Northwest ag profitable despite geopolitical tension and rising input costs
SPOKANE – 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 teams throughout Idaho, Montana, Oregon and Washington monitor conditions and report outlooks for commodities financed by the co-op.
All Market Snapshots and audio highlights are posted online at northwestfcs.com/industry-insights.
Northwest FCS’ 12-month outlook for the agricultural commodities most common in the Northwest is summarized below.
Apples
The apple outlook expects profitable returns for growers and slightly profitable returns for packers for the 2021-22 crop. A smaller, high-quality yield, and reduced imports, bode well for prices; however, reduced exports and rising costs may soften the market and diminish margins.
Cattle
The outlook for cattle suggests slightly profitable returns for cow/calf producers. The industry will face higher feed costs associated with rising global grain prices. If drought conditions persist, producers may reduce herd sizes to ensure they can provide remaining cattle with adequate nutrition. Stronger cattle prices and rebuilding hay inventories will provide tailwinds to cattle producer profitability.
Cherries
Slightly profitable returns overall are expected for the Northwest cherry industry. Removal of underperforming and disease-affected acres should limit risk of oversupply. Pricing should be strong if quality improves over last year and demand remains strong. Consumer inflation and rising input costs present industry headwinds.
Dairy
The dairy outlook suggests profitable returns. Increasing feed expenses will create headwinds for producer profits and limit dairy expansion. Further tightening of dairy herds could promote higher milk prices. Milk price future contracts have steadily increased since mid-2021. Geopolitical tensions have forced greater volatility in dairy milk prices.
Fisheries
The 12-month outlook foresees fisheries being profitable. While fisheries face challenges with changing Total Allowable Catch, distressed crab populations, inflation and geopolitical tension, consumers continue to demand seafood, driving prices up for all products.
Forest Products
The 12-month outlook sees forest product manufacturers as very profitable and timberland owners as profitable. Lumber prices have continued their march higher and Douglas Fir log prices are following, albeit more modestly. Overall, the forest products industry is set to benefit from strong housing demand in 2022.
Hay
The hay industry outlook suggests profitable returns. High input prices and irrigation water availability will provide headwinds to producers. High hay prices will linger through 2022.
Nursery/Greenhouse
Strong profits are expected for the nursery/greenhouse industry. Growers continue to benefit from a robust housing market and increased interest in landscaping and gardening. Rising input costs and labor scarcity are pressuring margins and limiting production capacity; however, consumers are willing to pay higher prices and growers have improved their efficiency.
Onions
The profitability outlook suggests slightly profitable onion returns. The short supply of remaining onions positions Northwest producers to receive favorable prices for early season onions. While onion prices are strong for remaining onion stock and the upcoming crop, rising input costs will pressure profits through increasing cost of production.
Pears
The pear outlook anticipates profits for growers and slight profits for packers. Fruit quality is good overall and demand from both domestic and export markets is strong. Fruit size improved total yield this year and favorable pricing should mitigate rising input costs.
Potatoes
The 12-month outlook suggests profitable returns for contracted and uncontracted potato producers. Tight supply of potato stocks will place pressure on an early potato harvest. Current inventory levels leave little room for processors to transition to the new crop and fryers will likely not be able to fully rebuild their inventories.
Sugar Beets
The sugar beet outlook projects profitable grower returns. Strong competition from other profitable crops incentivized cooperatives to secure sugar beet acres. Beet growers were able to secure higher contract prices to combat rising input costs and inflationary pressures.
Wheat
The 12-month outlook anticipates profitable returns for wheat producers. Drought is impacting much of the Northwest’s winter wheat acres. Favorable prices for wheat and pulse crops will provide tailwinds to producer profitability. Geopolitical tensions impacting major wheat exporting countries will provide further upward pressure on grain prices.
Wine/Vineyard
The 12-month outlook anticipates profits for vineyards and slight profits for wineries. Although crop size is below historical averages, low inventories and strong demand are driving up grape prices. Consumers continue to show a willingness to purchase higher-priced wines; however, consumption remains flat, and rising input costs and supply shortages will limit returns.