January 09, 2018
FOR IMMEDIATE RELEASE
2018 Presents Fresh Opportunities for Northwest Ag Commodities
SPOKANE, Wash. (Jan. 9, 2018) – Northwest Farm Credit Services, the Northwest’s leading agricultural lending cooperative, has released its quarterly Market Snapshot reports that look at the state of major agricultural commodities. Northwest FCS industry teams develop and release outlooks for the commodities they finance.
All Market Snapshots are posted online at Industry Insights.
Cattle – Those in the cattle industry are optimistic as calf prices remained unseasonably high through fall 2017. Despite continued growth in cattle and beef inventories, enduring domestic and global U.S. beef demand provide continued tailwinds. The 12-month outlook suggests slightly profitable results as exports and domestic demand continue to outpace a growing supply.
Dairy – Milk futures indicate a $2 per cwt, or 13 percent, decrease in milk prices from December 2017 to February 2018. The glut of skim milk powder continues to burden the European Union and Canada. However, drought in New Zealand and lower cheese tariffs in China may provide tailwinds to milk prices. The 12-month outlook suggests unprofitable returns as milk prices are projected to fall in the first half of 2018.
Fisheries – The fisheries industry is expected to continue experiencing solid profits. Pollock prices are increasing due to steady demand and favorable consumer perception of Wild Alaskan pollock. Russia announced total allowable catch, or TAC, reductions for their pollock fishery, which should reduce competition for U.S. pollock in European markets. Cod TAC was cut 16 percent in the Bering Sea and 80 percent in the Gulf of Alaska. However, cod demand and prices are strong, which should help soften the negative effects of lower TACs.
Forest Products – Strong lumber prices increased demand for logs in 2017; however, wet spring and winter weather coupled with a severe fire season decreased log inventories. This led to inflated log prices, which are expected to remain high into 2018. Lumber prices are anticipated to be stable, but with the increased log prices, mills could see some softening of profit margins in 2018.
Hay – Alfalfa hay exports remain strong, growing an additional 227,000 metric tons year over year. Saudi Arabia is the fastest-growing export market, up 106,000 tons from a year ago. However, this growth is focused on the U.S. Southwest. Northwest hay producers benefit most from growing Chinese demand, up 93,000 tons. Dairy hay stocks are adequate as milk prices fall and domestic demand slows. The 12-month outlook suggests alfalfa and timothy producers will remain slightly profitable.
Nursery-Greenhouse – The strong U.S. economy is boosting sales for the nursery/greenhouse industry, although tight labor availability is constraining industry growth. Younger generations prefer smaller, lower-maintenance yards, which is causing a shift in the industry to meet their demands. Also, more Americans are hiring professional landscape care. The outlook calls for solid profits.
Onions – Onion prices remain well above year-ago levels as fewer acres and a shorter growing season limited production. Medium-sized onion prices should remain moderate in the face of adequate supplies. Jumbo-size onions and larger will continue to command a higher price and producers with a supply of larger-size onions will remain profitable.
Potatoes – Potato production decreased 6.6 percent across the Northwest on fewer acres and lower yields. The 12-month outlook suggests grower returns will remain above the cost of production for the remainder of the 2017 marketing season due to limited supplies.
Sugar Beets – Although lower than the 2016 crop, 2017's sugar beet crop is the second largest on record. Growers were pleased with yields considering the late start to planting season. However, sugar content was lower than anticipated. Profitability in the industry will not be as strong as the previous year even though lower inventories and export limits on Mexico offer a promising outlook for the sugar beet industry in 2018. The outlook is for slightly profitable returns to sugar beet growers.
Apples – The Northwest apple crop estimate for the 2017 crop year was revised up and is now the second largest on record. Smaller crops from the U.S. East Coast, Canada, Mexico and Europe should increase demand for Northwest apples. The profitability outlook remains strong for growers with varieties that match changing domestic consumer tastes. Growers with older, less desirable varieties continue to see profits dampen.
Cherries – The 2017 record cherry crop overmatched demand and two-thirds of the crop generated little to no profit for the season. The profitability outlook shows slight profits for cherries marketed before the Fourth of July. However, cherries marketed after the holiday returned below break-even margins. Cherry crop sizes are volatile from year to year since weather events can significantly reduce marketable cherry volume. However, planted cherry acreage and cherry crops have increased over the last 30 years and 1,114 new cherry acres were planted in Washington state in 2016.
Pears – The Northwest pear crop for the 2017 crop year is projected to be 17.1 million boxes, the smallest since 2006. Some production decreases are due to less pear acreage. However, the reason for reduced yields is unknown. Although prices are up for Bartlett and Bosc crops, shipments are slower than five-year averages and pricing pressures will occur if shipment pace doesn’t pick up. The outlook shows only slight profits for the industry, due primarily to production decreases.
Wheat and Pulse Crops – Wheat prices remain around breakeven on large global stocks. India, a large buyer of Northwest pulse crops, imposed an unexpected import tariff on peas, lentils and garbanzo beans, all grown in rotation with wheat. Reduced exports to India are likely to lower overall profitably. The 12-month outlook suggests low wheat prices are likely to persist in 2018, with higher prices constrained by record world production and high ending stocks. Profitability will also be lower due to reduced revenue from rotation crops such as peas, lentils and garbanzo beans.
Wine-Vineyard – Washington’s 2017 wine grape harvest is abundant, although estimated slightly below last year’s record crop due to smaller fruit clusters. Oregon’s harvest is anticipated 5 to 10 percent larger than last season’s because of high yields and large clusters. Extreme winter weather in Idaho potentially cut production to half of last year’s crop, although numbers are not yet available. For wineries, the new tax bill is good news, granting tax rebates on the first 750,000 gallons produced. Wine sales, especially for the direct to consumer segment, remain strong. The outlook indicates robust profits.
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