July 10, 2017

Northwest FCS News


Outlook Cautiously Optimistic for Most Northwest Agricultural Commodities

SPOKANE, Wash. (July 11, 2017) – Northwest Farm Credit Services, the Northwest’s leading agricultural lending cooperative, has released its quarterly Market Snapshot publications that look at the state of major agricultural commodities in the Northwest. The outlook varies by commodity, with the majority of producers looking at slightly profitable results for their efforts. Despite delays from dismal spring weather, the sun is shining brighter on the forest products, nursery/greenhouse and wine/vineyard segments.

Cattle – Cattle producers are expected to be slightly profitable in 2017. A short-term supply shortage drove prices for all classes of cattle higher during the first half of the year. An influx of slaughter cattle later in the summer is expected to drive prices lower than a year ago. Global markets for beef are positive with double-digit year-over-year growth and recent access to China’s $2.5 billion market. Overall, cattle producers are expected to be slightly profitable for the next year.

Dairy – Lower milk production and weak prices strained producer profitability in the first quarter of 2017. However, Northwest dairy farmers are beginning to return to profitability as warmer seasonal weather returns dairies to normal operation. Feed inventory remains abundant despite the harsh winter. The Northwest FCS 12-month outlook is for slightly profitable returns as milk prices increase. The USDA’s forecast supports slight optimism, projecting an all-milk price between $17.80 and $18.40 per hundredweight in 2017.

Fisheries  – Consumers continue to drive demand and prices higher for most seafood, especially for higher-end species such as salmon and halibut. Pollock is one fishery not benefitting from higher demand; the fishery is also struggling with large inventories, which is dampening prices. Other challenges include small shrimp sizes and the smallest run of Klamath River fall chinook ever recorded.

Forest Products – In the forest products industry, the U.S. Department of Commerce announced preliminary anti-dumping duties at slightly under 7 percent. Countervailing and anti-dumping duties combined put a 27 percent duty on Canadian lumber, which has contributed to high lumber prices. However, since peaking in April, lumber prices have softened somewhat. High prices and strong demand for lumber are supporting elevated log prices, resulting in good profit levels for timberlands and mills. Drier weather has allowed better access to timberlands and mills are replenishing log yards.

Hay – Hay inventories have decreased since 2016, but remain above the 10-year average. Export markets rose in the first four months of 2017, increasing 21 percent. Drought conditions in eastern Montana will tighten supplies and raise prices in the area. Alfalfa prices have remained depressed leaving only slight profit margins for growers. Tight supplies of timothy have strengthened prices. Northwest FCS’ 12-month outlook is for slightly profitable returns for alfalfa growers and very profitable returns for timothy growers.

Nursery-Greenhouse – Wet conditions and limited access to labor at nurseries and greenhouses have dampened sales growth. However, the industry still grew sales by almost 4 percent compared to last year. Sales growth is expected to continue into the 2018 shipping season, but inventory availability will determine how much growth is achievable. The nursery/greenhouse sector is profitable due to strong demand and prices.

Row Crops

Onions – Cooler weather has delayed and reduced the length of the onion growing season, which could dampen yields and quality. The National Onion Association’s April report indicates mixed to low demand for much of the second quarter. Grower returns are projected above breakeven; prices may improve with overall lower production and favorable marketing conditions. However, this depends highly on weather trends for the remainder of the growing season. The Northwest FCS 12-month outlook is for slightly profitable returns for onion producers.

Potatoes – Low supplies of quality, fresh-packed potatoes are pushing up prices. The cool, wet spring will likely lead to lower yields for early dug potatoes. However, potatoes harvested later in the season may recover should warmer temperatures arise in July and August. Contracted potato growers continue to see slight profitability. Uncontracted growers are likely to remain at below breakeven levels.

Sugar Beets – Sugar beet planting was delayed up to three weeks due to precipitation, which could impact yields. U.S. and Mexico trade talks may lead to changes in Mexican imports and benefit domestic sugar prices. Sugar beet growers look forward to modest profitability for the 2017 crop year despite weather delays in many areas.

Tree Fruit

Apples – Apple packouts for 2016 are being affected by quality issues in storage. However, prices in general are increasing slightly. Reds, Galas and other less domestically desirable varieties are finding relief in the export markets. The industry anticipates that the 2016 crop will clean up before the 2017 harvest. The apple industry is profitable due to favorable prices for new varieties and a strong export market.

Cherries – California’s record-size, good-quality cherry crop created a smooth transition to the Northwest crop, which is estimated at a record 24.5 million 20-pound boxes. Due to the cold spring, the peak of the season is later than the typical Fourth of July holiday. Wind, hail and rain can cause quality issues for cherries; although storms have occurred in areas across the Northwest, no significant damage has been reported.

Pears – The percent of the 2016 pear crop shipped to date is lower than the last five years due to weakened exports and lower domestic demand. The 2017 crop is estimated at 17.6 million 40-pound boxes, which is smaller than the 2016 crop. The Bosc pear crop in particular is expected to be very small due to bloom issues. This may positively impact demand for other varieties. Overall good quality for the 2016 crop has kept producers profitable.

Wheat – Wheat acres are the lowest ever recorded by the USDA. Dry conditions in June followed the wet spring planting season across the Northwest. Early planted spring crops fared well, taking advantage of available moisture. Conversely, late-planted spring crops have been challenged by above-average temperatures and drying conditions. Low prices and variable crop conditions are leaving many growers below breakeven.

Wine-Vineyard – A cold, wet winter and spring are pushing the wine/vineyard industry back to normal growing conditions compared to recent years. Although some producers were subject to freeze and other winter damage in the vineyard, the broader wine industry outlook is positive entering the summer growing season. The wine industry is strong, with sales growth of 3 percent year over year and the direct-to-consumer segment is still cranking out double-digit sales growth.

Additional Market Snapshots are available for  CornSoybeansCrop InputsEthanol, and  Land Values.

About Northwest Farm Credit Services
Northwest FCS is an $11 billion financial cooperative providing financing and related services to farmers, ranchers, agribusinesses, commercial fishermen, timber producers, rural homeowners and crop insurance customers in Montana, Idaho, Oregon, Washington and Alaska. Northwest FCS is a member of the nationwide Farm Credit System that supports agriculture and rural communities with reliable, consistent credit and financial services.

Debra Strohmaier, Communications Specialist