PULLMAN, Wash. — Diversity came through once again for Pacific Northwest agriculture in 1996.
Despite uncooperative weather and varying circumstances for individual farmers, the region’s farm economy is in sound shape going into the new year, according to the 1997 Pacific Northwest Agricultural Situation and Outlook report published Friday (Dec. 27).
The report was produced by 40 agricultural economists and other farm and ranch experts, mostly associated with Washington State University, Oregon State University and the University of Idaho.
Commodity by commodity, here’s what they had to say:
Although a shorter U.S. crop often means better returns for Washington apple growers, the market for the 1996 crop does not look quite as bright as last year, says Washington State University’s Thomas Schotzko, an extension economist.
Returns will be a bit below 1995, which were above average. All three Pacific Northwest states had production increases in 1996. Washington production is estimated at 133.3-million boxes.
Since a large portion of apples grown east of the Mississippi are processed, the short eastern crop has pushed processing apple prices higher. There has been some talk within the trade that supplies of raw product may have to be purchased in Washington and shipped to processing plants in the East, says Schotzko.
Apple juice concentrate prices have been running higher than normal, but not as high as in 1995. European production was down 2 percent, but that will not likely affect the international concentrate market. In Washington, record production of Golden Delicious, Gala, and Fuji combined to push the crop back to a more normal level. While fruit size appears to be smaller this year, the quality of the fruit is unusually good. The end result will likely be a record volume of 1996 fresh shipments.
Because of conditions in the East and Mideast, grower prices will be at mostly profitable levels. However, growers with predominantly small fruit will suffer.
The volume of apples for processing will be greater than last year and high fruit quality will force processors to pay more. However, it doesn’t appear that juice apple prices will reach last year’s levels.
Apples are Washington’s most valuable crop, bringing orchardists some $1 billion a year.
U.S. pear production declined 18 percent in 1996. The U.S. Department of Agriculture estimate national production at 948,250 tons. At 95,000 tons, Washington’s Bartlett production fell 47 percent. Oregon’s 45,000 tons was down 36 percent.
Winter pear production also declined, although less dramatically. California-Oregon-Washington production was 345,000 tons, off 18 percent. Washington produced 175,000 tons, down 27 percent. Oregon was only down 12 percent, at 140,000 tons.
A short D’Anjou crop pushed prices up about 25 percent. Bosc prices are up about 30 percent. Winter pear prices will continue above last year’s levels, but grower profits will vary as yields were quite different from one orchard to the next, says Schotzko.
Prices for the few remaining Bartletts will also continue strong. There may be some carryover effect in 1997 as processors may not have adequate inventories.
Pears return Washington growers some $114 million a year.
The Pacific Northwest dairy industry is expected to grow modestly in 1997 after a volatile year in which milk prices went on a roller coaster ride.
University of Idaho Agricultural Economist Russell V. Withers says September’s national basic formula price was $15.37 per hundred weight (11.6 gallons), the highest on record. The October price was $14.13 and the November price will be less than $13. He expects the December price to be under $12, a drop of $3.50 from September.
Gradually recovering milk production appears to be easing a rather tight market. Prices have dropped in response to falling butter and cheese prices. Between mid-September and mid-November, cheddar barrels on the National Cheese Exchange fell 46 cents a pound to $1.20. Block cheese fell 39 cents to $1.30 per pound.
Apparently the market overcorrected on the high side in August and September and then on the low side in October and November. Cheese prices and consequently, milk prices will be considerably below September prices into early 1997. Wholesale cheese prices are likely to partially recover by January or February.
Pacific Northwest milk prices usually follow national figures, but a little lower. Costs of production, however, also are lower.
Withers expects unstable milk and feed prices of the past year to reduce the likelihood of increasing cow numbers, but production per cow should increase in most areas.
Pacific Northwest milk producers can expect lower average milk prices in 1997, but the prices they pay for feed also will be lower.
