"It's been a long time between drinks for some of these fellows," Groves said, squinting in the fading daylight.

In another dry field a round-bale feeder is tractored past a mob of cattle, which stampede the hay as it drops to the ground.

"Better close the door. They'll take it off as they go past," Groves said as we leave his truck to watch the cattle feed.

Eastern Australia is into the third month of the worst drought farmers can remember -- more severe than the 2002 drought which the weather bureau classes the worst in a century.

Smaller farmers are being forced to sell out to bigger competitors after up to three years of little or no income. Australia's winter crops, slashed by half in 2002, face decimation once again. Livestock slaughter is rising, too.

Dead, spiky thistles and small wild melons, which even sheep won't eat, are the only vegetation in Grove's moonscape-like fields at Cowra, 250 kms (155 miles) west of Sydney.

The drought is costing Groves over A$1,000 ($750) a week in feed alone. One group of 32 cows and calves eats three to four bales of hay a week, at A$65 ($49) a bale. Together with the five tonnes of oats fed to his 1,500 sheep, at A$200 a tonne.

"It costs us an awful lot of money to keep things going," Groves said as the cattle bellow over their evening meal.

Treasurer Peter Costello warned on June 1 that drought was again affecting the national economy, after the 2002 drought devastated farm output and wiped one percent off GDP growth.

IT'S BAD, REALLY BAD

Hardest-hit are farmers further west on the edge of the outback. But even Cowra is reeling, and wheat from this district is the key to Australia's rise to the world's second-biggest wheat exporter, after the United States.

"Federation" wheat bred for Australian conditions in the late 1870s by the father of the country's wheat industry, William Farrer, was produced on farms in the hills around this town.

Even in dry years Cowra farmers can usually count on some rain, but not this year. "I've never seen it as bad as this before," said Groves's neighbour Bev Donges.

Her husband Ian is manhandling sheep through wire fences for crutch shearing, ahead of lambing. Normally he would be planting wheat, after earlier sowing canola.

"I've never experienced having no crops sown at this time of year in my 30-odd years on the land," Donges said. "(And) I've never experienced two bad years in a row."

"If it turns out to be the mother of all droughts then there's going to be a lot of pain. This is the crunch year. People have been tightening belts (but) nobody can prepare for this. It's not written in the record books. It's uncharted waters."

Donges points across the valley to the brown hills beyond.

"Normally this time of year it would be all green here," he said amid the choking dust.

By this time of year in 2002, Donges farm had received eight inches (20 cm) of rain. This year it has received 2 inches (5 cm). It has not rained since early March.

One hundred and fifty kilometres (93 miles) to the south, the landmark entrance to Australia's sheep city, Goulburn, is a giant concrete sheep called the "Big Merino".

The main attention-grabbers now are large red and white warning signs: "Level 5 Water Restrictions Now In Place. Water Levels Now Extremely Low".

The city's main dam, Pejar, is down to less than 10 percent of its capacity. It is a dustbowl of cracked, dry earth, with "swimming prohibited" and "boating prohibited" signs stranded by the shrinking the water supply.

The town of 25,000 people could be out of water by January.

Mayor Paul Stephenson says the idea of bringing in water by truck and train was not feasible. Emergency action is under way to tap a discovery of subterranean water, build an 8.5 km (five mile) pipeline to bring in supplies, and to build Australia's first plant to turn sewerage into drinking water.

The sewerage treatment plant alone will cost A$30 million.

"BARREL OF A GUN"

Out of town, Tony Morrison is one of the district's biggest sheep farmers, running 7,500 animals on 4,000 acres (1,600 ha).

One of his dams, once big enough for boating trips, has been reduced to a strip of green sludge, surrounded by cracked earth.

"It's a death trap," Morrison said, showing how at water's-edge the crust is layered on spongy mud. "I can't tell you what its like to have 20 sheep bogged in an empty dam."

Like many farmers, he is probing for fundamental truths. Australia has been farmed for only 200 years. Is drought normal? Is the present drought the result of global warming? Is it the start of a new climate phase?

"It's in the back of everyone's minds. It puts great fear into everyone's hearts in the bush. And it's hard to find an answer," Morrison said. "That's pretty scary."

In Goulburn's sale yards, it's another drought-affected day.

Throughput is more than double normal at 1,000 cattle and 10,000-15,000 sheep a week, busy sale yard manager Tony Granger said as he tried to eat a breakfast-on-the-run.

Farmers around Goulburn had downsized their livestock by 50 percent in the past three to four years, and were now reducing numbers by a further 50 percent, he said.

Everyone knows that even if it rains now, farmers will have to handfeed livestock until September or October, at great cost.

Morrison alone has A$100,000 worth of grain stored on-farm.

"We're looking down the barrel," he said. ($US1 = A$1.33)