Just as the full impact of the drought was seen in the worst ever trade deficit in October, there’s some good news for farmers.

The sprinkling of moderate to heavy thunderstorms and fronts in the past month to six weeks has relieved the pressure of the big dry. And yields in some wheat growing areas are turning out to be better than expected, even with the continuing impact of the dry weather. Not by much, but enough to cause the country’s main forecaster, the Australian Bureau of Agricultural and Resource Economics (ABARE) to revise upwards its estimates of the 2007-08 grain harvests.

ABARE said yesterday in its latest crop outlook that it was now expecting 12.7 million tonnes of wheat to be harvested, instead of 12.1 million in its previous forecast. That’s probably the first real upward revision for more than two seasons such has been the impact of the big dry. It means that barring a return of the dry in the next two months, this year’s crop would be around two million tonnes above the 9.5 million tonne midget in 2006-07. And the good news extends to other crops: the barley harvest is now put at 5.5 million tonnes, compared to the previous 5 million and the canola harvest will now be around 931,000 tonnes, compared to the previous estimate of 909,000 tonnes.

It’s good news, but it must be remembered that ABARE’s original forecast mid-year for the 2007-08 wheat crop was 25 million tonnes, so the drought has effectively lopped it in half.

This loss of high volume, high value wheat exports can be seen in the October trade figures where in original terms they were down 14% (or more than $1.2 billion). The down turn in rural exports was small in seasonally adjusted terms but grain exports in either case are close to a 12 year low thanks to the drought.

ABARE said that total winter grains production is estimated to be almost 22 million tonnes for 2007-08, a 38% increase on 2006-07, but well below the five-year average of about 35 million tonnes.

ABARE said the improvement has come from better yields, particularly in South Australia and Victoria. But the dry conditions in most major cropping areas of northern Western Australia, South Australia, NSW and Victoria means the estimated winter crop production will be significantly lower than estimated mid-year. But ABARE said average to above-average rainfall in October and November in southern Queensland and northern NSW had promoted a large area of grain sorghum to be planted.

This means many farmers will have a better season than previously though. Sorghum can be planted late and as a result ABARE estimates that total area planted to grain sorghum will be 795,000 hectares in 2007-08, 74% above the area of 2006-07.

Assuming the weather conditions remain average, total grain sorghum production is forecast to double to just over two million tonnes this year, compared to 2006-7. But the lack of water will hit the plantings of rice and cotton hard and ABARE estimates that the area planted to rice will fall a huge 88% to around 2,000 hectares.

Cotton plantings will be off 61% to around 56,000 hectares, the smallest area planted for 30 years.