Elders revealed that the agriculture operations it has put up for sale, attracting "a high level of interest", have joined the agribusinesses hurt by dry weather in Australia, and dragged the group back into the red.

The veteran feedlot-to-wool trading group said that its rural services operations had been hurt by "weak industry-wide conditions" in Australia, blamed on a dearth of rainfall which is beginning to raise concerns over prospects for the wheat crop for which sowings are due to start next month.

"Dry and hot weather conditions over the summer have led to a reduction in demand for agricultural chemicals across the cropping and livestock sectors," Malcolm Jackman, the Elders chief executive, said, revealing a 10% drop in sales of farm supplies.

"Similarly dry conditions have led to reduced pasture and lower restock demand in the livestock agency business, which sees commissions down 28% compared with the same time last year."

The group, which has previously shied away from guiding on earnings for this year, said it now expected a "small underlying operating loss", before mark-to-market adjustments for changes in prices of assets such as livestock at its feedlot operations.

In the October-to-March period of its last financial year achieved an operating profit of Aus$14.8m.

Difficult times for agribusiness

The caution adds Elders to the list of agriculture groups which have warned over the impact of Australia's hot summer, which brought record temperatures to southern areas.

While some eastern parts received heavy rains in January, precipitation was "relatively isolated with large areas still experiencing below average rainfall", US Department of Agriculture farm officials said earlier this week, trimming expectations for growth in the Australian cattle herd because of deteriorated pasture conditions.

Indeed, other Australia farm groups to warn on profits include Australian Agriculture Company, or AAco, which warned two weeks ago that dry weather had hurt sales of cattle last month, as producers rein in restocking plans.

Ironically, the drop in cattle prices comes at a time of elevated beef prices, dynamics expected to fuel a rise in Australian beef exports to a record high this year, potentially usurping Brazil as the second-ranked shipper.

Elders said that its own feedlot operations, fattening cattle for the beef market, "continue to perform strongly".

Deal activity

Elders' comments come amid longstanding talks over the sale of its rural services division, which it said had received a "high level of interest", with a "number of parties" potentially interested in the business.

"No one interested part has been granted preferential status by Elders," the company added.

The group has also received interest in a takeover by rival RuralCo, its biggest shareholder, prompting Australian competition authorities this week to launch an informal review of a potential tie-up.

Elders said on Wednesday that "no formal takeover offer" has been received from RuralCo.

'Mounting anxiety'

The dry weather in Australia has brought some benefits to farmers, in speeding the sorghum harvest.

Sydney sorghum futures for May have retreated some Aus$18 a tonne from an early-month high, closing on Wednesday at Aus$263.00 a tonne.

However, it is beginning to raise alarm bells over prospects for the important winter grains crops for which sowings start next month.

Luke Mathews, at Commonwealth Bank of Australia, cautioned last week that "attention will soon focus on the upcoming 2013 winter crop seeding program.

"The current record-long heatwave in Victoria, South Australia and southern New South Wales has ensured the region has minimal soil moisture reserves.

"These low soil moisture reserves will result in mounting anxiety leading into the autumn planting season."

Australia's dry spell also coincides with a drought in nearby New Zealand, billed as the most widespread in 30 years, which has sent dairy prices soaring, lifting whole milk powder values to the highest since at least the 1990s.