In the News

The update features unique insights into economic drivers impacting agriculture and forestry in the West. This month’s report also features relevant insights into land values and drought conditions. 

Drought and water access

Increased precipitation levels have decreased drought conditions across several Western states, though significant portions remain in severe condition. Areas of southern California, Nevada and Arizona are in extreme drought and unlikely to improve over the coming month given low expected precipitation levels. Several contractual and political updates continue to impact water access, including the Colorado River Compact expiring in 2026, executive orders impacting California, and legislative initiatives in Oregon.

For full details on drought conditions and water access, see AgWest’s Drought and Water Update.

Land values report

Land values have held mostly stable across the West, with some observed declines in California, Idaho, Oregon and Washington due to rising water constraints, limited availability of high-quality properties and falling prices for certain commodities.

For full details on land values, see AgWest’s Land Values Report.

Major commodity insights

AgWest’s outlook for major commodities is summarized below. Visit AgWest Industry Insights for an expanded analysis of each industry, monthly economic headlines, relevant data and trends, and additional special reports.

Almonds and pistachios

The 2024 almond crop size is expected to decrease 16% over last season and prices have softened slightly on lower export demand. Some growers are electing to increase sales rather than wait for higher prices. The pistachio crop saw a 36% decrease from last season and prices continue to hold flat. Exports are down overall but saw substantial increases to both Vietnam and Germany.

Apples

Apple prices have been mixed depending on variety, but generally remain up year over year. Tariffs placed on Mexico and Canada, the two largest export markets for Northwest producers, were delayed by a month. If implemented, retaliatory tariffs are potential risk factors as they could lower demand at a time when prices are weak relative to their historical averages. Stable demand and a short crop continue to support pear prices, which are significantly up from last season.

Cattle

U.S. beef markets face challenges due to declining cattle inventory and international trade tensions. The national herd has decreased for six consecutive years, and rebuilding is unlikely in 2025. While beef inventory has been maintained by heavier carcass weights and increased imports, prices are expected to remain high. Sustained consumer demand is crucial for maintaining these record prices. Cattle imports from Mexico has resumed following a temporary suspension due to New World Screwworm, although trade tension with both Mexico and Canada over potential tariffs adds uncertainty to the industry.

Dairy

The dairy market is experiencing mixed signals. Bullish factors include market price stabilization, a smaller national herd, and lower production per cow due to highly pathogenic avian influenza (HPAI). Bearish factors including the threat of tariffs, rapid growth of cheese in cold storage, and less competitive U.S. prices on the global market. Dairies can mitigate uncertainty with risk management tools like Dairy Margin Coverage (DMC), which has enrollment open until March 31, 2025. 

Forest products

Lumber prices rose slightly in the last quarter of 2024 due to capacity curtailments, but housing permits remain flat and suggest a slow start to season. Elevated mortgage and insurance rates are impacting affordability and likely to pressure home sales in 2025. It’s unclear if and how natural disasters around the Los Angeles area and Southeast U.S. might lead to an increase in wood products demand. Log prices are largely trading sideways across the Northwest with some minor exceptions.

Hay

Harvested acres decreased across Western states, but low cattle inventories and mild winter temperatures have allowed ranchers to maintain reserves. Prices on feed alternatives are also at historic lows, tempering demand. Export demand for hay remains low, resulting in hay markets being less reactive to potential tariffs than other commodity markets. 

Oranges and lemons

Navel orange prices stabilized in January but remain 16% lower than last year. Quality and size improved later in the month due to weather conditions. The clementine crop had good quality and normal to above-average production. International juice prices are at very high levels due primarily to low orange production in Brazil. Lemon prices fell in January, especially for smaller, choice grade fruit, likely due to quality issues and excess small fruit supply. The end of the harvest season in key regions of California may reduce supply and stabilize prices.

Potatoes

The potato market faces uncertainty due to fluctuating fertilizer prices and mixed 2024 performance. While domestic retail sales increased slightly in volume, prices saw a year-over-year reduction, averaging $0.92 per pound. Restaurant sales declined after August and frozen potato exports, though improved, remain below pre-pandemic levels. For 2025, growers expect reduced planted acres and flat to lower production. Open market returns and contract prices are also anticipated to be lower. A key challenge is unpredictable spring fertilizer prices due to potential tariffs and trade disruptions, making it difficult for growers to estimate production costs.

Wheat

Wheat markets have proven to be sensitive to geopolitics and international trade. Threatened tariffs against Canada and Mexico caused market selloffs in January, demonstrating potential negative price impacts, although these may be mitigated if grains are excluded from retaliatory tariffs. Russia has reduced its 2025 wheat export forecast to a five-year low due to domestic demand after a difficult production year and record exports. Globally, the wheat stocks-to-use ratio is low, but significant price increases are unlikely without substantial production cuts.

Wine and wine grapes

Negative public perception of alcohol consumption is a growing risk. The Surgeon General and WHO have linked alcohol to cancer, though this contradicts research suggesting potential benefits or lack of harm from moderate consumption. Wine sales declined in December, and the number of wineries decreased in key Western states. Wine exports, valued at $1.17 billion through November 2024, could be affected by potential tariffs, particularly with major trading partners like Canada, China, and Mexico.