Australia's agriculture industry is set to undergo an extremely challenging year according to a new Rabobank report.
The report found production will remain weak as the sector faces the third consecutive contraction in farm gate revenues.
The Agribusiness Outlook 2020 report said a strong rebuild in national agricultural production is less than likely due to low soil moisture, water and feed shortages, and the localised impacts of bushfire.
Report lead author and Rabobank head of food and agribusiness research, Tim Hunt, said the multi-year drought had led to tough circumstances.
“Many farmers entered the current drought in good shape, after an extended run of good seasons and prices enabled them to build equity buffers,” Mr Hunt said.
“However, after poor seasonal conditions over the past three years, the sector is in a tough position heading into 2020.
“2019 was the driest year on record, compounding the drought already being experienced by the eastern states in the years prior.
“And, while recent rainfall across drought-affected regions has brought some optimism, farmers will need continued rain to replenish soil moisture and break the drought.
“Low soil moisture and feed shortages are widespread, while key water storages in the southern Murray-Darling Basin are at their lowest levels in a decade.”
These factors have seen production values drop for the 2019-20 growing season, with poor winter crops and meat and dairy production loss due to falling herd numbers.
Despite these challenges, Rabobank has forecast a continuation of current high prices for most agricultural commodities for the coming year.
“For the animal protein sector, Chinese imports will remain at elevated levels in the wake of China’s culling of livestock in response to African swine fever, with the rebuilding of their pig population to take several years,” Mr Hunt said.
“Global markets for wool and dairy remain firm and the local market basis (wheat price) will be sustained by constrained domestic grain production.”
Global markets, a weak Australian dollar and reduced local supply have contributed to a near-record year for farm gate prices.