Market still strong for Valley’s agricultural commodities

YAKIMA – Agriculture in the Yakima Valley and Pacific Northwest is looking strong, according to a series of reports from Northwest Farm Credit Services released this week.

The Spokane-based agricultural lending cooperative does a quarterly market analysis for several Northwest agricultural commodities. The analysis is based on research and monitoring of commodities by the firm’s industry teams in Idaho, Montana, Oregon and Washington.

In general, the reports state that five top commodities in the Yakima Valley – apples, cherries, pears, dairy and wine – are fundamentally healthy but there are areas of concern.

Here are several takeaways from those reports.

Ongoing trade disputes with major trading partners are the biggest concern for nearly all commodities

Those in the tree fruit industry have already known the impact of disputes with countries such as China, Canada and Mexico. All three countries have or will take action against the U.S. as a response to tariffs on imported goods such as steel and aluminum.

Mexico already has implemented a 20 percent tariff on U.S. apples, including those grown in the Yakima Valley. This is a big blow as about 10 percent of the Washington state crop is exported to the country. This likely will contribute to the slowing of shipments for the last portion of the apple crop harvested last fall. As of June 18, about 82 percent of the current crop has been shipped. That’s well below 84 percent from this time in 2016 and nearly 86 percent in 2015.

An ongoing dispute with China is expected to affect all Yakima Valley tree fruit – apples, pears and cherries – with new tariffs that are expected to take effect Friday. But the hit will be most felt in cherries, as China is the top importer of Northwest cherries – about 13 percent of Washington state’s cherry crop was exported to the Asian country last year.

Trade also is a key issue with dairy. One of the sticking points in ongoing negotiations of the North American Free Trade Agreement is a milk pricing system that U.S. dairy industry officials say has limited exports of U.S. product into Canada and allowed the country to sell other milk products at below-market prices elsewhere in the world, making the U.S. less competitive worldwide.

Mexico increased tariffs, effective today, on most types of cheese from 20 to 25 percent. About 75 percent of all cheese imports into Mexico are from the U.S. Not surprisingly, Mexico is the U.S.’s top export market for cheese. The tariffs could hamper what has otherwise been a strong year for U.S. dairy exports. As of April, exports made up about 19 percent of all U.S. milk production, an all-time high.

Shifting gears on Red Delicious

Once the dominant apple variety in the U.S., Red Delicious has taken a back seat to other varieties, such as Gala, Honeycrisp and Fuji, which have grown in popularity. But while the amount of Red Delicious has dropped, it still makes up a quarter of the Washington state crop. Much of that Red Delicious crop is exported. Mexico, China and India are all major markets for Red Delicious. Tariffs from the three countries could force the sales staff for packing houses to find new homes for these apples.

Crop sizes are big, though not record-breaking

Big, if not record-breaking, volume is expected for apples, cherries and pears this year.

The Northwest cherry crop now being harvested from growers in five states is estimated at about 23 million 20-pound boxes, which is in line with past crops, though smaller compared to last year’s record crop of more than 26 million boxes.

The official estimate for apples isn’t expected until later this summer, but the report noted estimates of the upcoming 2018 Washington apple crop at 125 million to 135 million 40-pound boxes. If the crop falls on the upper end of the range, it could be a record crop.

After a small pear crop in 2017 of 15.9 million 44-pound boxes, a larger crop of 18.9 million boxes is expected this summer.

The misfortune of the California cherry industry is good news for the Pacific Northwest

The California cherry crop was 50 percent smaller than the prior year’s record crop (9.6 million 20-pound boxes) due to damage from rainy and chilly weather. With much less supply for cherries in the spring months – California cherry season comes earlier in the year – most anticipate strong domestic and international demand for cherries being harvested in the Northwest now. In addition, cooler summer conditions will result in Northwest cherry season lasting well into August.

Direct-to-consumer is no longer a novel concept for wine, it’s the norm

Wine sales grew to just around 1 percent last year, compared to 7 to 8 percent in previous years. Wineries have to find ways to secure and retain customers. The traditional retail market is out of reach for most wineries in Washington due to size – most wineries are only producing a few hundred or few thousand cases, well below the volume that large retailers demand.

As a result, wineries are turning to more direct-to-customer sales, such as wine clubs, where subscribers agree to purchase a certain number of bottles several times a year. That model ensures guaranteed revenue and loyal customers for wineries. Others are trying versions of the subscription box model, where curated selections of goods are delivered to the customer’s home.