Spokane Journal of Business

Port delays could hurt agricultural markets, Northwest Farm Credit Services report says

Many producers, however, are coming off good years

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Northwest Farm Credit Services, the Spokane-based agricultural lending cooperative, says in a 2015 market outlook that lower fuel costs are good news for producers, but that many are experiencing higher transportation costs and slower sales due to shipping-related issues.

Michael Stolp, vice president of market research and development for NFCS, says slowdowns at several West Coast ports could affect hay, dairy, tree fruit, and row crops in particular. 

“The challenges associated with the port slowdown are most significant in those agricultural commodities that depend on containerized shipping, where labor is higher,” he says.  

A labor dispute between the Longshore & Warehouse Union and the Pacific Maritime Association, which negotiates and administers agreements with the union, is causing the slowdowns, and a quick resolution isn’t expected, the market snapshot says. 

Lower diesel prices could be a boon to wheat farmers in the long run, along with a recent boost in prices. According to the U.S. Energy Information Administration, average U.S. diesel prices are down about 94 cents from a year ago, as of Jan. 19. 

The rise in wheat prices was precipitated by Russia announcing a wheat export tax, which will be levied from February to June, the report says. However, a plentiful world supply will remain an issue, as will a higher-value U.S. dollar. The U.S. Department of Agriculture Economic Research Service predicts an average price of $5.90 to $6.30 a bushel for the 2014-2015 growing year; however, the agency reported a weighted average price of $6.87 a bushel for the 2013-2014 year. Weighted average prices are based off the monthly average prices received by farmers weighted by monthly marketings. 

The Northwest beef market is expected to have a solid year in 2015, Stolp says. The cattle market had a record year in 2014 and prices remained strong heading into the New Year. There is some volatility in the market, including price unpredictability and the rising cost of feeder cattle has resulted in larger margins and increased capital spending on cattle feeders, the report says.  

Dairy prices are expected to be pressured lower this year, by bearish global markets and a low export market, Stolp says. Milk prices peaked last fall and have since dropped 20 percent. 

“The dairy industry also experienced an exceptional year in 2014, but that has actually taken a turn, and markets have actually fallen,” Stolp says. 

Meanwhile, the Northwest hay market has stalled, the report says. Demand is expected to drop in 2015, because of dairy farmers preparing for lower milk prices and due to exporting issues, including a change in China’s hay testing protocols. Those changes have slowed down shipments to the Chinese market, the report says. 

Export delays and related issues also could affect the potato and apple markets this year, the report says. The delayed shipments are increasing the amount of processed potatoes as well as raw, unprocessed product. Meanwhile, the apple market, which had its largest crop in history last year, is being matched by large crops throughout the rest of the U.S. and global markets, Prices last year were lower than they’d been in a decade, but are beginning to level out, the report says. It says exports are critical to supporting the stable prices and clearing the way for this year’s crop. 

The wine and vineyard industry also had a record season last year, the report says, although finding enough fermentation space was a challenge for Washington and Oregon winemakers. The report says strong Northwest wine trends should continue. 

Sugar beets also had a strong year, with improved sugar markets and high yields last year, the report says. An upcoming agreement between Mexico and the U.S. should help prevent an oversupply of Mexican sugar beets being exported to the U.S., which should help keep prices from deflating. 

The forest products and nursery and greenhouse industries also reported profitable years, spurred on by the economic recovery and rising consumer confidence. The housing market, which is the primary driver of forest products, saw an annualized rate of more than 1 million new-construction units for the first time since 2007. However, lower lumber prices and higher log prices are creating a challenge for Northwest mills. 

Many nurseries and greenhouses reported that last year was their most profitable since 2008, Stolp says. 

“That was an industry that was hit particularly hard during the downturn,” he says.  

Demand for nursery and greenhouse products remained steady last year at high prices. The industry’s outlook for this year is positive; however, an informal poll of Northwest nursery producers last fall found that 43 percent see a shortage of labor as the industry’s biggest challenge. 

Overall, Stolp says, 2015 is looking like another challenging and rewarding year for the agricultural industries here. 

“The 2015 marketplace continues to be volatile, with opportunities for agricultural producers to understand and manage risk,” he says. 

Northwest Farm Credit Services provides about $12 billion in financing and related services to farmers, ranchers, agribusiness, commercial fishermen, timber producers, rural homeowners, and crop insurers. The cooperative leases an about 61,000-square-foot space at 1700 N. Assembly here as its headquarters. However, it bought the former Ambassador’s building near Spokane International Airport at 2001 S. Flint late last year for about $9 million, and plans to relocate to the 133,000-square-foot space later this year. 

The cooperative is a part of the nationwide Farm Credit System, a network of borrower-owned lending institutions that provide approximately $208 billion in loans annually.

Katie Ross
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Reporter Katie Ross covers manufacturing, hospitality, and government at the Journal of Business. An outdoor enthusiast and snowboard fanatic, Katie is a recent graduate of Gonzaga University.  

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