* GrainCorp says half-year profit falls 64 pct
* Dry weather threatens 2019 financials - GrainCorp
* Farmers warn production to fall without rains in two weeks (Adds farmer and trader quotes, share price reaction and details)
By Colin Packham
SYDNEY, May 11 (Reuters) - Australia’s largest listed bulk grain handler GrainCorp Ltd slashed its interim dividend on Friday amid a plunge in first-half profit, and warned it faces more challenges from unrelenting dry weather.
GrainCorp, which issued a profit warning in February after Australia’s smallest wheat crop in a decade, said first-half underlying net profit tumbled 64 percent to A$36.1 million ($27.2 million), from A$100.1 million a year ago.
The company stuck with February’s 2018 full-year earnings guidance of A$50-A$70 million for underlying net profit, but cautioned that the impact of back to back dry seasons that have parched soils could flow through into next year.
Lingering dry weather is threatening production across Australia’s east coast, where GrainCorp derives nearly all its income.
“The prevailing dry conditions across most of the east Australian grain belt are presenting serious challenges for grain growers, with dry-sowing occurring in many areas,” GrainCorp said.
Farmers have said they will begin to reduce wheat acreage to avoid yield losses that would occur from planting the crop outside the growing window if rains do not arrive within two weeks.
“We need to see something in the next 10-days or the crop will start coming back,” said Dan Cooper, a farmer in Caragabal, 400 km (250 miles) west of Sydney.
Grain growers typically wait to sow after showers, but Cooper said those who had planted crops already face widespread losses without imminent rains.
“We really need rain in the next fortnight or things could get really ugly really quickly.”
Traders are already trimming their crop forecasts below official estimates, which stand at 23.7 million tonnes for 2018/19 after last season’s harvest of 21.2 million tonnes, the lowest in a decade.
“Many are already calling this year’s crop at 7 million tonnes less than last season,” said Matthew Pattison, trader at COFCO International Australia.
GrainCorp Chief Executive Mark Palmquist said lower production would present a “challenge” for the company’s take-or-pay rail contracts. These require the bulk grain handler to pay for transportation of a fixed amount of grain or pay a financial penalty.
The poor start has weighed on GrainCorp shares, which have lost about 12 percent so far in May, and hit a near three-month low on Friday.
The company declared an interim dividend of 8 Australian cents per share, down from 15 cents last year.
$1 = 1.3278 Australian dollars Reporting by Colin Packham in Sydney; additional reporting by Chris Thomas in Bengaluru; editing by Richard Pullin