Western Australia's Wheat Decline Presents Golden Opportunities in Barley and Canola

Western Australia's wheat crop is set to decline by 13% in 2025–26, driven by hotter autumns, parched soils, and erratic rainfall. Yet, beneath this challenge lies a compelling investment thesis: the shift to barley and canola could offer outsized returns as farmers pivot to more resilient crops and global demand surges.

The Wheat Crisis: A Perfect Storm
Western Australia produces 40% of Australia's wheat, but the 2025–26 season is shaping up as a struggle. ABARES forecasts production to drop to 11 million tonnes—still 9% above the 10-year average—but yields are projected to fall 12% due to dry soils, especially in northern regions like Geraldton. The Bureau of Meteorology's outlook for June–September hints at below-average rainfall, amplifying risks.

Barley: The Drought-Resistant Darling
Barley is emerging as the crop of choice in this arid climate. Plantings rose 5.6% to 1.9 million hectares in 2025–26, with short-season varieties like Maximus CL gaining traction in dry zones. Though yields dipped 12% to 2.95 tonnes/hectare, the expanded area has cushioned production, which now totals 5.6 million tonnes.

The crop's resilience stems from its hardiness and strong pricing dynamics. Barley's versatility—used for animal feed, malt, and even human consumption—aligns with global demand. As wheat supplies tighten, barley prices could climb, especially if Australian exports fill gaps left by lower production.

Canola: A Southern Success Story, Northern Struggle
Canola's fate is split. Plantings rose 6.3% to 1.7 million hectares, but northern regions like Geraldton slashed sowing by over 50% due to bone-dry soils. Southern WA, however, thrived, with rains enabling a 2.8 million-tonne harvest. This regional divide underscores a key opportunity: investors should focus on southern growers and exporters.

Canola's oil is a critical input for food and biofuel industries, and global demand remains robust. Yet, its reliance on moisture makes it a high-risk, high-reward bet.

The Investment Playbook
1. Barley Plays:
- AGRI ETFs: Exposure to Australian agricultural commodities via the VanEck Vectors Agribusiness ETF (ARCA:ARCA).
- Land Holders: Companies with significant acreage in WA's barley belts, like Lands Acquisition Fund (ASX:LAF), may see land values rise.

1. Canola Catalysts:
2. Exporter Stocks: Companies like CBH Group, which handles 75% of WA's grain exports, could benefit from canola's premium pricing in Asia.

3. Regional Focus: Invest in firms with operations in WA's south, where yields are less weather-sensitive.

4. Weather-Linked Risks:
   Monitor the Bureau of Meteorology's rainfall outlook (June–September) for critical updates. A dry spell could send prices spiking, while timely rains might stabilize supply.

The Bottom Line
Western Australia's wheat decline isn't just a problem—it's a pivot point. Barley's reliability and canola's niche in global markets position both crops for growth. Investors who act now could reap rewards as farmers adapt to climate realities and global buyers seek alternatives to scarce wheat.

Final Note: Diversify geographically within WA and pair these plays with weather derivatives to hedge against climate risks.