January 31, 2012

Food Processors Doing Well – but Preoccupied with New Regulations

We must be eating well these days. Companies processing and packaging food are enjoying very favorable times. According to Dave Zepponi, President of the Northwest Food Processors Association (NFPA), the industry weathered the recession quite well. The industry has actually grown over the past few years and Zepponi says processors and industry suppliers are both chugging along at the moment.

Given these favorable trends it was no surprise that the Northwest Food Processors’ annual exposition a couple weeks ago was bigger and better than ever before. I traveled to Portland for this event and helped the Port of Grandview staff a booth in the exposition hall. The conference provided excellent learning and networking opportunities. It also afforded the Port an opportunity to market its property to food companies and suppliers.

While the industry is on the uptick it is also facing significant challenges. Most food companies have an aging workforce and know they will have to replace a significant number of talented employees who are reaching retirement age. Many food facilities are also antiquated and need investment to ensure they operate safely and efficiently. Perhaps the biggest challenge is government though. Zepponi said new regulations are putting extraordinary pressure on the industry. In particular, the Food Safety Modernization Act (FSMA) is the most comprehensive new food safety law in over 70 years. It drives significant new recordkeeping and operating requirements for food companies and their suppliers. The law gives the Food and Drug Administration the power to issue product recalls so repercussions for not following the law are deadly serious.

Quite a few of the breakout sessions at the event were designed to help food industry executives and their employees learn about food safety compliance strategies. Beyond getting employees up to speed the Food Safety Act will also force companies to modernize their facilities. No doubt about it, the FSMA is a game changer for food processors. Add compliance with other safety, land use, water quality, and environmental regulations and you can see why Zepponi suggests that government is the industry’s biggest issue at the moment.

In our Valley, food processors play a pivotal role within our regional economy. They employ thousands of people and provide an important supply outlet for local farmers. Hopefully our local food processing industry will stay on a roll. Growing markets and better margins are the prescriptions this industry needs to successfully overcome its current challenges.

January 24, 2012

New Brewery & Amtech Poised to Grow in Our Valley

Over the last couple months we have been quietly working with two local companies that are starting or expanding operations in Yakima County. It is exciting to see these firms move forward on projects that will add significantly to local payrolls.

: Loftus Ranches

The Moxee area is poised to become home to a new commercial brewery in Moxee. The company is being started by the Smith family, who operate Loftus Ranches and have been growing hops for over 80 years. The new brewery will be located near the corner of Birchfield Road and State Highway 24. In order to locate at this site, the City of Moxee plans to extend a water line approximately 10,000 feet to the company’s planned facility. The Yakima County Supporting Investments in Economic Diversification (SIED) program is helping the City and private developers fund the water line extension project. Trellis plans to distribute their ales throughout Eastern Washington and Northern Idaho. The company will start with 5-10 employees and expect to employ 20-25 as the business gets established.

Amtech Corporation is also growing again. The company is leasing a building next to their current facility in the Wapato Industrial Park. As this older 60,000 square foot industrial building gets renovated, Amtech will use 20,000 square feet immediately and has an appetite to fill the rest of the facility. Amtech is a diversified manufacturer of composite parts and assemblies. The company makes products for the military including hardtops for Humvees, as well as cargo trailers and covers. Amtech also manufactures components for trains, buses, lift booms and recreational vehicles (to name just a few product lines). As the company moves into a renovated building it plans to add 20 employees this year and another 20 in 2013. This will bring the headcount up to 220 employees at their Wapato headquarters.

We are very pleased with both of these projects. While some local manufacturers have been adding jobs over the last year, these are the two most significant job generating projects we have seen over the last three years. Our office is working with a couple other companies poised to expand as well, so hopefully these are all signs of an economic rebound here in our Valley.

January 16, 2012

Economists Share Different Outlooks for 2012

Last week I attended Enterprise Seattle’s (our King County relative) 40^th annual economic forecast event. At the morning session, three economists shared their outlooks for 2012. Their sentiments about the year ahead differed somewhat which is hardly surprising given the challenges of predicting an end to our persistently gloomy economy. The good news was that none of them were predicting that our economy would get worse.

Dick Conway, with Conway Pederson Economics, focused his comments on the Puget Sound and Washington state economies. Conway cited several indicators to show that the Western Washington economy was picking up steam. Retail sales accelerated over the last quarter of 2011, personal income is on the rise, and unemployment rates are dropping. Conway suggested that Boeing’s continued hiring, strong exports, and a significant pay raise at Microsoft combined to boost the Puget Sound economy. On a broader scale he told the audience that these trends plus an uptick in manufacturing are also helping the state economy rebound. Looking forward Conway opined that housing prices and sales would rebound this year. He also suggested that retail sales would notch higher given the stronger Western Washington economy.

Michael Dueker, chief economist with Russell Investments, felt the national economy would improve albeit modestly. Dueker forecast that US Gross Domestic Product (GDP) would rise 2.5 percent this year. He also felt that inflation would be benign and the stock market would rise modestly. Dueker said that Europe may be a drag on the US economy, but he added that the biggest issue affecting our economic growth is the high incidence of household debt. While American households are getting stronger, there are still too many people that are overly leveraged in term of their income/debt ratios.

Ken Goldstein, a veteran economist with the Conference Board, saw no economic rebound on the horizon. He felt the economy has no momentum and suggested that poor retail sales over the holidays were a sign of challenging times. Goldstein added that the national economy could struggle during the first quarter this year as people pay off debt they incurred during the holidays. Goldstein felt that a modest economic recovery is still two years away. The challenge he says is that our society’s disposable income has been squeezed heavily during the recession. As a result people have less money to spend and they are being a lot more conservative in terms of how and when they spend their discretionary income.

I enjoyed the panel’s remarks and feel that our Yakima Valley economy will fall towards the middle of their projections. Our farm economy is doing well and we are seeing an uptick in local manufacturing. I predict our retail sales numbers for the 2011 holiday season will also be relatively favorable, indicating that folks in the Yakima Valley feel a bit better than most about our local economic situation. We are not a boom town though so my prediction is that we will enjoy modest growth and ride the coattails of our state and national economy. I concur with the economists cited above – a broader economic recovery is probably still a year or two away. There are too many storm clouds on the horizon to feel confident that economies will surge.

I hope my safe forecast is too gloomy. At a time when broader economies are getting a bit better I hope that we can better control our own economic destiny in the Yakima Valley. Happy new year everyone. Let’s all work towards economic improvement at home, throughout Washington state, and around the world.

January 3, 2012