FOR IMMEDIATE RELEASE
Expected Returns on Most Northwest Ag Commodities Leveling Up
Weather, Trade Common Issues
SPOKANE, Wash. (Jan. 8, 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 – Northwest FCS’ 12-month outlook suggests profitability throughout the beef sector. Slaughter facilities are very profitable as they remain in a position of leverage over producers. Cattle feeders will be break-even to slightly profitable with variation based on risk management strategies. Cattle producers are expected to be slightly profitable, as strong demand for beef is coupled with peak cattle inventory.
Dairy – Northwest FCS’ 12-month dairy outlook anticipates slightly profitable returns in 2020. Futures markets suggest slightly profitable, stable milk prices in 2020. This comes as milk processors take a more active roll in supply management.
Fisheries – Northwest FCS’ 12-month outlook expects slightly profitable margins for fisheries as a whole. Returns to sablefish fishermen will be subdued. The pacific cod biomass is facing uncertainty as studies are revealing fish moving north. The king crab biomass is also struggling and continues to face potential closure.
Forest Products – Northwest FCS’ 12-month outlook calls for profitable margins for timberland owners and sawmill operators. Although log prices remain low compared to 2018’s peak, margins are profitable for timberland owners and prices are expected to remain stable or improve. Processors have worked through high-cost logs from 2018 and lumber prices are slightly improving.
Hay – Northwest FCS’ 12-month outlook suggests alfalfa profitability will moderate as producers intend to plant more acres in 2020. Large inventory of mid-grade timothy continues to drive languid prices, weighing on profitability.
Nursery/Greenhouse – Northwest FCS’ 12-month profitability outlook expects solid profitability for Northwest nurseries. A strong economy will support stable housing demand which will continue to sustain strong nursery sales. Growers secured price increases in recent years and modest price rises are expected in the year ahead. However, growing labor costs remain a challenge for producers.
Onions – The Northwest FCS 12-month outlook is for slightly profitable returns. Onion prices would be profitable but given variability of packouts, returns vary by producer and growing region. International competition driven by the strong dollar will continue to favor imports as domestic supplies remain low.
Potatoes – Northwest FCS’ 12-month outlook is for profitable contracted and uncontracted potatoes. An early cold snap froze as much as 15% of fresh market potatoes in Idaho. Other major production regions in the U.S. suffered the same fate. Inventory is lower year over year and higher prices will ration supplies for the rest of the 2019-2020 marketing season.
Sugar Beets – Northwest FCS’ 12-month outlook continues to be profitable for sugar beet growers for 2019-20, with a USDA forecast suggesting a drop in the stocks-to-use ratio from 14.5 (2018-19) to 13.5 (2019-20), a favorable ratio for Northwest sugar beet producers.
Apples – Northwest FCS’ 12-month outlook anticipates slight profits for growers. The large crop has tempered prices. However, good fruit movement and continued trade agreement momentum should support prices in 2020. Varieties and quality continue to play a role in profitability.
Cherries – Northwest FCS’ 12-month outlook expects slightly profitable returns for cherry growers. Mild weather during the growing season resulted in good fruit quality. Strong domestic demand after major crop loss in California created strong markets for Northwest cherries, but pricing programs set earlier in the year tempered returns. Little Cherry Disease, which impacts fruit size and eventually kills the tree, is a growing concern for the industry.
Pears – Northwest FCS’ 12-month profitability index expects growers to breakeven this season. Lower than anticipated supplies have increased prices. However, prices don’t often make up for lost production. For growers with frost damage, low production issues are compounded. Increasing costs and lower consumer demand are making it difficult for the industry to generate profits.
Wheat – Northwest FCS’ 12-month outlook calls for break-even returns. USDA’s projected 2019-20 season-average farm price for all-wheat is $4.80 per bushel, down $0.20 from last year. Variability in yield and quality will drive individual producer profitability.
Wine/Vineyard – Northwest FCS’ 12-month outlook indicates slight profits for vineyards while profitable returns are expected for wineries. Increasing wine values will benefit wineries. Vineyards without contracts will struggle to find opportunities to market their grapes away from the bulk wine market where profits are minimal. Losses will occur for some Washington vineyards unable to harvest portions of their crop due to the freezes.
About Northwest FCS
Northwest FCS is a $12 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.