Farmers Face Tight Margins as Input Costs Rise

Sydney — Australian grain growers face another difficult year in 2027 as rising fertiliser, fuel and freight costs threaten profitability despite strong harvest prospects in parts of the country, according to Rabobank.

In its Field Crop Margin Outlook 2027, the bank’s RaboResearch division warns that abundant global grain and oilseed supplies will limit price growth, while higher input costs continue to squeeze farmers’ returns.

Victoria, South Australia and Western Australia are better positioned to withstand the pressure, with favourable growing conditions expected to support strong yields.

However, increased production could push down local prices, limiting the benefits to growers.

“Disruptions in the Strait of Hormuz, the Red Sea and the Black Sea had coincided with Australia’s peak farm input procurement and early winter sowing, increasing growers’ concerns over input affordability and availability,” report co-author, Oskar Mitchell, a RaboResearch Agriculture Analyst said.

Higher costs have prompted some farmers to reduce fertiliser use and shift planted areas from wheat to less input-intensive crops.

Canola plantings have remained broadly stable nationally, supported by favourable subsoil moisture in some regions.

Mitchell warned that lower spending on crop inputs could constrain yields if seasonal conditions fail to compensate for reduced investment.

In Queensland and northern New South Wales, below-average rainfall and weaker yield prospects leave growers particularly exposed to high production costs.

The potential effects of El Niño add to uncertainty over eastern Australia’s cropping season.

Some farmers have brought forward fertiliser purchases and increased on-farm diesel storage to reduce supply risks, although these measures require additional working capital.

Globally, Rabobank expects the recovery in crop margins to remain uneven through 2027, with weather conditions, geopolitical tensions and agricultural supply levels shaping returns.

The report says the United States faces significant pressure, with corn margins close to break-even after operating costs and negative when full production costs are included.

European margins could improve if yields normalise, while Brazil is expected to retain comparatively healthy operating margins for soybeans and corn.

Argentina’s soybean margins are also expected to improve, although higher fertiliser costs and taxation continue to threaten corn profitability.