AUSTRALIAN rural export volumes rose 6.9% during 2025, driven by strong meat and grain shipments, with export values also lifting sharply early in 2026, the Westpac April quarterly agriculture report reveals.
Conflict in the Middle East has, however, created a weaker outlook for the year ahead.
According to the report, beef exports were up 10.8% year-on-year in the first two months of 2026, buttressed by strong demand from the US.
“Export growth is expected to slow as domestic supply tightens and trade policy headwinds intensify,” the report states.
“China’s new safeguard quotas are expected to materially reduce beef exports in [second half of] 2026, while weaker crop production will limit wheat and canola exports after several strong seasons.”
The report stated that “softer growth was always expected” this year as conditions normalised after a strong 2025, when farm gross domestic product expanded by 9.9%, “with livestock producers expected to focus on herd and flock rebuilding and crop production to soften”.
The authors noted the Middle East conflict had further weakened the outlook, predicting real farm gross value added (GVA) to contract by -0.8% in 2026, with the largest downgrade to crop production.
“This reflects higher diesel, fertiliser and freight costs linked to the Middle East conflict, alongside hotter and drier conditions, with climate modelling pointing to El Niño,” the report stated.
“Yields are expected to be lower overall, with wheat the most exposed.”
The Westpac Agriculture Commodity Price Index was said to have firmed in March but still fell 4.9% quarter-on-quarter in the 2025 fourth quarter and was just 2.3% higher over the year.
Beef and lamb prices were said to have remained high, backed by tight supply and strong external demand.
“Over the rest of 2026, prices are expected to ease as global supply weighs on wheat and sugar, while trade policy and increased competition place some downward pressure on beef prices,” the report stated.
“In contrast, canola prices have been revised higher, consistent with firmer global oilseed markets and stronger biofuel demand. Lamb prices are also expected to be stronger given a tighter supply outlook.”
The report noted “a key risk” regarding safe passage for shipping through the Strait of Hormuz.
“In this scenario, our modelling points to energy prices remaining higher for longer, with diesel and fertiliser prices still above pre‑conflict levels in 2027.”
Beef: Export volumes remain robust, up 10.8% y/y early in 2026, with the US accounting for 28% of shipments. However, China’s 205,000‑tonne tariff‑free safeguard quota is expected to be filled by mid‑year, leading to a sharp slowdown in exports in H2.
Sheep: Tight supply continues to underpin sheep and lamb prices. Despite the loss of Middle East export access, prices have remained elevated due to low supply and strong demand from the US and Europe.
Wheat: Global wheat supply remains ample, with world production estimated at a record 830m tonnes in 2025–26, capping price upside. Higher diesel and fertiliser prices, low soil moisture and an emerging El Niño are expected to weigh on yields and may sway some farmers crop choice.
Dairy: Global dairy markets have stabilised but remain uneven, with recent price gains concentrated in milk powders. Domestic supply conditions remain soft and higher fuel and fertiliser costs are squeezing margins despite temporary processor support.
Canola: Australian production for 2025–26 is estimated at 7.7mt, the second largest on record. Looking ahead, higher input costs and drier seasonal conditions are expected to limit yields, while stronger biofuel demand continues to support prices.
Sugar: Global production is forecast at 180–190m tonnes in 2025–26, with Australian output upgraded to around four million tonnes. Demand growth remains modest, with policy restrictions weighing on consumption in key markets.