2018 presents fresh opportunities for Northwest ag commodities

Northwest Farm Credit Services, the Northwest’s leading agricultural lending cooperative, has released its quarterly Market Snapshot reports that look at the state of major agricultural com-modities. Northwest FCS industry teams develop and release outlooks for commodities the company finances.

All Market Snapshots are posted online at northwestfcs.com/resources/industry-insights.

 

Cattle

Those in the cattle industry are optimistic as calf prices remained unseasonably high through fall 2017. Despite continued growth in cattle and beef inventories, enduring domestic and global U.S. beef demand provide continued tailwinds. The 12-month outlook suggests slightly profitable results as exports and domestic demand continue to outpace a growing supply.

 

Dairy

Milk futures indicate a $2 per cwt, or 13 percent, decrease in milk prices from December 2017 to February 2018. The glut of skim milk powder continues to burden the European Union and Canada. However, drought in New Zealand and lower cheese tariffs in China may provide tailwinds to milk prices. The 12-month outlook suggests unprofitable returns as milk prices are projected to fall in the first half of 2018.

 

Forest products

Strong lumber prices increased demand for logs in 2017; however, wet spring and winter weather coupled with a severe fire season decreased log inventories. This led to inflated log prices, which are expected to remain high into 2018. Lumber prices are anticipated to be stable, but with the increased log prices mills could see some softening of profit margins in 2018.

 

Hay

Alfalfa hay exports remain strong, growing an additional 227,000 metric tons year over year. Saudi Arabia is the fastest-growing export market, up 106,000 tons from a year ago. However, this growth is focused on the U.S. Southwest. Northwest hay producers benefit most from growing Chinese demand, up 93,000 tons. Dairy hay stocks are adequate as milk prices fall and domestic demand slows. The 12-month outlook suggests alfalfa and timothy producers will remain slightly profitable.

 

Sugar beets

Although lower than the 2016 crop, 2017’s sugar beet crop is the second largest on record. Growers were pleased with yields, considering the late start to planting season. However, sugar content was lower than anticipated. Profitability in the industry will not be as strong as the previous year even though lower inventories and export limits on Mexico offer a promising outlook for the sugar beet industry in 2018. The outlook is for slightly profitable returns to sugar beet growers.

 

Wheat and pulse crops

Wheat prices remain around breakeven on large global stocks. India, a large buyer of Northwest pulse crops, imposed an unexpected import tariff on peas, lentils and garbanzo beans, all grown in rotation with wheat. Reduced exports to India are likely to lower overall profitably. The 12-month outlook suggests low wheat prices are likely to persist in 2018, with higher prices constrained by record world production and high ending stocks. Profitability will also be lower due to reduced revenue from rotation crops such as peas, lentils and garbanzo beans.

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