Inflation, Rising Input Costs Impact Northwest Agriculture

Published online: Jan 13, 2022 Articles Northwest Farm Credit Services
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Source: Northwest Farm Credit Services

Northwest Farm Credit Services, the Northwest’s leading agricultural lending cooperative, has released its quarterly Market Snapshot reports covering the state of major agricultural commodities in the region. Northwest FCS teams throughout Idaho, Montana, Oregon and Washington monitor conditions and report outlooks for commodities financed by the co-op. 

All Market Snapshots and audio highlights are posted online at northwestfcs.com/industry-insights.

Northwest FCS’ 12-month outlook for the agricultural commodities most common in the Northwest are summarized below.

Potatoes

Contract potato producers are projected to be profitable. Open potato returns are projected to be slightly profitable. The amount of uncontracted potatoes acres will likely decrease as higher cost of production will encourage producers to shift uncontracted acres to other commodities. Fuel and fertilizer costs will continue to rise going into 2022. 

Sugarbeets

Profitable returns are expected for sugarbeets. Rising input prices will provide headwinds, but favorable producer payments will counteract increased costs.   

Onions

The profitability outlook for onions suggests breakeven returns. Producers with remaining 2021 large onions in storage will be well positioned to capture higher prices. Profitability in 2022 will depend on growing conditions; increased moisture is needed to make up for 2021 shortages. Rising input costs will create headwinds for producer profitability.

Apples

Slightly profitable returns are expected for growers and packers. A smaller, high-quality crop along with reduced imports bode well for prices; however, reduced exports and rising costs may soften the market and diminish margins.

Cattle

The 12-month outlook suggests slightly profitable returns for cow/calf producers. Cow/calf producers will face higher feed costs associated with the calves born in 2022. Gradually moderating feed costs in 2022 and stronger fed cattle prices will provide tailwinds to feeder cattle profitability into 2023.

Dairy

The dairy outlook suggests slightly profitable returns. Profitability will depend on milk destination and producers’ mailbox milk price. Milk price future contracts began increasing during the third quarter of 2021. Dairies actively managing risk and breakeven costs will be able to lock in prices at or above breakeven. 

Fisheries

Fisheries are expected to be profitable. While fisheries face challenges with changing TACs, a closed king crab fishery and potential COVID-19-related lockdowns in 2022, consumers continue to demand seafood and prices are strong for all products.

Forest Products

The outlook foresees forest product manufacturers as very profitable and timberland owners as profitable. After an avalanche in pricing, lumber has regained its footing and is trending solidly upwards. Log prices have held relatively constant from a sharp rise in pricing early in the quarter. Overall, the forest products industry is set to benefit from strong housing demand in 2022.  

Hay

The hay industry outlook calls for profitable returns. Extremely low inventory will keep hay prices elevated through much of 2022. Rising input prices will provide headwinds to producer profitability. 

Nursery/Greenhouse

Strong profits are anticipated for the nursery/greenhouse industry. Growers continue to benefit from a robust housing market and increased interest in landscaping and gardening. Rising input costs and labor scarcity are pressuring margins and limiting production capacity; however, consumers are showing a willingness to pay higher prices and growers have improved their efficiency.

Pears

The 12-month profitability outlook anticipates slight profits for pear growers and packers. Although exports continue to slow crop movement, quality is excellent, domestic demand remains strong and reduced pear acres are improving market conditions overall. Fruit size improved total yield this year and strong pricing should mitigate rising input costs.

Wheat

Profitable returns are expected for wheat producers. High prices, crop insurance payments and government programs cushioned potential losses from low production in 2021. Implementation of crop insurance and grain marketing strategies will provide tailwinds to small grains profitability.

Wine/Vineyard

The 12-month outlook anticipates profits for vineyards and slight profits for wineries. Although crop size is below historical averages, low inventories and strong demand are driving up grape prices. Consumers continue to show a willingness to purchase higher-priced wines; however, consumption remains flat, and rising input costs and supply shortages will limit returns.