Australia cut its official forecast for 2007/08 total commodity export income on Thursday, citing the effects of the worst drought in a century on farming exports as well as a strong Australian dollar.
The Australian Bureau of Agricultural and Resource Economics (ABARE) said it sees commodity export income rising 0.8 percent to A$140.5 billion (US$122.2 billion), less than the growth of 4 percent to A$144.7 billion it forecast in September.
"Farm export earnings are forecast to decline by more than 3 percent to A$26.8 billion in 2007/08, because of poor seasonal conditions in many parts of Australia," said Phillip Glyde, the bureau's executive director.
Australia has been battling its worst drought in 100 years, which this year halved the winter wheat crop to 12 million tons. After two successive years of drought, Australia is beginning to run out of grains stocks, the ABARE forecast showed.
Export earnings from grains are forecast to decline by 14 percent, mainly because of substantially reduced carry-in stocks from the previous year. This would mean that volumes shipped would be well down, Glyde said.
Export income from the main winter crop, wheat, will fall by 16.5 percent to A$2.3 billion. Australia, normally the second biggest wheat exporter in the world, will export 37.9 percent less wheat at only 6.96 million tons in 2007/08, compared with 11.20 million tons the year before.
Mineral resources would continue to be far and away the mainstay of Australia's commodity export performance, Glyde said.
The bureau forecast that the total value of all Australia's minerals and energy exports would rise by 1.8 percent to about A$109.8 billion in 2007/08, from A$107.9 billion in 2006/07.
The forecast is less than the bureau's forecast in September of 4.1 percent growth to A$112.2 billion because of the strong Australian dollar and weaker metals prices.
But Australia was starting to see the benefits of recent high levels of investment in its mining industry, with the volume of mineral resources production and exports increasing, Glyde said.
For iron ore, Australia's top commodity export, the bureau forecasts that exports will rise to 289.8 million tons in 2007/08 from 257.4 million tons the year before.
The value of exports is forecast to rise to A$18.03 billion from A$15.5 billion the year before, mainly because of booming demand from China.
The latest forecast is slightly less than the bureau's September forecast of iron ore exports for 2007/08 of 290.6 million tons worth A$18.5 billion.
Earnings from energy exports would rise by 7 percent to A$42.2 billion. Main exports are thermal coal, liquefied natural gas, uranium, crude oil and petroleum products.
Export earnings of metals and other minerals are forecast to fall by 1.3 percent to A$67.6 billion because of lower prices for metals and an assumed higher value of the Australian dollar.
The bureau has based its forecasts on an assumed value of the Australian dollar of around 88 US cents. This compares with an average value of the Australian dollar of around 87 US cents in the June-December period of 2007 and 78 US cents in the same period a year before.
The Aussie dollar is currently trading around 87 US cents.