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Drought Decimates Australian Wheat Harvest

Grains Council predicts 10 million tons versus last year's 25 million, one big wheat grower expects even less.

Australia's reduced wheat production forecast, down to 10 million metric tons compared to last year's actual output of 25 million tons, spurred trading in wheat and other grains in the U.S. 10 million seems like a small harvest for the drought-stricken country, but one of Australia's biggest wheat growers thinks it's still a high estimate.

Ron Greentree, who served 11 years as director of GrainCorp Ltd and farms in New South Wales, thinks the estimate of 10 million tons is "overstated by 20% to 30%." Rather, Greentree expects a harvest of only 6 to 8 million tons.

"People haven't accepted how bad it is," he says. He is meeting with legislators to lobby for liberalized wheat export arrangements.

Facing a crop that Australian Grains Council chief operating officer David Ginns thinks "may well be financially the worst for a generation," Australia is already looking offshore to solve potential domestic feed grain shortages. The Australian Quarantine and Inspection Service has already received a number of applications asking to import grain from a number of countries, says a spokeswoman. AQIS has not issued any import permits so far.

The tumble in production looks to cut export availability from about 20 million tons from the previous crop to less than 5 million from this one, and still less is Greentree's estimate comes to pass. Such a loss in available exports would support already high global prices for the grains.

Drought will damage barley production even more severely, the Grains Council says, potentially dropping about three quarters from 10 million to 2.5 million tons.

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