
AGRICULTURAL OUTLOOK -- SUMMARY                               July 20, 1998
August 1998, AO-253
              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 within 3 working days following this summary 
release.    
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RECORD WHEAT YIELDS BOOST WORLD SUPPLIES

Record U.S. Wheat Yields Pressure Prices in 1998/99

Large back-to-back wheat production in the U.S. and globally, along with weak
demand, are driving down prices.  This contrasts starkly with the situation 
just 3 years ago when low global stocks, modest U.S. production, and 
relatively strong demand elevated the season-average farm price to a record
$4.55 per bushel.  This season, another large U.S. crop and the absence of 
any major weather problems in most other wheat-producing countries will lead 
to further gains in U.S. stocks.  Several key wheat- importing countries are
expected to maintain or reduce import levels because of increased domestic
supplies.  As a result, the U.S. season-average farm price may fail to break 
$3 for the first time since 1990/91.  A record winter wheat yield, coupled 
with a forecast higher spring wheat yield (including durum), has put the U.S.
all-wheat yield at a forecast record 42.6 bushels, surpassing 40 bushels for 
the first time.  Mack N. Leath (202) 694-5302; mleath@econ.ag.gov

Hard White Wheat: A Promising Option for Farmers?

The introduction of promising varieties of hard white wheat (HWW), pending
possible release next year, has raised speculation about whether wheat growers
in Kansas and elsewhere in the Great Plains might make a dramatic switch from
hard red to hard white wheat.  University and industry studies show that HWW 
has a relatively high milling extraction rate and quality characteristics
suitable for whole-wheat bread, oriental noodles, and other products.  
However, several agronomic and economic factors will help determine the speed
and extent of its adoption, and HWW must establish its advantages with users 
as well as growers.  William Lin (202) 694-5303; wwlin@econ.ag.gov

World Rice Trade Soars to Record 

World rice trade in 1998 is projected to be a record 23.4 million tons, up 24
percent from last year and more than 11 percent higher than the previous record
in 1995.  This year's robust trade is primarily driven by weather-related
production problems, mostly caused by the 1997/98 El Nino, which have severely
reduced crops in several major importing countries in South and Southeast Asia
and across much of Latin America.  Rice trade in 1999 is projected at 20.2
million tons, 14 percent below the 1998 record, but still the third highest on
record.  Nathan Childs (202) 694-5292; nchilds@econ.ag.gov  

Farmers Rapidly Adopting Biotech Field Crops

U.S. farmers have weighed in resoundingly in favor of the new genetically
modified crop varieties that feature resistance to pests and the ability to
tolerate herbicides.  Farmers' rapidfire adoption of these varieties area has
soared to about 50 million acres in just 3 years in the market has been
propelled by potential cost savings and reductions in input use.  The second
wave of genetic modification will focus on product or output traits such as
improved nutritional qualities and processing characteristics. 

Genetically modified crops now on the market reflect very substantial
investments by the private sector.  Reports on the effectiveness of the new
varieties are generally favorable, and users have indicated that the higher 
cost of the seed is offset by reduction in chemical costs.  But adoption by
farmers has been so rapid and the technology is so new that only limited
assessment of economic, agronomic, and environmental impacts has been made.
There are concerns about potential buildup of resistance by insects and weeds,
and trade issues have arisen as other countries, notably the European Union,
have lagged the U.S. in the approval of genetically modified crops. The impacts,
problems, and solutions will become more evident as the technology evolves. 
Peter A. Riley (202) 694-5308; pariley@econ.ag.gov

Supermarkets Reshape Mexico's Produce Distribution System

The Mexican produce distribution system is in the midst of major structural
change.  Although small, specialized produce shops or stalls account for the
bulk of consumer produce purchases, supermarket chains are rapidly gaining
market share and challenging the capacity of the produce distribution network.
The emerging marketing system is changing not only the kinds of produce demanded
by Mexican households, but its quality, consistency, packaging, and handling. 
U.S. producers may have a window of opportunity for providing Mexican
supermarkets the quality and consistency of produce the Mexican distribution
system cannot yet deliver.  David Skully (202) 694-5236; dskully@econ.ag.gov  

Melon Consumption Shows Steady Growth in 1990's

Per capita consumption of melons continues to trend higher in the 1990's,
growing 24 percent since the decade began, and reaching 30.4 pounds in 1997. 
Among the factors in consumption growth are year-round demand and availability,
increasing health consciousness among consumers, strong economic growth, and
more creative marketing.  Melon sales have benefited from pre-cut product
displays and instore salad bars that have become mainstays of retail produce
marketing in the 1990's.  The annual retail value of all melons, including
imports, likely averages $3-4 billion.

