Australian Canola Exports Seen Falling as Middle East Disruptions Raise Costs

Australian canola production and exports are expected to fall in 2026-27 as conflict-driven disruptions in the Middle East drive up diesel and nitrogen fertilizer costs, threatening to curb output from one of Canada’s biggest export competitors, according to USDA’s Foreign Agricultural Service. 

In a report released earlier this month, FAS/Canberra forecast Australian canola production at 6.2 million tonnes for the 2026-27 marketing year, down 19% from the previous year’s near-record crop. Exports are projected at 4.7 million tonnes, a 16% decline, while domestic crush is expected to remain steady at 1.3 million tonnes. 

The outlook is significant for Canada, as Australia is a key competitor in world canola export markets and is the second-largest global exporter behind Canada. Despite the expected decline, Australia’s 2026-27 crop would still rank as the country’s fifth-largest on record, while exports would be the sixth largest if realized. 

FAS said the Middle East situation has disrupted energy and fertilizer supply chains for Australian producers, pushing diesel prices about twice as high and more than doubling nitrogenous fertilizer prices during the planting period. Those pressures are expected to influence producer decisions, particularly because canola and wheat are among Australia’s most nitrogen-intensive winter crops. 

Growers are expected to shift some acres away from high nitrogen-demand crops toward other options like barley, pulses and legume hay, while some may increase fallow area to conserve moisture and manage weeds. FAS forecast Australian canola harvested area down 6.8% to about 8.5 million acres, while average yield is expected to fall 13%. 

The FAS report said the relatively modest year-over-year decline in expected canola area is due to the fact that a significant portion of fertilizer requirements — particularly for planting — had already been secured prior to the escalation in prices. The lower yield forecast, meanwhile, reflects a “reversion from the exceptionally high yields achieved in 2025-26, as well as more conservative fertilizer application strategies.”