Prices for Australia's biggest agricultural export, wheat, are likely to remain depressed for another 12 months, according to Rabobank.
In part, wheat growers have become victims of their own success.
Big crops across the globe have contributed to a wheat glut unable to be absorbed by sluggish global economies. Wheat prices have slipped about 30 per cent in the past year to a decade low.
"Unless we see any climate disruption, prices will remain low for the next 12 months," said Rabobank Food and Agricultural research general manager Tim Hunt.
The Food and Agriculture Organisation of the United Nations (FAO) increased its forecast for 2016-17 global cereal production late last week to nearly 2.56 billion tonnes, about 40 million tonnes more than 2015.
This is part due to expectations for record production in Western Australia and an above average season on the eastern seaboard.
What food boom?
"The volume will offset things but what is frustrating is that it won't be that knockout year that ag needs," said NSW grower Dan Cooper.
"Margins have got thinner and thinner so people are surviving but they are not bringing in enough to keep in reserve for that bad year."
What happened to the so-called "food boom"?
Mr Hunt said in response to predictions for surging demand, farmers around the world responded and farms expanded. But demand has been slower than anticipated as economies struggle.
Last year the European Union scrapped milk quotas that were aimed at stopping over-production so its farmers could join the race to feed consumers in Asia. Global milk prices crashed to a record low.
Worst is over
But there are signs the pricing outlook is improving.
The FAO food price index rose in August to its highest point since May 2015, as increases in dairy, oils and sugar offset weak cereal prices.
Mr Hunt said the worst was over for the nation's dairy farmers because milk production was falling in major markets except the United States.
"We are finally turning a corner," he said. "We strongly believe we are past the worst."
Mr Hunt expected the milk price to rise 15 per cent in the next year to trade in the low $US3000 per tonne.
There has been a bright spot for Australian agriculture with beef producers enjoying record prices after drought cut herd numbers and squeezed supply.
Mr Hunt said prices, which are up 23 per cent on a year ago, were unsustainable and would fall about 15 per cent.
But even at those levels producers would make handsome margins.
This story first appeared on The Australian Financial Review.
