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Idaho farmers look ahead after roller-coaster year

By: John O'Connell
Published in Blog on  December 30, 2020

Potatoes are harvested in a field near Shelley in September.

By John O’Connell

Intermountain Farm and Ranch

Google searches for the word “recipe” skyrocketed during the first quarter of 2020 and are still up by about 16% from 2019, explained University of Idaho Extension educator Joel Packham.

Packham, of Cassia County, said UI’s food classes have also been filling up quickly.

Packham believes the facts evidence a renewed interest among Americans in cooking at home amid the COVID-19 pandemic. For the nation’s food producers, 2020 was marked by a major shift from foodservice demand toward retail sales, as more people dined at home.

Packham spoke about the strange ride Idaho cattle ranchers experienced in 2020 and offered his outlook for the future as part of UI’s recent Idaho Ag Outlook Seminar, hosted virtually this year because of the coronavirus outbreak.

The public may log onto https://www.youtube.com/channel/UCryFhhCBYwuWroPRC2Zf9PQ to view experts’ presentations on the potato, dairy, beef, grain and hay market outlooks, as well as presentations on water, weather, input cost trends, the financial condition of Idaho agriculture and the global and U.S. agricultural outlook.

Beef outlook

During 2021, Packham said, USDA anticipates beef exports will rise by 5%, and cow-calf producers are projected to have positive returns.

USDA estimated the fed steer price dropped from $117 per hundredweight in 2019 to $110 in 2020, but the agency predicts the price will rise to $115 per hundredweight in 2021, Packham said.

“Beef suffered during COVID-19 but appears to be on the rebound,” he said.

Packham said U.S. beef consumption held steady in 2020 and is expected to drop slightly in 2021.

He noted he bought some $7-per-pound hamburger during the spring as fear of COVID-19 shortages prompted some retail shoppers to stock their freezers.

“Wholesale beef demand went off the charts in May and June,” Packham said. “People were after wholesale beef in a way like never before.”

USDA listed the all fresh beef price at a sky-high $7.40 per pound in June, while cattle prices for producers were simultaneously “in the toilet,” Packham explained. The all fresh beef price was $5.85 during June 2019 and is currently $6.05 per pound.

Packham explained the discrepancy between high beef prices and low returns to producers resulted from packing plants getting backlogged on production amid the pandemic, even as consumers couldn’t get enough of their products.

He said the inverse of the 2020 situation occurred in 2014 and 2015, when several beef packers went out of business with too few cattle to fill their plants. Prices paid to producers, however, were driven up significantly.

Total U.S. retail sales of beef were up $11.5 billion, or 18%, from January through October of 2020, Packham said.

Foodservice sales, however, dropped from representing 60% of beef consumed during 2019 to half of beef consumed in 2020.

Packham said the beef supply outlook is favorable for the coming year.

“Herd expansion is over and it’s heading down,” he said.

USDA statistics show the U.S. herd has been declining since 2019, down by 380,000 head in 2020, and is projected to drop another 300,000 head in 2021.

Dairy outlook

Idaho dairy producers will likely see a tighter margin in 2021 due to the combination of rising feed prices and falling milk prices, said James Carr, director of West Coast Dairy.

During 2020, dairymen earned a margin of $9.21 per hundredweight, with the price of milk at $18.29 per hundredweight and feed costs at $9.08 per hundredweight, he said.

During 2021, Carr said, feed costs are projected to rise while milk prices will likely drop. USDA estimates the 2021 margin will be $6.89 per hundredweight — well below the break-even point — a level Carr said would trigger herd contraction.

“Idaho feed costs are moving higher. We’re showing feed costs in the middle of 2021 move up toward the $11 per hundredweight range,” Carr said.

Carr explained government cheese purchases helped keep the dairy market afloat in 2020. The government bought 240 million pounds of cheese during 2020, with government purchases accounting for 4% of all production from June through August.

“The (cheese) market recovered and flew by normal pricing into all-time highs,” Carr said.

He said replacing those government cheese purchases will be key in 2021. Furthermore, he said, not all Idaho dairymen benefited from the government’s 2020 cheese purchases.

Dairymen and milk processors involved more heavily in the butter and powder markets had milk “pushed back on them,” and powder stockpiled, he said.

Potato outlook

COVID-19 has “scrambled” the outlook for potato growers, said economist Bruce Huffaker, who is president of North American Potato Market News.

Huffaker believes the potato market has made up a great deal of ground following the COVID-19 hit, and demand should be relatively strong looking ahead.

Between April and June, global trade in french fries declined by 30%. It’s been recovering since then, Huffaker said.

“One of the challenges we are seeing still is while global trade is only down 2.8%, North American exports are still running 15% behind last year’s pace,” he said.

Huffaker said fresh potato shipments have been up, but much of that increased volume has gone to retail outlets.

“On the other hand, we have a major slowdown in foodservice sales due to a shutdown of restaurants (due to COVID-19),” he said. “That created some major problems for Idaho shippers. Idaho is reliant on foodservice business to carry its market.”

Idaho growers have faced softer prices than growers in some other regions as a result, Huffaker said.

Last spring, processors reduced their contract volumes with Idaho spud growers by 15 to 20 percent, he said.

“In order to have confidence to plant potatoes, growers are going to have to have contracts,” Huffaker said. “Going into the 2021 crop, how much processors will want to have planted will be interesting.”

Grain outlook

Based on a strong outlook for foreign exports, U.S. grain prices should rise in 2021, said UI Extension educator Jon Hogge.

For the 2020-2021 marketing year, USDA projects the price per bushel of barley will rise by a nickel to $4.75, the price per bushel of corn will rise 15 cents to $4 and the price of wheat will rise 20 cents to $4.80, compared with 2019-2020.

“Our global and U.S. ending stocks have increased slightly,” Hogge said. “We still have a lot of product on the market. Large stocks have created a little bit of downward pressure on price, but there has also been a lot of price volatility, and prices look pretty darned good for this coming year. Export is the story. As long as we continue to move product into food chains and feed chains that are anywhere else in the world, our prices will continue to be successfully on the rise.”

Hogge said a soft dollar has contributed to stronger exports of U.S. commodities. Exports to China have been especially encouraging. For example, according to USDA's Nov. 10 World Agricultural Supply and Demand Estimates, China's imports of U.S. wheat were up by 49 percent and its U.S. corn imports were up by 71% for the 2020-2021 marketing year.

“I’m here to tell you the exports that have happened in China moving that corn their way and moving some wheat their way have been a huge boon to our products here in the U.S.,” Hogge said.

He said 2020 was also marked by great market volatility, which presents opportunities for producers with a clear marketing strategy.

During 2020, the price per bushel of wheat swung 28%, or $1.40 per bushel, between its high and low points.

 

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