Ag bank says Australian agriculture well placed to fight off challenges

IT has been a dry past 12 months for farmers, with many worried about their future in the industry as water and feed issues bite into their margins and savings.

With farmers feeling the heat at the farm gate, agribusiness bank Rabobank sees a brighter future in 2025.

Despite expected rising global geopolitical tensions, an underperforming Asian economy resulting in low consumer confidence and a volatile energy market, Rabobank says that Australia’s agricultural sector is well placed for the year ahead.

In its flagship Australia Agribusiness Outlook 2025, the agribusiness banking specialist says that major agricultural sectors look ready to once again move confidently into the coming year, albeit with some challenges ahead.

The report says prices of livestock commodities are expected to “fare well” in 2025 and grain prices also hold upside potential.

And this is reflected in a forecast rise in the RaboResearch Australia Commodity Price Index for 2025.

Though prices of most agricultural commodities are not expected to reach the highs or lows seen over the past three years, the Outlook said.

The report, by the bank’s RaboResearch arm, noted though that soil moisture in many regions is lower than 12 months ago, while cropping and dairy areas along the south coast of Australia are too dry, although many of the country’s sheep and cattle areas received rains over the past two months, supporting feed availability.

Report lead author, RaboResearch general manager Australia and New Zealand Stefan Vogel, said the weather forecast for the next three months painted a similar picture, that hopefully can still be offset if rains arrive during the growing season.

“The recently-harvested winter grain crop had notably exceeded that of last year, although soil moisture levels in South Australia, southern Western Australia and western Victoria need to be watched for the upcoming season’s planting.

“For beef and sheep producers, the outlook for farm-grown feed in the first half of 2025 overall once again looks promising,” he said.

Mr Vogel said limited price moves were expected for farm inputs, such as fertilisers and plant protection chemicals, but there is some ‘upside price risk’, while crude oil prices were likely to come off their recent five-month high.

“The expected easing of the official cash rate (OCR) by the Reserve Bank of Australia this year would also be welcome relief for the sector,” Mr Vogel said.

“Rabobank is now forecasting a likelihood of three 0.25 basis point reductions, from as early as February.”

 

The report notes that the global economic outlook for 2025 in many regions of the world is subdued and Australia’s GDP growth recovery to 2.3 per cent in 2025 is almost an exception as major economies like the US (2.0 per cent growth versus 2.7 per cent in 2024) and China (at 4.7 per cent, down from 4.8 per cent) are expected to struggle, which hurts consumer confidence and demand in those regions.

The bank expects the Australian dollar to remain weak, near US60 cents, which benefits Australian exports, but makes imports more expensive, and Australia’s tight labour market is expected to slightly soften further.

RaboResearch’s Rural Commodity Price Index is expected to rise above the 10-year average in 2025, amid anticipated positive price developments for key sectors and solid production volumes.

Mr Vogel said price dynamics were likely to vary per sector.

“The beef price outlook is one of modest optimism, given fundamentals leave some room for minor upside movement,” he said.

“RaboResearch hold the view that in 2025 we may see stronger demand from feedlots for feeder cattle, with the other positive factor for the sector is that we anticipate higher live export volumes in 2025.”

Mr Vogel said there were also some signs of positivity on the horizon for grains.

“What should help provide support for wheat prices in 2025 is falling global stock levels,” he said.

“In addition, the world’s largest wheat exporter, Russia, is unlikely to have large volumes to export in the second half of this year, contrary to the past two seasons.”

The report indicates that farm input prices globally, both for fertilisers and plant protection products, are forecast to move sideways to slightly higher.

Global urea and phosphate prices in Australian dollar terms have moved upwards from their Q2 2024 lows and, as Australia imports most of its fertilisers, the weaker AUD was a key driver in this move.