Canola and red meat have emerged as early beneficiaries of the Middle East conflict as grain markets fail to deliver the rally many Australian growers had expected.

Despite escalating geopolitical tensions and surging input costs, grain prices remain capped by heavy global supply and an approaching northern hemisphere harvest, tempering any sustained upside.

RaboResearch general manager Stefan Vogel said demand for biofuel in Europe had pushed canola prices up about 10 per cent since the war began in late February. Wheat and barley has recorded similar gains, albeit off a very low base and “they’re already retreating”.

“In the last eight, nine months we’ve harvested really good (grain) crops in many parts of the world, including Australia,” he said.

Dr Vogel said the conflict was unlikely to materially impact global crop yields this year, limiting any further price upside. He said Australia could feel more pressure than other producers due to its planting window, with northern hemisphere crops to be harvested in the coming months.

“We are probably going to see a reduction in yields here because of the high inputs, but also depending on the weather, especially if you look in parts of NSW, it is pretty dry.”

High input costs were also unlikely to translate into stronger returns for growers, with about 80 per cent of Australia’s grain and oilseed production exported into global markets.

However, Dr Vogel warned that by 2027, if input prices remain high, “we will see many farmers in the world cutting back acreage when they plant”.

Beyond grains, other commodities have shown more resilience. Cotton “has moved up a little”, supported by rising prices for man-made fibres, while sugar has lifted in line with increased ethanol demand. Livestock markets have also held firm.

“We’ve seen prices for beef and sheep actually at pretty good levels for quite a continued period of time, and that is largely driven by the strong demand we have in the world market, especially for beef in the United States.”

However, he warned China’s beef import quotas could create downside risk later in the year as Brazil and Australia are potentially forced to ship more meat into other markets, hurting prices.

Victorian Farmers Federation grains vice-president Jason Mellings said he was preparing to sow canola and had not altered his rotation.

“It has cost me more but I have be able to secure the nitrogen I need,” he said.