FOR IMMEDIATE RELEASE

Northwest Producers Close 2016 With Results as Mixed as Their Commodities

Cost Management, Efficiencies and Market Timing will be Critical Success Factors in 2017

SPOKANE, Wash. (Jan. 10, 2017) – Northwest Farm Credit Services, the Northwest’s leading agricultural lending cooperative, has issued its latest market snapshots of industry drivers, profitability and outlooks for the following commodities:

Cattle – Calf prices reached five-year lows in October. Producers who retained ownership of uncontracted calves benefited from higher prices at year end and low feed costs in the interim. The national cow herd is projected to increase 3 percent in 2017 although increasing cattle supplies will cap beef prices. However, current futures markets provide profit opportunities for cow/calf producers and feedlots.

Dairy – Higher milk prices and low feed costs drove increased dairy profitability in the fourth quarter of 2016, which helped offset losses from the first half of the year. Forecasts for higher milk prices, lower production in major exporting countries and low feed costs favor dairies’ margins in 2017. Across the Northwest, increasing beef supplies are pressuring cull cow and bull calf prices lower. Day-old bull calves are selling for as low as $10 per head, down from $400 per head in 2014.

Fisheries – Demand for seafood is strong. Many fisheries, such as Pacific cod, are feeding strong consumer demand by innovating new ways to use the whole fish. However, the Bering Sea crab weak biomass and Prince William Sound salmon run failure have challenged the fisheries, which will struggle with profitability this season. Exports are strong for most fisheries despite a strong dollar.

Forest Products – Profitability in the Northwest forest products industry improved during the second half of 2016 following negative returns for many mills earlier in the year. Stronger lumber markets also supported demand for logs and timberland operations’ improved margins. Stable profits for the forest products industry are expected in 2017, supported by continued strength in new housing starts and repair and remodel activity.

Hay – Northwest hay markets and grower profitability remain weighed down by strong inventories and challenging export conditions. Supplies of weather-damaged hay overhang feeder markets, while demand for high-quality hay is capped by dairies with hay inventories of 12 months or more. Although alfalfa exports increased in 2016, continued strength in exports is uncertain. The U.S. dollar remains strong and freight prices face pressure upward due to shipping company consolidation.

Nursery-Greenhouse – Low inventories and sales growth are fueling nursery and greenhouse growers’ profits. Labor constraints and guarded optimism from lessons learned during the last decade deter producers’ over expansion, while housing starts drive demand for product higher. U.S. housing starts climbed 25.5 percent month over month to a seasonally adjusted annualized rate of 1.323 million in October 2016. Consumer confidence is also strong and further supports a favorable industry outlook in 2017.

Row Crops

Onions – Onion supplies and quality challenges cap returns below most producers’ cost of production. Strong Northwest onion production and inventories contrast the U.S. as a whole, which reaped generally lower yields. Declining onion quality is causing above-average inventory shrink and higher packing costs. Still, export demand for U.S. onions leads the prior year. Weather damage to Japanese onion crops continues to support Northwest onion exports.

Potatoes – High Northwest potato yields are oversupplying markets and limiting uncontracted (open) potato prices’ upside. Total U.S. potato production was up 1.7 percent in 2016, with the largest increases in Idaho and Washington, up 6.8 and 6.2 percent, respectively. Canadian imports add to ample U.S. supplies, incentivized by the strong U.S. dollar. Notwithstanding these challenges, contract potato growers remain profitable. Returns to uncontracted potato growers are generally below the cost of production.

Sugar Beets – High yields, lower-ending stocks and positive price forecasts support Northwest sugar beet growers’ profits. In Idaho, sugar beet yields were near record highs, averaging 42 tons per acre with 18 percent sugar. Overall, U.S. 2016-17 sugar production is projected up 3.8 percent. However, total 2016-17 sugar ending stocks are projected 7.6 percent lower than the prior year due to lower sugar imports.

Tree Fruit

Apples – Drivers impacting the Northwest apple industry include a near-record crop, quality challenges and large fruit size. Although not the record expected, the 2016 crop is the second-largest on record. Quality issues and larger fruit size pose problems for older varieties. However, prices for newer varieties are strong, supported by consumer demand. Profitability is solid for producers whose manifest matches domestic consumer demand, while margins are tighter for growers with lower-quality fruit or dated varieties.

Cherries – Market timing, variety and crop size drove cherry growers’ returns in 2016. Due to supply peaks, prices were volatile and sometimes changed day to day. Although flash bloom reduced yields for early blooming varieties, expectations for a smaller crop size didn’t materialize. Instead, the cherry industry yielded the third-largest crop on record and overall industry profitability.

Pears – Pear prices are stable, supported by manageable supplies and quality. The crop is 1.4 percent smaller than in 2015 and 6.5 percent lower than the five-year average. Domestic demand remains strong, with domestic shipments up in 2016 compared to the same time the previous year. Smaller crops, such as this season’s, typically rely less on export markets since more of the crop can be marketed domestically. Together, these factors provide growers and processors with strong returns.

Wheat – Wheat producers’ margins are tight, squeezed by surging U.S. and global supplies. U.S. 2016-17 wheat production increased 12 percent despite fewer harvested acres. Globally, 2016-17 wheat production is forecast at the fourth-consecutive record high. Facing overproduction, wheat producers’ returns vary. Low-cost, efficient operators’ returns are generally at or above breakeven, while losses are more common among higher-cost operations.

Wine-Vineyard – A robust harvest, high-quality grapes and strong consumer demand support continued profitability in the wine and vineyard industry. Northwest grape yields were strong, with a record crop harvested in Washington and production at expectations in Oregon and Idaho. Although global wine consumption is down slightly, consumption in the U.S. continues to grow, driven by millennials’ taste for premium, super-premium and luxury wines.

Additional Market Snapshots are available for  Corn,  Soybeans,  Crop Inputs,  Ethanol, and  Land Values.

About Northwest Farm Credit Services
Northwest FCS is a $10.9 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.

Contact:
Debra Strohmaier, Communications Specialist
debra.strohmaier@northwestfcs.com
509.340.5443

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