But shifting large-scale farming north to a wetter, hotter climate would be risky as animals and crops would face a higher frequency of heat stress, said a new report by the Commonwealth Scientific and Industrial Research Organisation (CSIRO).

Australia's outback, home to large scale cattle and sheep farms battling the worst drought in 100 years, would become more marginal with climate change, but the country's sugar, wine and horticulture farms could benefit from the warmer temperatures.

CSIRO examined the impact of climate change on 10 agricultural sectors in Australia worth A$40 billion (US$38 billion) a year and found negative and positive effects. The report looked at climate change forecasts out to 2070.

"We've applied the latest climate change projections to build a picture of the challenges that will affect all types of agriculture in all corners of the nation," CSIRO scientist Mark Howden said in a statement.

"For many agricultural businesses incremental changes may be enough, but some regions and industries will need to be open to more transformative changes," said Howden.

The CSIRO examined the impact of a temperature rise of two to 2.5 degrees Celsius on Australian agriculture. Significant reductions in rainfall and higher temperatures across Australia's wheat-growing lands would see reductions in yields and quality, said the report, but added that a possible reduction in frosts may increase crop options.

But it said that farmers who introduced new crop management practices, new crop varieties, altered rotations and improved water management, could turn a negative into a positive.

"In the wheat industry alone, relatively simple adaptations may be worth between A$100 million to A$500 million p.a. at the farm gate," it said.

Australia is the second-largest wheat, canola and beef exporter in the world and the largest barley exporter.

"Australian rangelands have often been associated with drought, that land can be degraded very rapidly, and that recovery of degraded lands is very difficult," said the report.

Cattle and sheep farmers face not only less rain and hotter temperatures, but soil erosion and acidification, salinisation, weed invasion and deteriorating animal nutrition and health.

The report said cattle and sheep farmers could combat climate change by adopting a conservative, but constant stocking rate from year to year and by owning multiple farms in different locations to offset climate changes.

"At a national industry level, there are likely to be winners and losers, with some rangelands becoming more productive while others become less suitable for grazing," said the report.

The Australian wine industry is the country's third-largest agricultural exporter, behind wheat and beef products, with exports for the year 2007 valued at A$3 billion.

Climate change will force winemakers to plant different grape varieties to overcome a decline in grape quality, but may open up new lands for vineyards.

"Some varieties that would not ripen in the present climate may be successfully planted in the future warmer climate," said the report. But some agricultural industries look set to benefit from climate change, said the CSIRO report. Sugar cane yields may rise with less rain and more sunshine creating a longer growing season, while a reduction in frost and less severe winters may see an expansion in horticulture.