Northwest FC Sees Mixed Drought Dynamics Outlook

Credit bank officials see lasting impact of dry weather and drought in 2012.

Published on: Oct 23, 2012

Drought conditions across most of the nation are impacting market dynamics for Northwest farmers, according to a new report from Northwest Farm Credit Services in Spokane, Wash.

Rising cost of corn and soybeans is negatively impacting the beef and dairy industries, but is supporting strong prices for Northwest hay growers, the bank notes.

Dry conditions in the Northwest adversely impacted wheat yields in southern and eastern Montana, and are now challenging winter wheat planting and germination across the region, says NFCS.

Northwest FC Sees Mixed Drought Dynamics Outlook
Northwest FC Sees Mixed Drought Dynamics Outlook

Meanwhile, the expectation of record-breaking crops for apple and wine growers is being met with strong demand, the report adds.  However, the slow U.S. economy continues to hurt nursery sales, which has seen some improvement, but needs more spirit in the housing market for a rebound, the service believes.

Here are the highlights of the general health of  select farm industries as reported by NFCS. For more details, go to www.farm-credit.com/resources:

BEEF:

Feeder cattle prices dropped significantly over the summer largely due to drought pushing corn prices to record highs. Drought also hurt pastures, resulting in many cattle producers marketing calves and yearlings early.

DAIRY:

High feed costs are challenging the dairy industry. Producers face thin profit margins, where NFCS's initial estimates reveal third quarter returns ranging from $2 per hundredweight losses.

HAY:

Northwest hay producers are benefiting from strong prices. Growers are meeting price resistance from dairy buyers and Northwest hay exports face renewed competition from California. Drought has had a dramatic impact on feed availability and price.

WHEAT:

Dryland grain producers' profits are supported by average to above average yields and strong prices reinforced by tight corn and soybean markets and questions about world wheat production. Producers southern and eastern Montana are the exception, where drought hurt yields.

POTATOES:

Increases in planted acres  and  excellent yields have resulted in a larger than expected Northwest potato crop. While growers with contracted crops remain profitable, open potato prices are below the cost of production.

SUGAR BEETS

Harvest results are staggering. Increased acreage and high yields have resulted in production increases of 6% in Idaho and nearly 20% in Montana. While the large crop is stretching processors' capacity, expectations are for favorable sugar prices for 2012-13 production since most of the crop is already contracted.

APPLES

The Northwest outlook is bullish. Early season pricing is historically high and there is very little carryover. Strong demand is propelling the new crop apple sales forward.

CHERRIES:

Optimism for the Northwest cherry season faded as the impact of adverse weather, record production, and a surplus of small cherries took a toll on the market. Peak harvest in July stressed the industry's infrastructure.

WINE/VINEYARD:

Washington and Oregon wine grape production could  break records, where warm weather favors crop production and a successful harvest. If the weather remains cooperative, harvest could end by Halloween.

NURSERY/GREENHOUSE:

Sales were up for most container and shade tree producers in 2012, but demand remains static due to a sluggish U.S. economy and housing market. Most of the growth in sales experienced this year came at the expense of other nurseries that could not compete or chose not to continue in business due to cash flow challenges.