Australia said on Tuesday its 2019/2020 wheat harvest was the lowest in 12 years, missing its forecast, as a severe drought across the east coast wilted crops.
Australia's chief commodity forecaster said in December it expected wheat production during the 2019/2020 season to total 15.85 million tonnes.
But with harvesting now complete, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said production totalled 15.17 million tonnes - the lowest since 2008.
The east coast recorded little rain over the season.
Dwindling Australian production has helped prop up global prices of wheat, which hit a 18-month high on Jan. 22 amid worries about tighter global output.
Australia is among the world's top 10 exporters of the grain, which typically contributes about 2% to the country's gross domestic product.
Lower wheat exports are also likely to hurt Australia's stuttering economy, although the impact on the country's biggest listed bulk grain handler, GrainCorp Ltd, will softened by a derivative contract that supports its earnings during times of severe drought.
In June 2019, GrainCorp signed a 10-year deal with insurance broker Aon Plc that will see it receive a payment of A$15 ($10.46) per tonne when grain production from Australia's east coast winter crop falls below 15.3 million tonnes. Payments will be capped at A$80 million a year.
GrainCorp will have to pay out when seasonal conditions are good.
The contact will be benchmarked against data from Australia's chief commodity forecaster, which said on Tuesday that winter grain production from the east coast totalled 11.44 million tonnes - giving GrainCorp A$57.9 million, according to Reuters calculations.
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