The NSW government has ruled out a 3,000ha trial of genetically modified (GM) canola but will go ahead with three smaller research trials.

The NSW government has ruled out a 3,000ha trial of genetically modified (GM) canola but will go ahead with three smaller research trials to test different varieties of the crop against conventional canola.

NSW Agriculture Minister Ian Macdonald said the decision to hold back on the large coexistence trial was a result of opposition from grain exporter AWB Ltd, which was concerned about exporting the crop.

The announcement dashes the hopes of agribusiness giants Monsanto, Bayer CropScience and Australian Oilseeds Federation, which had hoped to trial the 3,000ha of GM canola this year.

Green groups welcomed the news, saying it showed the NSW government recognised the trials inherent risks to markets, consumers and the environment.

But farmers said the decision may hurt Australias long term interests.

Western Australia and Tasmania have both banned GM crops, while Victoria last week extended its moratorium on the technology by four years. South Australia also has a moratorium in place.

Mr Macdonald said it had been necessary to take notice of the concerns raised by AWB.

"If one takes into account the fact that the AWB is the largest grain exporter by a significant factor ... we have to be very careful that we dont upset their markets," he said.

"Hopefully, the AWB and the other grains organisations and the proponents can consider the issues in the future and if they can find some unity then a proposal could be put forward some time in the future."

A spokesman for AWB said the company supported coexistence trials as long as the canola was not exported.

The GM canola should be used in domestic feed for stock or for research.

"We supported these trials but we had concerns about the possible impact if the canola was exported," he said.

Monsanto executive director Claude Gauchat said the company was extremely disappointed by the announcement.

Australian farmers would now be on the back foot against their overseas competitors, he said.

"This staged approach will only delay good decision making in time for Australia to capture the benefits of this technology and compete on a level playing field," Mr Gauchat said in a statement.