2022 Ag Outlook in Columbia Basin Looks Strong, Albeit Spendy

BILL SHIBLEY

With another year in the books for the agriculture industry here in the Columbia Basin region it is a great time to reflect back on what was and look forward to what we can expect for the coming year.

At the start of last year, it was pretty hard to be excited about agricultural commodity markets. Not that they were bad but they sure weren’t good, and it was hard to project much more than breaking even on many farm budgets for 2021.  Fast forward to today and prices have improved considerably with alfalfa hay being up 35% to 40% versus January of 2021, grain corn up 20% and soft white wheat up about 50% from the previous year.  As always agricultural prices are all over the board, some are contracted, like potatoes for processing into French fries and others are sold and consumed in a short window like asparagus or cherries.  However, I’m having a hard time thinking of any agricultural commodity that went down in price year-over-year.

Unfortunately, it isn’t all about price – one has to take into account yield and cost of inputs such as fertilizer and labor.  Our summer weather didn’t help on either front with the extreme heat wave in June and July of 2021 affecting yields across the board. While in some cases crops were only affected marginally such as alfalfa, others resulted in complete losses like cherries that were just getting ripe but weren’t quite ready to be picked. The summer heat continued to eat into profit yields as additional money also went towards things like higher harvest labor. For the crops that were ripe during the heat wave, many farmers had to switch to harvesting at night, adding on extra expenses to help keep their crews safe.

Inputs such as diesel fuel, fertilizer and chemicals weren’t too bad in 2021, if a farmer purchased their inputs earlier in the year.  However, these inputs have increased significantly throughout the year, with diesel up about 50% from the start of the year to the end.  Fertilizer and chemicals have increased that much and more especially with the supply chain issues.

So where does that leave us for this next year?  I’m cautiously optimistic, but if you know me, I’m generally optimistic.  Having been raised on a farm, graduating from high school in 1983 and making the decision to study agriculture in college during the worst time period in ag since the Great Depression, like most involved in the industry I’m pretty optimistic.  That being said, the good prices right now are being driven by relatively low inventories and that generally carries into the next crop year.  But, and I mean a big but, input costs have soared and there is a very real concern about not only price but availability of certain items, such as chemicals that often have part of their formula manufactured overseas, especially those in China.

I do believe the adage that “high prices cure high prices” and we will see the supply lines open back up to more normal levels.  I wish I could say when this will happen, but as we know based on the last couple years, predictions are fun, but often times like a broken clock – only right 2 minutes out of 1,440 minutes in a day….

 

Bill Shibley

Senior Agricultural Officer

WShibley@Community1st.com

William “Bill” Shibley has spent over two decades working in the agricultural lending industry. After graduating from Oregon State University with a degree in agricultural and resource economics, he relocated to the Tri-Cities in 1994 where continues to live and work today. Outside of the office, Bill spends much of his time supporting the farm and agricultural communities as President of the Washington State Wine Industry Foundation, 4-H Club Leader, and member of the MyTri 2030 Agriculture Steering Committee.

 

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