pears

Pears ripen earlier this season in an orchard on Pogue Road between Okanogan and Omak.

SPOKANE – A market snapshot report for the state’s major agricultural commodities has been issued by Northwest Farm Credit Services.

The Market Snapshot report covers the state of major agricultural commodities in the region, said the organization, which is the Northwest’s leading agricultural lending cooperative.

The 12-month outlook is divided by crop.

Apples

Northwest Farm Credit anticipates apple growers will see slightly profitable returns. Estimates call for a larger crop, which could pressure prices. Although trade tensions have eased with some countries, growers will be challenged to find enough markets, especially for older strains and varieties.

Drivers for the Northwest apple industry include a larger 2019-20 Northwest crop, continued trade tensions and high-quality fruit.

The Aug. 1 forecast for the 2019-20 Washington apple crop was 137.3 million boxes, up 18 percent from the state’s 2018 crop. The national crop is in line with average production.

Tariffs keep export markets challenging and typical export varieties are being redirected to the domestic market.

Favorable weather conditions are resulting in good fruit quality and size.

The 12-month outlook anticipates slight profits for growers with a modern fruit manifest. Dated apple varieties and strains will likely not garner profitable pricing. Good internal and external quality has resulted in cautious optimism for pricing. Some trade tensions have improved but finding enough open markets for the large crop could remain challenging.

As of the report’s release earlier this month, the remaining 2018-19 inventory was cleaning up nicely with 2.7 percent, or 3 million boxes, remaining in storage. Late-season packouts were generally below producer expectations, leading to some inventory losses. Crop overlap will be limited and early season pricing is attractive for growers.

This season, growers with up-to-date varietals will continue to be profitable as domestic demand remains favorable. Traditional varieties, which rely more on exports, will see additional challenges this year given the larger crop and trade challenges.

Labor appears to be adequate for harvest, said the report.

Some tightness is developing in the southern districts. Many crops are in peak harvest and rain is compressing labor demand slightly.

The use of federal H-2A visa labor has reduced the reliance on sourcing local workers. However, H-2A wages are high. Washington experienced a 6.4 percent adverse wage rate increase from $14.12 in 2018 to $15.03 in 2019 and ties with Oregon for the highest in the nation.

Canada and Mexico are the United States’ top two largest export partners.

Apples were hit with tariffs that arose from the steel and aluminum dispute last season. Tariffs were eliminated during negotiations for the United States-Mexico-Canada Agreement. Although the agreement hasn’t been ratified, tariffs on U.S. apples remain removed.

Many believe USMCA won’t be ratified until after the 2020 presidential election, if at all, which could re-open the door for more trade disputes among the three countries, said the report.

It is expected that exports to both Mexico and Canada will increase in the coming year as both countries are projecting smaller 2019 crops. Mexico’s apple consumption continues to outpace its production and demand is expected to grow as their economy becomes more developed.

India, previously the United States’ second-largest export market, is now third because of the 70 percent tariff on apples. Tariffs have resulted in a 67 percent reduction in boxes exported to India, from 8 million boxes in 2017-18 to 2.5 million boxes in 2018-19.

Even if trade tensions eased with India, exports to the country would likely remain subdued as the value of the Indian rupee against the dollar has crashed.

Cherries

Cherry growers should see profitable returns from early and late season cherries while mid-season cherries are expected to return slight profits, according to Northwest Farm Credit’s outlook.

The decreased California crop opened the market for early Northwest cherries. As is typical, increased supplies in mid-season depressed pricing.

Drivers for the cherry industry include good quality, plentiful demand and trade uncertainties.

-Fewer hot days and no wildfire smoke contributed to good growing conditions despite some rain and wind events.

-Retailers and consumers were hungry for Northwest cherries after California’s crop was decimated by rain.

-Finding new markets among ongoing trade disputes was a challenge again this season.

The latest estimate puts the 2019 crop at 22.1 million 20-pound boxes, revised down from the initial projection of 24.9 million boxes. The prolonged winter made crop estimates difficult and revisions were because of lower-than-expected yield.

The latest projections put the crop in line with the five-year average, although recent shipment reports indicate the latest crop estimate will be surpassed due to large fruit and strong packouts.

Despite heavy tariffs on U.S. cherries, China bought 1.3 million boxes. Although down from last year’s 1.6 million boxes, this year’s crop was smaller.

