Australian farmers should favour wheat over canola as margins recover, Rabobank says

Australian farmers should make significantly more money on their crops in 2024/25 than in the previous season thanks to a drop in fertiliser and chemical prices, with plantings likely to favour wheat over less profitable canola, Rabobank said on last Thursday.

Australia is one of the world's biggest agricultural exporters. Dry conditions last year hit crop yields but a swing to wetter weather heralds bigger harvests in the coming season and farmers have become more optimistic.

Rabobank said the cost of fertiliser and agrochemicals could be as much as 20% lower during 2024/25, more than offsetting a projected 6% decline in average grain prices.

Gross margins for farmers should rise from last season's low levels but still lag seven-year averages, it said.

Wheat farmers should earn a gross margin of A$281 ($186) a hectare, or 34%, up from an average of A$158 in 2023/24, the bank said.

For malting barley, it forecast gross margin of A$282 a hectare, or 33%, up from A$225 in 2023/24, and for canola a margin of A$251 a hectare, or 26%, up from A$158.

Pistoia said because wheat had the lowest variable cost it could expand its area over other crops, especially canola.

Farmers are likely to plant more than 12 million hectares of wheat, more than four million hectares of barley and around three million hectares of canola, Rabobank said.

That compares to plantings of around 12.4 million hectares of wheat, 4.2 million hectares of barley and 3.5 million hectares of canola in the 2023/24 season, according to Australian government data.

Australian farmers will begin planting in the coming weeks and harvest from around October.