Agricultural forecasting for 2026 across Australia and New Zealand involves more than usual uncertainty given the range of variables affecting production and returns.

Australian wheat production for the 2025-26 harvest is tracking toward 31 million tonnes, slightly above the 10-year average but well below the exceptional 2023-24 harvest of 39 million tonnes. Growing conditions have been variable across regions, with Western Australia performing well while parts of New South Wales experienced dry conditions at critical growth stages.

Global wheat prices are currently sitting around USD 235 per tonne, which provides reasonable returns for Australian growers given relatively controlled input costs this season. The key question for 2026 is whether Russian and Ukrainian production remains disrupted enough to support these price levels, or whether increased production from other origins pushes prices lower.

Barley exports from Australia face continued challenges in the Chinese market despite the formal resolution of trade restrictions. Chinese buyers have developed alternative supply relationships during the period when Australian barley was effectively banned, and these relationships aren’t unwinding as quickly as the industry hoped. The 2026 barley outlook depends partly on whether those trading relationships can be rebuilt.

Australian cotton production for 2025-26 is forecast at around 3.2 million bales, down from 4.1 million bales in 2024-25. Water allocation constraints in key growing regions limited planted area, though yields are expected to be reasonable where cotton was planted. Cotton prices have softened from recent peaks, reducing returns even for growers who achieved good production.

The Australian beef sector enters 2026 in a rebuilding phase of the cattle cycle. Herd numbers are starting to expand after several years of destocking, which means reduced slaughter numbers and export volumes in the near term. However, prices should remain supported by tight global supplies. The outlook is for modestly reduced export volumes but stable to higher prices.

New Zealand’s dairy sector faces what’s expected to be another stable but unspectacular year. Fonterra’s forecast milk price for the 2025-26 season sits at NZD 8.00-8.20 per kilogram of milk solids, which provides adequate returns for most farmers but nothing exceptional. Global dairy demand growth is modest, with Chinese demand in particular remaining subdued.

The shift toward higher-value dairy products continues in New Zealand. Whole milk powder, historically the primary export product, represents a declining share of production as processing capacity shifts toward cheese, butter, and specialty nutritional products. This value-add strategy should support returns even if overall volumes grow slowly.

New Zealand’s sheep and beef sector is forecasting relatively stable conditions for 2026. Lamb production is expected to decline marginally as the national flock continues its long-term contraction, but prices should remain firm given global supply constraints. Beef production may increase slightly as some pastoral land shifts from dairy back to beef production.

Horticultural sectors in both countries show divergent outlooks. New Zealand kiwifruit production continues expanding with new plantings of premium varieties maturing. The industry is targeting exports of around 180 million trays for the 2026 season, up from 165 million in 2025. Returns per tray are expected to remain strong given sustained demand in Asian and European markets.

Australian horticulture faces more variable conditions. Citrus production should be strong with favourable growing conditions, but global supply is also increasing, which may pressure prices. Table grapes are tracking toward a good season volume-wise, with exports to Asia expected to remain solid. Avocado production continues increasing but the market is becoming more competitive.

Wine sectors in both countries continue adjusting to structural challenges. Australian wine exports remain constrained by Chinese tariffs that show no signs of being removed. The industry is slowly reorienting toward other markets, but this takes time and involves accepting lower price points. Vineyard values have declined in many regions as the sector adjusts to new realities.

New Zealand wine production for the 2026 vintage is expected to be slightly below average due to spring weather affecting flowering and fruit set in some regions. However, quality indicators look promising. Export values may increase despite lower volumes if the vintage quality supports premium pricing.

Input cost trends are critical for agricultural profitability across all sectors. Fertiliser prices have stabilised after the extreme volatility of 2021-2022 but remain above historical averages. Fuel costs are relatively contained. Labour costs continue rising at 4-5% annually, creating margin pressure for labour-intensive operations.

Climate patterns create significant uncertainty in agricultural forecasts. The Bureau of Meteorology’s outlook suggests neutral ENSO conditions for the first half of 2026, which typically produces relatively normal rainfall patterns. However, the Indian Ocean Dipole may move into positive phase, which could create drier conditions in southern Australia during autumn and winter.

Water availability will be critical for irrigated agriculture in Australia. Current water storage levels in the Murray-Darling Basin are reasonable at around 65% of capacity, but this could change quickly if rainfall during the first half of 2026 disappoints. Water allocation prices have moderated from extreme 2023 levels but remain elevated.

Technology adoption in agriculture continues advancing, though at varying rates across sectors and regions. Precision agriculture tools are becoming standard in broadacre cropping, while adoption in livestock sectors is more gradual. Data-driven decision making is improving farm management, though the full productivity benefits take years to materialise.

The carbon farming opportunity represents a new revenue stream for some agricultural operations in both countries. However, the economics remain marginal for many farmers, and the regulatory frameworks continue evolving. The 2026 outlook for agricultural carbon credits is for modest growth in participation but continued uncertainty around long-term viability.

Looking at the overall agricultural outlook for 2026, the picture is one of modest stability rather than dramatic growth or contraction. Most sectors are adjusting to new normal conditions after the volatility of recent years. Prices are expected to remain relatively stable, production should be close to trend, and profitability will depend heavily on individual farm management rather than sector-wide booms or busts.