Geopolitics remains the \u201cdominant risk factor\u201d for Australian agriculture in the year ahead, Rabobank says in its newly-released annual outlook, with the prospect that fast-changing global trade rules and volatile commodity prices are set to continue.<\/p>\n
However, the global agribusiness banking specialist says in its flagship Australia Agribusiness Outlook 2026, Australia\u2019s agricultural sector remains \u201cwell positioned\u201d to navigate these global challenges, with the country\u2019s agricultural exports expected to continue their strong performance in 2026 and major commodity sectors entering the year \u201cfrom a position of strength\u201d.<\/p>\n
Report lead author, RaboResearch general manager Stefan Vogel said the recently-harvested Australian winter grain crop was \u201cthe second largest on record, around 10 per cent above last year\u2019s\u201d, while Australia\u2019s meat exports \u2013 including beef and sheepmeat \u2013 remain resilient despite geopolitical tensions and tariffs. <\/p>\n
\u201cLivestock product prices are forecast to hold up well,\u201d he said, \u201calthough grain prices are likely to stay subdued, given abundant global grain supply and growing inventory.\u201d<\/p>\n
Commodity price \u2018divergence\u2019<\/p>\n
The report says agri commodity prices are forecast to remain \u201cdivided\u201d in 2026, with prices for grains, oilseeds, pulses, cotton and sugar set to stay subdued, while meat, wool and dairy are expected to perform relatively well (albeit dairy prices are coming under increasing pressure from strong global supply).<\/p>\n
\u201cThat said, there is an anticipation of small price improvements for most crops, while livestock produce prices might marginally weaken from the relatively strong values seen in the second half of 2025,\u201d Mr Vogel said.<\/p>\n
Overall, the RaboResearch Australia Commodity Price Index \u2013 which tracks local prices of all key Australian agricultural commodities \u2013 is forecast to sit near its strong five-year average, he said.<\/p>\n
Geopolitical concerns<\/p>\n
Geopolitics and shipping remain \u201cmajor areas of concern\u201d, the RaboResearch report says.<\/p>\n
\u201cWith President Trump not slowing down in the second year of his second term, further geopolitical surprises are likely this year. Commodity markets \u2013 from energy to fertilisers to agri goods \u2013 may feel the effects,\u201d Mr Vogel said.<\/p>\n
The report says Australia had benefited from strong US demand for beef in 2025, despite tariffs. And, with most US tariffs on beef now removed, competition from South American beef in the US market may intensify, Mr Vogel said.<\/p>\n
\u201cMeanwhile, China\u2019s newly-introduced beef import quotas present additional challenges for both Australian and Brazilian beef importers,\u201d he said.<\/p>\n
The report noted tariffs continue to be used actively by key trading partners, even as some trade agreements progress, most notably the EU-MERCOSUR bloc (Argentina, Brazil, Paraguay, and Uruguay) deal. \u201cOther trade deals, such as the EU-Australia FTA, remain distant,\u201d Mr Vogel said.<\/p>\n
\u201cMilitary actions and threats \u2013 including Russia\u2019s ongoing war in Ukraine and new military signals from the US \u2013 add further uncertainty.\u201d<\/p>\n
Maritime shipping in 2026 also remains clouded by macro-economic and geopolitical volatility.<\/p>\n
Weather risk<\/p>\n
Climate and weather risks continue to be significant for Australia\u2019s ag sector, the report says.<\/p>\n
Soil moisture remains insufficient across much of the country, except northern Australia, RaboResearch says, making timely rainfall critical for grain planting and pasture growth in drier areas.<\/p>\n
\u201cThe prospects for agriculture will depend heavily on how weather conditions evolve,\u201d Mr Vogel said. \u201cThe Bureau of Meteorology\u2019s long-range forecast points to warmer-than-average temperatures and near-to-below-normal rainfall through into May for much of the country except the north. And El Ni\u00f1o \u2013 which typically results in drier conditions in Australia \u2013 is not off the cards, as several models are seeing chances of an El Ni\u00f1o pattern emerging in the second half of the year.\u201d<\/p>\n
The report says Murray-Darling Basin water storage is sitting below levels seen a year ago.<\/p>\n
Subdued economic outlook<\/p>\n
Australia\u2019s agricultural sector faces a somewhat subdued global economic outlook for 2026, the report says, with GDP growth forecast to slow in the US, China and the Eurozone, compared with last year.<\/p>\n
Australia may be an exception, with RaboResearch forecasting a modest improvement in GDP growth to 2.3 per cent in 2026 (up from 1.9 per cent in 2025). <\/p>\n
\u201cHowever domestic consumer confidence faces renewed pressure, with further interest rate cuts now relatively unlikely. Based on sticky inflation, markets are even pricing in RBA rate hikes,\u201d Mr Vogel said.<\/p>\n
Rabobank is forecasting the Australian dollar to remain at stronger levels than last year \u2013 to sit around USD 0.69 by late 2026 \u2013 supporting import purchasing power for Australia\u2019s agricultural sector, but softening export returns in AUD terms.<\/p>\n
On the topic of currency, the report also notes that the key role of the US dollar in agricultural trade is under challenge, with China increasingly pursuing commodity purchases in Chinese renminbi, while cryptocurrency stablecoins are also gaining traction in international commodity trade.<\/p>\n
\u201cExporters may need to prepare for shifts in global practice payments in the coming years,\u201d Mr Vogel said.<\/p>\n
Input prices \u201crangebound but elevated\u201d<\/p>\n
When it comes to agricultural inputs, the report says, prices for farm fertiliser and crop protection products are expected to remain \u201crangebound, but elevated\u201d through 2026.<\/p>\n
\u201cWhile still above pre-COVID levels, prices for farm inputs may be contained by slightly reduced demand due to tight global grain production margins,\u201d Mr Vogel said. \u201cHowever, geopolitical developments continue to pose upside risk to input prices.\u201d<\/p>\n
Energy markets appear oversupplied, RaboResearch says, leading to expectations Brent crude oil prices may trade below USD 60 a barrel in 2026, \u201calthough geopolitical risk remains a wildcard\u201d. <\/p>\n
Diesel costs, however, due to limited refining capacity, are expected to stay comparatively expensive \u2013 both globally and in Australia, which relies heavily on imports.<\/p>\n