive farm production into recession, while Prime Minister John Howard has warned drought will impact on economic growth.

"Well it will affect our GDP growth. Just how much remains to be seen and of course it depends on the extent to which our booming economy in other areas can offset it," Howard said earlier this month.

The slashed wheat production forecasts came a day after the Australian government announced it would pump more cash into a multi-billion dollar relief package for farmers in a bid to counter the impact of the drought.

An extra 560 million dollars (420 million US) in drought assistance will be extended to a further 44 farming regions scorched by the dry spell, on top of 350 million dollars announced last week.

The new injection unveiled by Deputy Prime Minister Mark Vaile on Tuesday takes the total relief provided since the drought began to bite in 2001 to 2.16 billion dollars as more areas of the country were declared stricken.

"We don't believe the day will ever come when the Australian community would be prepared to turn its back on its farming community given the significant contribution that they make to our economy and certainly to the culture of Australia," Vaile said.
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