AgWest Farm Credit released its Monthly Market Update covering the state of major agricultural commodities in Alaska, Arizona, California, Idaho, Montana, Oregon and Washington.
The update features unique insights into economic drivers impacting agriculture and forestry in the West. In addition to market analysis on 10 major agricultural commodities and crop inputs, this month’s report also offers an in-depth Profitability Report from AgWest’s lending, appraisal and crop insurance teams.
AgWest’s outlook for major commodities is summarized below. Visit AgWestFC.com/industry-insights to view expanded analysis for each industry, monthly economic headlines, relevant data and trends, and additional special reports.
General Sentiment
The agriculture economy is facing a downturn overall, with just half of farmers expected to be profitable in 2024 and row crop producers being hit the hardest. However, anticipated federal funds rate cuts and stabilizing interest rates have led producer optimism levels to be the highest in three years.
Crop inputs
Crude oil prices remain stable, influenced by geopolitical tensions, U.S. elections, and mixed economic data. Natural gas prices surged in anticipation of cold weather. Container shipping costs stayed high as buyers preemptively import goods to avoid potential tariffs. Slower shipping speeds and disruptions in the Red Sea are also contributing to longer shipping times. Bulk commodity prices declined slightly due to weak demand. Fertilizer prices increased, and tariffs could further increase costs, especially for potassium-based fertilizers sourced from Canada.
Almonds and pistachios
Almond prices rose notably in November. Strong demand, favorable weather conditions during harvest and quicker processing times have resulted in an increase in the pace of both export and domestic shipments. Most in the industry agree that almond acreage is at its peak and will decrease in coming years. Pistachio shipments are down due to a smaller 2024-2025 crop, but demand is strong, crop quality is excellent and prices are increasing.
Apples
A larger than expected 2024-2025 crop is being offset by good quality, larger than average fruit and export to foreign markets. Production outside the Northwest is down, which will help further offset supply, and prices increased for most varieties in November.
Diversified producers - Pear prices are up significantly due to small crop size. Southern producers should benefit, while northern states continue to face profitability issues. USDA announced a substantial economic relief package for specialty crop growers which should benefit tree fruit producers.
Cattle
USDA has temporarily restricted live cattle imports from Mexico after a case of New World screwworm (NWS) was detected in November. Restrictions are expected to be lifted in January but may be followed by subsequent quarantine policies. Improvement in drought conditions, especially in the West, supports lower input costs for cattle producers in 2025, and cattle prices are likely to remain elevated because of continued tight supplies.
Dairy
While dairy margins have significantly improved over the past year, dairy cow numbers have also increased and milk production has exceeded expectations. California and Arizona both saw decreases in production in October, due in part to Highly Pathogenic Avian Influenza (HPAI), and Idaho saw the largest increase in the West at 2.8 percent. Milk production is expected to increase in 2025 and demand is expected to remain strong; the All-Milk price is forecast to increase $0.10 to $22.85 per cwt, with price gains coming in the first half of the year. USDA released their final ruling on updates to the Federal Milk Marketing Order (FMMO) including updated make allowances, reverting to the higher of Class III and Class IV skim milk prices for Class I price calculations, and updating milk composition factors. Recommendations will first go through a referendum and, if passed, will likely take effect in mid-2025.
Forest products
Lumber and log prices continue to be impacted by political developments, increasing slightly after the presidential election and with the potential to increase further if suggested tariffs are put in place. However, these same tariffs could pose affordability challenges to the construction industry. Prices will ultimately correlate heavily with mortgage rates. Log input costs appear to be falling which should alleviate pressure on timberland owners, but reduced harvest levels may compress margins for harvest and haul operators. Timberland values remain strong despite challenging log and lumber markets.
Hay
Hay prices are likely to see continued pressure in 2025, with improving drought conditions and increased production overall. Production in the Northwest remained relatively stable, while growers in the Southwest saw 13.2 percent year-over-year increase. Greater inventories are putting downward pressure on already low prices. Export demand is not expected to increase in the immediate future, with international buyers likely waiting to see if prices drop further. Demand from cattle producers may improve with an anticipated harsh winter, but demand from dairies and feedlots has also been low.
Oranges and lemons
Navel prices started the season strong but saw a sharp decline in November due to a smaller than average size profile. Juice prices remain strong and a smaller than anticipated crop may eventually support prices. Lemon prices have fallen with an uptick in harvest, and the overall impacts of the Mountain Fire in Ventura, CA, appear to be limited.
Potatoes
USDA reports a 5 percent decrease in the 2024 potato crop compared to 2023, primarily due to reduced harvested acreage and lower yields across the nation. The Pacific Northwest saw a relatively balanced crop with higher yields in Washington and Oregon despite a decrease in harvested acres. Crop prices are unlikely to increase due to better balanced supply and demand, and open-market potato prices have stabilized. Concerns remain for the 2025 planting season with potential low profits and weak consumer demand. Simultaneously, four major potato processors are facing class action lawsuits alleging price fixing practices.
Wheat
Winter wheat conditions in the U.S. have drastically improved due to reduced drought. This positive trend is happening in other international markets, with Russia and Argentina both expected to have larger than expected crops. This development poses challenges for U.S. wheat exports, particularly due to a stronger U.S. dollar. U.S. growers are cautiously optimistic about the 2025 crop but are concerned about lower prices.
Wine and wine grapes
The wine grape market continues to face challenges with oversupply and weak prices for uncontracted grapes. Falling wine demand is pressuring retailers, distributors and producers alike. In California, crops were generally down, but quality is reportedly excellent despite lower yields. In Washington, crop size and quality were average with minor, localized reports of smoke taint and frost damage. In Oregon, crop quality was very good, but weak markets led some growers to leave grapes on the vine.