Soft commodities like wheat have avoided the worst of the downturn affecting oil, iron ore and other hard commodities, but in general the sector is still trading at the bottom of its range, say analysts.
"In general terms the agrisector in Australia is certainly faring a lot better than what the hard commodity sector is," said ANZ's senior agricultural economist Paul Deane.
"You wouldn't say that soft commodities have risen as much as what hard commodities have, and nor have they fallen as much. And with the weaker Australian dollar that's taken a lot of the sting out of falling global prices over the last three or four years."
Fortunately for Australia, so far this year one of its biggest soft commodity exports – wheat – has done reasonably well.
According to ANZ's recent 'commodity call' note, "grain markets are one of the few commodities still proving immune to the broader sell-off in the commodity complex."
Commodities like iron ore, copper and oil have been plunging since the beginning of 2016.
Corn and wheat prices are "tracking sideways" within well-established trading ranges, said ANZ. Wheat prices were tipped to increase by 13 per cent over the next 12 months while corn was tipped to slip 3 per cent.
Cheaply freighted Ukranian wheat was a major threat to Australia's traditional markets in Asia, with Thailand quadrupling its purchases of Ukrainian wheat over the past six months. Indonesia also bought up Ukrainian wheat.
Sugar, by contrast, was "one of the worst performing commodities" and cotton had also done poorly, said ANZ.
Prices for both fell in January after breaking key support levels.
However, cheap sugar was set to fuel demand and prices could be expected to rebound 30 per cent over the next 12 months, said the bank.
"Sugar prices for Australian growers haven't really been great. They picked up late last year which was an opportunity to move from break-even to a mild profit. They've come back a little bit since," said Mr Deane.
Cotton, however, would continue to trade lower and be about 2 per cent cheaper in a year's time.
"The recent sell-off in cotton prices has gone part-way in addressing cotton's overvaluation against synthetics, but prices still have further to fall to regain competitiveness."
One Australian soft commodity that continued to do exceptionally well was beef – about the only "bull" market currently going, said Mr Deane.
According to the Australian Eastern Young Cattle Indicator, beef prices were at $5.95 per kilgram – close to January's highs of $6 per kilogram, which was double the price beef was selling for in 2014.
"Even though global beef prices have been falling, Australian beef prices have disconnected from the global price because of domestic demand and supply issues," said Mr Deane.
"I am circumspect as to whether it can go much lower because global beef prices have been falling.
"Australian beef stands out among other markets as looking quite expensive."
Agricultural banker Rabobank have forecast a "brighter year" for Australian agriculture in its just-released Agribusiness Outlook 2016.
Further depreciation of the Australian dollar will help Australian agriculture, while low oil prices will ease costs but also weigh on agricultural commodity prices, said the report.
"China will remain a potential downside risk to the outlook however, with any further weakness in the Chinese economy likely to have widespread consequences on the demand for Australian agricultural exports."
Other key "swing factors" expected to impact Australia's agricultural industries include the dissipation of the El Nino weather pattern and global financial market volatility, said Rabobank.
The report forecast a positive outlook for most agricultural sectors, with prospects remaining particularly bright for beef and sheep producers, with upside for cotton, sugar, dairy and wine.
Fairfax Media Australia
