In the News

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

Producer sentiment remains mixed as tariffs have heightened volatility across all commodity markets. Livestock and dairy producers are enjoying an optimistic outlook, with favorable prices and low feed costs. However, most commodities are contending with persistent low prices and are unlikely to see significant price or profitability improvement in 2025. The current market uncertainty is placing significant pressure on producers as they weigh their options and planting decisions.

Crop inputs

Oil prices fell notably in the last month, with a drop in U.S. inventory being offset by anticipated production increases in the U.S. and elsewhere; Russia-Ukraine de-escalation efforts suggesting future trade normalization; and global trade and overall global economics being impacted by tariff applications. These and other factors have led to a decrease in transportation demand. Conversely, natural gas prices saw a spike due to cold weather and a slight increase in exports. Fertilizer prices saw another increase in February, but may see some relief with Russia-Ukraine de-escalation efforts.

Almonds and pistachios

Almond kernel demand remains strong in North America and Europe, but inshell demand from India is down. Narrowing price gaps between almond grades may incentivize producers to sell lower quality supplies. Despite some weather and pollination challenges, the 2025-26 almond crop is projected to be average to slightly below average, which should support prices. The pistachio market anticipates a large, high-quality 2025-26 crop, which should keep prices stable. However, early bud set increases the risk of weather impacts.

Apples

Despite prices being higher than last season, they are still generally below break-even, and insurance claim processing is slow. The 2025 apple crop has the potential to be large, but factors like orchard removal, minimal orchard management, and water shortages may lower overall production. Increased tariffs on exports to Mexico and Canada further complicate the situation. On a brighter note, pear production in Northern Washington is expected to rebound, and an early cherry harvest is anticipated in California and potentially the Northwest.

Cattle

The cattle industry is experiencing complex dynamics. Cow-calf producers are seeing strong margins due to low cattle inventories, driven by drought in many regions. Feedlots remain profitable thanks to low feed costs, but packers are facing tight margins due to high cattle prices. While this situation benefits producers in the short term, the pressure on packers could eventually impact producer profitability. Additionally, the trend of direct-to-consumer sales may further shift the industry landscape.

Dairy

The dairy industry is recovering from HPAI reductions, with milk production increasing nationally and in key states like California and Idaho. However, new tariffs threaten dairy profitability, making strong milk prices crucial. While lower feed costs offer some relief, regional variations exist, and rising feed costs in California due to water pumping restrictions are a concern. Western producers face challenges with hay and corn silage pricing. To navigate this uncertainty, producers should explore risk management strategies and carefully evaluate feed options.

Forest products

Long-term impacts of the Trump administration’s approach to reduce wildfires and expand timber production remain uncertain, and may encourage more public-private partnerships. Lumber prices have seen an 18% year-over-year increase, but the housing market continues to see high interest rates and building costs, which are likely to keep timber prices stable.

Hay

Hay producers continue to struggle with low prices, high inventory and increasing debt. While demand has picked up in some areas, buyers remain price conscious. In the Imperial Valley, good weather is leading to a high-quality first cutting, but fewer alfalfa acres are expected to enroll in the Deficit Irrigation Program due to weed challenges. Overall, significant price increases are unlikely in the near future unless severe drought occurs, forcing producers to focus on cost management and risk mitigation strategies.

Oranges and lemons

The citrus market is facing challenges. Navel orange harvest is about halfway complete, with good quality but small fruit size impacting prices. Strong juice prices are helping to support the market for lower-quality fruit. Lemon growers are seeing good quality but face weak demand and small fruit size. Some growers are abandoning harvest due to prices being below harvest costs. Trade uncertainty and potential tariffs add further pressure to the citrus industry.

Potatoes

The outlook for potato producers in 2025 is challenging. Following a difficult 2024 with surplus production and low prices, growers are expected to reduce planting again this year. Processor contracts are being cut, and tariffs are creating further uncertainty. While these factors may help balance supply with demand, potato producers should be prepared for another tough year, especially with potential irrigation constraints and continued low prices.

Wheat

Wheat growers are facing another difficult year with low prices, high costs, and a bearish market outlook. Despite hopes for a price rally due to issues with Russia's wheat crop, favorable weather in other regions has kept prices down. In the West, flooding and erosion have caused some challenges, and landlords are reportedly having trouble finding producers willing to rent wheat ground. Strong risk management strategies will be crucial for wheat producers during this difficult period.

Wine and wine grapes

The wine industry continues to experience a period of significant adjustment. While wineries with niche markets or strong direct-to-consumer sales are doing well, those producing lower-tier wines for mass distribution face oversupply and declining demand. This is leading to vineyard sales, acreage removal, and skipped harvests. In California, early bud break raises concerns about potential weather damage. Oregon faces similar challenges with excess inventory, but strong demand could lead to a quick recovery if the 2025 crop comes in small. Washington continues to see vineyard removals as it works to balance supply and demand.