Recent instability and volatile prices produce a cloudy future. Withers cautions his projections assume a return to more stable conditions in 1997.
Western states have continued to expand milk production while the Midwest and East have been cutting back. Four of the top five milk producing states had lower production in September of 1996 than for the same month a year earlier. California production was up 3 percent. Washington was up 1 percent. Idaho was up 12 percent, the highest percentage increase in the nation. Oregon production was down nearly 5 percent. Unfavorable weather combined with other problems to curb milk production in Oregon. However, production increases in Washington and Idaho more than offset Oregon’s decline and total production in the Pacific Northwest increased in 1996.
Milk is Washington’s third most valuable commodity, returning about $688 million a year to producers.
The outlook for Washington’s pork and lamb industries is good, but cattle producers will continue to struggle with high costs and low returns in 1997, according to Washington State University Agricultural Economist Raymond Folwell.
The feed grains situation, drought and large supplies of animals spelled trouble for the beef industry in 1996. Cow-calf operations will continue to struggle to make profits in 1997. However, despite the improvement in slaughter cattle prices, the prices for calves and stockers will be about the same or slightly higher than a year earlier.
The bright spot for the industry is that corn prices are falling and are expected to continue this trend for some months. Corn and other feed grain prices were at record highs last year.
The fourth quarter should end with slaughter prices approaching $70 per hundredweight which is $5 above 1995.
Washington’s beef industry is the state’s fifth ranking agricultural industry. Cattle producers receive about $452 million a year for their animals.
Combined export demand and high pork belly prices suggest continued strong prices for hogs in 1997. All of the future market prices are in the range of $73 to $77 per hundredweight for the first six months of trading in 1997, and between $63 and $70 for the last six months of 1997. Pork production is a $6.1-million-a-year industry in Washington.
Lamb prices hit record highs in 1996. There was some weakening of slaughter prices as wholesale prices declined in the late summer. During the second quarter of 1996 lamb prices were in the mid $90 per hundredweight range. By early summer the prices increased to over $105, but decreased to less than $90 as wholesale prices declined.
Lamb prices will remain in the historically high price range and might exhibit the normal seasonal price pattern. Fourth quarter prices should be slightly over $90 per hundredweight with feeder lamb prices being slightly higher.
The smallest lamb crop since 1993 signals lower production and higher lamb prices in 1997. The feeder lamb prices will follow the same pattern but could be tempered by high feed grain prices. 1997 prices will remain around the mark set in 1996. It will take a couple of years before production increases will put much downward pressure on prices.
WHEAT AND FEED GRAINS
Tight supplies for wheat and feed grains are expected to continue through the 1996-1997 marketing year. This, and growing world demand will support prices during the first half of 1997, says University of Idaho Agricultural Economist Larry Makus.
“However,” he says, “the world has demonstrated its capacity for increasing grain production when prices remain strong. Historically tight supplies in the latter part of the 1995- 1996 marketing year were moderated by a substantial increase in world wheat and feed grain production in 1996. Thus, a repeat of last year’s grain price levels seems unlikely. However, prices will remain volatile.
“Exports likely will be the source of short-term volatility. As spring approaches, 1997 world grain crop conditions will become the dominant market force,” says Makus.
U.S. wheat supplies are tight but adequate, and world wheat supplies are significantly above last year. U.S. wheat exports will be the major market factor for the next couple of months. However, the market will begin to focus on the 1997 crop early next spring.
“Given generally favorable planting conditions for winter wheat, strong price levels, and reduced Conservation Reserve Program acres, U.S. wheat acreage and production will likely expand in 1997,” says Makus. He expects a similar world response. “If production expands as expected, additional downward pressure on 1997 wheat prices is the logical expectation.
“Based on the projected expansion of world and U.S. production, 1997-1998 wheat prices will be off 50 cents to 60 cents per bushel. Farm gate prices in 1997-1998 ranging from $3.50 to $4.00, and Portland white wheat prices ranging from $3.70 to $4.10 are currently projected,” says Makus.
