Mr Sherrard says the main factors driving the trend back to higher food commodity prices include a return to world economic growth – with global GDP forecast to expand by 3 per cent in 2010 – along with increasing population levels, particularly in the developing Asian countries which are important markets for Australia’s F&A sector. Other major drivers include rising energy prices and investor activities in commodity markets.

"Rising energy prices affect food prices by increasing the demand for agricultural commodities for the production of biofuels and also because oil and natural gas are used in manufacturing farm inputs, such as fertilisers and chemicals, making farm production costs more expensive," he said.

"Investor activity on commodity markets contributed to price rises in 2007 and we are seeing investors starting to return to commodities now, which may push up prices again."

In addition, the report says, there is the potential for supply constraints on international markets if developing countries restrict trade in order to promote food security and reduce domestic food price inflation. A return to these policies could place upward pressure on global food commodity prices by dislocating trade.

While the balance looks weighted towards food commodity prices continuing to rise, there are some variables that could see downward price pressure on agricultural commodities during 2010, the Rabobank report says.

In the grains market, improved stock levels could limit price movements, with a record global grains harvest in 2008, followed by another large harvest in 2009, allowing global grains stocks to rebuild.

Also the future is not certain in relation to biofuels, Mr Sherrard says. "The use of biofuels in most countries is supported by government policies," he said. "A change in these policies could reduce biofuel demand, potentially contributing to lower price levels for grains and oilseeds."

The strong Australian currency also remains a significant concern for the agricultural sector in 2010, the report says.

"For agricultural exporters and producers, a downside of the relatively impressive performance of the Australian economy has been the strength of the Aussie dollar, particularly against the US dollar," it says.

And while the outlook for Australian agriculture in 2010 is generally positive, some commodities will be better placed than others to capitalise on the improved global conditions, the Australian Agriculture in Focus report says.