AGRICULTURAL OUTLOOK -- SUMMARY                                May 20, 1998
June 1998, AO-252
     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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PRICES FOR MAJOR FIELD CROPS RETURN TO LEVELS OF EARLY 1990'S

Large Supplies Color Markets

Large U.S. supplies in 1998/99 will reduce season-average farm prices for
most field crops from 1997/98, based on USDA's first 1998/99 forecasts of 
U.S. and world supply and demand.  After surging to record highs during 1995 
and 1996, grain prices are forecast to return to the levels of the early 
1990's, while soybean prices will return to levels last seen in the 1980's.  
The slump also reflects weaker foreign demand.  Although lower prices will 
encourage gains in domestic consumption in 1998/99, export growth will be 
relatively limited because of larger supplies in some competing countries 
and weak import demand resulting from the Asian economic crisis.  Mark Simone 
(202) 694-5312; msimone@econ.ag.gov

Red meat and poultry production will remain large in 1999, about unchanged
from 1998.  Increases in pork and broiler production will likely offset a 
sharp decline in beef production.  Primary market prices for hogs and 
poultry are expected to be about the same as in 1998, while cattle prices 
rise.  Despite stagnant hog and poultry prices in 1999, producer returns 
are expected to improve as feed costs decline.

Growth Slowing for U.S. Red Meat and Poultry Exports

U.S. red meat--beef and pork--and poultry meat exports are expected
to grow about 2 percent in 1998, a sharp slowdown from the double-digit rates
that 
have prevailed in the 1990's.  About the same rate of increase in meat exports
is
forecast for 1999, although production is expected to increase about 3 percent
in 1998 and remain about the same in 1999.  Reduced demand in Asian markets,
especially Japan and Korea, will lead to significantly reduced U.S. meat exports
to the region this year.  However, strong demand in Russia and Mexico will help
U.S. meat exports continue to grow.  In 1998, Russia is projected to increase
its meat imports to about 2.5 million tons, and Mexico's meat consumption is
expected to grow faster than its production in 1998, resulting in a 15-percent
increase in meat imports.

Livestock Sectors Restructure in CEE/NIS Countries

One of the most dramatic adjustments brought on by liberalization of the
economies of Central and Eastern Europe (CEE) and the Newly Independent States
(NIS) has been the virtual free fall in their livestock sectors.  In that
liberalization, consumer and producer subsidies for meat were eliminated, and
producers were exposed to new international competition.  Consumer demand
plummeted, and producers were increasingly squeezed between falling output
prices and skyrocketing production costs. The result was a drastic decline in
livestock inventories of all kinds.

The situation is beginning to change, however, in some of the transition
economies, particularly in the CEE countries.  In general, the restructuring
process is quite far along in Poland and Hungary, but remains incomplete in 
most of the NIS countries.  A major impediment to the complete restructuring 
of the region's livestock sectors is the poor development of institutions 
needed to support markets, including clearly defined property rights, 
bankruptcy procedures, enforcement of contracts, a credit system, and market
infrastructure.  Britta Bjornlund (202) 694-5142; brittab@econ.ag.gov

Enhancing Food Safety With Ozone

Ozone recently gained approval for use in the U.S. food processing industry
as a disinfectant wash or spray to help rid food of dangerous pathogens
(bacteria, parasites, fungi, and viruses).  When dispersed into water, ozone 
can kill bacteria--like E. coli--faster than traditionally used disinfectants, 
such as chlorine.  Most bottled water is safely treated with ozone, and nearly 
200 municipal water treatment plants in the U.S. employ ozone to help cleanse 
their drinking water.  The adoption of ozone technology in food processing 
depends upon economic competitiveness with existing and emerging technologies 
that sanitize food, as well as its effectiveness in enhancing food safety. 
Alex Majchrowicz (202) 694-5355; alexm@econ.ag.gov

Agriculture & Wetlands: Is "No Net Loss" Achievable?