“If world or U.S. production drops significantly below current projections, prices can certainly increase dramatically. Additionally, how aggressively the U.S. responds to competition for wheat exports will be another source of uncertainty. If U.S. exports for 1996-1997 fall much below 1 billion bushels, additional downward pressure on wheat prices will likely result.
At the end of the 1995-1996 marketing year, world grain supplies were at the lowest level in 20 years. This pushed last spring’s grain prices to record levels. U.S. wheat and corn export prices peaked in May at the highest levels on record.
Following these record high prices, world wheat production for 1996-1997 is forecast at 579.1-million metric tons, an increase of 7.9 percent. Makus says this would be the second largest world wheat crop on record.
All of the major wheat exporting countries expect expanded production in 1996.
“Larger crops for exporting countries indicate competition for wheat exports is going to be more intense during the 1996- 1997 marketing year,” says Makus.
World production of coarse grains is projected to rise 11.2 percent in 1996-1997, led by a 27.6 percent increase in the United States.
World coarse grains stocks for 1996-1997 are projected to increase by 26 percent over 1995-1996, but stocks will remain at historically low levels.
Makus says historically tight supplies for U.S. grains (especially feed grains), was the key factor in record high farm prices for corn and wheat during the 1995-1996 marketing year. However, a significant increase in 1996 U.S. feed grain production is expected to moderate prices.
The 1996 U.S. wheat crop is forecast at 2.3 billion bushels, slightly above last year’s 2.2 billion bushels. Slightly higher domestic use will be more than offset by lower exports. Lower total use coupled with slightly higher production will increase wheat carryover by 15.7 percent.
However, Makus says a 1996-1997 carryover of 435 million bushels will still be below the five year average of 491 million bushels. Farm level wheat prices for 1996-1997 are currently forecast in the $4.10 to $4.50 range, suggesting prices will be below the 1995-1996 record farm level price of $4.55.
U.S. white wheat production totaled 355 million bushels in 1996, the largest white wheat crop on record. Tight supplies of some other wheat classes and high feed grain prices kept white wheat prices relatively strong until mid-October.
The 1995-1996 season average wheat price in Portland reached a record level of $5.35, with spot prices going well over $6.00 in May. Portland wheat prices moderated as the 1996 harvest approached, but stayed close to $5.00 through harvest. However, white wheat prices slipped below $4.00 late in October.
Wheat is Washington’s second most valuable commodity, bringing farmers nearly $733 million a year.
Most Pacific Northwest potato growers harvested a high-yielding, high-quality potato crop in 1996. This depressed open-market prices, says University of Idaho’s Joseph F. Guenthner, an extension economist.
The U.S. Department of Agriculture reports the 1996 U.S. fall crop was a record 448 million hundredweight, 11 percent larger than last year.
Production in the three Pacific Northwest states was up 10 percent. Each state produced record large crops. Washington produced 90 million hundredweight, 12 percent over 1995.
Increased acreage and higher yields both contributed to increased production. Northwest growers harvested 34,800 acres in 1996, which is up 6 percent. Washington growers increased acreage from 147,000 to 161,000, an increase of 10 percent.
Higher yields were reported in all 12 of the largest potato-producing states. The combination of improved technology and acreage shifts to higher yielding areas contributed to the upward trend in yields.
Quality was generally good in the Pacific Northwest.
Demand is expected to remain strong in processing, fresh and dehydrated markets. The snack food industry is stimulating the demand for dehydrated potatoes. Frito-Lay’s Baked Lays have been remarkably popular, says Guenthner.
Baked Lays are not made with traditional chipping potatoes. They are an extruded product made with dehydrated potatoes.
Low prices are encouraging consumers to eat more fresh potatoes. This leads to stronger future demand.
Potatoes, Washington’s fourth most valuable crop, bring growers some $553 million a year.
