The value of all that is farmed in Australia has fallen to $58 billion, from $63.8 billion two years ago.

Key points: The eastern drought significantly reduced the 2018–19 winter crop, but a bumper WA crop provided a buffer to the national total

The eastern drought significantly reduced the 2018–19 winter crop, but a bumper WA crop provided a buffer to the national total A significant decline in live animal exports contributed to the fall

A significant decline in live animal exports contributed to the fall It could take more than 5 years for the value of all that is farmed in Australia to return to 2016-17 levels

In its latest commodity report, released today, ABARES found improved commodity prices and the low Australian dollar had softened the decline, largely driven by drought.

"Drought in the eastern states significantly reduced the 2018–19 winter crop, but one of the largest Western Australian harvests on record has provided a buffer to the national total," it said.

Livestock industries also contributed to the decline, with ABARES reporting the volume of livestock products dropped by 2 per cent this year.

"Milk and wool production have been affected by the drought, and a significant decline in live animal exports also contributed to the fall," it said.

"This is largely because of cessation in live sheep exports during the northern hemisphere summer months."

ABARES reported that floods in Queensland last month could further reduce the volume of live cattle exports.

Despite increasing risks to trade, it forecast a recovery in the value of Australian agricultural production in 2019–20 to be worth around $59 billion, if seasonal conditions improved.

Farm produce values are then expected to hit $61 billion by 2023–24.

Are farmers making money?

High commodity prices and a low Australian dollar kept farm incomes "comparatively high overall" this year, ABARES reported.

Beef and veal producers are set to endure a difficult 2019–20. ( Supplied: ABARES )

While farm incomes varied greatly between regions, it found farmers outside drought-affected regions were likely to have an above, or well above, average on-farm income.

Low winter crop production in the eastern states drove up the demand and price of fodder and grain, creating opportunities for farmers who harvested a crop.

"Average farm cash incomes on broadacre farms in Western Australia are projected to increase from $368,000 per farm in 2017–18 to $490,000 per farm in 2018–19," it said.

But ABARES also reported 75 per cent of dairy farmers, and half of all broadacre farmers were expected to receive a lower income in 2018–19 compared to last year.

Dairy farm incomes fell by more than $67,000 on average.

ABARES attributed that to the high cost of production, including feed and water prices, to falling dairy farm incomes, and a drop in forecast milk production.

"At the national level, the average farm cash income for dairy farmers is projected to decrease from $160,900 per farm in 2017–18 to $93,000 in 2018–19," it said.

The average farm income for sheep properties increased from $131,600 per farm in 2017–18 to $142,000 in 2018–19.

The story with exports

Export earnings were expected to fall by 6 per cent this year, buoyed by the low Australian dollar which depreciated by 10 per cent against the US dollar.

"During the drought years of 2002–03 and 2006–07 the Australian dollar appreciated but, in contrast, the Australian dollar depreciated during the 2018–19 drought," it said.

ABARES also forecast export earnings to fall to $25 billion by 2019–20, before a projected increase of 0.8 per cent each year to be worth $47 billion by 2023–24.

It said while population and income growth in export markets would drive demand for agricultural exports, global trade issues posed a risk.

"Trade tensions between China and the United States [our largest and third-largest export markets respectively] could affect global income growth and reduce import demand from not only the United States and China but also from across Asia."

In 2017–18 almost 70 per cent of Australia's agricultural exports went to Asia, with exports to China valued at $11.8 billion.

Increasing competition from major exporters is also expected to test Australian exporters.

"For example, increased US beef supply is forecast to reduce demand for Australian beef in the United States and Japan [and] low cost wheat exporters such as Argentina and the Russian Federation are expected to compete strongly with Australia in price-conscious Asian grain markets," ABARES reported.

The commodity forecaster also warned that new trade agreements between Australia's key markets and its competitors, such as the EU–Japan deal, were increasing competition.

Next year …

ABARES forecasts a 4 per cent increase in the volume of farm production next year, assuming average seasonal conditions.

Farm production is then expected to increase by 1.5 per cent year on year, but ABARES acknowledged there was a lot of uncertainty about next year, much of it driven by low soil moisture and Australia's ability to rebuild its cattle herd and sheep flock.

It said farmgate prices would remain "virtually unchanged" in 2019–20 with the average price of crops likely to offset a decline in livestock prices.

"Prices for cattle, lamb and wool are forecast to decline but to remain historically high, after increasing significantly over recent years," it said.

The National Farmers' Federation has a plan to increase the value of Australia's farm industries to $100 billion by the year 2030.