The effects of drought are becoming more apparent as agricultural production continues to fall, according to the December commodity report from the Australian Bureau of Agricultural and Resource Economics.
“The impact of drought continues to be felt across Australia's agricultural sector, contributing to a forecast unprecedented third consecutive year of falling production,” the report said.
Key findings of the report show the value of farm production is set to fall by three per cent to $61 billion in 2019-20.
ABARES predicted the reduced agricultural production would cause export earnings to fall by eight per cent to $45 billion.
The main drivers of this fall are lower crop and livestock production and a diversion of grain to the domestic market for feed and human consumption.
The total crop production this year is set to be the lowest in more than 10 years due to low soil moisture levels.
Livestock prices have improved and are helping to maintain the total value of production above $60 billion in 2019-20.
The spread of African swine fever across Asia continues to affect global livestock production and trade, as the shortage of meat produce has increased prices.
Australia's farm gate prices for livestock will increase annually due to the export demand from countries affected by African swine fever.
Pasture productivity has been limited by drought and Australia's livestock industry may see a temporary increase in the number of animals finished in feedlots, potentially using imported feed.
Farm gate milk prices are expected to reach a record high but high input costs will reduce the profitability of many dairy farms, despite global milk prices having improved since the ABARES September outlook report was released.
Higher farm gate milk prices won't prevent national milk production from falling as seasonal conditions lead to higher costs for dairy farmers, ABARES said.