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Northwest Ag Commodities Experiencing Varied Impacts of Coronavirus Pandemic

 

April 9, 2020



SPOKANE–Northwest Farm Credit Services has released its quarterly Market Snapshot reports covering the state of major agricultural commodities in the region. Northwest FCS industry teams throughout Idaho, Montana, Oregon and Washington monitor conditions and report outlooks for commodities financed by the co-op.

In the first quarter of 2020, agricultural industries–including forestry and fisheries–navigated volatile economic conditions caused largely by the coronavirus pandemic.

The 12-month outlook for agricultural commodities common to the area are presented as follows:

Cattle: Northwest FCS’ 12-month outlook for cattle suggests variable profitability throughout the beef sector. Packing margins are at a record high on strong domestic demand. Cattle feeders continue to work through large inventories, specifically heavier feeder cattle. Feeders’ ability to protect pricing protect during this volatile period will determine their profitability, which appears to be breakeven to a slight loss. The outlook for cow calf producers is breakeven to slightly profitable depending primarily on the producer’s ability to price protect or market calves at or above their cost of production.

Dairy: Northwest FCS’ 12-month dairy outlook anticipates unprofitable returns in 2020. The long-term effects of the coronavirus pandemic on the dairy industry are uncertain. Producer profitability will depend on risk management strategies placed before the COVID-19 outbreak.

Fisheries: Northwest FCS’ 12-month outlook expects fisheries to be slightly profitable. Pollock, the largest fishery in the U.S., continues to exhibit strong demand and pricing. Plus, some progress has been made on the trade deal with China. However, headwinds include lower Pacific cod total allowable catch, increased salmon inventory and small-sized sablefish.

Forest Products: Northwest FCS’ 12-month outlook calls for slightly profitable margins for timberland owners and forest products manufacturers. Although markets were improving at the beginning of 2020, forecasters expect subdued end-market activity through the summer and pricing is being pressured down. Still, timberland owners and mills are expected to be slightly profitable for the year.

Hay: For hay, Northwest FCS’ 12-month outlook suggests alfalfa profitability will moderate as producers intend to plant more acres in 2020. Large inventory of mid-grade timothy continues to drive weak prices. Export prospects remain favorable despite trade disruption.

Nursery/Greenhouse: Northwest FCS’ 12-month profitability outlook for the nursery industry remains positive for 2020. Growers report strong orders and an early start to the spring shipping season. However, rapidly changing market conditions due to the COVID-19 pandemic create uncertainty for consumer demand. Spring will bring challenges and opportunities for the industry.

Onions: Northwest FCS’ outlook for onions shows below break-even prices. COVID-19 fears and onion quality issues are negatively impacting current prices. However, the 2020 crop is being planted in excellent conditions and is earlier than in past years.

Potatoes: Northwest FCS’ 12-month outlook is for slightly profitable returns for both contracted and uncontracted potatoes. Inventory is lower year over year and higher prices will ration supplies for the rest of the 2019-20 marketing season. Going into the 2020 crop year, the outlook is moderately favorable for producers.

Sugar Beets: Northwest FCS’ 12-month outlook continues to be profitable for sugar beet growers for 2019-20, with a USDA forecast suggesting a drop in the stocks-to-use ratio from 14.5 (2018-19) to 13.5 (2019-20), a favorable ratio for Northwest sugar beet producers.

Wheat: For wheat, Northwest FCS’ 12-month outlook calls for break-even returns. USDA’s projected 2019-2020 season average farm price for all-wheat is $4.55 per bushel, down $0.61 from last year. Variability in yield and quality will drive individual producer profitability.

Apples: Northwest FCS’ 12-month outlook expects slight profits for apple growers. A large crop has suppressed prices while lower quality fruit is further reducing growers’ returns. Improving export markets are positive for the industry but domestic demand is sluggish. Growers need good varieties, quality and yields to be profitable in this environment.

Cherries: Northwest FCS’ 12-month outlook expects slightly profitable returns for mid-season cherries and profitable returns for early- and late-season cherries. Although Little Cherry Disease and cold mid-March temperatures will likely decrease the 2020 crop, the mid-season supply glut is still expected to reduce margins during that marketing window.

Pears: Northwest FCS’ 12-month profitability index indicates break-even profitability for the pear industry. A smaller crop is helping move the pears. However, puckouts’ are low this year and growers with poor quality are experiencing negative margins. Growers need high puckouts’ and good yields to capture profits this season.

Wine/Vineyard: Northwest FCS’ 12-month outlook anticipates slight profits for wineries and vineyards. With overproduction in the two largest wine-producing areas, grape prices are falling and finding buyers for grapes is difficult. Sales measured by volume are declining as consumers cut back on alcohol consumption.

 
 

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