The bank's Australian Agriculture Outlook found while lamb prices will remain well below levels of previous years, production should remain high.
"It's been a really tough six months for the Australian sheep industry driven by that limited capacity to process that large national flock," report author Sean Hickey said.
"Those retail prices are finally starting to come down."
In September, lamb producers earnt about half the price their animal was worth the previous year, with lamb around $4.22 a kilo, while lamb was worth $7.58 a kilo a year ago.
Retail lamb prices remained static over the same period with consumers paying just under $20 a kilo, but supermarkets have dropped their prices over the past four months.
"We would expect much larger price declines will be seen in the quarterly December figures which would more closely reflect the sharp declines seen in the price farmers are receiving," Mr Hickey said.
A better year is also on the way for almond producers, who were hit by the deadly varroa mite in 2022, which impacted production after pollination services were limited.
Australian output of almonds is forecast to increase by as much as a third as the availability of beehives improves.
Total output is estimated to rise by 28 per cent to 140,000 tonnes in 2024.
"A varroa mite related shortage of beehives in key regions and challenging conditions were the key factors in last season's reduced yields," the report said.
"Strong export demand combined with low domestic carryover stocks will also push almond prices higher over the first half of the year."
Horticulture more generally is expecting a boost, which is good news for the fruit and vegetable regions of Victoria.
"Drier weather conditions combined with relatively cheap irrigation costs are expected to drive above average production and quality across most key varieties coming into 2024," said Wayne Saunders, Rural Bank's regional manager for northwest Victoria.
The report found table grape production will reach near record levels this season while stone fruit production is also expected to jump substantially.
Rural Bank expects milk production to remain flat while farmgate milk prices will fall from record highs.
Wool markets will also remain stable in 2024 with ongoing soft demand.
Australia's beef production is expected to lift eight per cent in the first half of 2024, while winter cereal production will fall from the strong results it has posted over the past three seasons.
Nationally the wheat crop of 25.8 million tonnes is down 34 per cent from last season's record.
The report found that improving trade conditions throughout the back half of 2023 and supply chains returning to normal will help boost Australia's agricultural exports in 2024.
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