Producers face higher yields, lower returns

Northwest Farm Credit Services released its quarterly Market Snapshot, a look at the state of major agricultural commodities in the Northwest.

Beef – Current and projected cattle markets are volatile and trending down. Bearish market forces include increasing herd numbers and beef production, sluggish beef exports and a relative decrease in poultry and pork prices. The USDA’s recent decision to allow Brazilian beef imports is significant, but the net effect to U.S. markets is limited due to the Other Country Tariff Rate Quota system. (The quota caps beef exports from Brazil and other named countries at 64,000 metric tons).

Forest Products – The U.S. housing industry drives forest products industry demand and prices. Although housing starts are up nearly six percent from 2015, they remain below sustainable levels. Pent-up housing demand supports the forest products industry in the long term. In the near term, recently improved lumber prices face challenges from rising Canadian lumber imports. Log price increases are limited by ample supplies fueled by summer logging not hindered by forest fires.

Hay – Ample and low-priced feed supplies are swamping hay markets. Favorable growing conditions increased hay, grass, alfalfa and corn silage yields throughout the Northwest. Strong production and old-crop inventory carryover continue to challenge hay prices, with many growers accepting offers between $55 and $100 per ton for fair-quality hay. Demand from U.S. dairies is lackluster, but export demand is up nearly 11 percent year to date.

Nursery-Greenhouse – Nursery and greenhouse growers are optimistic, citing strong demand. Ornamental buyers are committing to orders early to assure access to product, driving year-to-date sales up nearly 10 percent. Greenhouse sales are similar to last year, with increases limited by adverse seasonal weather. Overall, the outlook for the nursery and greenhouse industry is positive, buoyed by inventory shortages, strong demand and expectations for rising housing starts. Labor shortages continue to temper producers’ optimism.

Wheat – Northwest wheat producers’ yields are bursting bins, but low prices are squelching profits. Year over year, U.S. wheat supplies are up 17 percent and global wheat supplies are a record 745 million metric tons. In Washington state, winter wheat yields set records. The USDA projects 2016-17 all-wheat prices at $3.30 to $3.90 per bushel, at or below producers’ cost of production. Bright spots include millers’ price premiums for high-quality wheat.



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