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Farmers benefiting from higher food prices

YAKIMA — Higher food prices at the grocery store might not be good news for consumers, but those prices are resulting in big returns for Washington farmers in an industry that’s proving to be a bright spot in an otherwise slumping economy.

After two straight years of disappointing declines, the value of Washington’s agricultural production increased nearly 12 percent to $7.93 billion in 2010 — the second-highest value on record behind only 2007 — and experts say the good days of agriculture could continue this year.

“There’s no reason to think otherwise,” said Mike Brady, an agricultural economist at Washington State University in Pullman. “Agriculture is strong, farm incomes are up across the U.S., and additionally, with Washington, the processing industries provide a lot of additional value to the region.”

Rich soils and available irrigation enable Washington farmers to produce some 300 crops each year. The state’s food and agriculture industry contributes 12 percent, or roughly $38 billion, to the state economy and employs 160,000 people. Washington state ranks first in the U.S. for production of 10 crops, including apples, sweet cherries, raspberries and hops.

Nine of the state’s top 10 crops increased in value in 2010, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service. The value of nursery and greenhouse products, which ranked eighth, stayed even with 2009 despite the continued downturn in the housing market.

Apples remained the state’s most important crop last year, valued at $1.4 billion, a slight increase from the previous year. Washington produces roughly half the U.S. crop.

Farmers who produce a few other key crops — cherries, milk and wheat — saw huge increases in value. Milk ranked second in the value of production at $950 million, a 39 percent increase from 2009, followed by wheat at $925 million, a 56 percent increase. Cherries were up 59 percent to finish seventh on the list at $367 million.

Dairy farmers and cherry growers rebounded from an oversupply that drove down prices in 2009, Brady said. Meanwhile, wheat growers benefited from bad weather in other regions, such as the Ukraine and Australia, which damaged competing crops.

“On the grain side, these are crops where the prices and quantities produced are driven by global, multi-country demands,” he said. “We’ve had pretty stable conditions, where everyone around us in terms of wheat has had negative weather-related shocks.”

Wheat grower Eric Maier of Ritzville wonders about 2011. The cool, wet spring delayed harvest for some crops, but for wheat, “that’s a bushel builder,” he said.

“Last year was an above average crop in the Pacific Northwest and prices were fair,” he said. “But this is probably one of the biggest crops in history.”

That means there will be plenty of wheat to sell on the domestic and export markets, he said, but it also could drive down prices at a time when production costs — diesel and fertilizer — are still high. Roughly 85 percent of Pacific Northwest wheat is exported to other countries.

Recent trade developments also could present new opportunities for Washington growers. On Friday, President Barack Obama signed free trade agreements with South Korea, Colombia and Panama that should lower tariffs on U.S. goods.

Also Friday, Mexico canceled tariffs it had imposed on American goods in a 2009 dispute over the United States’ refusal to allow Mexican trucks to make deliveries deep inside the U.S. Those tariffs have cost Northwest fruit growers tens of millions of dollars.

Exports are critical to maintaining healthy domestic prices in the tree fruit industry, and much work on free trade agreements remains to be done, said Mark Powers, vice president of the Northwest Horticultural Council, a group that works to address national and international policy issues that affect Northwest tree fruit growers and shippers.

About one-third of Northwest tree fruit crops are exported, accounting for about $600 million.

U.S. trade officials are shifting attention to the Trans-Pacific Partnership, an economic alliance that would link the United States with Brunei, Malaysia, New Zealand, Vietnam and four countries that are already free trade partners — Australia, Chile, Peru and Singapore.

“Countries are now actively going out and striking deals, either bilaterally or regionally, and the U.S. has not been doing that for a number of years. That’s putting us at a competitive disadvantage,” Powers said. “And still we’re doing well. We have an industry that works quite well together and it all comes back to the fruit. They grow excellent fruit.”