Production is set to rise to a record level of 8.1 million tonnes in 2026/27, more than 15 per cent above the five year average, according to the Rabobank winter crop forecast released on Tuesday.
The canola price is hovering above $800 a tonne, which is the highest it's been in several years due to demand from several sectors.
"Growth in global consumption of oilseeds is expected to outpace production, while stronger biofuel demand should reduce stocks and support canola prices," analyst Vitor Pistoia said.
Nearly 60 per cent of the canola haul will come from WA, with a 41 per cent increase in planting area this season.
Growing conditions in southern Queensland and NSW have been somewhat tougher, as dry conditions forced some growers to forego sowing canola, Nutrien Ag agronomist Luke Doel told AAP.
Crops in southern parts of NSW were boosted by late rainfall in May.
"We've had the late start, which has been offset by the unusually warm winter," said Mr Doel, who is based in the state's central west,
"So everything's come in three or four weeks early.
"Flowering started mid-July, which is very early."
The mixed climatic conditions across Australia have led to a decline in total winter crop volumes, at a forecast 62.9 million tonnes.
Though that is nearly eight per cent down on last season, it is still 2.6 per cent above the five year average, the report said.
"Production is more concentrated in southern and western regions of the country this year," Mr Pistoia said.
Wheat growers were forecast to harvest a total of 31 million tonnes, which is 13 per cent down on last season, while barley and pulse production would also decline, according to the forecast.
Predictions of a strong El Nino climate pattern have influenced producers' plantings decisions and may affect prices.
A Commonwealth Bank analysis released in early October said El Nino could cost $13.4 billion over the next two years, leaving gross domestic product about 0.45 percentage points lower than it otherwise would be.
6°C