Despite Volatility, Profitable Returns Expected for Most Northwest Agricultural Producers

SPOKANE, Washington (October 1, 2020) – Northwest Farm Credit Services, the Northwest’s leading agricultural lending cooperative, has released its quarterly Market Snapshot reports covering the state of major agricultural commodities in the region. Northwest FCS industry teams throughout Idaho, Montana, Oregon and Washington monitor conditions and report outlooks for commodities financed by the co-op.

All Market Snapshots are posted online at Industry Insights. 

Northwest FCS’ 12-month outlook for the agricultural commodities most common in the Northwest are summarized below.  

Cattle – The 12-month outlook for cattle suggests modest profitability centered around risk management strategies. Diminished throughput in the spring drove retail prices higher, reduced exports and burdened the industry with heavier feeder cattle. 

Dairy – Slightly profitable returns in 2020 are anticipated for the dairy industry. COVID-19 continues to depress demand, but government programs, such as the Food Assistance Program and the Food Box Program, have kept demand and prices up. Government programs will provide tailwinds to producer profitability. Overall producer profitability will depend on use of price risk management tools.

Fisheries – Fisheries are expected to see slight profit margins. Some fisheries continue to face pandemic and trade war-related challenges such as supply chain disruptions and deteriorating demand. Some are dealing with difficult fishing or weak biomasses. However, several government-assistance programs have been established to help keep operations afloat.

Forest Products – Lumber processors and timberland owners are expected to be profitable. Record lumber prices through the second half of 2020 will likely result in strong log prices. A seasonal slowdown in construction and increased log inventories due to fires are predicted to correct the upward price trend.

Hay – The outlook for hay growers is varied. Rain disrupted first cutting and smoke in September slowed drying times for late cuttings. Export volume slowed during the summer as traders assessed exportable supplies. Individual producer profitability will depend on the ratio of high- and low-quality hay.

Nursery/Greenhouse – Strong profits are anticipated for the nursery/greenhouse industry. The industry has benefitted from the pandemic’s stay-at-home orders and sales have increased dramatically. A strong housing market will support continued sales. Although costs associated with COVID-19 mitigation efforts have cut into industry profits, margins are high, and operations should be in the green this year.

Row Crops

Onions – The outlook suggests break-even to slightly profitable onion returns. Onion size and quality are favorable. Yet, producer returns remain sensitive to restaurants reopening.

Potatoes – Contracted and fresh market potato producers are looking at slightly profitable returns. Average yields combined with fewer planted acres lowered total production. Potato processors reduced contracts during planting due to COVID-19 concerns and may have to purchase uncontracted potatoes. Uncontracted potatoes sold to processors will be profitable.

Sugar Beets – Sugar beet growers should see profitable returns for the 2020-21 season. The USDA forecast suggests stocks-to-use ratios will continue to decrease from 14.2% in 2019-20 to 13.5% in 2020-21, a favorable ratio for Northwest producers.

Tree Fruit

Apples – Apple growers can expect to see slightly profitable margins. A smaller crop and solid demand should increase prices. However, several quality issues have challenged growers this season. Quality will be a key driver of individual growers’ profits. 

Cherries – Overall, profitable margins are anticipated for cherry growers. Reduced supply coupled with strong domestic demand helped sustain high pricing, which will translate into strong margins for growers. However, those with measurable losses in tonnage may not have had enough fruit to capture returns and will be reliant on crop insurance.

Pears – The 12-month profitability index forecasts slightly profitable returns for pear growers. Although demand has been lackluster the last few years, increased pricing indicates demand may be finding some higher ground. Good quality will also increase growers’ returns.

Wheat – The outlook calls for slightly profitable returns for wheat growers. The USDA’s projected 2020-21 season average farm price for all-wheat is $4.50 per bushel. Current markets are showing a higher average of $4.70 to $4.80 per bushel from the 2019-20 season. High yields and government payments will partially offset otherwise break-even wheat prices. 

Wine/Vineyard – Slight profits are expected for both vineyards and wineries, although it’s a mixed bag for both. Lower grape yields and bulk wine supplies should support improved grape markets, but fundamental oversupply issues remain. Some wineries in the retail and direct to consumer channels are having record sales; however, wineries reliant on tasting rooms, events or other in-person sales are left with limited options to generate revenue.   

About Northwest FCS 

Northwest FCS is a $13 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. For more information, go to northwestfcs.com.  

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Contact

Kylee Andrews
Communications Specialist
Kylee.Andrews@northwestfcs.com
509.340.5443