THIS year is set to be "extremely challenging" for Mallee farmers, as the agriculture sector faces its third-consecutive contraction in farmgate revenues – according to a new industry report.

Rabobank's Agribusiness Outlook 2020 said while a strong rebuild in national agriculture production was possible in 2020/21, it is "less than likely" as much of the country's agriculture sector continues to grapple with low soil moisture and water storages, feed shortages and the localised impacts of bushfire.