Wetlands have figured prominently in policy debates since the 
mid-1970's; public benefits that accrue from keeping wetlands in their 
natural state often run counter to private interests in converting wetlands. 
Federal wetlands programs have evolved from incentives for conversion to 
regulatory programs for conservation and incentives that encourage restoration 
and retention.  

Given the difficulty in estimating public benefits and private costs
represented by different wetland policies, the best use of wetlands is
uncertain.  "No net loss" of wetlands is a Federal policy goal that emerged 
in 1989 and that has garnered bipartisan support, reflecting a compromise 
between those who believe that too few wetlands have been converted and those 
who believe that too many have been lost.  The U.S. appears to be approaching
achievement of "Ano net loss" of wetland acreage in the 1990's.  But the goal
may not be sustained if economic conditions spur additional wetland conversion,
wetland provisions of the Clean Water Act are weakened, the link between 
wetland preservation and farm program payments is diminished, or Federal 
funding for wetland restoration programs is reduced or eliminated.  Ralph 
Heimlich (202) 694-5477; heimlich@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 in 2 working days; for details, call
(202) 694-5050.


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

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

Prices received by
 farmers (1990-92=100)        106     107      --      --      --      --     --
   Livestock/products          97      98      --      --      --      --     --
   Crops                      113     115      --      --      --      --     --

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

Cash receipts ($ bil.) 1/      62     202      47      42      48      59    198
   Livestock ($ bil.)          23      93      22      22      24      24     91
   Crops ($ bil.)              39     108      25      20      24      35    104

Retail prices (1982-84=100)
   All food                   159     157     160     160     160      --    160
     At home                  159     158     160     160     160      --    160
     Away from home           159     157     160     160     162      --    161

Ag. exports ($ bil.) 2/      16.3    57.4    14.4    12.9    12.5      --   56.0
Ag. imports ($ bil.) 2/       9.2    35.8     9.4     9.5     9.9      --   38.0

Commercial production
 Red meat (mil. lb.)       11,167  43,209  11,038  11,149  11,342  11,148 44,677
 Poultry (mil. lb.)         8,383  33,258   8,245   8,665   8,705   8,625 34,240
 Eggs (mil. doz.)           1,667   6,460   1,637   1,640   1,665   1,690  6,632
 Milk (bil. Lb.)             38.2   156.6    39.3    40.9    38.9    38.6  157.7

Consumption, per capita
 Red meat/poultry (lb.)      53.9   208.6    52.0    54.0    54.4    54.4  214.7

Corn
 Beg. stock (mil. bu.)3/    2,497     426     883   7,247   4,937      --   883
 Use (mil. bu.)3/           1,617   8,850   3,004   2,311      --      --  9,000

Prices 4/
 Choice steers--Neb.
  direct ($/cwt)            66.61   66.32   61.73   65-67   65-69   69-75  65-68
 Barrows/gilts--IA,
  So. MN ($/cwt)            43.53   51.36   34.74   37-39   39-41   35-37  36-38
 Broilers--12-city          54.00   58.80   56.40   57-59   58-62   53-57  56-59
 Eggs--NY gr. A large
 (cts./doz)                 88.20   81.20   79.00   69-71   73-77   80-86  75-78
 Milk--all at                                      13.15-  12.40-  13.55- 13.40-
  plant ($/cwt)             14.53   13.34   14.60   13.45   13.00   14.45  13.90

 Wheat--KC HRW
  ordinary ($/bu.)           3.82    4.16    3.62      --      --      --     --
 Corn--Chi. ($/bu.)          2.74    2.78    2.72      --      --      --     --
 Soybeans--Chi. ($/bu.)      6.95    7.60    6.68      --      --      --     --
 Cotton--Avg. spot
  41-34(cts./lb)            67.64   69.89   64.48      --      --      --     --

                             1991    1992    1993    1994    1995    1996   1997
                          
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Farm real estate
 values 5/6/
  Nominal ($/acre)            703     713     736     782     832     890    945
  Real (1982 $)               521     507     511     529     550     574    598
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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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