HAY & FORAGE
Reduced acreage, lower yields caused by cool weather and lower quality due to rain damage bolstered Pacific Northwest hay prices for the 1996 crop.
William P. Ford, Washington State University area extension agent, Pasco, says prices for alfalfa hay were $10 to $30 per ton higher than the 1995-96 marketing year, depending on type, quality, region, and availability. Prices are expected to remain strong through the 1996-1997 market year.
Feeder hay prices will range from $75 to $85 per ton, and dairy, export, and horse hay will range from $90 to $120 per ton.
Premium Timothy price increases were even greater, about $50 a ton with prices ranging from $180 to $250 depending on area, quality, and availability.
Export demand from Japan slowed again for alfalfa cubes, but remained steady for baled hay during 1996. Higher forage prices; milk prices; winter weather; federal land-use policies; grain prices, and competing crop prices may affect demand in the new year.
Demand for forage products from Japan is playing an important role in Pacific Northwest hay markets. In 1995, Japan imported 1.7 million metric tons from the United States. 1996 exports through October are running 2.7 percent above 1995 levels for hay and 9.9 percent below 1995 for alfalfa cubes.
Given the same level of total supplies, level exports, and a steady demand from dairy and horse sectors, hay prices should remain strong through the 1996-97 feeding period.
Depending on winter weather, a potential shortage of higher quality hay should keep prices strong through the first cutting of 1997. If winter weather is open and mild, prices during the 1996-97 feeding season will remain stable. A normal, cold, snowy winter would increase demand and fuel stronger prices. Export demand for the first six months of 1997 will also play an important role in any carryover and price increases in the new year.
If Northwest hay acreage remains the same in 1997, prices should remain stable to slightly higher in the 1997-98 marketing year. But, given the uncertainty about potato acreage and other crops, the potential exists for a hay acreage increase of 5 percent to 10 percent. If this occurs, prices will decline slightly in 1997-98.
Hay is Washington’s seventh most valuable farm commodity, producing nearly $326 million a year.
Washington’s 1996 Concord grape crop was 103,521 tons. This is the fourth smallest crop in 20 years and the smallest since 1985 when 99,000 tons were harvested, says Washington State University Agricultural Economist Raymond Folwell.
Extreme cold in January and February reduced production. Since 1985 the average size crop in Washington has been 175,000 tons.
While small, Folwell said, “Washington’s crop had some of the best quality attributes ever obtained in terms of color, sugars, and acidity.”
Concentrate Concord grape juice will bring Washington growers $13-$14 a gallon — almost double the early asking price for concentrate in 1995. “Inventory levels will not drag the prices down,” says Folwell. “Assuming a normal crop in 1997 the price outlook is good for next year.”
The 1996 Pacific Northwest wine grape crop was about 30,000 tons, only half of 1995’s production. Low temperatures in early 1996 and frosts during the spring reduced yields.
Cash prices for all 1996 wine grapes will top $1,000 per ton. This is more than 50 percent higher than 1995’s average price of $654 per ton. Red varieties averaged $1,350 per ton, white varieties about $875 per ton.
Wine sales continue to increase for the Washington industry. Overall, sales climbed 11 percent. Out-of-state sales were up 19 percent, in-state sales were up 0.03 percent.
“Growers should not expect the 1996 prices to hold for the 1997 crop unless the crop is extremely small,” says Folwell. “The demand for grapes should remain strong as a result of the short 1996 crop. Sales should continue strong since Washington’s wine industry is dominated by premium table wines which is the only segment of the market that is expanding.”
Concord and wine grape production is valued at about $73 million a year.
SMALL FRUITS AND NUTS
Except for stable strawberry prices, grower prices for small fruits were higher in 1996. This left food processors few opportunities for substitution between small fruits with no place to hide from higher product prices.
