Rabobank's chief researcher says volatility over the Russia-Ukraine war is likely to continue for most of the year, even if peace talks are successful.
Australia and New Zealand RaboResearch general manager Stefan Vogel said in 2021-22 Ukraine's shipments of grain and oilseed fell by 30 per cent and that was expected to decline even further this financial year.
"Ukraine (and Russia) are delivering a lot of challenges to output and input markets, like grain, fertiliser and energy," Mr Vogel said.
He said Australian grain prices had not risen as much as they had for some competitors.
"The challenge for farmers, this year, is how can they can benefit from the Ukraine crisis - it will be long lasting; let's all hope peace talks lead to a good outcome, but it seems doubtful there can be a quick solution found."
He said Ukraine usually exported 75 per cent of its grain and oilseed.
But he said Ukrainian farmers were experiencing two issues, even if they were able to harvest a crop in July or August.
"How do the farmers change their practices, given there is a lot of uncertainty from the war?
"All the ports are closed and we will probably see only very limited volumes hitting the world market.
"That's good news for us in Australia - at the end of the day, all import nations have to look for alternatives, so supplies from Europe, the US, Argentina, and Australia will remain in high demand."
There were also likely to be restrictions on the amount of Russian grain being exported.
It was likely Russian president Vladimir Putin would limit export volumes, to keep bread prices low.
"We think Russia will continue to do what it has already done for many years now and put in export volume restrictions," Mr Vogel said.
"Without Ukraine, the world is missing out on twice the export volumes of Australia, across grains and oilseed, so that is sizeable and will provide more opportunities for us here."
But Mr Vogel said that would be offset by rising input costs, with Belarus and Russia being major exporters of urea, ammonia and potash.
"About 30 per cent of the global exports of potash come from Belarus and 21 per cent from Russia, so that is a worrisome picture because the fertiliser industry and market is a little bit different from what we have seen in grains
"We have seen clear sanctions, even before the war."
No Belarussian potash can be shipped through the EU, meaning it has to go out through St Petersburg, doubling the transport distance and increasing costs.
That was coupled with rising gas costs in Europe, pushing up the price of fertiliser production
"We have to plan for higher prices - on top of that, comes freight.
"Freight rates are still very high, they are not as high as they were three or four months ago, but they are still three and a half to four times more expensive than usual."
Livestock and dairy producers would also have to prepare for higher prices for soy feed, after 15 per cent of Brazilian production was lost, due to dry conditions.
Soy production volumes in neighbouring South American countries had also been affected.
"Our farmers might be benefitting on the output side, with high milk prices, high beef and grain prices, but they also need to watch their costs.
"The common theme is costs are rising, but there is some good news in that milk and beef have been in high demand, so the prices in these sectors cover those costs."
Rabobank analysts said keeping track of margins and controlling input costs would be vital for farmers preparing for winter crop plantings.
In a podcast, Urea Price Halfpipe, senior commodity analyst Cheryl Kalisch Gordon and senior agriculture analyst Wes Lefroy, said while higher commodity prices were a boon for Australian farmers, record input prices meant grain growers would need to have a strong focus on margin controL for the upcoming season.
"Our analysis shows that the 'returns to key production inputs' (ratios) remain positive but have fallen, even though output prices have also increased.
"Returns to urea application in wheat production for example have fallen from nearly 10:1 in 2019 to 2.5:1 at current prices."
Greater per hectare costs of production also increased business risk for the season ahead, Dr Kalisch Gordon said.
Dr Kalisch Gordon said growers, "first and foremost", were thinking about efficiencies within their cropping businesses and how they use their nitrogen fertiliser to ensure they receive "the best bang for the buck".
"Farmers are also considering their crop choices and about planting less fertiliser-'hungry' crops and are also thinking about which nutrients they can stand to reduce in their program," she said.
Mr Lefroy said it was "really remarkable' how resilient Australian fertiliser suppliers had been over the last 12 months.
"Despite the challenges last year with COVID, port shut-downs, Chinese restrictions on exports, supply chain issues and the high cost of freight, Australia actually imported a record amount of Mono-Ammonium Phosphate (MAP) and urea.
This resilience will give growers some comfort in a difficult global situation," he said.
"These high urea prices and elevated supply risks may impact farmers' plans for the initial application for the winter crop and possibly even make top-up applications challenging in this pricing environment.
"It's important to note that procurement times are still long, so it may take up to three months for prices to actually flow through.
"It is a fast-evolving situation and there is no better time for growers to be in contact with their local fertiliser suppliers and consultants to gain an understanding of how local suppliers view the situation."