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                             March 19, 1999
April 1999, ERS-AO-260
     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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Near-Term Weakness Expected in U.S. Farm Economy

The stage was set for agricultural prospects to worsen in 1999 when the
outlook for U.S. agriculture changed abruptly during 1998.  Rising world
commodity supplies and weakening international demand last year reduced farm
prices and the value of farm exports.  The U.S. government reacted with
legislation to increase assistance to farmers, which is helping to maintain
farm income and tempering financial hardship for many producers.  In 1999,
supplies of most agricultural commodities will remain large, and the outlook
for exports remains somewhat pessimistic in the near term.  With exports and
prices likely to be lower in 1999, farm financial stress will intensify,
particularly in the Corn Belt. 

Much of the U.S. agricultural sector will be adjusting to the combination of
weak demand and large global supplies in the next few years, according to
USDA's 10-year baseline projections.  Compared with the last few years,
agricultural commodity prices are down, the value of U.S. agricultural exports
is lower, and net farm income declines. The international factors weakening
the long-term U.S. agricultural outlook include fallout from the financial
crisis in Asia and economic contraction in Russia; projected lower growth
(relative to last year's baseline) in China's grain imports; and expanding
production potential among trade competitors.  In the second half of the
baseline, more favorable economic growth in developing regions supports gains
in U.S. agricultural exports, leading to rising nominal market prices, gains
in farm income, and increased financial stability in the U.S. agricultural
sector.  Paul Westcott (202) 694-5335; westcott@econ.ag.gov


Boom & Bust: Will Agricultural History Repeat?

Conditions in the farm sector in the 1990's in some respects resemble those
of the boom and bust cycle of the 1970's into the 1980's.  Reminiscent are
changes in the value of the dollar, the role of agricultural exports, weather-
related problems followed by a surge in production, and sustained increases in
farmland values and farm indebtedness.  But significant differences exist.
Although a number of factors could aggravate the current downturn, the
magnitude of the contraction will be mitigated by the current domestic
economic stability, less pronounced expansion, and more conservative borrowing
and lending.  Robert N. Collender (202) 694-5343; rnc@econ.ag.gov  


Managing Risk with Insurance & Pricing Strategies

Making good risk management choices requires: 1) understanding the farm's
risk environment, 2) knowing how the available risk management strategies work
and which risks they address, and 3) selecting the strategy or combination of
strategies that will provide the protection that best suits the farm's and the
operator's individual circumstances.  The farm's principal risk lies in the
uncertainty of the revenue generated by the production process.  Insurance and
forward pricing offer tools to manage risk.  The majority of insurance
policies sold are: standard yield-based crop insurance, revenue insurance, and
revenue insurance with market-value protection.  Combining insurance with
forward pricing--e.g., a cash forward sale, a futures hedge, or a put option
hedge--generally results in lower risk than either alone.  Randy Schnepf
(202) 694-5293; rschnepf@econ.ag.gov


Rice Tariffication in Japan

Japan will change its rice import system on April 1, 1999 to allow imports
outside the existing minimum access quota, but annual increases in the quota
will be less than without the April 1 change.  Japan's minimum access quota
for rice imports, implemented in 1995 under GATT's Uruguay Round Agreement on
Agriculture (URAA), ended the effective ban on rice exports to Japan.  The
tariff on imports within the minimum access quota is zero, but the URAA allows
Japan to add a markup to these imports.  Imports above the minimum access
amount will be subject to a tariff, but there is virtually no chance that any
rice paying the over-quota tariff could compete with Japan's domestic
production.  U.S. rice exports to Japan will likely be lower than they would
have been without tariffication, hitting California producers hardest.  John
Dyck (202) 694-5221; jdyck@econ.ag.gov


Broccoli: Super Food for All Seasons
     
Broccoli has again caught the interest of American consumers, after
stagnating sales in the early 1990's.  Broccoli is regularly identified as the
vegetable eaten most often for health reasons, and the introduction of pre-cut
and packaged value-added products provides more convenience for consumers. 
Americans consumed 2 billion pounds of broccoli in 1998, about 8 pounds per
capita, 34 percent higher than in 1990 and nearly 3 times the 1980 level.  The
industry boasts farm revenue averaging $484 million (1996-98), up 24 percent
from the previous 3 years, reflecting higher prices caused by rising demand. 
The U.S. retail price for fresh-market broccoli in 1998 averaged $1.10 per
pound, up 12 percent from a year earlier and up 27 percent since 1995.   Gary
Lucier, (202) 694-5253; glucier@econ.ag.gov


Food Prices to Post Modest Gains in 1999

The Consumer Price Index for all food is expected to increase 2-3 percent in
1999, following a 2.2-percent increase in 1998, the smallest since 1993. Food
at home is projected to increase 2-2.5 percent, while food away from home
should increase 2.5 to 3 percent.  Overall, lower meat, egg, and coffee and
soft drink prices countered higher prices for dairy products, fresh fruits and
vegetables, and fats and oils.  Although 1999 looks like another year of low
food price inflation, uncertainties remain about the ultimate effect of
changes in meat exports, increasing consumer demand for high-butterfat
products, and high orange and banana prices.  Annette L. Clauson (202) 694-
5373; clauson@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 Monday, March 22 at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/.  For details
on electronic subscriptions, call (202) 694-5050.

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