Two major themes are driving significant uncertainty across the sector however, the volatile geopolitical environment, which has pushed input costs higher, and a forecast for challenging drier weather conditions over the coming six months.
The conflict in the Middle East has notably impacted fuel and fertiliser costs, while rising interest rates and a stronger Australian Dollar are adding further pressure on producer margins.
Senior Manager of Industry Insights at Bendigo Bank Agribusiness Eliza Redfern said producers were certainly navigating a complex and challenging environment looking into the next six months.
“While the widespread rainfall to start winter has been a welcome relief and has boosted confidence, there is no doubt the stakes are higher this year. The conflict in the Middle East has created an unfavourable cost environment, squeezing margins across all commodities,” Ms Redfern said.
“Furthermore, a forecast for a strong El Niño event bringing warmer and drier conditions means the dial could swing quickly from cautiously optimistic to a more negative footing, especially if a widespread outbreak of the H5N1 avian influenza strain occurs. Farmers’ production and profitability will be tested as they manage these significant cost pressures and seasonal risks through the remainder of the year.
“The conflict-driven closure of the Strait of Hormuz has sent a shockwave through supply chains, driving diesel and fertiliser prices sharply higher and impacting everything from vegetable planting acreage to broadacre crop rotations. While the recent peace agreement does offer hope, it will likely take months for supply chains to normalise.
“Success in the coming months will hinge on strategic management of input costs and navigating the critical spring seasonal window amidst geopolitical and weather uncertainty,” Ms Redfern said.
For Victoria, a strong autumn break has set a positive tone, though a developing El Niño poses a threat. The state is positioned for an above-average crop, but the dry forecast and high costs are a key test. Dairy margins are tightening, and while livestock conditions are favourable, producers are cautious about restocking.
Cattle
Tight domestic supply is being outweighed by growing export headwinds, foreshadowing a modest easing of prices from recent near-record highs.
Cropping
An improved season has lifted crop potential, but comfortable global supply and weak Australian export competitiveness are keeping prices rangebound.
Dairy
Farmers will continue to feel the margin squeeze, weighing on production, while the price competitiveness of Australian dairy products will be challenged.
Horticulture
Robust fruit and nut yields are tempered by mixed demand and cost pressures, placing a premium on top-quality produce. Tight margins remain a key concern.
Sheep
Ongoing strong lamb and mutton pricing will continue to benefit producers, although production is likely to remain subdued in the second half of 2026.
Wool
The industry will need to navigate price volatility as supply shortages compete against global macroeconomic demand pressures.
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