Sustained dry weather is likely to have reduced Australia's winter crop by 41 per cent compared to the record crop in 2016/17, agribusiness banking specialist Rabobank says.
Rabobank says a repeat of last year's record grain production is unrealistic, but it is hoped that the crop will come in around the five-year average.
Rabobank is forecasting a national grain crop of 35 million tonnes for 2017/18, which is about 24 million tonnes below last year's record production and eight million tonnes below the five-year average.
"The dry winter and frost in some areas has really taken its toll on wheat," Rabobank agricultural analyst Wes Lefroy said in a statement on Wednesday.
The winter wheat crop is likely to be about 20.9 million tonnes - about 14 million tonnes smaller than last year and 19 per cent below the five-year average.
The canola crop is forecast to be about 2.6 million tonnes - about 28 per cent below the five-year average.
The barley and oats crops are also expected to be below average, at 7.9 million tonnes and 1.1 million tonnes respectively.
Production of pulses is expected to only marginally lower than average because planted hectares rose by 11 per cent.
Although grain production will be considerably lower, the high level of carry-over stocks should support exports.
Mr Lefroy said most of Australia has been affected by long periods of dry weather.
In Western Australia and South Australia, the season was dry from the start, forcing many farmers to reduce the number of planted hectares.
Crops were also planted into dry topsoil.
Late winter rain in Western Australia and South Australia helped minimise crop losses, but for some regions it wasn't enough to bolster production.
Much of NSW failed to get any meaningful winter rain until October, and frosts exacerbated crop losses.
Consequently, NSW may produce its smallest crop in 10 years.
Victoria fared better, with parts of the north-west experiencing one of their best years in recent memory as early October rain shored up yields.
Rabobank is forecasting a small lift in global wheat prices for 2018 as high global stocks continue to weigh on the price outlook.
Rabobank said low-cost producers such as Russia, the Ukraine and Argentina are driving much of the build-up in stocks.
