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 Industry Insights.
Northwest FCS’ 12-month outlook for the agricultural commodities most common in the Northwest are summarized below.
The 12-month outlook on cattle suggests slightly profitable returns. The national herd size is moderating, which is providing tailwinds to producer profitability. Instability around COVID-19 continues to weigh on restaurant demand for high value cuts.
Slightly profitable returns in 2021 are forecast, although continued volatility is likely. The Coronavirus Food Assistance Program provided direct payments to producers and the Farmers to Families Food Box Program purchased dairy products, which supported milk prices, mainly Class III. Similar assistance is expected in 2021.
The 12-month outlook for fisheries expects profitable returns. Although 2020 hit the seafood industry hard with restaurant sales declining more than 50%, consumers remained hungry for seafood. Fisheries will continue to face challenges with ongoing COVID-19 protocols, changing total allowable catches and uncertain trade relations in 2021. There is optimism for increased demand as restaurant sales recover and retail demand remains strong.
The forest products outlook anticipates profitable operations for both mills and timberland owners. Strong demand and tight supplies are leading to favorable log and lumber prices. Robust housing starts will keep demand high, which could increase further as the COVID-19 vaccine improves economic conditions.
The 12-month outlook for the hay industry calls for slightly profitable returns. In 2021, the hay market will focus on modestly optimistic fundamentals. A weaker dollar favors exports, and higher prices for protein substitutes, like soybean meal, will provide tailwinds to hay producers.
Onions are forecast to provide break-even returns over the next 12 months. Supply and demand indicate prices could increase, yet producers are sensitive to continued COVID-19 restrictions in the food service industry.
Slightly profitable returns are expected for potato producers. Processors’ demand for uncontracted potatoes is restrained as the COVID-19 situation continues to dampen restaurant demand for processed potato products, such as french fries.
Sugar beet growers should see profitable returns for the 2020-21 season. The USDA forecast suggests stocks-to-use ratios will continue to decrease from 14.2% in 2019-20 to 13.5% in 2020-21, a favorable ratio for Northwest producers.
Apple growers can expect to see slightly profitable margins. A smaller crop and solid demand should increase prices. However, several quality issues have challenged growers this season. Quality will be a key driver of individual growers’ profits.
Overall, profitable margins are anticipated for cherry growers. Reduced supply coupled with strong domestic demand helped sustain high pricing, which will translate into strong margins for growers. However, those with measurable losses in tonnage may not have had enough fruit to capture returns and will be reliant on crop insurance.
The 12-month profitability index forecasts slightly profitable returns for pear growers. Although demand has been lackluster the last few years, increased pricing indicates demand may be finding some higher ground. Good quality will also increase growers’ returns.
The outlook calls for slightly profitable returns for wheat growers. The USDA’s projected 2020-21 season average farm price for all-wheat is $4.50 per bushel. Current markets are showing a higher average of $4.70 to $4.80 per bushel from the 2019-20 season. High yields and government payments will partially offset otherwise break-even wheat prices.
Slight profits are expected for both vineyards and wineries, although it’s a mixed bag for both. Lower grape yields and bulk wine supplies should support improved grape markets, but fundamental oversupply issues remain. Some wineries in the retail and direct to consumer channels are having record sales; however, wineries reliant on tasting rooms, events or other in-person sales are left with limited options to generate revenue.
About Northwest FCS
Northwest FCS is a $13 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. For more information, go to northwestfcs.com.