October 4, 2017

Northwest FCS News

Most Northwest Ag Commodities Showing Slight Profits

SPOKANE, Wash. (Oct. 5, 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 reaping slightly profitable results. Fisheries, forest products and wine are benefiting from strong demand. On the downside, wheat growers are plagued by drought conditions and competition in the global marketplace from Russia’s record crop.

Cattle – Cattle producers are expected to be slightly profitable. Strong calf prices are fueled by strong demand and growing beef exports. Producers who market calves in the fall have a profitable opportunity as prices rally.

Dairy – Dairy producers are operating at or around break-even margins. From July to August, the U.S. dairy herd growth paused for the first time in a year. The USDA’s forecast supports slight optimism, projecting an all-milk price between $17.70 and $17.90 per hundredweight in 2017. Labor supply and expense continue to weigh heavily on Northwest dairy producers.

Fisheries – Good profitability for fisheries should result from strong prices and demand. Cod, halibut, sablefish, salmon and the Amendment 80 species (including Atka mackerel, Aleutian Islands Pacific ocean perch, Pacific cod, and flathead, rock and yellowfin sole) are capturing elevated prices. Even pollock’s depressed prices of the last few years are turning around. The weaker U.S. dollar should boost exports, further elevating revenue for the fisheries industry.

Forest Products – Limited supply, stable demand and market disruptions from the Softwood Lumber Agreement between the U.S. and Canada have all contributed to stronger lumber prices resulting in profitable margins for timberland owners and mill operators. Supply shortages are a result of extensive fires in the Northwest and British Columbia. Steady housing starts continue to create stable demand for the forest products industry.

Hay – Hay producers are operating slightly above break-even margins. Low supply of high-quality hay is leading to higher hay prices. Producers look forward to higher prices as supplies continue to tighten. Year-over-year U.S. hay export volume increased 25 percent in the first seven months of 2017.

Nursery-Greenhouse – Persistently high prices, due to limited supply and solid demand, are keeping the industry profitable. Higher median household income, positive consumer sentiment and steady housing demand should continue to bolster sales. However, labor constraints are reducing growers’ ability to expand production.

Row Crops

Onions – Onion grower returns are projected to be profitable. Early fall onion sales met strong demand, creating favorable early season prices. Questions surrounding onion yields and quality contribute to the higher prices, which are likely to remain throughout the marketing season.

Potatoes – Contract potatoes are expected to be slightly profitable throughout the season. Uncontracted potatoes may slip toward breakeven during harvest but are expected to be profitable later in the season. Growers report average yields for early harvested potatoes despite late planting. The USDA reports Idaho producers planted 4.6 percent fewer acres of potatoes in 2017.

Sugar Beets – Positive pricing for the sugar beet industry should result in slight profits for growers. Early harvest portends favorable yields and sugar content. Cool weather during the end of September helped increase sugar concentration in beet crops across the region. Damage to sugarcane production by Hurricanes Irma and Harvey is still being assessed but provides tailwinds to sugar prices.

Tree Fruit

Apples – Apple growers should see positive profits for this season’s crop. Early reports for the 2017-18 crop shows strong demand and pricing. Washington’s crop is projected to be the third largest on record. Smaller crops in other U.S. growing regions and across the globe provide good marketing opportunities for the Washington crop this season. Domestic demand is stable and a weaker U.S. dollar compared to recent years will boost export demand.

Cherries – This season’s Northwest cherry crop set a record at 27 million 20-pound boxes. Cherry growers with pre-Fourth of July product are profitable due to a smooth transition from California’s crop and manageable supplies leading to favorable prices at the start of the season. However, growers supplying cherries to the market post-Fourth of July will likely see losses, especially if coupled with small fruit size or quality issues. Many blocks with small, undesirable cherries were not picked in the glut of the season.

Pears – Profit margins for pear producers are expected to be narrow this season. The total Northwest crop is projected up 2.3 percent from the prior year. However, production is still below historical levels. The Bosc crop is down 19 percent this season compared to last due to a light bloom with significant reductions in the Yakima growing region. The smaller crops of the last few years left growers with lackluster, but decent, profits. Another small crop might start cutting into returns.

Wheat – Wheat growers are expected to be slightly below breakeven due to continued low prices and variable crop conditions. Drought conditions troubled growers across the region, especially in eastern Montana. The USDA’s 2017-18 forecast all-wheat price is between $4.30 and $4.90 per bushel.

Wine-Vineyard – Good quality and average to slightly reduced yields are expected for Washington and Oregon. Idaho’s yields are significantly reduced due to severe winter damage. Solid profits for the wine industry should continue as a result of positive consumer trends and strong wine sales. Total U.S. wine sales are up 6 percent year over year. The direct-to-consumer marketing channel continues to provide opportunities to wineries, growing 18 percent compared to last year.

Additional Market Snapshots are available for Corn, Soybeans, Crop Inputs, Ethanol, 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