CANCEL

FOR IMMEDIATE RELEASE

Strong Economy, but Trade Risk Looms for Northwest Producers

SPOKANE, Wash. (April 3, 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 in the region. Northwest FCS industry teams working 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.

Cattle – Cattle producers should see slightly profitable returns over the next 12 months. Roughly half of the country is experiencing some level of drought or dryness, and winter wheat grazing conditions have deteriorated. Many calves are moving into the feedlots, which may slow or reverse cowherd expansion. Exports remain strong as the dollar loses value relative to currencies of many trade partners. However, uncertainty regarding trade policy continues to hang over beef markets.

Dairy – Dairies are expected to be unprofitable in the first half of 2018, then see moderate improvement into the fall. Global oversupply continues to plague the industry. However, demand is strong and trade is fervent. China purchased 74,000 tons, or 36 percent, more dairy products in January 2018 when compared to January 2017. It appears dairy products are on clearance in an attempt to clear the glut.

Fisheries – Strong profits should benefit fisheries over the next 12 months. Pollock demand and prices are positive. The Bering Sea cod ‘A’ season trawl fishery closed in 22 days due to increased participation and a lower total allowable catch (TAC). Halibut and sablefish TAC have been set after a delay due to harvest-level disagreements between Canada and the U.S. Halibut TAC for 2018 is 16.6 million pounds, down 9.3 percent from 2017. For 2018, sablefish TAC is 25.8 million pounds, a 14.7 percent increase from 2017.

Forest Products – The 12-month profitability outlook calls for very profitable margins for timberland and profitable margins for mills. Log prices remain elevated due to tight inventory and high lumber prices. Demand for lumber is trending high in 2018 with strong housing starts, and in a robust economy is forecast to continue with starts around 1.28-1.31 million at a seasonally adjusted annualized rate. This bodes well for the future of the forest products industry.

Hay – The 12-month profitability outlook shows profitable returns to alfalfa growers, despite weak dairy demand. Exports to China and Saudi Arabia will continue to drive the alfalfa export market as both continue to grow. Drought conditions in the Klamath Basin will result in reduced irrigation water availability, thereby lowering production in 2018. In Montana, extended snow cover is driving cattle producers to feed longer than normal, drawing on already low inventory.

Nursery-Greenhouse – The nursery/greenhouse industry is expected to operate in a profitable state through the next 12 months. Strong economic indicators support robust 2018 sales predictions. However, rising labor and trucking costs will dampen profit margins. Access to labor and uncertainty surrounding immigration are primary challenges for the foreseeable future.

Row Crops

Onions – Northwest FCS’ 12-month profitability outlook calls for slightly profitable grower returns. Reduced yields in 2017 resulted in lower inventories, which ended the shipping season early for many Northwest onion packers. Onion prices fell slightly through the first quarter of 2018 but remain profitable. Onion packers should be operating new facilities in the fall of 2018 after rebuilding from the January 2017 snow storm.

Potatoes – Growers should see profitable returns as shrinking supplies bolster open potato prices. Early harvested 2018 potatoes will ride the wave of profitability. However, robust seed sales point to a larger potato crop in 2018, which may weigh on prices in the fall.

Sugar BeetsSlightly profitable returns are predicted for sugar beet growers in the next 12 months. Total domestic sugar use is forecast to increase nearly 2 percent. Favorable weather conditions for processors have resulted in high sucrose-extraction rates and minimal shrink in storage piles. However, increasing imports and production will likely raise ending stocks and limit upside price potential.

Tree Fruit

Apples – Northwest FCS’ 12-month profitability outlook calls for slight profits in the apple industry. The 2017-18 crop is currently 135.7 million, 40-pound boxes, making it the second largest crop on record. Shipments are slower than average due to small-sized fruit, a large crop and a later harvest than the last few years. Slow shipments are pressuring prices down. The federal electronic logging device mandate, which requires truckers to use a certified device to monitor hours of service, is elevating trucking costs.

Cherries – The cherry industry’s 12-month profitability outlook is generally split. Early season cherries are anticipated to be profitable while mid- to late-season cherries are expected to operate near breakeven. Mild December and January weather gave way to cooler temperatures in February, likely slowing a potentially early harvest in the Pacific Northwest. However, an early harvest in California is expected. An early California harvest with good quality will favor early season Northwest cherries. However, as more cherries enter the market in the mid- to late-season, prices will compress.

Pears – Slight profits are forecast for the pear industry in the next 12 months. The 2017-18 fresh crop is 16.4 million, 44-pound boxes. Production is tied for the lowest on record with the 2004-05 crop and is 13.8 percent smaller than the 10-year average. Prices are strong for good-size and quality fruit. However, prices are low for small-sized fruit, which is in abundance.

Wheat and Pulse Crops – The wheat industry may see slight profitability through the next 12 months. While global supplies continue to grow, U.S. wheat production is projected 25 percent lower. Lower production may provide price support into the 2018-19 crop year. The USDA’s 2017-18 season-average farm price for all-wheat is projected at $4.60 to $4.70 per bushel, just above the cost of production.

Wine-Vineyard – 2017 grape tonnage for Oregon, Washington and California is strong. Washington tied the second-largest tonnage on its record with 227,000 tons. Oregon is expected to set a record with early reports coming in at 85,000 to 90,000 tons. California’s 4 million tons is similar to last year, down less than 1 percent. Ample supplies have led to excess bulk supply. Although direct-to-consumer sales growth remains strong, growth is expected to plateau and competition remains stiff.

Other industry reports available from Northwest FCS:  Corn, Crop Inputs, Ethanol, Land Values and Soybeans.

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.

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Contact:
Deb Strohmaier, Communications Specialist
debra.strohmaier@northwestfcs.com
509.340.5443