Farmers have started to cut crops for hay while they can, with time running out for rain to justify seeing them through to harvest.
Hay cutting is underway in the isolated areas of northern NSW where there are crops and has also started in the Riverina.
Some crops have already been cut and will be baled shortly. More crops will be cut in the coming weeks with farmers reporting strong demand for hay contractors.
It's a heartbreaking call, after a similar situation last year.
Strong hay prices and the lack of soil moisture to finish crops have made it an easy decision for farmers, so long as the crop has enough vegetation to warrant the expense.
Cereal hay prices eased in recent weeks as new crop supplies became available, but it's still demanding upwards of $500 a tonne delivered into the Darling Downs and northern NSW.
Unfortunately, the dry season means that many cereal crops lack the volume of vegetative matter to justify cutting for hay.
Many central NSW farmers have already made the decision to let in sheep where crops weren't large enough to justify cutting for hay.
Hotter and drier than normal weather is set to continue across most of Australia for the coming three months, according to the latest Bureau of Meteorology seasonal outlook.
The Bureau said the positive Indian Ocean Dipole (IOD) was the major factor influencing the drier than normal conditions. The Bureau said they expect the positive IOD to break down in December.
Shrinking production estimates and underlying nervousness about the dry weather has seen grain markets move sharply higher in the past week.
ASX wheat new crop futures rallied more than $20 a tonne in the past 10 days to $348 a tonne on forecasts for a hot, dry spring. It's the highest price since May.
Global grain market influences remain negative, as large global supplies and sluggish demand weighs.
The International Grains Council (IGC) raised its estimate for world wheat production, citing larger crops in the United States, EU, Canada and Argentina.
IGC raised its forecast for world wheat production by one million tonnes to 764 million tonnes, sharply up on last year's 733 million tonnes.
IGC trimmed its forecast of global wheat trade, which was cut by half a million tonnes after a slow start in the Black Sea and EU, but is still expected to increase by two per cent from last year.
