Profit outlook mixed for Northwest agriculture
Most agricultural commodities in the Northwest are expected to show varying degrees of black ink in 2018, but milk producers can expect their share of negative margins.
Most agricultural sectors in the Northwest will be slightly profitable in 2018, and some will be very profitable, but many will face challenges of one type or another, an analyst says.
“There’s good and bad in the story. The economy is strong, but there are some concerns with trade risks,” Karen Witt, vice president of industry and portfolio insights with Northwest Farm Credit Services, said.
Strong profits are expected in the fisheries and forestry industries based on strong demand for fish and lumber. Profitable returns are also forecast for the wine/vineyards industry, supported by the strong economy, she said.
Dairy, however, is facing significant challenges that will spill over somewhat into hay markets, she said.
There are definitely some challenges in dairy, a long road of challenges not helped by bad weather last year and high inventories of cheese, butter and skim milk powder, she said.
“There is significant inventory out there both nationally and globally that continues to put significant pressure on milk prices,” she said.
“The dairy industry should expect milk prices to remain unprofitable through the second quarter as the world oversupply is sold at clearance prices,” she said.
Hay should be slightly profitable, but alfalfa hay will face downward pressure from weak dairy demand, she said.
Cattle producers should see slightly profitable returns, but drought in other areas of the country could push more cattle to slaughter and bring some downward pressure on prices. There are also concerns on the trade side regarding beef exports, she said.
Wheat prices have seen some improvement, and U.S. production is projected to be lower, so the wheat industry should see slight profitability this year, she said.
Pulse crops face tariffs from India, which has caused difficult returns. But production seems to be good from what Farm Credit is hearing from producers in the area, she said.
Demand for potatoes is good, and shrinking supplies should bolster prices on the open market. A mild winter for processors has resulted in great sugar extraction and should bring good profits and good returns to producers, she said.
With no hard freeze as of yet this spring, the apple crop is doing well and should progress nicely, she said. There are some concerns with quality coming out of storage, however. Demand for newer varieties, more popular than Red Delicious, is key, she said.
Profitability in cherries has a split outlook. California had an early warm-up, but its early cherry crop is not large, so market conditions are favorable for the early crop in the Northwest. But there could be some price challenges as more supplies enter the market after the Fourth of July, she said.
China’s planned tariffs, if implemented, could be a challenge to all tree fruits, she said.
Farm Credit is also forecasting profitability for the greenhouse and nursery sector but dampened profit margins due to higher labor and trucking costs.
Slightly profitable returns are forecast for onion and pear growers.