Winter crop production is expected to fall by a third but a boost to sugar and horticulture output will help deliver Australian agriculture's third highest annual gross value on record.
The latest forecast from the Australian Bureau of Agricultural and Resource Economics and Sciences, or ABARES, predicts overall agriculture production value will reach $86 billion this financial year, down slightly from the record $92 billion last year.
"We're shifting out of the record years of the last couple of years, supported by high rainfall and high prices, we're starting to see production come off and prices starting to come off quite significantly," ABARES executive director Jared Greenville told AAP.
The crops and commodity reports expect drier conditions to cause total crop production value to fall 20 per cent to $46 billion.
Dr Greenville said the reports show the sector remains strong despite challenging conditions.
“National winter crop production is expected to be around 45.2 million tonnes, slightly below the 10-year average," Dr Greenville said.
Wheat production has been revised down from the June forecast and is expected to fall by 36 per cent to 25.4 million tonnes, slightly below the ten year average.
Summer crop plantings will fall from last year but still remain above the average, due to high levels of water storage taking the sting out of lower spring and summer rainfall.
But horticulture and sugar are bucking the trend.
Horticulture will likely increase by $1 billion to reach a record $18 billion, reflecting higher production and increasing domestic fruit and vegetable consumption. And sugar value is forecast to increase 15 per cent from $2 billion to $2.3 billion.
Drier conditions will also mean livestock producers are likely to send more animals to slaughter.
Saleyard prices for cattle and sheep are expected to fall as supply increases, while sheep prices are also forecast to fall below their long-term average.
Along with a fall in global meat prices, the value of livestock production is forecast to fall by $1.6 billion to $34 billion in 2023/24.
Exports are also on the decline, with ABARES expecting them to fall by 17 per cent to $65 billion.
“It is important to remember that falls are coming off the back of record years which have helped rebuild financial reserves and our agricultural sector remains resilient and competitive," Dr Greenville said.