Spokane, Wash. (April 8, 2011) – Strong markets for most ag commodities are tempered by increasing uncertainties this spring. Agricultural producers’ challenges include rising input prices, a wet and cold spring that will delay planting, and the unknown impact of the Japan Disaster on Pacific Northwest ag markets. The wine and tree fruit industries also face undetermined damages caused by two severe winter freezes.
The following highlights depict the general health of select industries included in Northwest FCS Knowledge Center Market Snapshots, which are available at www.farm-credit.com/resources.
Beef: With cattle prices at record highs, cattle producers are both optimistic and cautious. The price for a 550-pound steer has increased by more than $33 per cwt in the last year. However, rising energy, input and feed costs remain a concern in an extremely volatile market. Tighter beef supplies will likely continue to support higher retail prices. However, most analysts expect consumer beef demand to remain flat in 2011.
Wheat: Northwest wheat producers enter the 2011 production season with optimism, fueled by strong 2010/11 grain markets and ample moisture throughout the growing area.Recent declines in wheat prices and increases in input prices are partially offset by producers’ forward sales and input pre-purchases. Global wheat production is expected to increase in 2011. Wheat markets, though, are supported by low, current supplies of milling quality wheat and uncertainties related to weather.
Dairy: Northwest FCS estimates dairy producers’ average breakeven milk prices between $15.50 and $16.50 per cwt. At current milk prices, dairy producers’ margins generally remain positive. Dairy markets face opposing forces in 2011. Although domestic demand for butter and cheese is expected to rise, higher production and competition for exports will challenge price improvements.
Apples: 2010 crop movement is strong, supported by a smaller Northern Hemisphere apple crop this year. A shorter crop on the East Coast and in the Midwest has provided opportunities for the Northwest apple industry in the domestic market. While it’s too early to assess the scope of damage from two winter freezes, the 2011crop size may be smaller.
Hay: The Pacific Northwest hay market is strengthening ahead of first cutting in 2011. Demand for hay from dairies continues to improve given higher milk prices and low on-farm inventories. However, dairies will likely continue to purchase hay just as needed. Japan represents about 50 percent of all U.S. hay exports. Any negative impact to Japanese hay imports will affect the market. Hay growers with strong yields and quality are likely to do well this year, but higher input costs are likely to compress margins.
Forest Products: Most Northwest forest products producers experienced an improvement in market conditions and prices during 2010, although financial performance was below long-term averages and future expectations. The domestic housing market has stabilized, but remains weak. Demand remains steady for home repair and remodel, and demand is strong for exports of logs and lumber to China.
Nursery/Greenhouse: Signs of a tepid economic recovery are underway. The pathway to recovery for the nursery industry depends upon improvement in consumer confidence and the housing markets. Producers still face a sluggish market with uncertainties ahead and escalating fuel costs that compress margins. Emerging shortages of certain nursery products will benefit some producers. Sales in 2011 are expected to be stronger than 2010, but producers still face a very challenging marketplace.
Potatoes: Potato growers are optimistic entering the 2011 production season. Potato supplies are tight throughout the Northwest and old crop supplies aren’t expected to carry over into new crop production. Although a concern, rising input expenses have been largely offset by profitable markets.
Sugar Beets: Roundup Ready seed has been approved for the 2011 planting season. Although industry reports suggest adequate quantities of Roundup Ready seed are available for the 2011 planting season, supplies are limited for replanting. Sugar beet producers continue to enjoy strong sugar prices, with world sugar inventories at two-decade lows.
Wine/Vineyard: Wine sales are encouraging, with recent reports citing the U.S. as the largest wine market. Many Northwest wineries are reporting solid sales increases. The 2010 harvest varied by state with Washington wine grape growers harvesting a record crop and Oregon wine grape growers harvesting a lower-than-expected yield. Washington growers are waiting to see the affects of two cold snaps which may have killed vineyard buds in some areas.
KnowledgeCenterquarterly Market Snapshots include information on 18 industries and periodic special reports. If you’d like to receive these updates on a regular basis, sign up to receive the e-newsletter version of the Market Snapshots at www.farm-credit.com/resources. Also available on the resource pages are other Knowledge Center tools, Land Value Survey and Dr. Dave Kohl and Dr. Ed Seifried’s regular columns. Northwest FCS Knowledge Teams have been created for the major agricultural industries Northwest FCS serves and are comprised of experienced, front-line staff.
Northwest FCS provides financing, related services and crop insurance to farmers, ranchers, agribusinesses, commercial fishermen, timber producers, and rural homeowners in Montana, Idaho, Oregon, Washington, and Alaska. For more information, go to www.farm-credit.com.
Posted by Haylie Shipp