Spokane, Washington - July 9, 2015 - Extreme heat throughout the Northwest is raising concerns for crop yields and quality. Wheat, apple and cherry crops face the most significant hurdles, followed by potato, sugar beet and hay crops. Wine grapes are drought tolerant and less affected. Commodity markets are generally lower, pressured by ample supplies and competition for export markets. Exceptions include historically high beef prices. The market outlook for the forest products and nursery industry is positive, supported by ongoing improvement in the U.S. economy. 

The following highlights depict the general health of select industries included in Northwest Farm Credit Services’ Knowledge Center Market Snapshots, which are available at northwestfcs.com/resources.

Beef -- High cattle prices are projected through 2015, supported by historically low cattle supplies and strong domestic beef demand. U.S. beef exports are expected down slightly in 2015, constrained by the strong U.S. dollar and high prices. Feed costs remain low, capped by forecasts for a strong corn crop, ample feeder hay supplies and stable pasture conditions. Factors for cattle industry attention through yearend include consumer demand, lower beef imports, substitute protein marketing and prices, strength of the U.S. economy and the impact of the U.S. dollar on export activity.

Dairy -- Milk prices are lower in 2015, pressured by strong milk supplies and competition for international markets. Lower feed prices soften the blow to producers’ bottom lines. Additionally, producers enter this downturn well positioned, with balance sheets fueled by profits from 2014. Modest milk price gains are expected through December, supporting most producers’ breakeven returns for the year. 

Hay -- Tight supplies of high quality alfalfa will be met with the strongest demand in 2015, but dairies and exporters are likely to keep downward pressure on prices. Fewer acres in production and persisting drought across much of the Western U.S. should result in lower levels of hay production in 2015. This should help the industry work through the currently robust level of hay stocks, but the sheer volume of lower quality hay in the market will continue to weigh on feeder hay prices. Grower profitability is expected to be down.

Wheat -- Northwest wheat growers enter summer with harvest expected to begin two to three weeks earlier than normal. Drought and extreme heat limit yields in most areas. Eastern Montana is an exception; where above average yields are expected. Wheat prices are below most producers’ breakeven price. Strong global wheat supplies dampen the likelihood of significant wheat price increases in the near term.

Potatoes -- Potato crops are 10 days to two weeks ahead of schedule. USDA estimates 2015 planted potato acres up 1.3 percent in Idaho and 3.0 percent higher in Washington. Columbia Basin growers are optimistic, anticipating strong early-season yields and prices. Inventory carryover from the 2014 crop is a concern in Southeast Idaho, where open potato prices are steeply discounted and below growers’ breakeven price. Supplies of larger potatoes, which command a price premium, are limited.

Sugar Beets -- Sugar beet producers close out the 2014-15 marketing year with mixed results. Grower returns in Idaho are positive, while returns in Montana are pressured by beet inventory losses. Looking forward, Northwest sugar beet crops are good, with low replants and adequate moisture. Globally, sugar production and consumption are forecast to converge in 2015-16. Significant near-term price increases are unlikely, with higher prices likely to incent sales from ample world reserves.

Apples -- Northwest apple growers will experience profit margin compression with the 2014-15 crop. Between low packouts and low prices for most varieties many growers will not be profitable. Although producers with a high concentration of modern apple varieties and strains are expected to remain profitable, the impact of current prices to bottom lines will be felt. However, following a string of profitable crops, most in the industry are financially well positioned to work through this down market. A smaller 2015-16 crop is positive, but sustained summer heat could adversely impact crop quality.

Cherries -- Industry profitability will vary this year. Growers with good crop volume and strong packouts will do well. Without crop insurance coverage, growers that were significantly impacted by rain and heat will struggle despite strong prices. The heatwave that is impacting the Northwest is the biggest wildcard in how and when the season ends. Depending on the severity and duration of the heat, trees may sustain damage that will impact future harvests. Areas dealing with drought are most at risk.

Wine/Vineyard -- Northwest wine grapes could yield a bumper crop in 2015. Acreage is up in Washington, offsetting freeze and isolated hail damage. Drought conditions in the Yakima Valley are mitigated by vineyards’ low water use. In Oregon, strong yields and an early harvest are expected. Although California faces its fifth drought year, wine grape production is largely unaffected. Wine sales continue to grow, led by increased consumer spending supported by improved unemployment and lower gas prices.
 
Forest Products -- Housing starts are the primary driver of the U.S. forest products industry. Home construction and home sales are constrained by only marginal improvements in unemployment, high student loan debt among potential first-time home buyers, and high credit standards. Underlying demographic trends and continued improvement in the economy are expected to drive improvement in the housing sector over the long run. Volatility in lumber, panel and log prices is expected to continue as supply adjusts to swings in demand.

Nursery/Greenhouse -- The outlook for the nursery and greenhouse industry is positive, supported by rising sales and steady demand. Most producers experienced strong sales through spring due to diminished supplies and signs of a resurging housing market. Product prices are also higher, providing producers profits as buyers accept price increases to assure product deliveries. Demand is expected to remain strong through the remainder of the year and into 2016, supported by rising consumer confidence.

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Contact 
Jennifer Rohrer
Public Relations and Communications Coordinator
Jennifer.Rohrer@Northwestfcs.com
509-340-5303