Northwest producers face higher yields, lower returns

nw-farm-servicesNorthwest Farm Credit Services released its quarterly Market Snapshot publications that look at the state of major agricultural commodities in the Northwest.

Nursery-Greenhouse – Nursery and greenhouse growers are optimistic, citing strong demand. Ornamental buyers are committing to orders early to assure access to product, driving year-to-date sales up nearly 10 percent. Greenhouse sales are similar to last year, with increases limited by adverse seasonal weather. Overall, the outlook for the nursery and greenhouse industry is positive, buoyed by inventory shortages, strong demand and expectations for rising housing starts. Labor shortages continue to temper producers’ optimism.

Fisheries – Good fishing and strong demand support higher or sustained prices for many fisheries, including pollock, Pacific cod and halibut. Other fisheries, such as black cod, pink shrimp and salmon, face challenges. Whale predation of black cod, a salmon run failure in Prince William Sound and a voluntary shutdown of the pink shrimp industry challenge these fisheries. Overall, the fishing industry faces opportunities in consumers’ preferences for healthy and sustainable proteins.

Forest Products – The U.S. housing industry drives forest products industry demand and prices. Although housing starts are up nearly 6 percent from 2015, they remain below sustainable levels. Pent-up housing demand supports the forest products industry in the long term. In the near term, recently improved lumber prices face challenges from rising Canadian lumber imports. Log price increases are limited by ample supplies fueled by summer logging not hindered by forest fires.

Beef – Current and projected cattle markets are volatile and trending down. Bearish market forces include increasing herd numbers and beef production, sluggish beef exports and a relative decrease in poultry and pork prices. The USDA’s recent decision to allow Brazilian beef imports is significant, but the net effect to U.S. markets is limited due to the Other Country Tariff Rate Quota system. (The quota caps beef exports from Brazil and other named countries at 64,000 metric tons).

Dairy – After increasing more than $2 per hundredweight (cwt) between May and August, December class III milk futures slipped, weighed down by butter and cheese inventories. However, lower feed prices are softening falling milk prices’ impact on dairy producers’ profit margins. Cost of production is down by as much as $1.50 per cwt on dairies where new-crop inventories enter feed rations. Globally, milk production is slowing, especially in the European Union and Australia.

Hay – Ample and low-priced feed supplies are swamping hay markets. Favorable growing conditions increased hay, grass, alfalfa and corn silage yields throughout the Northwest. Strong production and old-crop inventory carryover continue to challenge hay prices, with many growers accepting offers between $55 and $100 per ton for fair-quality hay. Demand from U.S. dairies is lackluster, but export demand is up nearly 11 percent year to date.

Row Crops:

Onions – Onion growers are guardedly optimistic entering fall. Good quality and large sizes are reported in Eastern Oregon and Southwestern Idaho. In the Columbia Basin of Washington and Oregon, stands vary, but yields are near historical averages. Lower U.S. onion imports and growing season challenges in Japan support manageable supplies. Therefore, expectations are positive for profitable onion prices through year end.

Potatoes – Northwest potato production is mixed. In Idaho, favorable weather conditions support strong yields, up 5 to 10 percent from the prior year. Washington potato yields are down by the same percent, limited by high early-season temperatures. Although fresh market potato prices were initially profitable, markets are now at or below producers’ costs of production. Lower fuel, fertilizer and pesticide expenses help buffer potato growers’ margins.

Sugar beets – Favorable growing season conditions propelled sugar beet yields and sugar content above historical averages in Idaho and Montana. Strong yields are met with weakening domestic demand due to consumers’ attitudes toward genetically modified sugar beets. However, global sugar demand continues to outstrip production. In China, August sugar imports increased more than 30 percent over the prior year.

Tree Fruit:

Wine-Vineyard – Wine grape harvest is coming to a close and yields are strong. Demand is driven by consumers seeking high-quality, branded wines, which are typically in the $20-plus price range. The direct-to-consumer market remains an opportunity for wineries looking to grow in the premium segment. Buyers of wineries wanting to shore up fruit supply or purchase a well-known brand are driving mergers and acquisitions in the industry.

Apples – Most apple producers are optimistic for new-crop quality and pricing. After last year’s 114.6 million box crop, the new apple crop is estimated to be Washington state’s second or third largest in history, at 120 million to 130 million boxes. Strong production meets favorable fruit coloring, sizing and overall quality, supported by a near-optimal growing season. Exceptions include instances of bitter pit in storage for some varieties. Access to harvest labor remains adequate and early 2016-17 pricing is strong and stable.

Cherries – The Northwest’s 2016 sweet cherry season closed successfully, with performance varied across regions. Warm spring weather caused ‘flash bloom’ in some orchards, reducing pollination from 10 days to as few as two days, which reduced some growers’ yields. However, larger fruit sizes and quality somewhat offset lower yields. Prices followed seasonal trends, with strong early- and late-season returns and some variability mid-season.

Pears – An early Northwest pear harvest led to a strong market and positive industry outlook. The 2016-17 crop is projected larger than last year’s crop, which was the smallest in five years. This year’s crop size is estimated below the five-year average. Outstanding fruit quality offsets relatively lower pear volumes, supporting higher packouts. Together, manageable crop volumes, high quality and strong current and projected crop prices fuel industry optimism.

Wheat – Northwest wheat producers’ yields are bursting bins, but low prices are squelching profits. Year over year, U.S. wheat supplies are up 17 percent and global wheat supplies are a record 745 million metric tons. In Washington state, winter wheat yields set records. The USDA projects 2016-17 all-wheat prices at $3.30 to $3.90 per bushel, at or below producers’ cost of production. Bright spots include millers’ price premiums for high-quality wheat.

About Northwest Farm Credit Services

Northwest FCS is a $10.6 billion financial cooperative providing financing and related services to farmers, ranchers, agribusinesses, commercial fishermen, timber producers, rural homeowners and crop insurance customers in Oregon, Washington, Montana, Idaho 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.








Share This Post

GAMES



© Copyright 2017 The North Coast Citizen