Poor rainfall threatens to halve WA's wheat crop this year, adding further pressure to global grain prices already being driven higher by one of the worst droughts in US history.
New research from ANZ Bank says poor rainfall in WA - Australia's biggest grain exporting State - has placed the annual winter wheat crop on a knife edge.
"WA wheat production could quickly drop to 6 million tonnes from our current forecast of 8mt if adverse weather conditions persist into September," ANZ's senior agriculture economist Paul Deane said. "Western Australian 2012 wheat production hinges on rainfall over the next month.
"Yield potential is already well below trend in the northern and eastern Wheatbelt due to the late start to the season and one of the driest July's on record."
Latest official government forecasts, updated in June, are for a WA winter wheat crop of about 8.6mt, down from last year's haul of 11.7mt.
Although ANZ said this season was unlikely to be as bad as drought-ravaged 2010 or 2006, the poor start threatens to spark a further big jump in grain prices.
Prices have already risen by about $100/tonne in the past three months, according to the Australian Wheat Board.
The price for wheat delivered to Kwinana is currently about $340/t.
Kim Simpson, president of the WA Farmers grains section, who crops about 2500ha in Ballidu, said the next month was make or break for most farmers.
"We're all just hanging out for rain," he told _WestBusiness _. "A lot of us are getting 3 or 5 millimetres at a time, which keeps us alive. But we haven't got long without rain before there will be real damage, as there is no moisture in the ground. It is on a knife edge and yields will be down."
However, Mr Simpson said the WA Agriculture Department was tipping a wet spring.
Mr Deane said a "rainfall event" of 25mm or more would reduce the short-term risk to the WA crop, which often accounts for 10 per cent of the global seaborne market.
Drought in the US corn belt has sparked a rapid jump in all global grain prices, as livestock producers bid for scarce supplies.
This is already having a flow-on effect for US shoppers. It will also affect the price Australian shoppers pay for food such as dairy and eggs. But ANZ said high stocks in WA silos would provide some buffer for this year's exports.