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                   April 19, 2000
May 2000, ERS-AO-271
     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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U.S. Farm Income Down in 2000

U.S. farm income is forecast down in 2000 as government payments
to farmers decline from a record high in 1999 and as rising fuel
prices push up production costs.  Assuming no new emergency
funding legislation, net farm income in 2000 is forecast to
decline to $39.7 billion from the preliminary estimate of $44.2
billion for 1999.  With field crop prices remaining relatively
low and hog and cattle prices moving higher, crop farms will be
affected more than livestock.  

Fuel costs for farmers will be only modestly affected by the
recent retreat in crude oil prices until at least late summer,
after plantings are complete.  The agriculture sector generally
has limited ability, in the short run, to pass on higher fuel
costs to consumers in the form of higher output prices.  Farm
income: Bob McElroy (202) 694-5578; rmcelroy@ers.usda.gov; Oil
prices: David Torgerson (202) 694-5334; dtorg@ers.usda.gov  

A Fair Income for Farmers?

Political debate over agricultural subsidies and the notion of a
"fair" income from farming is likely to continue as farmers face
persistent low field crop prices and the prospect of reduced farm
income in 2000.  To address policy implications of the debate,
USDA's Economic Research Service (ERS) analyzed the financial
performance of farms, delineating them by enterprise (commodity)
type.  Financial performance was measured by examining a farm's
revenue relative to its economic costs of production.  

Focusing on wheat farms (those for which at least half of total
value of production is from wheat), ERS found that the
characteristics of U.S. wheat farms and their financial
performance indicate diversity in the ways farmers manage their
businesses and earn their living.  Such heterogeneity illustrates
the difficulties that confront policymakers in reaching consensus
about the level and distribution of government income support. 
Mitchell Morehart (202) 694-5581; morehart@ers.usda.gov

U.S. Soybean, Corn, & Cotton Plantings to Rise in 2000

Planting intentions for the eight major U.S. field crops (corn,
soybeans, wheat, barley, sorghum, oats, cotton, and rice) total
252.6 million acres in 2000, up about 1 million from last year's
planted area.  On the eve of planting decisions, farmers faced
mixed price signals for major field crops prices were up for
corn, soybeans, and cotton from a year earlier, but down for
winter and spring wheat.  Farmers intend to plant a record 75
million acres of soybeans and the largest cotton area (15.6
million acres) since 1995. Corn plantings are expected to expand
1 percent to 78 million acres.  U.S. farmers have indicated their
intention to modestly cut back the biotech share of planted
acreage.  William Lin (202) 694-5303; wwlin@ers.usda.gov

Dry bean growers intend to reduce acreage 9 percent from 1999's 2
million.  With low dry bean prices, planting intentions are down
in each of the six major dry-bean-producing states North Dakota,
Michigan, Nebraska, Minnesota, Colorado, and California.  Reduced
output and somewhat stronger export demand should trim dry bean
stocks this season, pushing aggregate dry bean prices for 2000/01
slightly above lows experienced during 1999/2000.   Gary Lucier
(202) 694-5253; glucier@ers.usda.gov

Farm Finances Remain Healthy
 
The overall financial health of farmers and their lenders remains
solid in early 2000, despite low prices for major farm
commodities over the last few years.  Large Federal payments to
farmers producing food and feed grains, oil crops, and cotton
have mitigated the negative effect of lower prices on farm
financial conditions and have played a key role in stabilizing
farm income.  Government payments, by providing liquidity to
farmers, are reducing demand for credit and underpinning farm
creditworthiness.  All major institutional lender groups continue
to report generally healthy farm loan portfolios, and most
lenders report low levels of delinquencies, foreclosures, net
loan charge-offs, and loan restructuring. Jerome Stam (202) 694-
5365; jstam@ers.usda.gov

Higher interest rates in the general economy are expected in
second-half 2000 and first-half 2001, putting upward pressure on
interest rates for farm loans.  However, the expected rise in
farm loan rates is less than for nonfarm interest rates,
reflecting the less-interest-sensitive deposit base of rural
banks as well as the strong competition they face from the Farm
Credit System. Paul Sundell (202) 694-5333; psundell@ers.usda.gov

Curbing Nitrogen Runoff: Effects on Production & Trade
  
Policy decisions to mitigate the environmental impacts of
agricultural production involve trade-offs among economic
interests and environmental goals.  USDA's Economic Research
Service posited a goal of 10-percent reduction in agricultural
nitrogen release, analyzing four alternative generic policy
approaches: a "green payment" to producers for reducing
fertilizer use; regulation limiting per-acre nitrogen use; a tax
on nitrogen fertilizer; and buffer strips and other land
retirement. These policy approaches have varying effects on
commodity prices, on agricultural trade and other economic
indicators, on government costs, and on consumers, as well as
ancillary effects on soil erosion. Mark E. Smith (202) 694-5490;
mesmith@ers.usda.gov

Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available tomorrow at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-
bb/2000/

The magazine in PDF format will be posted in about 5 business
days, and printed copies will be available in about 2 weeks.


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