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                        October 19, 1999
November 1999, ERS-AO-266
     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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Reducing Tariffs Under Uruguay Round Agreement

Tariffs are considered a highly visible and easily negotiable target for
reductions during the next round of trade negotiations, to be launched by
the World Trade Organization in Seattle on November 30.  Under the Uruguay
Round Agreement on Agriculture, developed countries agreed to reduce all
agricultural tariffs by at least 36 percent, on average, over the period
1995 to 2000, with a minimum reduction of 15 percent per tariff-line (i.e.,
for a product or products to which the legally established tariff applies). 
Countries had a great deal of flexibility in deciding how much each
agricultural tariff would be cut, so average reductions vary by country. 
The U.S., European Union, Japan, and Canada will each slightly exceed the
average requirement, with overall cuts of 37 to 38 percent.  Australia cut
75 percent of its agricultural product tariffs by levels above the required
36-percent average, resulting in an average reduction of 48 percent. 
Countries tended to cut the smallest tariffs by the greatest amounts, with
most large tariffs reduced by only the minimum amount. In the next round,
further reductions, particularly on the large tariffs, will no doubt
encounter serious resistance. John Wainio; jwainio@econ.ag.gov

Cutting Ag Nitrogen Runoff to the Gulf of Mexico

A zone of hypoxic, or oxygen-deficient, water covers about 7,000 square
miles of the Gulf of Mexico at peak periods of the year.  The primary cause
of oxygen deficiency is believed to be high loads of nitrogen in the
discharge from the Mississippi River, with an estimated 65 percent coming
from agricultural activities.  USDA's Economic Research Service analyzed
the economic and environmental effects of three strategies for reducing
excess nitrogen releases into the Mississippi River basin: reducing
nitrogen use, restoring wetlands, and combining wetland restoration with
reduction in nitrogen use.  To achieve a 20-percent reduction in nitrogen
loadings, a policy of restrictions to cut nitrogen fertilizer use by 40
percent represents the most cost-effective strategy (least cost for
achieving the targeted reduction), but the combined strategy is nearly as
cost-effective.  Mark Peters (202) 694-5487; mpeters@econ.ag.gov

Weak Demand Dampens Outlook for U.S. Cotton

The U.S. cotton crop is projected to rebound from 1998's decade-low output,
but prospects of potential earnings from the larger output are dampened by
weak demand and rising stocks.  Sluggish U.S. cotton mill demand is the
result of persistent competition from manmade fibers and double-digit
growth in imports of textile and apparel products.  While higher foreign
demand will support increased U.S. exports, China's net exports of cotton
are trending upwards, and world prices have been dipping lower as a result. 
Increased world economic growth and lower cotton prices are boosting cotton
consumption in 1999/2000.  Stephen MacDonald (202) 694-5305;
stephenm@econ.ag.gov

FSA Credit Programs Target Minority Farmers

Racial and ethnic minority farmers often rely on USDA's Farm Service Agency
(FSA) loan programs for their credit needs, especially in regions where
minority farmers are clustered.  Because many have limited financial
resources, minority family farmers are less likely than other farmers to
qualify for credit from private lenders and are more likely to turn to FSA
for credit.  Loan targeting by FSA sets aside a share of the annual loan
funding for farmers who may be socially disadvantaged--a term that includes
those who have been subject to racial or ethnic discrimination.  While
racial and ethnic minorities represent less than 4 percent of U.S. farmers,
they comprise nearly 7 percent of all FSA direct borrowers in 1999.  Steve
Koenig (202) 694-5353; skoenig@econ.ag.gov  

What Makes a Successful Small Farm?

Farmers may measure success of their farming operations in different ways--
e.g., providing adequate household income without having to work off-farm;
providing a rural lifestyle; or increasing gross sales, acreage, or assets. 
In analyzing farming practices that support successful small farms, USDA's
Economic Research Service focused on small-scale farms (sales under
$250,000) where farming is the primary occupation of the operator, ranking
the farms' success by returns to assets and by operating expense ratios. 
The analysis found that top-performing farms are more likely than the
lowest-performing farms to apply three critical management practices: using
production strategies that control costs, actively marketing their
products, and adopting effective financial strategies such as maintaining
cash and credit reserves. Janet Perry (202) 694-5583;  jperry@econ.ag.gov 

Traditional Ag Markets & the Dry Edible Bean Industry

Evidence from the dry bean industry suggests that some observers may be
underestimating the ability of traditional "spot" markets to handle a
growing array of agricultural products.  Conventional wisdom holds that as
demand for nonstandard products proliferates, production contracts will
increasingly come into use.  In contrast to spot market sales--where buyer
and seller do not interact prior to the transaction--production contracts
usually specify how the crop is to be produced and the compensation to the
grower.  But even as commodity specifications have become increasingly
complex, the use of spot markets continues to effectively coordinate buying
and selling of nonstandard dry beans.  Because it is relatively easy to
verify the typical product quality characteristics (e.g., foreign matter,
moisture content, and post-canning quality), dry bean buyers can purchase
from suppliers who provide desired quality without using contracts. 
William Chambers (202) 694-5312; chambers@econ.ag.gov

Approved by the World Agricultural Outlook Board

Printed copies of Agricultural Outlook will be available in about 2 weeks. 
For further information, call Dennis Shields  (202) 694-5331.  The full
text of the magazine will be available electronically on Wednesday, 10/20
at http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/.  For
details on electronic subscriptions, visit
http://usda.mannlib.cornell.edu/ess_emailinfo.html

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