As of Thursday, July 21, 2016
Waning returns for grain, feed and livestock are in contrast to stable or improved returns for forest products, according to the July Northwest Farm Credit Services Snapshots report.
Beef – Cattle markets are soft, pressured by increased supply and competition from poultry and pork. The cow herd grew in 2015 and is expected to continue growing at a slower pace in 2016. Total cattle on feed in June grew 2.2 percent from the prior year. Higher beef supplies haven’t translated to lower retail beef prices. Comparatively lower pork and poultry prices represent solid competition for consumers’ dollars and are expected to create headwinds for cow/calf producers through year end.
Hay – A wide price spread between dairy-quality hay and lower-quality feeder hay increased grower focus on quality versus quantity. Weather permitting, production of higher quality hay should offset losses and bolster growers’ profit margins. Export shipments reveal a relatively strong start to the year, with increased shipments to the United Arab Emirates, Taiwan, Saudi Arabia and China.
Wheat – Northwest wheat crop conditions are average to well above average, supported by timely rains in most regions. However, the outlook for wheat prices remains bearish, overshadowed by forecasts for rising U.S. and global ending stocks. Questions around quality loom domestically and internationally. Although record U.S. hard red winter wheat yields are forecast, millers note challenges associated with low protein levels. Protein premiums are expected to widen.
Forest products – Although slow to rise, housing starts are forecast higher than 2015, driven by multi-family and new home construction, home improvement and tight supplies of existing homes for sale. Improved housing starts are expected to support lumber and panel prices through year end. Second quarter log supplies outpaced demand in the Columbia River region, with higher inventories attributed to consistent log inflows and lower export demand from Japan. Log inventories are tighter in the Puget Sound, Twin Harbors, Southern Oregon and Willamette Valley regions. Northwest timberland remains in high demand with steady price increases.