Northwest Farm Credit Services, the Spokane-based agricultural lending cooperative, says commodity markets appear generally strong this year for most agricultural producers, but wheat producers will face challenges turning a profit due to lower grain prices.

Meanwhile, the cooperative also says agricultural land in the Northwest rose significantly in value in 2013 because of steady demand and a limited supply of those properties. Based on survey responses, preliminary year-end numbers for average dollar-per-acre land values showed an increase of about 13 percent from 2012 to 2013.

For its outlook on crops, Northwest Farm Credit Services regularly re-leases reports it calls market snapshots to describe the general health of various agricultural industries in Washington, Idaho, Oregon, and Montana. The Jan. 10 market snapshot says many ag producers expect a profitable year. 

The report says lower corn prices are supporting improved margins for dairy farmers and for feed lots. Year-over-year corn prices have fallen from nearly $7 to the low- to mid-$4 per bushel.

However, the cooperative reported that wheat prices were hovering just above $6 per bushel, an amount near what most growers need to break even. The average price for soft white wheat was down slightly in December, at $7.24 per bushel, compared with just over $8 a year earlier. 

Strong profits in recent years are expected to bolster wheat producers’ ability to bear the downside risk, the cooperative says.

“Wheat market fundamentals are bearish, pressured by rising global stocks and weak cross market support from corn,” the report says. “Stronger prices are unlikely in the near term without a supply disruption.”

Ample corn supplies also are reducing the amount of wheat being used as livestock feed, the co-op says.

Dairy operators are more profitable so far this year, while milk prices are expected to remain strong in 2014. Although lower feed costs are expected to support dairy producers’ profit margins, prices for soybean meal, alfalfa, and other feed ingredients remain high compared with corn prices, the report says.

For hay producers, tepid demand has softened that crop’s prices, though they remain at or above break-even levels. 

Northwest Farm Credit Services says that shortages of high-quality alfalfa continued heading into 2014, because for the past three seasons, producers haven’t had ideal growing conditions. The limited supplies likely will support prices at profitable levels for higher-quality alfalfa, the cooperative says.

Meanwhile, profit margins for sugar beet producers also are being pressured lower due to global oversupply.

The cooperative says cattle markets continue to strengthen, and prices for cattle are at record levels. Tight supplies will continue to support cattle prices for the foreseeable future, it says. Global and domestic beef demand is strong, though continued beef price increases might challenge consumer demand.

For the Northwest apple industry, increased supplies are weighing on markets. Apple prices, while generally profitable, have been pressured lower.

Prices are expected to be firm through the first quarter of this year and stay strong through the marketing season.

The ag cooperative says it informally polled its customers involved in Northwest wineries and vineyards and found that wine sales were up 4 percent in 2013. 

Worldwide wine consumption continues to increase, with leading growth markets including the U.S., China, and the United Kingdom. 

China’s wine consumption has doubled twice in the past five years and is projected to nearly double again by 2016, surpassing U.S. wine consumption, Northwest Farm Credit Services says. 

Supply and demand are expected to remain balanced, matching improved global production and rising wine inventories with declining growth in vineyard acreage and increasing demand.

The cooperative says that the forest products industry still is facing volatility in pricing and demand. Competition between domestic mills and export buyers is driving log prices higher. In areas of the Northwest, log prices exceed levels during the height of the housing boom. 

In the lumber and panel markets, mills have experienced periods of strong price increases followed by other periods of equally steep downward corrections. 

“This volatility complicates management decisions, particularly in an environment of rising log costs,” the cooperative says. “U.S. fiber consumption is expected to grow in 2014, driven primarily by increases in housing starts. However, price volatility is expected to continue.”

 Northwest Farm Credit Services provides more than $12 billion in financing and related services to farmers, ranchers, agribusinesses, commercial fishermen, timber producers, rural homeowners and crop insurance customers in five Western U.S. states: Montana, Idaho, Oregon, Washington, and Alaska. 

The cooperative is a member of the Farm Credit System, a nationwide network of borrower-owned lending institutions that provide nearly $194 billion in loans.