SYDNEY (Reuters) - Australia's largest listed bulk grain handler GrainCorp Ltd <GNC.AX> expects underlying profit to halve this financial year, and exports to drop dramatically, as crops in the country's east succumb to mercilessly dry back-to-back growing seasons.
The dramatic cut to grain stock and profit forecasts for the 12-month period ending September 2018 come as farmers on Australia's east coast prepare to harvest summer sorghum crops in parched fields, several months after winter wheat crops suffered the same yield-destroying fate.
GrainCorp said in its earnings guidance on Thursday that much of this year's grain crop will be consumed locally, leading to a cut in exports of up to 75 percent.
"Significantly lower grain stocks across the eastern seaboard means a large portion of the crop will remain in Australia, either on-farm or secured by domestic customers," GrainCorp Chief Executive Mark Palmquist said in a statement.
The already difficult conditions facing farmers in New South Wales and Queensland states will turn near calamitous should fields stay dry approaching the mid-year, when wheat, Australia's biggest crop, is planted.
"There's going to have to be fairly significant rain as there's no sub-soil moisture. It's really dry," said Rabobank senior grains analyst Cheryl Kalisch Gordon.
A February report by the Australian Bureau of Agriculture, Resource Economics and Rural Sciences found rainfall in the crop regions of northern New South Wales and Queensland had been well below average over the past three months, with some areas suffering a severe deficiency.
Conditions have been better in Western Australia, the country's biggest wheat exporting state.
There has already been a recent run-up in wheat prices driven by U.S. crop concerns, although overall global supplies remained ample.
GrainCorp said on Thursday it expected underlying profit after tax for the 12 months to September to be between A$50 million ($40 million) and A$70 million, well below the A$142 million recorded in fiscal 2017.
GrainCorp shares were up 4 percent on Thursday afternoon, although still down 10 percent lower from early January levels.
Australian retail stockbroker Morgans said in a client note that many investors had already written off fiscal 2018 given the small east coast grain crop and reduced exports.
(Reporting by Jonathan Barrett in SYDNEY; Additional reporting by Aaron Saldanha in BENGALURU; Editing by Paul Tait and Tom Hogue)
