Some Australian farmers are set for a stellar year thanks to a bout of good weather lifting production, robust demand, and a weak Aussie dollar boosting the country’s exports.
Cattle owners are expected to be among the biggest winners in 2025 as a drop in global supply, particularly from the world’s top producer, the United States, lifts beef prices.
Commonwealth Bank’s agriculture economist Dennis Voznesenski said prices would likely bounce back this year if rainfall in the US prompted farmers to rebuild their herds. A severe drought in key cattle regions sent US livestock numbers to their lowest in decades.
If higher rainfall replenishes pastures, it will prompt US farmers to keep cattle on farms to rebuild their herds, reducing slaughter activity and increasing the need for imports. “We could be a big beneficiary here in Australia as beef prices rise,” he added.
Last year, cattle prices fell from a 2023 peak of around $8.50 with the eastern young cattle indicator ending 2024 at $6.84 a kilogram.
The US remains a huge market for Australia, accounting for a quarter of this country’s total beef exports last year. Shipments of Australian beef to the world’s largest economy soared 65 per cent in 2024, from the year before.
But cattle farmers will not be the only winners, with the overall value of agriculture expected to climb $6 billion in the 2024-25 financial year to $94.3 billion, according to the Australian Bureau of Agricultural and Resource Economics.
“It is looking like the second-highest production ever, and that’s largely based on an increase in terms of revenue from cropping and livestock,” said Michael Whitehead, director of agribusiness at ANZ.
While agriculture accounts for just 2 per cent of Australia’s $2.7 trillion economy, it is a big contributor to exports. Last financial year, the industry brought in $60 billion as more than 70 per cent of the agricultural output was exported.
A surprising helping hand has come from a weaker Australian dollar – which makes exports more attractive to overseas buyers – and better-than-feared weather conditions.
The dollar slumped more than 9 per cent against the greenback last year and is languishing near five-year lows at around US61.6¢. Meanwhile, the Bureau of Meteorology is expecting above-average rainfall for the next three months.
Wheat
ANZ’s Mr Whitehead said wheat was a crop to watch. That’s because the stock-to-use ratio – that is the amount of grain in storage compared with how much the world uses – dropped to 19 per cent, a level only reached three times in the past half a century and an indicator that prices are bound to lift.
He said a trigger could be a supply shock as countries rush to secure grain imports.
CBA’s Mr Voznesenski predicts wheat prices could climb as much as 10 per cent this year because of lower output from key export countries including Russia, Ukraine, Europe, and North America, from adverse weather conditions.
Developments in the Russia-Ukraine war are being closely watched as the region accounts for a third of global exports. The analyst cautioned that a truce would weaken global wheat prices, after President-elect Donald Trump vowed to quickly end the war after taking office on January 20.
Rabobank’s head of agricultural commodities Stefan Vogel, meanwhile, is predicting that the global consumption of grains including corn, barley and wheat will exceed supply this year, boding well for prices.
Dairy
It is a different story for the dairy and wool industries, which are both on the backfoot and likely to stay under pressure.
ANZ’s Mr Whitehead anticipates that further reductions in Australian milk production and dairy cattle stock will prompt higher imports as farmers shift to more profitable products such as cheese, beef or horticulture.
“It is a structural change, the industry is getting smaller,” he said.
A key area to watch is dairy processing. New Zealand-based dairy giant Fonterra is trying to sell its Australian business, a major supplier of milk, and last year, Coles bought two processing plants in Melbourne and Sydney from Canada’s Saputo.
Yet, Rabobank’s Mr Vogel is more optimistic, highlighting that milk prices have held up well. “Maybe they are not as good as one or two years ago, but they are still at very historically good levels,” he said, before adding that Australian dairy farmers were making money.
Wool
Wool, once Australia’s biggest agricultural product, has been a challenging sector for farmers with the arrival of synthetic fibre. Bendigo and Adelaide Bank does not anticipate a bounce in prices this year, largely due to falling demand from China.
And, things could get worse should Trump implement his threat of hefty tariffs on the Asian giant.
“If garments manufactured in China and exported to the US attracted a large tariff increase, would that impact Australia wool exports?” asked ANZ’s Mr Whitehead. The economist stressed that locally produced wool has the biggest reliance on China among Australian agricultural commodities.
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