Markets: Whether bullish or bearish, it’s about the weather

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Producers are looking to the sky to determine the success of their respective commodities. Agricultural markets in the Northwest and across the U.S. are volatile; shifting higher or lower with changes in the weather forecast. The Northwest’s mild spring is boosting production in the dairy and wheat industries while negatively impacting yields for hay growers.

The following highlights depict the general health of select industries included in Northwest Farm Credit Services Knowledge Center Market Snapshots, which are available at www.farm-credit.com/resources.

Beef: Cattle prices remain at historic levels due to reduced numbers and strong global demand. Recent auction results for the Northwest reveal that calf and feeder cattle prices have increased 30 percent year over year. Profitability remains positive for cow/calf and stocker operations, while profit margins for feedlot operations are challenged by higher feeder cattle prices and volatility in the cost of gain.

Dairy: Northwest dairy producers face low milk prices and high feed costs. Mild weather promotes increased milk production, but the Northwest is oversupplied. Average milk prices in Idaho are forecast at mid-$16 per cwt for the remainder of the year, while average Washington milk prices are forecast at mid- to high $15 per cwt. That compares to breakeven levels of approximately $17 per cwt in Southern Idaho and between $17.25 and $18.25 in Washington. Improvement in producers’ profit margins is expected to come from higher milk prices in 2013. Milk prices could increase this summer if above normal temperatures reduce milk production.

Hay: Rains delayed harvest and damaged hay crops throughout the Northwest during the spring and early summer. Given tight supplies, hay producers are poised to benefit from strong prices in 2012, but the industry outlook is uncertain. Growers are meeting price resistance from dairy buyers and Northwest hay exports face renewed competition from California hay farmers. Growers also face increased costs for rent, fertilizer, fuel and other inputs.

Wheat: Timely rains in Washington, Oregon and North Idaho have bolstered wheat yield projections. In wetter areas, producers have sprayed for stripe rust up to twice, but yield gains associated with ample moisture should offset producers’ extra expense of spraying. Crop conditions are less favorable in areas of Montana and may further deteriorate in Southern Montana, where too little rain is impacting production. Overall, wheat prices are supported by strength in grain markets.

Northwest FCS provides financing, related services and crop insurance to farmers, ranchers, agribusinesses, commercial fishermen, timber producers and rural homeowners in Montana, Idaho, Oregon, Washington and Alaska. For more information, go to http://www.farm-credit.com/.



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