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Top 5 things made in Whatcom County, and why that’s changing

When it comes to making products, Whatcom County is reaching a crossroads: Traditional industries still dominate, but global market conditions are forcing change, creating opportunities for new ones to emerge.

Whatcom County’s gross domestic product is around the middle of the pack compared to the rest of the U.S. In 2014, Whatcom County produced goods valued at nearly $10 billion, a 3.2 percent increase compared to the previous year, according to data from the U.S. Bureau of Economic Analysis.

That ranks 197th highest out of 318 metro areas, while the annual increase ranked 65th highest.

Much of that product comes in the form of refined oil, according to the data.

Here’s a look at the top 5 items produced in Whatcom County in terms of gross domestic product:

Oil refineries

▪  In 2014 the two refineries at Cherry Point made around $1.4 billion in product.

Outlook: The two local oil refineries, BP Cherry Point and Phillips 66, have made major investments in facilities in recent years, with BP growing its workforce significantly. The current oil glut is keeping gas prices low, and that has curtailed oil exploration elsewhere.

As Alaska’s North Slope oil production continues to dwindle, the two local refineries will have to adjust, getting oil from other parts of the U.S. That could be a problem, though, if oil prices remain low and production is curtailed in other regions like North Dakota, said James McCafferty, who helps run the Center for Economic and Business Research at Western Washington University. If the low prices result in curtailed production, it will lead to higher prices, but it is unclear what that period will do to refineries.

If Alaska production continues to fall, and with no offshore drilling expected soon in the region, McCafferty wonders what will feed the local refineries.

“It’s a long story problem,” McCafferty said.

The two local refineries have an advantage in that they play a crucial role on the West Coast. Since no refineries have been built in the U.S. for nearly 40 years, refining oil in the U.S. can lead to shortages when something goes wrong. This has been demonstrated dramatically in recent years, as a single West Coast refinery shutdown can mean an immediate spike in gas prices at the pump.

Aluminum

▪  $260 million in 2014. The Bureau of Economic Analysis did not disclose the actual figure; this is based on Intalco’s website on production and the average price for aluminum.

Outlook: The outlook has been well documented in the past few months. Alcoa announced last week it was delaying its idling of the Intalco smelter until the end of June. If the Ferndale smelter is idled, it will mean laying off about 465 people, leaving about 100 to operate the casthouse. If the smelter is idled for a significant amount of time, it would take a bite out of Whatcom County’s GDP.

Global market factors are the main reason the future of aluminum production in Whatcom County is murky. Oversupply and low aluminum prices have forced Alcoa to idle or close several smelters in the U.S., including its facility near Wenatchee.

Farming

▪  $250 million in 2014.

Outlook: While Whatcom County farmers are working on a variety of local challenges like water usage and water quality, they are also concerned about global markets.

For dairy, the class III prices that many local dairy farmers sell at have dropped to $14.44 for 100 pounds of milk, the lowest in nearly five years, said Lee Mielke of Mielke Market Weekly in a recent column for the Lynden Tribune. The typical break-even point for many local dairy farmers is around $17 for 100 pounds of milk. The lower price point was expected early on, however, giving farmers a chance to adjust accordingly. That’s different from a few years ago, when prices were fluctuating unpredictably, making it difficult to maintain a budget.

Dairy is experiencing a global oversupply with lower milk prices that are expected to stay relatively low throughout 2016, said Gerald Baron, executive director at Whatcom Family Farmers. He added that the strong U.S. dollar has increased price competition not just for dairy but for the berry producers.

In recent years, both the raspberry and blueberry farmers have gone through a period of growth. Despite a smaller harvest this past year because of drier weather, the market for both berries appears on the rise, so farmers continue to plant more acreage.

Access to water and water quality are critical issues for the industry, ones the farmers hope to make progress on working with the local tribes and government agencies, Baron said. A major focus for 2016 is for the farming community to better tell its story to the community at large as well as to those considering going into the industry.

“Current questions involving farming, particularly by young people, can be best answered by direct engagement with farmers,” Baron said.

Food and beverage manufacturing

▪  $192 million in 2014.

Outlook: Whether it’s cereal, peanut butter, craft beer or liquor, Whatcom County makes a wide variety of food and drinks sent all over the country.

At first glance it may seem Whatcom County is at a disadvantage for distribution of perishable products. Situated in the far northwest corner of the U.S., getting products to market can be more challenging than in the Midwest or near major metro areas.

But other tangibles seem to more than make up the distribution issue for some local manufacturers. Rob McCormack said the number one advantage he sees to having a facility in this area is the community. McCormack, who is the Chief Operating Officer of Erin Baker’s Wholesome Baked Goods, is impressed by the number of people that come into the company’s downtown retail store and manufacturing facility to tell them what they like — and occasionally don’t like — about the products.