Marion blackberry production fell from 25 million pounds to 17 million pounds from 25 million last year. Evergreen blackberry production dropped from 8 million pounds to 6.7 million pounds. “At these production levels, prices remain high. However, a note of caution may be indicated by higher cold storage holdings for blackberries compared to last year,” says Washington State University Extension Economist Richard W. Carkner, Puyallup.
As of October 31, cold storage holdings were 24 million pounds, up from 21 million last year. A large crop in 1997 could result in sharply lower prices.
The 1996 Northwest blueberry crop was characterized by lower production and sharply higher prices. The Northwest crop was down about 30 percent from last year and North American production was down 15 percent. Grower prices nearly doubled, with prices continuing to increase after pack time.
North American production is expected to be below normal for 1997. “Low prices in recent years resulted in deferred plant and field maintenance. With this and recent winter damage, it will take a few years to bring production levels back,” says Carkner.
Blueberry use has been increasing with new products coming on the market. Cold storage inventories are the lowest since 1992, with limited uncommitted product available.
Prospects for 1997 look good. Current prices are expected to hold and, with a return to normal production, growers should have a good year.
Northwest cranberry growers had another good year in 1996 and the outlook for 1997 is very positive.
Production ranged from normal to well above normal in 1996. North American production was up slightly from last year. At the same time, demand continues strong based on expanded cranberry product lines and continued strength in juice markets. There is strong competition between processors for product, which pushes prices up.
Northwest production, including Washington, Oregon and British Columbia, was down about 27 million pounds, or 27 percent, from last year. Data for world production is expected to reflect near normal production. Cold storage holdings at the end of October were down about 8 million pounds from last year and would be even lower if it weren’t for 12 million pounds coming from Chile.
Grower prices for the reduced crop were higher than last year, but with fewer berries growers did not fare nearly as well as last year.
“The outlook for 1997, given a return to 1995 production levels and barring major imports, should result in prices favorable to growers,” says Carkner.
Buoyed by increased domestic consumption and rising exports, wholesale prices for processed vegetables should remain above the previous marketing year throughout 1996- 1997, says Larry Burt, Oregon State University extension economist.
U.S. per capita consumption of canned vegetables has risen at an annual rate of about 3 percent and frozen products at about 1 percent in recent years. Overall wholesale prices for canned vegetables are up about 5 percent. Frozen vegetable stocks are considered adequate.
Wholesale prices are expected to remain stable at levels just above year ago levels.
Except for frozen sweet corn, processed vegetable exports have increased. Asian markets currently take more than half of the U.S. export volume. More than one quarter is shipped to Canada. Competition from imports has declined.
Nationally, processors contracted for about 12 percent less green pea acreage in 1996. Frozen green pea products are expected to remain in shorter supply this marketing year. The previous year’s higher wholesale price level should be maintained throughout 1996-97. Wholesale prices for canned green peas are expected to increase slightly in 1997.
Higher stocks, sluggish movement, and depressed prices toward the end of the previous marketing year reduced contracted snap bean acreage about 7 percent in 1996. A slightly smaller pack and good demand produced a 13 percent increase in wholesale prices for the first part of the 1996-97 marketing year. The increase is expected to hold into 1997.
Wholesale prices for frozen snap beans have been running slightly ahead of year ago levels. Despite a slightly smaller pack, prices are expected to remain steady, at best.
Frozen sweet corn stocks were up 8 percent toward the end of the marketing year. Canned stocks were only slightly higher. Flat prices at that time encouraged processors to contract for about 4 percent fewer acres in 1996 than in 1995.
Wholesale prices early in this marketing year have been about 3 percent higher than year ago levels. Moderate stocks now available should keep wholesale prices steady for the rest of the 1996-97 marketing year.
Given somewhat tighter stocks of frozen sweet corn and good demand, wholesale prices have kept about even with a year ago. Relatively high stocks of frozen cut corn products may weaken prices in 1997, but prices for frozen corn on the cob will be steady or a little higher for the remainder of the 1996-97 marketing year because supplies are smaller.
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