Australia's most populous state entirely in drought

David Gray  Reuters Australia's most populous state New South Wales is now 100% in drought- a property on the outskirts of Walgett

One of the driest winters on record has led to water shortages and diminishing food for stock across the state and Minister for Primary Industries Niall Blair said producers were facing "very hard decisions".

The NSW Department of Primary Industries' Combined Drought Indicator has revealed 38.7 per cent of NSW is now drought-affected, 38.2 per cent is in a drought, and 23 per cent of the state is suffering through an intense drought.

Only less than 10 millimetres of rain was recorded in the western, northwest and central areas of the state over the past month.

With dry conditions forecast to continue for the next three months, farmers had to decide whether to continue the expensive and laborious task of hand-feeding cattle and sheep or sell their livestock.

The Bureau of Meteorology's outlook for the next few months shows below-average rainfall and hotter temperatures than normal, which will likely exacerbate the drought.

"Producers are now faced with some very hard decisions on whether to graze sown crops or rely on potential rainfall in the next two months in order to increase yield production", Blair added.

Much of Australia's southeast is struggling with drought.

Farm reservoirs have dried up and crops are failing.

Earlier this week, Prime Minister Malcolm Turnbull announced $12,000 grants for farming families.

Who is affected: While the whole state has been declared in drought, the worst affected groups are the state's farmers and people living in regional communities.

"Now we are the land of droughts and flooding rains, we recognise that", he said. "They plan for drought, they are good managers, but it can become really overwhelming".

But the problem is not confined to NSW - more than half of neighbouring Queensland is in drought.

Smatterings of rain fell on Monday in parts of eastern Australia devastated by drought, but not enough to make a difference.

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