Australia's agriculture sector is booming, with farmers expected to reap a record $66 billion for their produce this year despite trade tensions with China and the global pandemic.

At the same time, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has found that food prices jumped more than 15 per cent, as consumers paid more for red meat.

The government's commodity forecaster said decent weather conditions and a huge grain harvest drove an 8 per cent increase in the value of food and fibre compared to last year.

Its latest outlook, released today, shows 2020-21 will record a $5 billion jump on Australian farming's second most valuable year recorded in 2016-17.

ABARES acting executive director Jared Greenville said average farm incomes this year were expected to increase by 18 per cent to $184,000 a year for broadacre farmers growing crops and livestock, and $190,000 for dairy farmers.

"And we're seeing the biggest ever wheat crop and near-record winter crop production.

"Not all (farmers are doing well), but most are doing pretty well.

"We've got farm cash incomes — the returns that farmers are actually getting — pretty high in NSW, above the 10-year average, but across the rest of the country we're looking at relatively average profit levels, but that's still a big turnaround on the last couple of years when they've been well below."

Not all produce delivers big returns

While the value of the grains sector surged — almost 60 per cent gross on last year — ABARES reported an 8 per cent fall in the value of livestock production.

Despite record prices for sheep and cattle, farmers are reluctant to send stock to slaughter, preferring to keep them on farm for breeding after years of drought decimated flock and herd numbers.

The spread of African swine fever in Asia, which has wiped out hundreds of millions of pigs, also contributed to increased demand for beef and lamb.

These factors have meant higher prices paid by Australian consumers for red meat.

The fall in livestock sector value also contributed to a 4 per cent fall in total export value for agriculture to be worth $46 billion, with 2020-21 the third consecutive year that export earnings had fallen.

The value of exports to Australian agriculture's most valuable trading partner, China, are also expected to fall next year, when the result of Beijing's decision to impose tariffs on barley and wine will be realised.

Value of farm produce to fall

Dr Greenville said the improved weather conditions this year would help farmers have another decent year, but there are some headwinds expected to hinder the industry, with the value of total production forecast to fall to $63.3 billion in 2021-22.

He said it was unlikely that Victoria and New South Wales could replicate their 2020-21 harvest, the largest ever winter crops recorded by those states.

He also expected farmers to continue to focus on rebuilding sheep and cattle numbers, so less livestock would be available for slaughter.

Overall, ABARES has forecast a fall in the prices farmers receive for most commodities, apart from cotton and wool, which are expected to recover from sharp falls due to COVID-19.

Horticulture holding

According to ABARES, the value of the fruit, nut and vegetable industry is expected to represent more than 20 per cent of agriculture's gross value in the next five years.

Despite concerns that COVID-19 restrictions would hinder the number of workers available to harvest crops, Dr Greenville said returns for the sector were holding.

"We've seen some small price rises for a number of hort products but nothing significant," he said.

The full impact of labour shortage was yet to be realised, he said, and supply chains had held up during the pandemic.

Regardless of trading conditions and access to markets and labour, Dr Greenville said the results of the latest ABARES outlook proved that weather was the most dominant factor in Australian agriculture.