Higher prices and slower economic growth lie ahead for Australia as farmers brace for drier conditions from a strengthening El Nino, according to Commonwealth Bank analysis published by 7NEWS.
The crucial winter cropping period began before the climate phenomenon fully set in, so most regions have been spared the worst so far, with the exception of northern New South Wales and Queensland. CBA agricultural economist Dennis Voznesenski noted that the Bureau of Meteorology has forecast the El Nino to strengthen over the coming summer and into spring, raising concerns about moisture reserves drying up for the 2027 crop.
The Australian Bureau of Agricultural and Resource Economics and Sciences currently forecasts a 61 million tonne harvest for 2026, which would rank as the fourth-best season on record. But Voznesenski warned that if dry conditions persist, the impact on next year's crop could be far more severe.
Farmers are already adjusting. Rabobank senior grains analyst Vitor Pistoia said growers are reducing planting area and switching from water-intensive crops like canola and chickpeas to less thirsty grains such as wheat and barley. "That limits their upside (income) potential because ... in a blue-sky scenario, usually chickpeas and canola deliver better financial results than wheat and barley," Pistoia told AAP.
Livestock farmers are also thinning their herds as drier conditions reduce pasture. The resulting increase in slaughter numbers pushes down livestock prices, but consumers are unlikely to see lower beef prices. Voznesenski said meat prices — particularly beef — are likely to remain elevated because of record export demand from the United States.
National Farmers Federation president Hamish McIntyre, who runs a property in southwest Queensland, has been selling off older animals and building up feed stores. He noted that rising irrigation costs reduce production of water-intensive fruits and cotton, as well as meat and grains. "Which drives up the costs in our metropolitan areas, which is inflationary, which is a worry," McIntyre said.
The agricultural sector is also facing elevated oil and fertiliser prices, rising interest rates and worker shortages, compounding the challenges from the dry weather.