“It’s rare to have a community wrap its arms around a company like they do with us,” McCormack said.

The company has steadily grown over 20 years and now employs 45 people. It sells its products across the West Coast, Southwest and Midwest. As an example of size, the company uses 800,000 pounds of oats a year and about 70,000 pounds of prune puree.

In the past 10 years we have seen a growing number of local companies experience tremendous success and expand their local workforces.

John Michener, economic development specialist, Port of Bellingham

Erin Baker said she’s very optimistic about the future of the company, because she gets a sense that Americans as a whole are reaching the point where they want to buy healthier food and are willing to spend the time looking for it at stores. She feels her company is well-positioned for this change in eating habits as long as they continue to get the message out about the product.

Food and beverage manufacturing has posted strong growth in Whatcom County in recent years, according to the BEA data, rising $67 million between 2008 and 2013.

The recent growth of craft breweries in Bellingham should continue to add to that growth.

Information (computer software)

▪  $120 million in 2014.

Outlook: Being close to the high-tech hubs of Seattle and Vancouver, B.C., also presents opportunities for Whatcom County. According to the BEA, computer software grew into a $120 million industry here in 2013, up $18 million compared to five years earlier.

It can be difficult to judge the vitality of the high-tech industry being next door to a metro area that is home to tech giants like Microsoft and Amazon. When compared against some similar-size communities, Whatcom County appears to stack up well. While making less computer software than Santa Cruz, Calif. ($203 million), Whatcom County is ahead of metro areas like Flagstaff, Ariz. ($60 million).

Much of the growth is taking place with existing Whatcom County firms, said Meg Weber, executive director of the Technology Alliance Group for Northwest Washington. But, she added, many of the established Whatcom County firms have arrived here in the past 10 years.

“TAG sees the greatest potential for growth in the local tech sector to be in divisions of existing companies or relocation of companies in growth mode with 5 to 40 employees,” Weber said.

Weber sees several challenges the community needs to address to help grow the industry, including more housing for middle-income families looking to relocate here, better access to a “second job” for the relocating spouse and better access to capital for startup firms looking to create new products.

Other aspects of the economy would need to grow to attract more tech companies in this area. Bob Pritchett, CEO of the Bible software company Faithlife, said one of his hopes is for Bellingham International Airport to get more direct flights, particularly heading east. After a $38 million expansion project, the airport hasn’t yet been able to convince airlines to start offering more flights. It’s come at a time when the industry itself is changing, with less emphasis on smaller or mid-size airports than a few years ago, according to a recent Wall Street Journal article. The Port of Bellingham’s Aviation Director Sunil Harman said in a recent article that while a west-east route is a high priority, market conditions suggest it won’t happen soon.

HOW WHATCOM CAN DIVERSIFY

While Whatcom County relies heavily on two volatile industries — refined oil and aluminum — for its overall GDP, it has plenty of opportunity to grow other industries, said John Michener, an economic development specialist for the Port of Bellingham.

“In the past 10 years we have seen a growing number of local companies experience tremendous success and expand their local workforces,” Michener said, citing Faithife, Erin Baker’s Wholesome Baked Goods, All American Marine and Tri-Van Truck Body as a few examples.

Given the climate and geography of Whatcom County, Michener believes a number of industries could continue to grow, including maritime, value-added agriculture, advanced manufacturing, outdoor recreation and professional services.

“The local geography can be a bit of a challenge if national distribution plays a role in the company’s success,” Michener said. “At the same time, being located close to Seattle and Vancouver, B.C., our local firms have the opportunity to participate in much larger sectors such as aerospace and information technology.”

Reach Dave Gallagher at 360-715-2269 or dave.gallagher@bellinghamherald.com. Follow him on Twitter at @BhamHeraldBiz and on Facebook at BellinghamHeraldBusiness.

SURPRISING STUFF MADE IN WHATCOM COUNTY

Whatcom County businesses make a wide variety of products that tend to remain below the radar because they are shipped to other parts of the country and world. Here are a few examples:

▪ Rope (Samson Rope in Ferndale)

▪ Pizza ovens (Wood Stone in Bellingham)

▪ Shoe soles (Superfeet in Ferndale)

▪ Breakfast cereal (Nature’s Path in Blaine)

▪ Prosthetics (Cascade Prosthetics and Orthodics in Ferndale)

▪ Fish oil (Barleans near Ferndale)

▪ Custom trucks (Trivan near Ferndale)

▪ Dried milk (Darigold in Lynden)

▪ Bike racks for cars (Heininger Holdings in Bellingham)

▪ Pet bedding, cat litter (Healthy Pet near Ferndale)

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