A worsening drought has forced Australia, the world's second-largest exporter of wheat, to slash its crop forecast for this year by 29 per cent, an outcome that could put pressure on global grain prices.

The Australian Bureau of Agricultural and Resource Economics (Abare), the government forecasting agency, said it now expected a wheat crop of 16m tonnes, down from 20.4m tonnes in its March forecast, and 21 per cent below last year's 20m tonnes, itself only a moderate crop by Australian standards.