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Australian wheat harvest tumbles

By Geoff Hiscock
CNN Asia Business Editor

Australian consumer spending is easing as confidence falls
Australian consumer spending is easing as confidence falls

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SYDNEY, Australia (CNN) -- New figures have confirmed the devastating impact of the drought on Australian farm output, with the country's winter grain harvest falling 61 percent over the previous year.

Australia has been the world's No. 2 wheat exporter in recent years, but the long-running drought is cutting deep into its export capacity.

Figures released by the national commodity forecaster ABARE on Tuesday estimate that the 2002 winter grain production was just 15.4 million tonnes, the lowest since the 12 million tonne harvest of 1982-83.

The 2002 result is a sharp contrast to the record 39.6 million tonne harvest in 2001.

"There is little doubt that 2002-03 is turning out to be one of the worst years on record for Australian grains producers," ABARE executive director Brian Fisher said Tuesday.

"After a low winter grains harvest, there is little relief in sight for summer crop producers."

ABARE has previously estimated that the drought will cut about 0.75 percentage points from Australia's gross domestic product in the 2002-03 financial year.

Economy slowing

The housing and construction boom of the past 18 months appears to be coming to an end
The housing and construction boom of the past 18 months appears to be coming to an end

The decline in farm output comes at a time when the broader Australian economy is slowing, with annual growth running at about 3 percent.

The subsidy-driven housing boom of 2001-02 is coming to an end, and consumer confidence has plunged sharply this month under the weight of global tensions, stock market weakness and the drought.

A survey by the National Australia Bank last week showed that Australian business confidence in January fell to a 12-month low.

Earlier this month, the central Reserve Bank of Australia left its benchmark interest rate unchanged at 4.75 percent, reflecting the dip in economic momentum. The widely expected decision means the bank has now left rates on hold for eight months.

Much of Australia has been in the grip of a drought for the past 12 months or more, forcing farmers to slash the area they sow to crops and to trim their breeding herds of sheep and cattle.

Bushfire threat

High temperatures and an acute bushfire threat -- seen most devastatingly in fires that destroyed more than 400 homes in the national capital Canberra last month -- are adding to the burden.

There has been some rain in recent weeks in parts of eastern Australia, but more follow-up falls are needed.

The Bureau of Meteorology's latest prediction is that, based on its climatic modelling, the drought may break in March. But it could be a patchy recovery and some areas could miss out entirely.

About 70 percent of the country is classified as being in serious or severe drought conditions, and 97 percent of the most populous state, New South Wales, is drought "declared," making farmers there eligible for drought relief.

ABARE's Fisher said the lack of irrigation water has severely reduced the area sown to Australia's two major summer irrigated crops, cotton and rice.

Cotton lint production in 2002-03 is forecast at 262,000 tonnes, down from 693,000 tonnes harvested last season. Rice production is expected to fall from 1.28 million tonnes to 370,000 tonnes, and sorghum from 2.12 million tonnes down to 760,000 tonnes.

"A poor sorghum crop will mean that grain supplies will remain tight for Australian feedgrain-using industries until the next winter grains harvest," Fisher said.

"A good autumn break is essential not only for Australia's grain producers, but also for a recovery in pasture production for our broadacre grazing industries."

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