Export to China this year and last pales in comparison to the 3.2 million boxes exported in 2017 before the trade dispute started. The industry was lucky this year as the trade war didn’t escalate further until the tail end of the season, the report said.

On Aug. 6 the Chinese government ordered government importers to ban all agriculture goods. Effective Sept. 1, the Trump administration imposed an additional 10 percent tariff on $300 billion worth of Chinese goods. China matched the retaliation, which increased tariffs to 60 percent for cherries.

Continued trade disputes with China have motivated Chinese importers to source fruit from other growing regions, such as Canada.

Pears

Northwest Farm Credit foresees slight profits for pear growers in the next 12 months. The official crop estimate says production will be similar to last season’s.

However, reports from the northern Washington growing region indicate the crop is smaller than estimated. Although the pear industry is working hard to improve consumer demand, solutions may take a few years to achieve success. Therefore, soft prices are expected again this year.

Drivers for the pear industry include mixed signals on crop size, good fruit quality and flat consumer demand.

-The August estimate puts the 2019-20 crop at 18.6 million boxes, an 8 percent increase from the May forecast of 17.3 million boxes. However, reports in northern Washington indicate the crop will be smaller than estimated.

-Fruit quality is high and packouts are expected to be strong.

-Consumer demand for pears is stagnant.

The report said the 12-month profitability index predicts growers to break even. A large crop would pressure prices; if production decreases significantly, prices aren’t likely to increase enough to cover losses.

The industry has some ideas in development to address continued subdued consumer demand.

Quality is reported high in all growing regions and early packouts are strong. An exception to this is frost-damaged fruit, which is also reported across growing regions.

Bosc production is reported down significantly – half of typical yields in some orchards – and Bartlett and Anjou fruit sizes are small. The differing regional crop sizes are impacting how some sales desks are pricing pears.

A smaller, high-quality crop might be more beneficial to growers as pricing would likely be strong. However, reduced tonnage is problematic on an individual grower level since higher prices don’t always make up for reduced yields.

There are a few silver linings this season. Exports should remain strong as tensions with the country’s two biggest export markets, Canada and Mexico, have improved. Fire blight was minimal this season, which helps lower costs such as labor to remove infected trees.

Over the last 17 years, the percentage of the pear crop sent to canning has declined significantly. In 2001, 75 percent, or about 180,000 tons of pears, were canned. By 2018, canned pears represented only 48 percent of the pear crop while the balance went to the fresh market.

Although some trade tensions remain elevated, the pear export market appears positive going into the new crop, the report said. Smaller-profile fruit is preferred in most export markets and year-to-date exports are strong.

Pear Bureau Northwest shows overall pear exports through August up 29 percent compared to last season. Mexico represents the largest share of that increase, up 47 percent. Pear shipments to Canada were up 23 percent.

Tariffs decreased pear shipments to China by 93 percent, or 32,000 boxes. However, exports to Israel increased 148 percent, or 83,000 boxes, making it the third-largest export market for U.S. pears.

Cattle

Northwest FCS forecasts slightly profitable returns throughout the beef industry.

Growing packer margins support a very profitable year while cattle feeders are expected to remain slightly profitable despite current negative margins. Producers still face uncertain calf prices that may limit profitability.

Forest products

Timberland owners should be profitable and mill operators slightly profitable, according to Northwest FCS’ outlook. A mild fire season meant summer logging was not interrupted and now log supplies are ample.

Increased log supplies are helping mills manage low lumber prices. As building season wraps up, housing starts are around 1.25 million, below many projections of around 1.3 million.

Hay

Northwest FCS suggests that in the next 12 months, alfalfa will be profitable given tighter supplies and timothy slightly profitable due to an abundance of middle-grade hay inventory. Supplies of high-quality hay are limited.

Wheat

Northwest Farm Credit’s 12-month outlook calls for break-even returns to wheat producers. Strong global stocks continue to weigh on grain prices.

Rotational crop returns are below break even and yields are varied significantly across the Northwest.

Wine/vineyard

Northwest FCS’ 12-month outlook indicates slight profits for vineyards while winery returns are expected to be slightly profitable.

New products and younger consumer groups present opportunities despite the larger trend of slowing alcohol consumption. High grape supplies continue to challenge vineyards, especially growers with uncontracted acreage.

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