While cantaloupes are reportedly purchased more often than any other type of
melon, watermelon accounts for over half of melon consumption by weight. Imports
complement U.S. domestic output to provide consumers with melons year-round. 
Imports accounted for 20 percent of total U.S. consumption in 1997, up from a
10-percent share in 1980.  The combination of year-round availability,
enterprising promotion, and nutritional savvy among consumers favors continued
expansion of melon demand.  Gary Lucier 694-5253; glucier@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 within 3 working days at:
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/ 

For details on electronic subscriptions, call (202) 694-5050.


Table 1.  Key Statistical Indicators of the Food and Fiber Sector                
              
                         
                                        
                           1997              1998                     
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                           IV      Annual    I       II      IIIF    IVF Annual  
 
                                     
Prices received by                                     
 farmers (1990-92=100)       106     103     102     103      --       --     -- 
    Livestock/products        97      98      94      96      --       --     -- 
    Crops                    113     112     110     111      --       --     -- 
 
                                        
Prices paid by                                    
 farmers (1990-92=100)                                      
   Production items          116     117     115     114      --     --       -- 
     Commodities/services,                                        
     interest,                                         
    taxes/wages              117     117     117     117      --     --       -- 
 
                                        
Cash receipts ($ bil.) 1/     64     208      49      44      49     59      201 
   Livestock ($ bil.)         25      97      23      23      24     24       94 
   Crops ($ bil.)             39     112      26      21      25     35      107 

                                        
Retail prices (1982-84=100)                                      
   All food                  159     157     160     160     160    160      160 
     At home                 159     158     160     160     162    163      161 
                                        
Ag. exports ($ bil.) 2/     13.2    57.4    12.9    16.3    14.4    12.9    56.0 
Ag. imports ($ bil.) 2/      9.3    35.8     8.7     9.2     9.4     9.5    38.0 
                                        
Commercial production                                       
 Red meat (mil. lb.)      11,167  43,209  11,038  11,036  11,667  11,248  44,989 
 Poultry (mil. lb.)        8,383  33,258   8,258   8,520   8,530   8,625  33,933
 Eggs (mil. doz.)          1,667   6,460   1,637   1,640   1,665   1,690   6,632
 Milk (bil. lb.)            38.2   156.6    39.2    41.1    39.0    38.7   158.0 
                                           
Consumption, per capita            
 Red meat/poultry (lb.)     53.9   208.6    51.7    53.0    54.5    54.8   213.9 
   
                                        
Corn                                    
 Beg. stock 
 (mil. bu.)3/           2,496.6   425.9   883.2  7,246.8 4,939.9 3,039.1  883.2  
  Use 
  (mil. bu.)3/          1,617.1 8,849.5 3,004.2  2,307.8 1,904.6   --   8,825.0  
                          
Prices 4/                                    
 Choice steers--Neb.                                        
  direct ($/cwt)6         6.61   66.32    61.73    64.16  62-64   66-70   63-65  
  
 Barrows/gilts--IA,                                    
  So. MN ($/cwt)         43.53   51.36    34.74   39.50  37-39   33-35   36-37 
 Broilers--12-city       54.00   58.80    56.40   61.00  63-65   56-60   59-61
 Eggs--NY gr. A large                                       
 (cts./doz)              88.20   81.20    79.00   66.50  69-71    77-83   73-75  
  
 Milk--all at                     14.35-   14.15-  14.15-    
  plant ($/cwt)          14.53   13.34    14.60   13.57  14.75    14.85   14.45  
                                          
 Wheat--KC HRW                                    
  ordinary ($/bu.)         3.82    4.16     3.62    3.32      --    --       --  

 Corn--Chi. ($/bu.)        2.74    2.78     2.72    2.49      --    --       --  

 Soybeans--Chi. ($/bu.)    8.54    7.60     7.19    6.95     6.68   --       --  

 Cotton--Avg. spot                                     
  41-34(cts./lb)          69.81   69.89    71.40   67.64    64.48   --       --  

                                        
                    1992  1993     1994      1995      1996      1997      1998 
                        
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Farm real 
 estate values 5/6/                                     
  Nominal ($/acre)  713   736      782       832       890       945       1,000 
  Real (1982 $)     507   511      529       550       574       598         620 
   

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1.  Quarterly data seasonally adjusted at annual rates.  2. Annual data based
on Oct.-Sept. fiscal years ending with year indicated.  3. Sept.-Nov. first
quarter; Dec.-Feb. second quarter; Mar.-May third quarter; Jun.-Aug. fourth
quarter; Sept.-Aug. annual.  Use includes exports & domestic disappearance.
4. Simple averages, Jan.-Dec.  5. 1990-94 values as of Jan. 1.  1986-89
values as of Feb. 1.  6. The 1989-94 values are revised based on the 1992
Census of Agriculture.  F = forecast, -- = not available.
                                     
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