Spokane Journal of Business

Most INW crops to produce slight profit, forecast suggests

Lumber prices remain high; fruit yields shrink

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Most of the Pacific Northwest’s agricultural commodities are expected to be slightly profitable, according to a quarterly report by Spokane-based agricultural lending cooperative Northwest Farm Credit Services.

The report shows, however, some products are being buoyed by government programs, while others face quality issues due to environmental factors.

Hannah Williams, industry analyst at Northwest Farm Credit, says the market is mixed.

“Some industries and individual operations have been in great positions to capture demand-supply shifts, and others remain challenged,” Williams says. “As the COVID-19 dust settles, many are adjusting to the new normal, and some markets are settling down. Producers will continue to monitor changes in consumer behavior around spending, grocery shopping and eating out at restaurants.”

Two industries are likely to experience continued high demand related to active housing markets and stay-at-home orders.

“The housing market continues to be very robust in the Spokane area and the U.S., which is driving demand in lumber and nursery-greenhouse sales,” Williams says.

The market snapshot of the state of key agricultural commodities in the Northwest shows that forest products will be profitable. Higher prices on logs are expected to result from continued high demand, and recent wildfires also will contribute to higher lumber prices in the short term. However, a slight slump in prices is expected due to seasonal construction slowdowns and increased regional log inventories due to salvage harvesting.

Nurseries and greenhouses also are experiencing high demand due to consumers focusing on their homes and robust housing markets. While producers saw increased costs related to implementing practices to prevent the spread of COVID-19, they’ve been buoyed by federal assistance programs, such as the Paycheck Protection Program and the Coronavirus Food Assistance Program, the report says.

The hay industry has suffered from environmental factors, including rain damage and slower drying times caused by smoke produced by wildfires. While there’s plenty of mid- and low-quality timothy hay, fewer acres and delayed harvest lead to lower production of dairy- and horse-grade timothy. Hay producers’ profitability will depend on the individual producer’s ratio of high- and low-quality hay.

Fisheries are experiencing reduced demand and disruptions in supply chains due to effects of the COVID-19 pandemic and an ongoing trade war, but government assistance programs are keeping producers afloat for now. Alaskan pollock is a challenging harvest due to small fish and slower fishing, while halibut pricing has suffered as a result of restaurants closing due to stay-at-home orders, the report says.

For dairy producers, the snapshot notes that profitability will depend on the use of price risk management tools. Milk prices have begun to stabilize after a period of steady decline, and demand for block cheese remains strong. However, demand for cream and butter hasn’t recovered from the decline in demand caused by the COVID-19 pandemic. The USDA’s Coronavirus Food Assistance Program and an extension of its Farmers to Families Food Box program have helped to bolster demand and prices.

Profitability in cattle production also will rely on risk management strategies, but that industry is expected to see modest profitability, the snapshot shows. International demand for beef has been mellow due to the pandemic. Many producers will have to cull herds more aggressively, as wildfires have impacted pasture conditions. Beef cattle producers are expected to receive about 20%, or about $2.8 billion, of available Coronavirus Food Assistance Program funds.

Wheat production has seen reduced demand and high production, leading to record-high wheat stocks. The USDA projects average farm price for all-wheat to decline by 20 to 30 cents per bushel in the 2020-21 season. Washington crops were strengthened due to timely rains and minimal impacts from wildfires. Exports will experience challenges as Australia and Canada produce higher yields.

Tree fruit is expected to be slightly profitable. Apple crops are expected to be smaller, having been impacted adversely by high winds and smoke. Quality will be key to profits of individual growers. Poor weather also shrank the cherry crop to a four-year low, and the spread of COVID-19 increased labor costs and softened exports. However, higher domestic sales have offset reduced exports and maintained pricing.

 

Virginia Thomas
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Reporter Virginia Thomas has worked at the Journal since 2017 and covers the banking and finance industries. As a reporter, she loves learning about Spokane's many growing industries. She enjoys travelling with her husband, snuggling with her cats, and cross stitching.

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