

AGRICULTURAL OUTLOOK -- SUMMARY                               January 21, 1998
February 1998, ERS-AO-248
     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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ASIA CRISIS LIKELY TO IMPACT U.S. AGRICULTURAL ECONOMY

U.S. Economy To Cool  in 1998

GDP growth in the U.S. is expected to slow in 1998 to 2.5 percent, following
3.8-percent growth estimated for 1997. With the labor market expected to
remain tight, slightly higher wages and high capacity utilization rates in
1998 will bump inflation up by a very small amount. Interest rates are
expected to be stable over the course of 1998. 

The Asian financial crisis will curtail growth in the U.S. rural economy in
1998 because of both weaker farm exports and increased competition in the
manufacturing sector, which will likely also slow growth in farm households'
off-farm employment. However, the expected drop in energy prices in 1998, some
declines in other raw material prices, and a strong dollar will constrain
price increases of manufactured inputs for farmers. Wage-related inputs will
likely see small increases. [Dave Torgerson (202) 694-5334]

The Asia Crisis and the Farm Economy

The current financial crisis in Asia inevitably raises questions about its
impact on the U.S. economy in general, and on the farm and rural economy in
particular. Although forecasts can reflect only a best guess as to how the
markets will "bottom out" until the situation stabilizes, business forecasters
have all lowered their expectations for global economic growth in 1998.

The slowdown in Asian and world economic growth and the weakening of Asian
currencies relative to the U.S. dollar will affect the U.S. rural and
agricultural sectors through a reduction in international demand for U.S.
exports and, therefore, slower U.S. economic growth. Demand for U.S. livestock
and poultry products will be lower in 1998 than had been expected before the
Asia events. U.S. agricultural exports are expected to grow more slowly in
fiscal 1998 and 1999, reaching a level 3-6 percent lower than would be
expected without the Asia events. [Greg Gajewski (202) 694-5321]

U.S. Farm Income: Below Record but Strong
     
While not likely to equal the record set in 1996, farm income estimates for
1997 and prospects for 1998 look quite favorable.   Net farm income is
forecast to be around $46 billion for both 1997 and 1998, above the average
for 1990-95 ($43 billion), but lower than the record $52 billion for 1996.
Export market uncertainties, triggered by the Asia crisis, will be important
in evaluating farm income prospects for 1998. The combination of strong growth
in farm asset value and a modest expansion in farm debt indicates a rising net
worth (equity) for the farm sector in 1997 and 1998. 

The lower farm income forecasts for 1997 and 1998 derive from a modest
$1.6-billion decline in crop and livestock receipts from 1996's record of $202
billion--largely reflecting smaller expected crop returns, since livestock
receipts are expected to increase for 1998--and a modest increase in expenses.
[Jim Ryan (202) 694-5586] 

Americans Eating More Leafy Green Vegetables

Consumption of leafy green vegetables--including lettuce, endive, escarole,
cabbage, spinach, broccoli, collards, turnip greens, mustard greens, and
kale--has been trending higher over the past two decades, accounting for about
$2.5
billion (16 percent) of all farm cash receipts for vegetables in 1996, up from
13 percent ($1.1 billion) in 1986. Lettuces of all types account for the
largest share of farm cash receipts for leafy green vegetables, amounting to
more than half in 1996.  Production of leaf and romaine varieties have jumped
40 percent from 1989 to 1996.

Per capita use of all leafy green vegetables, despite a longrun upward trend,
has remained stable during the 1990's at around 50 pounds, with the overall
numbers influenced strongly by trends for head lettuce--the leader in
consumption of leafy greens. Exports provide a key market for several leafy
greens. About 21 percent of fresh-market broccoli supplies are exported, up
from 17 percent in 1990. About 14 percent of the U.S. fresh-market spinach
supply is exported, 12 percent of leaf and romaine lettuce, and 6 percent of
head lettuce. [Gary Lucier (202) 694-5253]

U.S. Dairy Product Markets Restructuring

Technological advances and automation in the U.S. dairy industry have
increased productivity and improved product quality and consistency, leading
to fewer and larger farms and processing plants. Reduced transportation costs
have led to integration of local markets into regional or even national
markets, and rapid capital flows and ownership changes have altered the
objectives of marketing and distribution firms.  

The dairy sector is divided into several distinct markets, each with unique
characteristics. Cooperatives have been most important in the bulk raw milk
and manufactured product markets, while proprietary firms have gravitated
toward fluid milk processing and frozen products, as well as yogurt and
cheese.  Dairy cooperatives could change significantly as Federal programs are
reduced or eliminated. Members may expect cooperatives to expand marketing
activities and to more aggresively pursue different ways of managing supplies
and inventories. [Don Blayney (202) 694-5171]

Farmers' Use of  "Green" Practices Varies Widely

Farmers increasingly face pressures to convert from traditional production
systems to "green" practices that are potentially more friendly to the
environment. These practices are used for a variety of purposes, including
pest management, nutrient management, irrigation water management, and crop
residue management, and include techniques such as pest scouting, soil
testing, applying fertilizer at or after, rather than before, planting, and
conservation tillage.
     
