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                             February 19, 1999
March 1999, ERS-AO-259
     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 within about 3 working days following
this summary release.    
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Lower Output to Revive Hog Prices in 1999    

In 1998, hog prices tumbled to the lowest annual average since 1972, $31.67
per cwt--the average for December was $14 per cwt, the lowest December monthly
average since 1963.  Responding to the run of low returns in 1998, U.S.
producers reduced their breeding herds late in the year.  Based on market hog
inventory, pig crops, and farrowing intentions reported in the December Hogs
and Pigs report, pork production in 1999 is expected to total about 18.9
billion pounds, down from last year overall (less than 1 percent), with a
sharp decline in the final quarter.  With receding slaughter levels, lower
production, and continued increases in net exports, hog prices are expected to
rebound from the extreme lows in late 1998, rising throughout 1999 from the
mid-$20's to near $40 per cwt, and averaging in the mid-$30's per cwt for the
year.  Leland Southard (202) 694-5187; southard@econ.ag.gov 


Brazil's Financial Crisis & Potential Aftershocks
     
The intensifying financial crisis in Brazil, marked by a sharp devaluation of
its currency in mid-January, has renewed concerns about the consequences of
the crisis for U.S. agriculture.  Latin America and Asia together bought about
60 percent of U.S. agricultural exports last fiscal year, and Brazil's
currency devaluation is already having repercussions in other countries in
Latin America.  In the short run, Brazil's devaluation will have relatively
little impact on U.S. agricultural trade with Brazil, though an expected
reduction in U.S. agricultural exports and an increase in agricultural imports
will likely widen the U.S. agricultural trade deficit with Brazil ($684
million in fiscal year 1998).  In the longer run, the potential for effects on
U.S. agricultural trade is greater, particularly if Brazil is unable to regain
financial control and if the continuing crisis forces other Latin American
countries to take measures to stay competitive--such as devaluing currencies
or raising import tariffs.  Suchada Langley (202) 694-5227;
slangley@econ.ag.gov

Coffee Exporters Count on Higher Earnings
Brazil and other coffee exporting countries are expecting a smaller 1999/2000
Brazilian crop to draw down world supplies and reverse the 1998/99 downturn in
prices and foreign exchange earnings.  Prices for arabica coffee, milder in
taste than robusta--and the type most widely consumed in the U.S.--have been
lower since last summer due to sharply higher 1998/99 production, particularly
in Brazil, which accounts for about one-third of world output.  

The fortunes of coffee exporters depend increasingly on supply management by
producers, because importers have become less willing to hold stocks to buffer
the price volatility.  Traditionally, U.S., European, and Japanese importers
reacted to declining coffee prices by building up stocks.  In recent years,
however, U.S. and other importers and roasters have moved toward just-in-time
inventory to avoid carrying costs.  Because of this, prices will vary more
than in the past.  John Love (202) 720-5912; jlove@oce.usda.gov

Value-Enhanced Crops: Biotechnology's Next Stage 

Biotechnology's next quest, to provide field crops with value-enhanced
qualities for end- users--output traits--is underway.  Biotechnology's first
stage featured crops with improved agronomic qualities--input traits--valued
by farmers, such as resistance to pests.  The industry now visualizes a more
consumer-driven system in which farmers grow crops designed for the specific
needs of end-users in food manufacturing, the livestock sector, and even the
pharmaceutical industry.  Breaking with agriculture's traditional supply-side
orientation may not be easy, however.  Whether biotechnology's second stage is
a wave or a modest ripple will hinge on several economic and technical
factors.  Peter A. Riley (202) 694-5308; pariley@econ.ag.gov

Farmers Sharpen Tools to Confront Business Risks  

Risk management involves finding the combination of strategies most likely to
achieve a desired level of return at an acceptable level of risk.  Three risks
that concern farmers most, according to USDA's 1996 Agricultural Resource
Management Study, are uncertainty regarding commodity prices, declines in crop
yields or livestock production, and changes in government law and regulation. 
     
Farmers have a variety of tools for cutting risk, such as diversification of
production across multiple enterprises, entering into production and/or
marketing contracts, and keeping extra cash on hand for emergencies.  Other
strategies include crop or revenue insurance, futures market trading, and
off-farm employment.  When individual efforts to deal with financial stress
fail and large numbers of farms face significant financial loss, the Federal
government has stepped in to assist farmers with direct payments, loans, and
other types of support.  Most recently, the 1999 Agricultural Appropriations
Act provided for $2.375 billion of emergency financial aid to farmers.  Since
farm business characteristics vary widely and operators' risk preferences
differ, there can be no "one size fits all" approach to risk management.  
Joy Harwood (202) 694-5310; jharwood@econ.ag.gov

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 February 26, at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/.  For details
on electronic subscriptions, call (202) 694-5050.
END_OF_FILE

