SPOKANE, Wash. – Northwest Farm Credit Services, the Northwest Farm Credit Union, has released its quarterly market overview reports covering the status of the region’s major agricultural products. Northwest FCS teams in Idaho, Montana, Oregon and Washington State are monitoring conditions and presenting prospects for products funded by the co-op.
All market overviews and audio highlights are posted online at Industry Insights.
Northwest FCS’s 12-month outlook for the most common agricultural commodities in the Northwest is summarized below.
The 12-month outlook for livestock suggests modest profitability centered on risk management strategies and input costs. Rising costs for feed, fertilizers and fuel will test the profitability of the industry.
The dairy outlook anticipates slightly profitable returns. Higher feed costs will weigh on the profitability of producers. Risk management strategies will become increasingly important as the prospect of direct government assistance wanes. However, the cost of risk management is higher and producers must adapt to the new cost structure. The USDA predicts slightly lower milk prices in 2021, as Class III prices decline and Class IV prices gain traction for export.
Slight benefits are expected for the entire seafood industry. COVID-19-related disruptions, including closures of processing plants and restaurants, have challenged the industry. Although restaurants are a huge outlet for seafood, consumers continue to show high demand at retail outlets. Optimism for restaurants to reopen in 2021 bodes well for seafood sales.
The outlook for forest products calls for profitable logging and highly profitable processing operations. Factories have reached a new level of profitability as product prices set new records. For forest land owners, strong domestic demand is expected to keep log prices favorable, supporting profitability even though log supplies remain high in some areas.
The 12 month outlook for the hay industry calls for slightly profitable returns. Producers in drought-affected areas will face headwinds for production and profitability. Disruptions to shipping containers will slow exports, potentially leaving a surplus of supply in key export regions. Higher prices for corn, soybeans and wheat will boost producer incomes.
Nursery / Greenhouse
Significant benefits are expected for nursery / greenhouse producers. The industry continues to benefit from the effects of the pandemic on consumers who spend more time at home. The drastic increases in sales are expected to continue through 2021, but could normalize in 2022 with the reopening of the company. The housing market is strong, which also supports continued sales.
Returns to equilibrium are expected for the onion industry. Damage to the Texas onion crop during the February cold snap will reduce national onion supplies. The Northwest is well positioned for the remainder of the 2020 storage harvest to take advantage of rising prices in the onion market.
Profitability prospects suggest slightly profitable yields for contract potato growers. Open potato yields are expected to break even as growers face a higher cost of production. Fuel and fertilizer costs have risen 8% to 25% since the start of 2021. The pace at which restaurant sales return to normal will be a key factor for the industry.
The profit outlook for sugar beets projects profitable yields in 2021. USDA forecasts suggest that the stocks-to-use ratio will increase to 15.1%, from 12.9%. Higher stock-to-use ratios tend to create headwinds, but the potential for normalization in consumer demand appears to bolster producer profitability.
The 12-month outlook suggests apple growers will break even. Although prices are high for the current small crop and the supply is cleaning up well ahead of the 2021-22 harvest, poor packaging has hurt growers’ profitability. If a large 2021-22 harvest is achieved, prices are likely to be moderate and it will be difficult to generate profitable income.
The 2021 cherry harvest is expected to be slightly profitable. Although yields tend to be high, removing underperforming acreage should result in a manageable harvest. If the growing conditions produce high quality fruit and growers can prune to obtain the right size fruit, good consumer demand will produce favorable prices.
The 12-month profitability index forecasts the equilibrium of pear producers. Although pears are enjoying more favorable prices due to manageable supplies and good quality fruit, producer yields were declining. There is optimism for a bigger crop 2021-22. However, consumer demand may not meet an increase in the harvest, leading to lower prices.
Profitable yields are expected for wheat. Higher prices for wheat and rotational crops should support producer incomes. The USDA has raised export projections for white wheat, while the outlook for hard red winter wheat demand has moderated. The drought in eastern Montana will likely affect the profitability of producers.
Wine / Vineyard
Slight profit margins are expected for wineries and vineyards. The reduction in supplies improved the dynamics of the vineyard market while the success of wineries depended on their sales channels. Still, overall consumer demand has remained stable and wineries with on-site sales are expected to experience some recovery this year.
About Northwest FCS
Northwest FCS is a $ 14 billion financial cooperative that provides financing and related services to farmers, ranchers, agri-food businesses, commercial fishing operations, lumber producers, rural landowners and insurance customers. -harvest in Montana, Idaho, Oregon, Washington and Alaska. Northwest FCS is a member of the National Farm Credit System which supports agriculture and rural communities with reliable and consistent financial and credit services. For more information, visit north-westfcs.com.