NOTE: AO has 10 issues in 1999.  Please note that reports are released in
one month, BUT THE ISSUE DATE IS FOR THE FOLLOWING MONTH; e.g., the May
1999 issue is released in April.

AGRICULTURAL OUTLOOK -- SUMMARY                             May 20, 1999
June/July 1999, ERS-AO-262
     Approved by the World Agricultural Outlook Board
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This SUMMARY is published by the Economic Research Service, U.S. Department
of Agriculture, Washington, DC 20036-5831.  The complete text of the 
report will be available electronically 2 working days following this
summary release.    
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Reprise of Large Supplies For U.S. Agriculture

Large supplies of major U.S. field crops are expected to persist in
1999/2000, with season-average farm prices stabilizing or declining.
Wheat is the exception, with production expected to decline and average price 
to rise moderately.  Linwood Hoffman (202) 694-5298; lhoffman@econ.ag.gov

Red meat and poultry production in 2000 is forecast about the same as
expected record production in 1999.  Increased poultry production, bolstered by
continued profitability and low corn and soybean meal prices, will offset
modest declines in beef and pork output.  Broiler prices in 2000 will
continue to decline from record levels reached in 1998, while cattle and
hog prices will continue to recover some from 1998's extreme lows.
Leland Southard (202) 694-5187; southard@econ.ag.gov

U.S.-Canada Wheat Trade: Geography & Economics 

A dramatic increase in U.S. imports of Canadian wheat resulted from a
series of events in the early 1990's.  Trade liberalization agreements
expanded the potential for trade with Canada, while U.S. export subsidies
and elimination of internal Canadian transport subsidies for exported grain
increased the economic incentive for Canada to export to the U.S. rather
than to other foreign markets.  At the same time, bad weather generated
unusually large trade in feed wheat.  Nevertheless, geography and market
economics are the fundamental determinants of current U.S.-Canada wheat
trade; most Canadian wheat production is far enough north and west from
most centers of U.S. production and use to limit any economic advantages of
U.S. imports from Canada under normal circumstances.  The early 1990's
runup in imports appears to have been an isolated occurrence that has run
its course.  Gene Hasha (202) 694-5193; ghasha@econ.ag.gov

Russia's Economic Crisis: Effects on Agriculture

The economic crisis in Russia that began in August 1998--triggered by
devaluation of the ruble and the government's default on domestic debt--has
reduced demand for food and lowered food consumption, because substantial
depreciation of the ruble has significantly raised domestic prices for
foodstuffs and lowered consumer wealth and income.  Russian imports of
agricultural and food products have dropped by about three-fourths, causing
U.S. agricultural exports to Russia-- 2 percent of total U.S. agricultural
exports before the crisis--to plunge by near 80 percent.  Agricultural
production in Russia should be stimulated, since major depreciation of the
ruble against foreign currencies substantially improves the price
competitiveness of domestic output compared with imports.  William Liefert
(202) 694-5156; wliefert@econ.ag.gov

Imports Rise in Middle East and North Africa 

The Middle East and North Africa (MENA) region is a major global market for
agricultural and food products, including wheat, barley, oil meals, and
vegetable oils.  The combination of increasing demand for food--caused by
rapidly growing populations, rising real incomes, and diets changing with
urbanization--and decreasing resources for agriculture--seen in declining
farm populations and land in farms, and in increasing competition for
water--has overwhelmed the region's capacity to meet its consumption needs. 

The U.S. is a major supplier of agricultural commodities to the region,
with shipments averaging $4.1 billion per year during 1996-98, a 29-percent
increase over 1990-92 and 4 percent above the 1993-95 average.  The April
1999 lifting of U.S. trade sanctions on food could add to increased U.S.
exports to the region in the long term.  Michael Kurtzig (202) 694-5152;
mkurtzig@econ.ag.gov                                    

Conservation Reserve Program Approaches Acreage Limits

USDA's Conservation Reserve Program (CRP), after accepting 5 million acres
in its 18th signup in March 1999, stands just 5 million acres shy of its
statutory limit of 36.4 million acres, with relatively little acreage due
to expire in the next 3 years.  In order to provide for joint Federal-State
conservation reserve initiatives, and to reserve 4 million acres for the
Administration's Clean Water Action Plan, future signups will not be able
to enroll such large acreages. Should legislation raise the statutory cap
on enrollment, analysis shows that new enrollment would likely have less
erosion- reduction benefits compared with other environmental benefits
included in the CRP Environmental Benefits Index scoring system.  However,
with greater acreage placed in conserving uses, total erosion benefits
would still increase.  Assuming all potential bidders would indeed bid, no
radical shifts in the geographic distribution of acreage would be expected. 
Mark Smith (202) 694-5490; mesmith@econ.ag.gov

State Trading and Management of Grain Marketing in China 

The role of state trading enterprises in the People's Republic of China is
a key agricultural issue as China seeks membership in the World Trade
Organization.  Despite more than 15 years of economic reform, government
state trading enterprises continue to provide China with enormous power to
manage the level and direction of trade flows of several major agricultural
commodities, including wheat, rice, and corn.  Examining the entire chain
of governmental organizations engaged in domestic and international grain
marketing is necessary to understand the role of state trading in China
because policies and institutions are intertwined, and any attempt to
successfully reform state trading practices will have to go beyond the
traditional concept of simply disciplining individual enterprises. 
Frederick W. Crook (202) 694-5217; fwcrook@econ.ag.gov

END_OF_FILE
