Geopolitics remains the “dominant risk factor” 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.
However, the global agribusiness banking specialist says in its flagship Australia Agribusiness Outlook 2026, Australia’s agricultural sector remains “well positioned” to navigate these global challenges, with the country’s agricultural exports expected to continue their strong performance in 2026 and major commodity sectors entering the year “from a position of strength”.
Report lead author, RaboResearch general manager Stefan Vogel said the recently-harvested Australian winter grain crop was “the second largest on record, around 10 per cent above last year’s”, while Australia’s meat exports – including beef and sheepmeat – remain resilient despite geopolitical tensions and tariffs.
“Livestock product prices are forecast to hold up well,” he said, “although grain prices are likely to stay subdued, given abundant global grain supply and growing inventory.”
Commodity price ‘divergence’
The report says agri commodity prices are forecast to remain “divided” 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).
“That 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,” Mr Vogel said.
Overall, the RaboResearch Australia Commodity Price Index – which tracks local prices of all key Australian agricultural commodities – is forecast to sit near its strong five-year average, he said.
Geopolitical concerns
Geopolitics and shipping remain “major areas of concern”, the RaboResearch report says.
“With President Trump not slowing down in the second year of his second term, further geopolitical surprises are likely this year. Commodity markets – from energy to fertilisers to agri goods – may feel the effects,” Mr Vogel said.
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.
“Meanwhile, China’s newly-introduced beef import quotas present additional challenges for both Australian and Brazilian beef importers,” he said.
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. “Other trade deals, such as the EU-Australia FTA, remain distant,” Mr Vogel said.
“Military actions and threats – including Russia’s ongoing war in Ukraine and new military signals from the US – add further uncertainty.”
Maritime shipping in 2026 also remains clouded by macro-economic and geopolitical volatility.
Weather risk
Climate and weather risks continue to be significant for Australia’s ag sector, the report says.
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.
“The prospects for agriculture will depend heavily on how weather conditions evolve,” Mr Vogel said. “The Bureau of Meteorology’s 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 Niño – which typically results in drier conditions in Australia – is not off the cards, as several models are seeing chances of an El Niño pattern emerging in the second half of the year.”
The report says Murray-Darling Basin water storage is sitting below levels seen a year ago.
Subdued economic outlook
Australia’s 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.
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).
“However 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,” Mr Vogel said.
Rabobank is forecasting the Australian dollar to remain at stronger levels than last year – to sit around USD 0.69 by late 2026 – supporting import purchasing power for Australia’s agricultural sector, but softening export returns in AUD terms.
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.
“Exporters may need to prepare for shifts in global practice payments in the coming years,” Mr Vogel said.
Input prices “rangebound but elevated”
When it comes to agricultural inputs, the report says, prices for farm fertiliser and crop protection products are expected to remain “rangebound, but elevated” through 2026.
“While still above pre-COVID levels, prices for farm inputs may be contained by slightly reduced demand due to tight global grain production margins,” Mr Vogel said. “However, geopolitical developments continue to pose upside risk to input prices.”
Energy markets appear oversupplied, RaboResearch says, leading to expectations Brent crude oil prices may trade below USD 60 a barrel in 2026, “although geopolitical risk remains a wildcard”.
Diesel costs, however, due to limited refining capacity, are expected to stay comparatively expensive – both globally and in Australia, which relies heavily on imports.
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