Australia has crimped its forecast for beef exports by nearly 7 percent, with farmers easing off on slaughtering cattle as they look to rebuild herds from 20-year lows following three years of drought.

Shipments from the world's No.4 exporter of the meat are expected to total 1.025 million tonnes in the 2016/17 season, the Australian Bureau of Agriculture, Resource Economics and Rural Sciences (ABARES) said, down from its June forecast of 1.1 million tonnes and dropping from over 1.17 million tonnes the year before.

Declines in one of the country's main rural exports are a blow to the government as it looks to shift the economy away from its reliance on mining as a commodity boom fades.

They are also giving rival beef exporting nations like Brazil the chance to ramp up market share in key consumers such as China, where a rapidly-expanding middle class is developing a taste for foods like steak and hamburgers.

"Producers are stretching themselves to be able to try and get back as quick as possible, but losing market share is something that is going to inevitably happen in the short-term," said Matt Bennetto, a farmer in Queensland, the country's largest cattle producing state.

Like many in the country's cattle industry, Bennetto is rebuilding his herd in the wake of the arrival of rains in the last three months that are starting to nurture pastureland he needs to feed animals.

The worst El Nino weather pattern in 20 years wilted grass and dried out dams in parts of Australia, pushing slaughter numbers to record highs.

After operating around the clock until as recently as December 2015, many slaughterhouses in states such as Queensland are now idle. Slaughter rates for Australian cattle were down more than 20 percent during the first seven months of 2016 compared to the same period last year, according to Reuters calculations based on official data.

The pullback in Australian exports comes as South American nations, in particular Brazil, are looking to expand shipments to key markets such as China.

Brazil for the first time in July became the largest supplier of beef to China as Australian shipments fell 45 percent, data from the industry body, Meat and Livestock Australia showed.

Brazil's drive to capture a greater share of the Chinese market gathered momentum earlier this month as Agriculture Minister Blairo Maggi visited China to secure greater access to for beef exporters from his country.

"Brazil is going to be a major wrench in the works for (Australia)," said Lygia Pimentel, director of Agrifatto Consultancy in Sao Paulo.

Meanwhile, ABARES lowered its forecast for Australian milk production during the 2016/17 season to 9.3 billion litres, from its June forecast of 9.5 billion litres.

Australian sugar production was seen at 5.1 million tonnes, edging up from the June estimate of 5.08 million tonnes, ABARES said.

($1 = 1.3029 Australian dollars)