NOTE: AO has 10 issues in 2000.  Please note that reports are released in one
month, BUT THE ISSUE DATE IS FOR THE FOLLOWING MONTH; e.g., the May 2000 issue
is released in April.

AGRICULTURAL OUTLOOK -- SUMMARY                        September 20, 2000
October 2000, ERS-AO-275
     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 2 working days following this summary
release.    
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Corn Production & Use to Hit Record Highs 

Record U.S. corn production is forecast for 2000, with higher acreage planted
and record yields. Anticipated record-high domestic demand and bright prospects
for exports will limit the stocks gain. Nevertheless, ending stocks are expected
to be the highest since 1987/88, and market prices will remain weak. Expanding
world corn trade (to the highest level in over a decade), combined with low U.S.
corn prices and reduced competition from China and Eastern Europe, is expected
to result in a sharp increase in U.S. share of world exports. Allen Baker (202)
694-5290; albaker@ers.usda.gov 

U.S. Ag Exports to Edge Higher in Fiscal 2001

The value of U.S. agricultural exports will climb in fiscal 2001, for the second
year in a row, according to USDA projections. Exports should increase to $51.5
billion--2 percent over revised estimates for fiscal 2000--marking a continuing
upswing since the Asian financial setbacks of 1997-99. A rise in volume
(quantity) accounts for much of this gain, as large global supplies of many
commodities are expected to keep prices relatively low. Exports of high-value
products (HVP's)--that is, all agricultural exports other than bulk commodities-
-are projected up just 0.6 percent to $33 billion, reflecting projected gains in
horticultural products and soybean oil.  Increased demand for U.S. agricultural
exports reflects favorable economic conditions worldwide. Also, the dollar is
expected to depreciate against the euro, yen, and Canadian dollar, making U.S.
exports more competitive in developed country markets. Carol Whitton (202) 694-
5287; cwhitton@ers.usda.gov

Food Price Inflation to Remain Low in 2000 & 2001 

Consumers continue to see only modest increases in food prices, with the
Consumer Price Index (CPI) for all food forecast to rise 2.3 percent in 2000 and
2-2.5 percent in 2001.  This follows increases of 2.2 percent in 1998 and 2.1
percent in 1999. In 2000, generally lower prices for fruits, due in part to a
rebound in citrus output, are offsetting higher prices for red meat that result
from strong demand. Modest increases are forecast for most food categories next
year.  Annette L. Clauson (202) 694-5389; aclauson@ers.usda.gov

Farm Program Benefits Affect Planting Decisions & Ag Markets
Direct government payments, topping $20 billion in 1999 and forecast even higher
in 2000, have boosted farm income during the last 2 years, but effects on
resource allocation and agricultural markets vary across programs. USDA's
Economic Research Service analyzed four farm programs--production flexibility
contracts, crop insurance, marketing loans, and disaster assistance--to explore
effects on agricultural markets of program-related economic incentives that may
alter production decisions. Among the findings was that production flexibility
contract payments create a small incentive to increase aggregate production,
with the mix of crops planted based on market signals. Crop insurance and
marketing loans create direct incentives to expand production of specific
commodities by increasing expected returns. Ad hoc disaster assistance may have
some influence on production decisions if producers have expectations of future
assistance based on past government actions. Paul C. Westcott (202) 694-5335;
westcott@ers.usda.gov

Farm Payments & the Rural Economy

Government support for the farm sector is frequently linked by advocates of farm
program payments to survival of rural communities. In the past decade, about 8
of every 10 dollars in Federal direct farm payments went to farms in
nonmetropolitan (nonmetro) counties. The payments smooth farm income
fluctuations resulting from swings in commodity prices, and inject cash that
supports other rural businesses.  But farm program payments are a small fraction
of what the Federal government spends in rural areas. In 1998, per capita
Federal spending in nonmetro counties totaled $4,725, including only $182 for
farm payments. Nevertheless, government payments may play a significant role in
some local economies, particularly the 556 nonmetro counties identified as farm-
dependent because of the importance of farm income there. In farm-dependent
counties, farm payments were much higher--$937 per capita--but still less than
one-fifth of $5,369 in per capita Federal spending. Fred Gale (202) 694-5349;
fgale@ers.usda.gov 

Taiwan's Hog Industry 3 Years After Disease Outbreak

The highly contagious foot-and-mouth disease (FMD) that hit Taiwan's densely
packed hog farms in 1997 is under control. The outbreak ravaged Taiwan's hog
industry, eliminating Japan's single largest source of imported pork, and
creating a marketing opportunity for other exporters, including the U.S.
Taiwan's authorities have taken advantage of the FMD crisis to address generally
the problems of hog farming on the island. Even before the FMD outbreak,
official policy aimed to reduce the number of hogs, because raising hogs posed a
serious environmental hazard to this land of limited water resources and more
than 20 million people. Taiwan's hog farmers are not expected to reclaim their
lucrative pork export market in the near future, mainly because Taiwan remains a
listed FMD-infected area. Another fundamental problem for Taiwan's hog industry
is the high cost of production--in part because all feed ingredients must be
imported--that makes Taiwan vulnerable to import competition. Sophia Huang (202)
694-5225; shuang@ers.usda.gov

Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available 9/21 at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/2000/
The magazine in PDF will be posted in about 5 days, and printed copies will be
available in about 2 weeks.

END_OF_FILE
