
NOTE: AO has 10 issues in 1998.  Please note that reports are released in one
month, BUT THE ISSUE DATE IS FOR THE FOLLOWING MONTH; e.g., the May 1998
issue is released in April.

AGRICULTURAL OUTLOOK -- SUMMARY                             November 19, 1998
December 1998, AO-257
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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Large Supplies, Sluggish Export Prospects Pressure Corn Prices
U.S. corn farmers, now wrapping up the second-largest harvest in
history, face weak prices in 1998/99.  The large increase in corn
supply is expected to outstrip the rise in demand, keeping
downward pressure on prices.  Although domestic use of corn will
rise to a new record, only a small recovery in U.S. exports is
likely.  Global import levels are weak, despite low prices,
because of economic and financial problems in several regions of
the world.  U.S. corn exports will remain comparatively low,
although forecast to rally from the depressed performance of
1997/98 as competitor shipments decline.  Pete Riley (202)
694-5308; pariley@econ.ag.gov

The Western Rail Crisis: One Year Later
Rail service in the western U.S. appears to have improved
substantially following a series of service failures which
snarled traffic beginning in the summer of 1997.  Steps taken by
Union Pacific Railroad in response to last year's crisis,
although slowing recovery in the short term, will add to overall
rail capacity in the region for many years to come.  Recent
improvements should allow carriers to handle the 1998 grain and
soybean harvest, which promises to be the largest in history. 
Bumper crops of grain and soybeans have combined with large
carryin stocks to push grain storage capacity beyond its limits
in many regions, but this fall's ground piles of grain are not
the result of transportation snags.  The large crops, worldwide
economic problems, and increased competition have reduced demand
for U.S. grain, particularly at Pacific Northwest ports. 
William J. Brennan (202) 690-4440; William_J_Brennan@usda.gov

U.S. Peanut Consumption Rebounds
Before the recent rebound in domestic food use of U.S.-grown
peanuts, demand had weakened in the early 1990's.  Stagnant
commercial peanut use, rapidly falling government purchases, and
rapidly rising volumes of imported peanuts and products had
combined to reduce demand.  But industry promotion efforts
launched in 1996 have paid off, and while it is difficult to
measure the impact, U.S. edible peanut consumption rose nearly 2
percent in 1997/98, to 2.17 billion pounds.  Lower peanut prices
and introduction of new products may also have helped boost
consumption.  While the issue of peanut allergies may cut into
U.S. peanut consumption in the short run, the most immediate
challenge for the U.S. peanut industry may be the recent
appearance of peanut butter/paste imports from Mexico.  Scott
Sanford, Farm Service Agency (202) 720-3392;
scott_sanford@wdc.fsa.usda.gov

Indonesia's Crisis: Implications for Agriculture
Triggered by a regional financial crisis that began in Thailand
in July 1997, Indonesia's sudden economic collapse in 1997-98 had
several contributing factors, including a rapid increase in
short-term, private debt and a weakly regulated banking system. 
The economic chaos has cut U.S. agricultural exports to Indonesia
by more than half, from $639 million in January-September 1996 to
$312 million during the same period in 1998.  By itself,
Indonesia is not a large market for U.S. agricultural exports,
which totaled $57.2 billion in calendar year 1997.  However,
Indonesia and its ailing Southeast Asian neighbors, together with
South Korea, accounted for 16 percent of the increase in U.S.
agricultural exports from 1990 to 1996.  Gary Vocke
(202) 694-5241; gvocke@econ.ag.gov

Uruguay Round Agreement on Agriculture: The Record to Date  
During the 3 years since initial implementation of the Uruguay
Round Agreement on Agriculture (URAA), the record is mixed.  The
Uruguay Round's overall impact on agricultural trade can be
considered positive in moving toward several key goals, including
reduction of  agricultural export subsidies, new rules for
agricultural import policy, and disciplines for sanitary and
phytosanitary trade measures.  The URAA has also encouraged a
shift in domestic agricultural policies away from practices with
the largest potential to affect production, and therefore, to
affect trade flows.  However, significant reductions in most
agricultural tariffs will have to await a future round of
negotiations.  Mary Anne Normile (202) 694-5162;
mnormile@econ.ag.gov

The 1997 Tax Law: New Incentives for Farmers To Invest for
Retirement Recent changes under the Taxpayer Relief Act of 1997 
offer new choices and opportunities for retirement planning at a time 
when farmers have a number of incentives for diversifying total assets
beyond the farm.  The tax law changes for Individual Retirement
Accounts present new tax benefits, while lower capital gains tax
rates reinforce farmers' traditional inclination to reinvest in
farm assets to provide income at retirement.  Although incentives
in the new tax law are likely to increase overall investment,
they will likely generate relatively little additional
diversification into off-farm assets, given farmers' historical
preferences.  James Monke (202) 694-5358; jmonke@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 tomorrow at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/.  For details
on electronic subscriptions, call (202) 694-5050.
                               
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