Australia Agribusiness Outlook

Australian agribusinesses are well-placed for 2025 despite expected rising geopolitical tensions, an underperforming Asian economy resulting in low consumer confidence, and a volatile energy market, which likely will make for an interesting year. Prices of livestock products are expected to fare well in 2025, and grain prices also hold upside potential, as reflected in a rising RaboResearch Australia Commodity Price Index forecast for 2025. Soil moisture in many regions is lower than one year ago. Most cropping and dairy areas along the southern coastline of Australia are too dry, while many of the country’s sheep and cattle areas received rains over the past two months supporting feed availability. The rain forecast for the next three months paint’s a rather similar picture, which can hopefully still be offset if rains arrive during the growing season. Farm input costs, like fertilisers and plant protection chemicals, might remain stable but hold upside price risk, while crude oil prices might come off their recent five-month high.

RBA interest rate cuts are on the cards in Australia for Q2 and/or Q3 2025. We expect the RBA to make three small 0.25 basis point reductions, as global geopolitical headwinds might keep inflation and interest rates higher for longer. The global economic outlook for 2025 is subdued in many regions of the world, with Australia’s GDP growth recovery to 2.3% in 2025 being almost an exception. Major economies like the US (2.0% growth versus 2.7% in 2024) and China (4.7% versus 4.8%) are expected to struggle, which hurts consumer confidence and demand in those regions. The Australian dollar is forecast to remain weak near USc 60, which benefits Australian exports, but makes imports more expensive. Australia’s tight labour market is expected to soften slightly.

Major agricultural sectors are well-prepared for the upcoming year. The recently harvested grain crop exceeded that of last year’s, but soil moisture levels in South Australia, southern Western Australia, and western Victoria need to be watched for the upcoming planting season. For beef and sheep producers the outlook for farm-grown feed in the first half of 2025 looks promising. Prices of most commodities are not expected to reach the highs or lows seen over the past three years.

Geopolitics and shipping remain areas of concern. Trump’s return to the US presidency is expected to keep markets volatile. If trade duties are imposed as threatened, they are likely to be met with retaliation, with agri commodities possibly being impacted. Additionally, there is uncertainty about whether the US, a key destination for Australian beef, will impose import duties. The ongoing conflict in the Middle East, along with the re-routing of ships away from the Red Sea due to piracy attacks, are expected to continue causing volatility in 2025, as the recent ceasefire and suspension of Houthi attacks on vessels could be short-lived. The war in Ukraine can still impact grain markets if Russia progresses further west and limits Ukraine’s grain exports.

Globally, farm input prices for fertilisers and plant protection products, are forecast to remain stable or increase slightly. In Australian dollar terms Global urea and phosphate prices have moved upward from their Q2 2024 lows. As Australia imports most of its fertilisers, the weaker Australian dollar has been a key driver in this increase. Looking ahead to 2025, we don’t expect very significant price swings but see more upside than downside price risk. Costs on Australian farms are expected to remain well above pre-pandemic levels. Geopolitical tensions and potential conflict escalations could result in significant energy price swings and impact freight costs, thereby affecting the costs of fertiliser and plant protection products in Australia. Our global crude oil price outlook predicts Brent crude will drop below USD 70/bbl due to an expected oversupply, although the early 2025 price rally is heavily driven by fears of escalation in the Middle East.