The Prime Minister John Howard announced that the government will spend more than AUS$400m (€240m) on helping farmers in drought stricken areas, on top of the AUS$560m (€336m) "exceptional circumstances" fund that was set aside for farmers in 2006. The decision will come as a boost to the supply chain, with processors facing ongoing price hikes as Australia continues to suffer from the effects of adverse weather conditions on agricultural land. "We're announcing a package, which will provide an additional $430 million of drought assistance to farmers throughout Australia," Howard said. "The drought is continuing to have a devastating impact on much of rural and regional Australia," he added. "Without urgent spring rain, crops are expected to fail in coming weeks, placing further strain on an already deeply stressed farm sector." The announcement comes as the National Farmers Federation (NFF) is warning that the lack of rain this winter will result in huge cost increases for both manufacturers and consumers. "This drought has reached a scale that is unprecedented," said NFF President David Crombie. "Its impact has already been felt throughout the entire community and that is set to worsen." Many farmers were relying on wet weather over the past three months to ensure crops this year, Crombie explained, a situation that unfortunately did not materialise. Adding insult to injury, the demand for Australian agricultural commodities is currently at its highest level since the 1980s, which is exacerbating the situation, he added. "Australia is consistently about the world's second or third largest producer of wheat," a United States Department of Agriculture commodity analyst told AP-FoodTechnology.com . The analyst added that of around the average 15m tonnes of wheat produced annually in the country, more than half found its way onto the foreign market. Compared with costs only last July, barley prices in August increased by 0.7 per cent, conola costs rose 7.3 per cent, sugar 0.7 per cent, beef 4.6 per cent and dairy 7.6 per cent, according to NFF statistics. Price increases are not only an Antipodean problem, as adverse weather conditions in Canada, the US and some areas of Europe have created a global wheat shortfall. As a result of droughts and floods global wheat stockpiles are forecast by the US Department of Agriculture to fall to their lowest levels in 26 years. In Canada, the country's harvest output could fall by 20 per cent this year, according to official estimates. Smaller markets in Europe, such as Romania, are also facing shortfalls, where drought and excessive heat means the country will not produce sufficient grains and oilseeds to cover current needs. The International Grains Council is now predicting a seven million tonne shortfall in the global wheat supply to meet demand in 2007-8, as it downgraded its harvest estimates to 607m tonnes. The overall grain shortfall will lead to higher meat prices, as livestock farmers pay more for animal feed. For example, the British Poultry Council said last month that feed wheat costs are 40 per cent higher than this time last year and almost 70 per cent higher than 2005, making poultry price rises inevitable.