Spokane-based agricultural lender Northwest Farm Credit Services offers a mixed outlook for the region’s agriculture, forest products, and fisheries industries in a newly released analysts’ report. 

Michael Stolp, Northwest FCS vice president of consumer insights, says many Northwest producers face an uncertain beginning to the year, with several factors affecting product markets, foremost among them being weather changes, a strong U.S. dollar overseas, and surplus production of some crops. 

“On the positive side, most areas are experiencing above-average precipitation and snow packs above normal. This should provide a strong start to the 2016 growing season,” says Stolp. 

He adds, “Less certain are how market dynamics will play out with a strong U.S. dollar and its drag on exports, slowing economic activity in China, and world surpluses in crops like wheat.” 

Stolp says the United States Department of Agriculture estimates a 2015 net farm income nationally of $55.9 billion, which is down $35 billion, or 38 percent, from 2014. 

“Exports are also down in 2015, falling 8 percent from 2014,” he adds.  “The drop in exports is significant, as U.S. agricultural exports account for 32 percent of total U.S. gross farm receipts.”

Based in part on Northwest Farm Credit’s November predictions, the agricultural market outlook the Journal published in December stated that despite an average production year for most Inland Northwest farmers, the post-harvest marketplace was softer due to a worldwide surplus. Wheat production was limited by drought conditions, and prices were below most growers’ breakeven price. 

Northwest Farm Credit’s latest outlook notes that lower prices continue to challenge wheat, dairy and hay producers’ bottom lines, as prices are pressured by large supplies and slowed exports. 

The cooperative says untimely rain and extreme heat in 2015 also affected the quality of hay, resulting in stocks for lower quality hay rising slightly. That in turn has caused dairy producers to reduce hay in feed rations, choosing instead to substitute relatively low-priced corn, soybeans and other feeds to meet nutritional needs at lower cost. 

Although feed prices were lower, the cooperative says milk prices are projected below most producers’ breakeven price through the first half of 2016. The dairy industry is faced with strong global production, reduced milk exports, and falling cull cow prices, referring to cows that no longer meet dairy production standards and are instead sold for meat.

The cooperative also reports that following an extended period of high prices, beef cattle prices are falling, although they are expected to remain at profitable levels. Market cycles pressured prices lower through the end of the year as the 2015 calf crop increased. Exports also were lower, slowed by a strong dollar.

The cooperative’s report on row crops says that Northwest potato growers harvested more acres last year, but production was down almost 3 percent due to lower yields, the quality of which was affected by an unseasonably warm growing season. Notwithstanding those challenges, U.S. potato exports were up more than 4 percent, although frozen potato stocks were down 4.5 percent. 

Sugar beets are doing well, with production having increased 3.3 percent in 2015, the report says. Although year-end sugar stocks are lower due to lower sugar imports, global consumption is expected to outpace production this year. 

Looking ahead, the cooperative says the Northwest apple industry is improving, supported by lower 2015-2016 production. It attributes the smaller crop to smaller apple size, crop damage, and fewer acres in production. Early sales were said to be brisk, but prices continue to improve as the shipping pace slows. The cooperative estimates that prices also might be limited by a strong dollar and slower-than-normal export sales.

Meanwhile, the cooperative reports wine sales are strong and bulk wine markets are active. Northwest wine producers’ 2015 crop was said to be heavy and of relatively high quality, despite an early harvest due to warm temperatures. Wine sales continue to increase overall, and mild winter weather is expected to favor Northwest wine grape production in 2016. 

The forest products industry is experiencing a slow, but sustained recovery as demand improvements are met with increasing lumber supplies from the U.S. and Canadian imports. 

The cooperative also reported encouraging 2015 sales results for nursery and greenhouse crops. Sales and profitability are expected to continue this year, with the introduction of more native plants, drought-tolerant plants, and marijuana. 

The El Niño weather pattern, which is a seasonal series of climatic changes resulting in unusually warm and nutrient-poor water in Pacific regions, is expected to negatively affect West Coast fisheries, as total landings often decrease in the year following above-average ocean temperatures. El Niño is expected to increase the size of toxic algae blooms, which already caused the delayed opening of California, Oregon, and Washington Dungeness crab fisheries in late 2015.