THE long-awaited recovery in global dairy prices is forecast to take its time in 2016, but Australian export values are headed for a three per cent rise this financial year, helped considerably by the weaker dollar.
Market fundamentals are also improving for sugar, wine and cotton - thanks to the dollar - according to latest agribusiness banking industry research.
Beef and sheep values are set to stay around current robust levels as Australian agriculture generally benefits from lower exchange rate and oil price tail winds.
The National Australia Bank (NAB) tips dairy export prices will rise in 2015-16 to average $3482 a tonne, while the value of Australian exports is forecast to lift 3.2pc.
After a 5pc drop in the Australian dollar against the US currency in January, dairy returns were likely to continue to be supported as our currency dipped further to a predicted average US66 cents by mid-year.
However, milk production continues to grow in the northern hemisphere production and is putting the brakes on any speedy recovery in global demand says Dairy Australia.
International commodity prices remained under pressure said Dairy Australia's industry analyst, John Droppert, although a stable domestic market and the favourable exchange rate had helped buffer the impact of declining world prices, high input costs and a dry season, particularly in Victoria.
NAB's Murray Valley agribusiness manager, Dave Davies, said producers were shielded from much of dairy's price 2015 tumult so the bank's weighted dairy export price indicator ended last year slightly up, at $3351.68/t, and was expected to approach $4000/t by late 2016.
"Australian prices are likely to be supported by ongoing global interest in our products, with free trade agreements such as the China Free Trade Agreement only helping this trade and helping us operate on a more level playing field against New Zealand," Mr Davies said.
Rabobank's head of food and agribusiness research, Tim Hunt, also put his money on global dairy markets lifting "towards the latter half of 2016".
The bank's latest agribusiness outlook upgraded sugar, wine and cotton prospects compared to last year's "subdued market conditions", with sugar prices helped by the first global production deficit in six seasons.
"The cotton market is also set to tighten, with both sugar and cotton being key beneficiaries of the weaker Australian dollar," Mr Hunt said.
However, grain and oilseed prices were still "range-bound" by large global stocks and sluggish demand growth.
Rabobank also warned further weakness in the Chinese economy was likely to have widespread consequences on demand for Australian agricultural exports.
Lower oil prices, while helpful in cutting farm input costs, were also likely to destabilise some markets by reducing global biofuel demand and making synthetic fibre more competitive.
Although our weak dollar would support farm exports considerably, currency movements in other key exporting nations would also subdue Australia's global competitiveness in some markets.
Significant currency devaluations among key global competitors had also muted market signals, encouraging commodity production in some regions despite high global stocks and falling US dollar prices - notably wheat and dairy output.
"The Russian ruble has depreciated about 50pc against the US dollar since early 2014, compared to a 20pc depreciation in the Australian dollar, which has underpinned Russian wheat returns," Mr Hunt said.
Dairy Australia noted while southern hemisphere milk production had slowed, northern hemisphere growth was persisting, particularly in Europe.
"Continuing supply growth is the key factor keeping the market depressed, but prices are ultimately a function of the supply-demand balance, and dairy demand hasn't kept pace," he said.
"In recent months, growth in global demand has been relatively small and on a slowing trend as inventories have built up.
"Exports to the Middle East and China are easing, however, many South East Asian countries continue to stock up on relatively affordable products and global exports to Japan had seen their strongest growth in years."
Despite the challenges Rabobank's national country banking manager Todd Charteris believed 2016 should be a more promising year for Australian producers, given 2015 "presented a host of challenges", led by the strong El Nino which hindered production - particularly winter crops.
"After enduring a hot and dry year, it looks as though 2016 is shaping up as more favourable, with expectations of wet, cooler weather and prospects of a La Nina (wetter) weather pattern developing in the second half of the year," Mr Charteris said.
Rabobank tips the Australian dollar will keep sliding to US64c by year's end, although NAB has anticipated a rebound back to around US69c.