Farmers' use of green practices varies widely among crops and from year to
year, but some positive trends can be identified. For example, surveys show
that no-till, a form of conservation tillage, occurred on nearly 15 percent of
land planted to crops in 1996, up from 5 percent in 1989.  Farmers have also
been improving irrigation water management by switching from gravity-flow
irrigation to pressurized sprinkler irrigation, by scheduling irrigation
according to plant needs, and by using improved gravity irrigation practices.
[Richard Magleby (202) 6904-5615]

Printed copies of Agricultural Outlook will be available in about 2 weeks. 
For further information call Anne Effland (202) 694-5319.  The full text of
the magazine will be available electronically in 3 working days; for details,
call (202) 694-5050.  

   Table 1.  Key Statistical Indicators of the Food and Fiber Sector

                                                                1997          
                                               -------------------------------
                                               I        II       III      IV F

  Prices received by farmers (1990-92=100)   107       108       107       106
    Livestock & products                      98        99        99        97
    Crops                                    116       117       115       113

  Prices paid by farmers, (1990-92=100)
    Production items                         115       117       116       115
    Commodities & services, interest,        116       117       116       116
     taxes, & wages

  Cash receipts ($ bil.) 1/                   47        41        --        --
    Livestock ($ bil.)                        23        23        --        --
    Crops ($ bil.)                            24        18        --        --

  Market basket (1982-84=100)
    Retail cost                              160       159        --        --
    Farm value                               107       107        --        --
    Spread                                   188       187        --        --
    Farm value/retail cost (%)                24        24        --        --

  Retail prices (1982-84=100)
    All food                                 157       157       158       159
      At home                                158       158       158       159
      Away from home                         156       156       157       159

  Agricultural exports ($ bil.) 2/          14.9      13.2      12.9        --
  Agricultural imports ($ bil.) 2/           9.1       9.3       8.7        --

  Commercial production
    Red meat (mil. lb.)                   10,459    10,655    10,941    11,167
    Poultry (mil. lb.)                     7,986     8,491     8,395     8,370
    Eggs (mil. doz.)                       1,587     1,591     1,604     1,665
    Milk (bil. lb.)                         38.9      40.6      38.9      38.3

  Consumption, per capita
    Red meat and poultry (lb.)              49.7      52.2      52.4      53.7

  Corn beginning stock (mil. bu.) 3/       425.9   6,903.7   4,494.1   2,496.6
  Corn use (mil. bu.) 3/                 2,819.1   2,411.9   2,001.3   1,617.1

  Prices 4/
    Choice steers--Neb. Direct ($/cwt)     66.40     66.63     65.65     66.60
    Barrows & gilts--IA, So. MN ($/cwt)    51.06     56.41     54.45     43.40
    Broilers--12-city (cts./lb.)            60.0      59.1      62.0      54.0
    Eggs--NY gr. A large (cts./doz.)        84.9      72.1      79.7      88.2
    Milk--all at plant ($/cwt)             13.47     12.93     12.70     14.37
                                                                         14.40
  Wheat--KC HRW ordinary ($/bu.)            5.48      4.57      4.49      3.76
  Corn--Chicago ($/bu.)                     3.87      2.86      2.86      2.64
  Soybeans--Chicago ($/bu.)                 7.74      8.54      7.19      7.60
  Cotton--Avg. spot 41-34 (cts./lb.)       70.73     69.81     71.40     69.89



                                            1989      1990      1991      1992
                                             ---------------------------------
  Farm real estate values 5/,6/
    Nominal ($ per acre)                     668       683       703       713
    Real (1982 $)                            539       528       521       507

  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 January 1.  1986-89
values as of February 1.  6/ The 1989-94 values are revised based on the 1992 
Census of Agriculture.  
F = Forecast, -- = Not available.

....................................................................continued


......................continued (new page--right side)


    1997                        1998                   
----------      --------------------------------------
  Annual F       I F       II F     III F    Annual F 

       107        --        --        --        --    
        99        --        --        --        --    
       115        --        --        --        --    


       116        --        --        --        --    
       116        --        --        --        --    


     199.5        --        --        --        --    
      93.9        --        --        --        --    
     105.6        --        --        --        --    


        --        --        --        --        --    
        --        --        --        --        --    
        --        --        --        --        --    
        --        --        --        --        --    


       157       159       160       161       161    
       158       160       160       161       160    
       157       160       161       162       161    

      57.4        --        --        --      58.5    
      35.8        --        --        --      38.0    


    43,222    10,977    10,895    11,242    44,137    
    33,242     8,355     8,840     8,855    34,775    
     6,447     1,630     1,640     1,665     6,625    
     156.8      39.2      40.8      38.7     157.1    


     208.1      53.0      53.8      54.4     215.5    

     425.9     883.2        --        --     883.2    
   8,849.5        --        --        --   9,415.0    


     66.32     65-67     66-70     65-71     66-71    
     51.33     37-39     39-41     41-45     38-41    
      58.8     53-55     55-59     57-61     54-58    
      81.2     76-80     68-72     72-78     74-79    
     13.37    13.75-    12.20-    12.15-    12.95-    
     13.40     14.15     12.90     13.15     13.75    
        --        --        --        --        --    
        --        --        --        --        --    
        --        --        --        --        --    
        --        --        --        --        --    



      1993      1994      1995      1996      1997    
--------------------------------------------------    

       736       782       832       890       942    
       511       529       550       574       596

    


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