Australian crop gross margins 2026: Outlook and key drivers

As the Australian grain industry moves into the 2026/27 season, the sector is operating under renewed margin pressure. Global grain oversupply across major exporting regions continues to cap price upside and maintain a broadly bearish sentiment across grain markets. Should the season deliver below-average yields, gross margins are expected to be significantly thinner than those achieved in recent years. At the same time, farm input costs remain structurally elevated, with fertilisers in particular continuing to weigh on cost structures and compress overall profitability. In addition, the expected appreciation of the Australian dollar warrants close attention, as it has the potential to further erode export returns and farmgate prices. RaboResearch's Australia agribusiness outlook 2026 provides a comprehensive view of the forces shaping the sector.

For the 2026/27 season, average gross margins are expected to decline across all states, marking a broad-based deterioration from both last season and recent historical norms. Queensland is projected to see the sharpest contraction, with average margins falling from an estimated 36% in 2025/26 to around 15% in 2026/27. Western Australia is expected to follow a similar pattern, with margins declining from 38% to 23%. We anticipate more moderate, but still material declines in New South Wales, from 35% to 25%, Victoria, from 36% to 32%, and South Australia, from 37% to 33%.

At the crop level, margin compression is expected across all major commodities in 2026/27, although the extent of the decline varies. We project national wheat margins to ease from around 28% to 19% and expect barley margins to fall from 29% to 21%, leaving both crops around one-third below their long-term averages due to rising global stocks and subdued prices. In contrast, we expect oilseeds and pulses to retain relatively stronger margin support and remain close to their long-term averages. We forecast canola margins to fall from 56% to 30%, chickpea margins from 71% to 47%, and lentil margins from 62% to 56%, supported by tighter global supply conditions and structurally stronger demand.

Tighter gross margins are likely to heighten growers' sensitivity to the longstanding trade-off between production risk and price response. In a scenario of low grain prices and rising input costs, greater emphasis may be placed on crops that have historically offered relatively higher margin resilience under variable seasonal conditions, such as barley. At the same time, canola is expected to retain a meaningful share in cropping programs despite its higher upfront cost structure, owing to its stronger margin potential relative to wheat and barley. This dynamic extends to genetically modified (GM) canola, which faces discounts of up to AUD 100 per tonne relative to non-GM in early 2026 at Australian ports. The area growth in pulses seen in recent years is likely to lose momentum amid a weaker margin outlook, but pulses remain a profitable option in higher-yielding regions, further supported by their benefits in crop rotation.