The agriculture industry in the Yakima Valley and throughout the Northwest looks solid so far this year, though it hasn’t been without challenges.
That’s the takeaway from the latest quarterly reports from Northwest Farm Credit Services, a Spokane-based firm that provides financing to businesses in agricultural and rural communities.
Northwest Farm Credit Services’ industry teams in Idaho, Montana, Oregon and Washington research and monitor trends in a variety of commodities and compile their findings in quarterly reports. The reports aim to provide the firm’s grower clients information to help them make business decisions.
The latest series of reports were released at the end of June. Here are the key takeaways for the Yakima Valley’s top commodities: apples, cherries, pears, dairy and wine grapes:
Mother Nature was kind to Washington state cherry growers (and not so kind to others)
California growers were expected to harvest a record 10 million 20-pound boxes of cherries this year — the record is 9.6 million boxes in 2017. Substantial rain, however, damaged much of the late-harvest crop. The California harvest ended up at 7 million boxes.
The crop fared slightly better weather-wise than last year, when similar weather conditions cause the state to see a year-over-year drop of 50 percent.
The bad weather in California meant that Washington growers avoided a potential overlap of product that would have depressed prices.
Washington and the rest of the Northwest cherry region benefited from the weather in another way: A snowy and cold winter slowed initial growth of this year’s Northwest crop, and many expected the cherry harvest to be delayed up to two weeks. However, a warm May quickened production and harvest ended up starting as usual at the start of June.
Things look good overall for cherry growers this year. Northwest Farm Credit Services predicts profitable to slightly profitable margins in the coming months.
Apple shipments for the 2018 crop were strategically slower
A report from the Washington State Tree Fruit Association shows the 2018 crop to be at 117.2 million 40-pound boxes, well below the 131 million boxes initially predicted. It would also be the smallest crop in three years.
As of June 3, 80.4 percent of the 2018 crop was shipped, lower than the 82.3 percent a year ago. The slow shipment pace likely reflects fruit warehouses holding on to fruit in hopes of future price increases. A drop in exports also contributed to the slower shipment pace.
Like cherries, production of the upcoming apple crop was hampered by cold weather earlier in the year but quickened thanks to a warm May. Harvest is expected to start in late July, which could mean some overlap with 2018 apples now in storage.
Apple growers are expected to see slight profits.
Crop size for the upcoming pear crop may align better with demand
As of the end of May, the Northwest pear industry projected that Washington and Oregon growers would harvest 17.3 million 44-pound boxes this year. That would be a 9 percent drop from the same period a year earlier. Demand is not expected to increase, so a smaller crop is expected to lead to better prices for growers.
As a result, pear growers are expected to have slightly profitable returns in the next 12 months.
Tree fruit and trade
Tree fruit exports continue to be hampered by trade disputes
In 2017, China imported around 3 million boxes of cherries from the Northwest, making that country the No. 1 market. That dropped to 1.9 million boxes in 2018 due to the U.S. trade war with China. With retaliatory tariffs totaling 40 percent percent on U.S. cherries to China still in place, shipments are not expected to increase with this year’s crop. The dispute may have long-term effects as China turns to other countries, such as Chile, for cherries.
Meanwhile, apple exports are down by a considerable amount, especially in key markets. Apple growers saw some relief when the U.S. resolved a dispute over its steel tariffs with Mexico and Canada, which led to the lifting of a 20 percent tariff on U.S. apples to Mexico. However, the U.S. is now threatening a new tariff on Mexican products over immigration, which may prompt Mexico to retaliate on U.S. items such as apples.
More recently, India imposed an additional 25 percent tariff on U.S. apples, bringing the total tariff to 75 percent. Not surprisingly, exports of the 2018-19 U.S. crop in Mexico and India were down by 25.9 percent and 66.8 percent, respectively. Exports of the 2018 crop to Canada, which did not impose any new tariffs, also dropped by 17 percent.
Trade disputes also have affected the pear industry. Tariffs from China have halted all shipments to Asian countries. Potential tariffs from Mexico could hamper recent export growth. Mexico and Canada imported 40 percent more pears during the 2018-19 season, a nearly 40 percent increase from a year earlier.
Improved profitability for the dairy industry
Northwest Farm Credit Services expects the region’s dairy industry will see slightly profitable returns in the next 12 months, thanks to increasing milk prices for the second half of 2019. That would be welcome news to the sector, which has struggled to break even in recent years.
However, the industry will still encounter challenges, such as rising feed costs. Feed prices have increased due to reduced corn and soybean planting in the Midwestern U.S. and low hay inventory. Trade may be a potential issue with President Donald Trump’s plans to impose new tariffs with Mexico, which is the largest importer of U.S. milk products.
Wine grape prices in state could drop as volume grows
The Washington wine crop has reached high yields in recent years. The 261,000 tons of Washington wine grapes harvested in 2018 were second only to the 270,000 tons from 2016. The 2019 crop is expected to be sizable, with new plantings of grapes coming online. A large crop may lead to a decline in prices. Vineyards not under contract with a winery may struggle to find buyers and some maturing vineyards may have contracts that do not get renewed.
While U.S. wine sales continue to grow — in 2019, sales increased by 4 percent to $48 billion — the industry has encountered stiff competition from other alcoholic beverages, such as beer and spiked sparkling water.