April 4, 2017

Northwest FCS News


Some Markets Spring More than Others in Early 2017

SPOKANE, Wash. (April 6, 2017) – With a cold, wet winter in the rearview mirror, food and fiber producers in the Northwest are looking forward to spring, getting back into their fields and timberlands. For some industries, profit margins look promising. For others, the profit outlook is weak. World stock oversupply and low prices continue to limit wheat growers’ profitability, while commercial fishermen enjoy strong demand for their catch. Highlights for Northwest agriculture, forestry and fisheries are as follows.

Cattle – Northwest cattle producers and feedlots increased feed rations with cold weather and above-average precipitation this winter. Spring pasture conditions are better than in past years, where select areas faced significant drought stress. Overall, prices for most cattle prices rallied during the first quarter of 2017 after a volatile end to 2016, supported by domestic consumption and export demand. Northwest FCS’ 12-month outlook for cow/calf producers and feedlots include profitable operations with active marketing and risk management.

Dairy – Northwest dairy producers’ year-over-year cow numbers increased by 7,000 this February. Milk production remained unchanged. Severe winter weather weighed down milk per cow and increased costs. Nationally, milk production is up from the prior year, fueled by 66,000 more cows. U.S. cheese inventories and European skim milk powder stocks remain high, limiting milk market upswings and Northwest producers’ profits. Although margins are generally at or below breakeven, Northwest FCS’ 12-month outlook is for slightly profitable returns where producers manage expenses and milk-price risk.

Fisheries – Demand across fisheries remains strong. Ongoing challenges include a strong U.S. dollar and uncertain trade policy. However, new vessel construction and improvements to existing vessels are enhancing efficiencies in some fisheries. These enhancements support additional product mixes and value-added products. Northwest FCS’ 12-month outlook for the fisheries industry includes above break-even returns. Despite soft pollock prices, a reduced crab total allowable catch and a poor pink salmon run, these fisheries remain profitable. Strong demand for Pacific cod, sablefish and Amendment 80 fisheries support strong prices and profitability.

Forest Products – The housing market improved in 2016, but at a slower rate than expected. Single-family starts accounted for 67 percent of total housing starts in 2016, lower than the 10-year average of 71 percent, but higher than 64 percent in 2015. Market conditions and forecasts indicate a steady housing recovery, underpinning Northwest FCS’ 12-month outlook for strong mill and timberland profitability. Positive mill returns are driven by improving lumber prices and lower-cost log inventory carried over from last year. Robust fiber demand supports timberland producers’ continued profitability.

Hay – Northwest hay markets are stronger as colder-than-normal weather and prolonged periods of snow cover drove cow/calf producers to feed substantially more feeder hay than anticipated. This is a boon to the industry as feeder hay inventories move lower going into the 2017 production season. Although prices are down 9 percent from the prior year, the total value of forage exports increased from 2015 to 2016. Nearly all export growth has come from increasing alfalfa sales, particularly to newer destinations. Currently, most hay producers are operating at or below break-even margins. However, Northwest FCS’ 12-month outlook is for slightly profitable returns for producers who start 2017 with a clean inventory slate and focus on cost control.

Nursery-Greenhouse – Consumer demand and single-family housing starts are expected to buoy overall demand for nursery stock. Although sales are expected to grow in 2017, early season sales may be impacted by wet and inclement weather. Sales growth matched with more-balanced inventory levels support stable or higher grower prices and improved margins. Northwest FCS’ 12-month outlook is for continued strong returns and industry profitability.

Row Crops

Onions – A severe snowstorm followed by heavy rain led to the collapse of as many as 50 onion storage and processing buildings in the Treasure Valley of Oregon this January. Initially, onion prices increased dramatically, but seasonal supply from Mexico pressured prices below breakeven. A long winter and late spring has delayed planting by as much as three weeks. A late start to the growing season may lead to lower yields in 2017. However, favorable weather conditions through the summer can put crops back on track. Onion growers’ current returns are below breakeven. The 12-month outlook for profitability remains low, with slightly higher prices for high-quality old crop coming out of storage.

Potatoes – A cool, wet spring has delayed Northwest potato growers’ fieldwork and planting by as much as two weeks later than normal. Delayed planting may influence early season processing potato supplies. Although contracted potato growers remain profitable, most uncontracted potato producers’ returns are below breakeven. Northwest FCS’ 12-month outlook for profitability includes slightly profitable results for contract potato growers and continued pressure on uncontracted potato growers’ profits.

Sugar Beets – A record 2016 sugar beet crop extended processors’ timelines beyond normal season end. In Idaho, warmer temperatures threaten the quality of remaining sugar beet piles. Entering spring, sugar beet growers’ planting is delayed by as much as two weeks due to above-average precipitation. Among row crops, sugar beets remain a favored rotation. Northwest FCS’ 12-month outlook for profitability includes modest profitability for the 2017 crop.

Tree Fruit

Apples – The Washington State Tree Fruit Association’s March 1 Storage Report reveals a Northwest fresh apple crop at 134 million boxes, the second largest crop on record. Crop size for 2016-17 continues to come down from the 137.9 million boxes estimated in December. Crop shrinkage is driven mainly by quality issues associated with early harvest heat and late-season rains. Apple sales are on pace with past years. Headwinds moving forward include sales of traditional varieties facing lower demand and fruit with larger profiles. Northwest FCS’ 12-month outlook for profitability is positive for growers whose varietal mix meets consumer demand. Producers experiencing quality issues and/or those with plantings centered in traditional varieties may struggle.

Cherries – Fewer cherry pests and virus issues, as well as a better-timed harvest, are potentially positive results of a cold Northwest winter. Growing degree days to date are near historic averages, placing forecasts of harvest start dates near mid-June. This favors early-season cherry growers with a supply gap afforded by California, where growing degree days are ahead of normal and an early harvest is expected. A crop size similar to 2016 and expectations for a well-timed harvest support a profitable 12-month outlook for the cherry industry.

Pears – No significant damage is reported after several pear-growing areas in the Northwest experienced negative temperatures this winter. Current pear prices parallel supplies, with d’Anjou prices up on a smaller crop and Bartlett and Bosc prices down on larger crops. Despite slow shipments and weak export markets, Northwest FCS’ 12-month outlook is for stable pear-grower profits, supported by harvest yields, packouts and favorable prices.

Wheat – Winter wheat crop conditions throughout the Northwest are good to excellent, supported by ample winter snows and abundant spring precipitation. Producers’ fieldwork is delayed by soaked soil, condensing windows for planting but buoying prospects for a strong, spring-crop start. Globally, 2016-17 wheat ending stocks are projected at a record 250 million metric tons, up 4 percent from the prior year. Bloated world stocks and low prices continue to limit wheat growers’ profitability. Northwest FCS’ 12-month outlook includes break-even results and expectations for profits where producers’ rotations include pulse crops and/or above-average yields.

Wine-Vineyard – Washington, Oregon and Idaho produced another high-quality vintage in 2016, with Washington harvesting an unprecedented 270,000 tons of grapes in 2016. Although vineyard-producing areas in Washington and Idaho experienced sub-zero temperatures this winter, reports of damage are limited. The wine industry continues to be driven by higher-value wines and the direct-to-consumer market. Northwest FCS’ 12-month outlook for the wine-vineyard industry is for continued strong profits.

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