The man was operating the hay baler at around 3.30pm when his right arm was caught in machine, resulting in the partial amputation of his arm.
The man managed to call for help and was later airlifted to Canberra Hospital for emergency medical treatment.
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Wagga police inspector Peter McLay said officers were treating it as a workplace accident, and had handed the case over to SafeWork NSW for further investigation.
"This is obviously a very serious workplace injury, and SafeWork NSW will be conducting an investigation into the cause of the incident," Inspector McLay said.
"We do not have his current condition, but it is expected he will survive."
A SafeWork NSW spokesman said investigations were ongoing.
"SafeWork NSW is investigating an incident where a 36-year-old farm contractor suffered serious injuries to his arm after it was caught in a hay baler near Marrar," he said.