SPOKANE — Grain prices are likely to be a little higher this year, but not enough to offset higher input costs, an expert says.
"They might even be more attractive if we can sort out some of these trade disruptions and frictions," said Randy Fortenbery, small grains economist at Washington State University. "But at least we haven't completely collapsed on the grain price side."
Fortenbery gave his economic forecast Feb. 6 at the Spokane Ag Expo and Pacific Northwest Farm Forum.
He called for wheat prices to be 10 to 20 cents higher over the next 11 months, but warned that won't pay for storage.
"If you're sitting on wheat you harvested in 2018, you're still going to lose money trying to carry this forward," he said.
Fortenberry doesn't see a reason to aggressively sell 2019's wheat crop. Wait to see if there's some trade resolution or a production problem somewhere in the world, he suggested.
The industry is in the middle of the most aggressive trade realignment and negotiations in decades, Fortenbery said.
Fortenbery cited several concerns that impact growers:
• Trade disputes with China.
• The U.S. withdrawal from the Trans-Pacific Partnership while competing countries remain in the deal, which could put American farmers at a disadvantage in longtime or growing markets, such as Japan and Vietnam.
• Renegotiating the North American Free Trade Agreement with Canada and Mexico.
"If we had a commodity, think soft white wheat, that is very unique and can't be replaced by some product grown somewhere else in the world, we might still get attractive tariff treatment, because the customer in Japan really wants it," he said. "But that's an 'if' that may not happen if somebody finds a substitute or figures out a way around serving the products the Japanese consumer wants without putting soft white wheat in it."
U.S. beef has a larger challenge, Fortenbery said, because it's not unique and could lose a presence in Japan to other TPP countries unless a bi-lateral agreement is negotiated.
Japan has agreed to negotiate with the U.S., but there's no timeline for an agreement, Fortenbery said. Any positives could be years down the road.
Until Congress and the Canadian and Mexican governments move the new United States-Mexico-Canada Agreement forward, it remains on hold.
"The president has suggested that if Congress doesn't ratify it, he's going to pull out of NAFTA completely," Fortenbery said. "That would be a bad thing for agriculture. ... Mexico and Canada are really important trading partners for us on the ag side."
Any new agreements have to be ratified by Congress, Fortenbery said, which could be challenging in the current political climate.
Commodity prices have declined, while costs have gone up, Fortenbery said. Feed purchases, labor, livestock or poultry purchases, interest, net rent, pesticides, fuel and oil and property taxes and fees all increased in 2018 compared to 2017. Only seed and fertilizer costs decreased.
The Trump administration imposed tariffs on steel and aluminum imports, and other nations retaliated with tariffs on U.S. agricultural crops and products.
U.S. steel and aluminum prices dropped after the tariffs were imposed. The tariffs weren't the only reason, but they were significant, Fortenbery said.
Negotiations with China and Japan could mean improvements in trade relationships, he said.
"But at least so far, there's been a pretty significant cost paid by agriculture, and there haven't been benefits generated to the other economic sectors that we thought might happen when the policies were first put in place," he said.
Trade must stabilize, Fortenbery said.
"I don't care whether it's big tariffs or no tariffs, what companies need is a stable production environment," he said. "People can adjust to tariffs if they know they're there permanently."