A farmer about 400 miles northwest of Sydney, in New South Wales, moves his stock to a new paddock in search of feed.

CANBERRA, Australia—A severe drought has gripped an area of Australia more than twice the size of Texas, turning normally fertile crop areas into dust bowls, draining water reserves and leaving wine-producing regions parched. Hungry kangaroos are turning up in cities.

Millions of dollars of farm equipment is idle across vast expanses of agricultural land in the continent’s east, and farmers are wondering if they should bother planting summer crops.

“There’s not a blade of grass, not even a vestige or shoot. It’s dirt,” said Carolyn Fretwell, a rancher whose family has grazed cattle and sheep on the plains near Coonabarabran, 300 miles northwest of Sydney, for 80 years.

They have used all their stocks of hay, so to feed their animals the family now trucks in sugar cane and cotton from about 700 miles away. “We’ve lived through droughts, but this is the first we’ve had to feed the stock 100%,” she said.

The current drought, which began for some in 2013 but intensified this winter when seasonal rains failed to arrive, isn’t yet as severe as a dry spell from 2001 to 2009 that wiped 1% from economic growth and forced many farmers off the land for good.


Still, it is likely to worsen a global grain shortfall and lower beef prices, as a heat wave ravages crops in Europe and North America. Australia is the world’s No. 4 wheat exporter and the No. 2 beef exporter, after Brazil.

The eastern state of New South Wales and much of Queensland, which together represent a third of the $1.2 trillion national economy, were declared drought-affected last week. In some areas, water reserves are dangerously low.

The 3,000 residents of Coonabarabran may be the among first to run out of water. The town’s dam is a muddy ditch. Locals are cutting back on showers and feeding their gardens with water recycled from washing machines.

“I look out the window and it’s just brown. People are fragile, bursting into tears,” said Julie Shinton, whose husband is the town’s mayor. “People have had no income for two years, but if they walk off the land that’ll be the end.”

Angus Attkinson stands on his farm outside Coonabarabran, in the Central Western region of New South Wales, where farmers continue to battle a crippling drought. Photo: Brook Mitchell/Getty Images

Greg Jerry, a farmer in the area, said he has been shooting sheep and cattle that are too weak to stand, amid the worst local conditions in five generations. “With the wind and dust, it’s just turmoil. Some days it’s like being in the Sahara.”


Farther north near Walgett, farmer Ed Colless said his 13,000 acres of prized black-soil farmland have received just a spray of rain since 2016. Some areas of his property, where wheat, sorghum, chickpeas and cotton once grew, are desolate patches of dust and cracked earth.

“We’ve had one small crop in the last seven years,” he said.

The central bank last week singled out the drought as a risk to Australia’s 27-year growth streak, exacerbating the effects that sluggish wage growth and high debt are already having on consumer spending. One of the country’s main banks last week said it would cut business loan rates for farmers in drought-declared areas, and offer low-interest loans to support farmers through the next season.

With official forecasters worried that the dry spell could intensify under an El Niño weather system threatening to develop in the Pacific within months, Australia’s largest commercial bank last week estimated the drought would knock as much as 0.6% from economic output this year. Agriculture accounts for 3% of the economy.

A dam used for watering stock in New South Wales now sits dry in one of the harshest droughts in Australian history. Photo: Joshua J Smith for The Wall Street Journal

The drought also poses a risk to Prime Minister Malcolm Turnbull, who faces elections by May. The conservative leader has struggled to maintain the support of rural voters, who have been drifting to populist and right-wing parties. Mr. Turnbull’s party has been behind in polls for more than a year and in July lost a series of important special elections, including one in Queensland, where populist small parties siphoned support.


Mr. Turnbull recently toured drought-stricken areas in a Stetson hat and boots to try to strike a chord with rural voters, announcing hundreds of millions of dollars in farm-assistance payments and loans, as well as pipelines to ensure towns don’t run dry. The government may also send the army into drought areas, officials said, to help deliver stock feed and infrastructure.

“These are bleak times and a lot of people find it very hard to cope,” Mr. Turnbull said. “I think everyone agrees that we’re seeing rainfall that is, if you like, more erratic, droughts that are more frequent and seasons that are hotter.”

Six-year-old Harry Taylor plays with the bones of dead livestock on his family’s farm in New South Wales. Photo: Brook Mitchell/Getty Images

The drought could cut Australia’s wheat harvest by a fifth, said Nathan Cattle, managing director of online grains trader Clear Grain Exchange, even as winter rain shields Western Australia, which produces half of the national harvest.

Cattle ranchers are having to decide whether to cull livestock or buy food, with the number of cattle sent to slaughter expected to top 7.8 million by December, according to industry body Meat and Livestock Australia, up 9% on 2017.


Meanwhile, global wheat prices have soared to multiyear highs as a heat wave in Europe and the Black Sea slashes forecasts for this year’s harvest. The U.S. Department of Agriculture this month forecast global wheat stockpiles to fall for the first time since 2013.

“There’s not many places where we’re looking and saying, ‘This is going to be a bumper crop,’ ” said Cheryl Kalisch Gordon, a senior grains analyst at Rabobank in Sydney.

The picture is dire for Australia’s famed wildlife, too. In Canberra, officials urged drivers to slow down after kangaroos moved into suburbs in search of food.

“Appoint a passenger kangaroo ‘spotter,’ ” the city government said in a public notice. “If kangaroos are chased by dogs, mobs of them can end up on the roads or in backyards where they can damage themselves and property.”

Farmers have been left with no option other than to buy hay with which to hand-feed stock in the absence of any rainfall, which would normally provide productive pasture growth. Photo: Joshua J Smith for The Wall Street Journal

Write to Rob Taylor at rob.taylor@wsj.com