Average farm profit is expected to drop from A$216,000 to A$65,000 per farm, with declining crop production and weaker livestock prices compounding rising input costs.
The forecast was outlined in the latest Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) report, published on June 2.
The downturn reflects a broader cost squeeze across the sector, with fertiliser and fuel prices remaining elevated amid global supply disruptions, while dry seasonal conditions limit yields and planting decisions.
“We expect fertiliser and fuel input costs to remain elevated in 2026–27. Farm revenue is forecast to decline due to lower crop and livestock production volumes and lower prices received for livestock,” said ABARES acting executive director David Galeano.
The report expects fertiliser and fuel price indices to increase by 43 per cent and 14 per cent in 2025–26, followed by further year-on-year increases of 2 per cent and 11 per cent in 2026–27.
Declining production
After a record year, ABARES forecasts that the value of agricultural production will fall 5% to A$98.3 billion in 2026–27.
Crops are expected to bear the brunt of the decline, with total crop output forecast to fall 21% in 2026–27 as drier conditions and higher input costs reduce both planting area and yields.
Production is expected to decline across key commodities. Wheat, barley, canola and pulses are forecast to fall by 26%, 15%, 19% and 16%, respectively.
Against this backdrop, ABARES expects the value of crop production to decline by 8%.
Despite lower production, global crop prices are expected to rise in 2026–27 due to tighter global supply, partially offsetting the fall in output.
However, ABARES said higher prices are unlikely to fully compensate for declining volumes and rising input costs, leaving farms under pressure.
Livestock producers are also expected to face weaker returns, with cattle and lamb prices projected to fall as global demand softens and supply remains elevated following strong production in recent years.
Overall, livestock and livestock product values are forecast to decline by 2 per cent, with export values also falling.
Input costs to remain elevated
At the same time, input costs are expected to remain a pressure point.
“The Middle East conflict is expected to continue placing pressure on the agriculture sector through higher input costs and weaker farm profitability over the forecast period. ABARES’ forecasts assume continued access to key imported inputs, including fuel and fertiliser, although at higher prices, reflecting observed patterns in availability and public and private responses to supply disruptions,” the report said.
Climate conditions are adding to the uncertainty, with below-average rainfall forecast across many cropping regions and the potential emergence of an El Niño event increasing downside risks to yields.
“Farmers’ decisions over the last few months have been shaped heavily by seasonal conditions and gross margins. Despite the headwinds facing the sector, farmers who have received favourable rainfall are making the most of the opportunity,” said Galeano.
“However, variable rainfall in summer and autumn has limited the area planted to winter crops and pasture growth in some regions. Also, many cropping regions are expected to face drier than average winter conditions.”
