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                             July 20, 1999
August 1999, ERS-AO-263
     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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U.S. Wheat Supplies Remain Large in 1999/2000

Large beginning stocks of wheat will offset an expected decline
in forecast U.S. production, leaving U.S. supplies at 3.4 billion
bushels in 1999/2000, up slightly from last year and the highest
level since 1987/88.  Declining returns in recent years have
encouraged U.S. producers to switch to other crops or leave more
land fallow.  This year farmers planted an estimated 62.9 million
acres, down 5 percent from last year and the lowest since 1973. 
Weather has been relatively favorable in several states, and the
all-wheat yield in 1999 is forecast at 42.7 bushels per harvested
acre, down slightly from last year's record of 43.2 bushels.  

Although global trade will pick up while world production
declines moderately, little if any increase in world prices is
expected because major wheat exporters' supplies are large.  The
average price received by U.S. farmers is projected at $2.45-
$2.95 per bushel in 1999/2000, with the midpoint up 5 cents from
last season but down from the 1990's average of $3.38.  Mack N.
Leath (202) 694-5302; mleath@econ.ag.gov


Agriculture & the Evolution of Tariff Bargaining

Preparations have already begun for the ninth round of
international trade talks, to be launched at the World Trade
Organization Ministerial Conference in Seattle this December. 
Over the course of the previous eight rounds, countries
successfully lowered tariffs for manufactured goods from a trade-
weighted, most-favored-nation (MFN) average of over 40 percent to
about 4 percent.  While agriculture had been included in each of
the previous rounds, it was not until the Uruguay Round of
Multilateral Trade Negotiations (1986-94) that real progress was
made to negotiate overall reductions in barriers to agricultural
trade, particularly in reducing or eliminating export subsidies. 

The weight of remaining agricultural trade protection has now
shifted toward tariffs, some of which are extremely high
(although there is a growing concern about technical barriers to
trade).  A review of how reductions in tariffs for manufactured
goods was accomplished reveals some valuable lessons for future
negotiations on agricultural tariffs, which are, on average,
still much higher than those on manufactured items.  John Wainio
(613) 759 7452; jwainio@econ.ag.gov


Korea's Agricultural Imports Recovering from Financial Crisis

South Korea was the fourth-largest destination for U.S.
agricultural products in 1997, buying 5 percent of U.S.
agricultural exports.  But beginning in late 1997 and extending
into 1998, Korea experienced a major economic shock--including
devaluation of its currency, a decline in the production of goods
and services, and temporary inability to obtain credit. 
Agricultural imports fell by 28 percent in calendar-year 1998. 
The economy is now rebounding, following strong intervention by
the government and the International Monetary Fund.  Agricultural
imports are rising again, particularly beef, soyoil and soymeal,
and processed foods and beverages.  The crisis appears to have
only temporarily interrupted growth in a major U.S. agricultural
market.  John Dyck (202) 694- 5221; jdyck@econ.ag.gov


Facing the Methyl Bromide Phaseout

Public and private research programs are exploring alternatives
to methyl bromide, a widely used agricultural pesticide that is
being phased out by parties to the Montreal Protocol.  Methyl
bromide, used for over 50 years to control insects, pathogens,
nematodes, and weeds in vegetable, fruit, and nut crops, is used
for soil fumigation before planting crops and for post-harvest
fumigation of agricultural products in storage and prior to
shipment.  In 1992, methyl bromide was classified as a substance
that depletes the stratospheric ozone layer, which protects the
earth against the most harmful types of solar radiation.  
Phaseout under the multilateral Montreal Protocol exempts some
uses of the chemical.

Many U.S. users of methyl bromide are concerned that alternative
practices currently available to replace it will be less
effective, resulting in financial losses.  Some potential
alternatives are fairly well developed while others are
relatively new. Craig Osteen (202) 694-5547; costeen@econ.ag.gov 


Crop & Revenue Insurance: Bargain Rates but Still a Hard Sell

Federal crop and revenue insurance subsidies alter the tradeoff
between expected income and risk exposure, so operators may
attain significant risk reduction at relatively low cost, while
actually increasing expected (i.e., longrun) returns.  Government
outlays for insurance programs pay a portion of producers'
premiums on approved policies, and reimburse private insurance
carriers for the costs of selling and underwriting policies,
adjusting losses, and processing policy data.

Yet the rate of participation in insurance programs has remained
significantly less than universal for a variety of reasons--for
example, general lack of information about how insurance programs
work, the advantages they impart, and the true extent of
farm-level risk.  Randy Schnepf (202) 694-5293;
rschnepf@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 by Wednesday, 7/21 at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/.  For details
on electronic subscriptions, call (202) 694-5050.

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