This paper addresses the question of whether data assimilation of remotely sensed leaf area index and/or relative evapotranspiration estimates can be used to forecast total wheat production as an indicator of agricultural drought. A series of low to moderate resolution MODIS satellite data of the Borkhar district, Isfahan (Iran) was converted into both leaf area index and relative evapotranspiration using a land surface energy algorithm for the year 2005. An agrohydrological model was then implemented in a distributed manner using spatial information of soil types, land use, groundwater and irrigation on a raster basis with a grid size of 250 m, i.e. moderate resolution. A constant gain Kalman filter data assimilation algorithm was used for each data series to correct the internal variables of the distributed model whenever remotely sensed data were available. Predictions for 1 month in advance using simulations with assimilation at a regional scale were very promising with respect to the statistical data (bias = ±10%). However, longer‐term predictions, i.e. 2 months in advance, resulted in a higher bias between the simulated and statistical data. The introduced methodology can be used as a reliable tool for assessing the impacts of droughts in semi‐arid regions.