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Australian dry puts squeeze on crops
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australia has again cut its winter grain outlook as drought conditions worsen in the world's No. 2 wheat exporter. The government's national commodity forecaster, ABARE, said Tuesday that production of the four major winter crops -- wheat, barley, canola and lupins -- was now likely to be just 14.8 million tonnes for 2002-03. That is a drop of 57 percent from last season's near-record harvest of 34.1 million tonnes, and a sharp revision from ABARE's forecast of 20 million tonnes made in September. The drought will hurt Australia's export income, which relies heavily on agricultural commodities. Australia is a major supplier of wheat and barley to the Middle East, Japan and China. Japan is the primary market for canola, while lupins go mainly to India. Significant impactABARE executive director Dr Brian Fisher said that after the latest downgrade, the drought was now estimated to cut Australia's economic growth rate in 2002-03 by about 0.7 percentage points, or about Aust. $5.4 billion (about $3 billion). Fisher said the drought would have a "significant impact" on growth through direct and indirect linkages between agriculture and other industries. The ABARE prediction is broadly in line with an earlier forecast by SG Australia chief economist Glenn Maguire, who told CNN on October 10 that the drought could be Australia's worst on record and deliver a growth cut of 0.75 percentage points. (Full story) Australia's biggest bank, National Australia Bank, said Tuesday that agribusiness conditions are weakening, with the impact of the drought on margins becoming increasingly evident in the September quarter. "The deterioration in agribusiness contrasts starkly with the ongoing strength in the non-farm business sector as a whole," NAB chief economist Alan Oster said in the bank's quarterly survey. Star performer
Australia has been one of the star performers among the world's advanced economies this year, growing at a rate of between 3.75 percent and 4.0 percent. But economic forecasters have been warning for some time that the El Nino-induced drought, combined with the volatile international situation, will cut the growth outlook sharply. Bush fires in parts of eastern Australia are adding to the uncertainty. (Full story) Much of Australia has been in drought for more than six months, with some highly productive agricultural areas of Queensland, New South Wales and Western Australia having been dry for a year. "Continued dry weather and warmer temperatures over much of the grain belt has resulted in another cut to (the) winter grains production forecast for 2002-03," Fisher said Tuesday, releasing a special update of ABARE's Australian Crop Report. He said New South Wales and Victoria were the worst hit States, with little or no worthwhile rain in many of the main growing regions over the past seven weeks. Sharp fall in outputFisher said wheat production was now forecast to be around 10.1 million tonnes. That is a sharp drop from a forecast of 13.5 million tonnes made on September 10, and less than half the 24 million tonnes of wheat harvested a year earlier. "While grain production will be well down this season, world grain prices have increased steadily since mid-year," Fisher said, noting that this reflected poor harvests in North America and the expected poor harvest in Australia. Wheat prices are up about 40 percent so far this year, with wheat for December delivery trading at $4.15 a bushel on the Chicago Board of Trade Monday. That is down from a five-year high above $4.30 last month. Australian prime hard wheat for December delivery is quoted at $240.00 a tonne.
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