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                        May 22, 2000
June-July 2000, ERS-AO-272
     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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Farm Commodity Abundance to Continue

Large supplies of major U.S. field crops, along with low prices, are expected
again in 2000/01, according to USDA's first forecast for the season.  While
domestic consumption of most major oilseeds and grains is anticipated to remain
strong because of low prices, export prospects will vary by crop, and ending
stocks in 2000/01 will build for soybeans, corn, rice, and cotton. Gregory K.
Price (202) 694-5315; gprice@ers.usda.gov 

Red meat and poultry production in 2001 is forecast at around 83 billion pounds,
up less than 1 percent from this years expected record.  Increased poultry
output and a turnaround in pork production will more than offset a modest
decline in beef production.  Despite plentiful meat supplies, strong consumer
demand is likely to maintain hog prices that have risen in 2000, while poultry
prices are expected to decline only slightly in 2001.  Prices for both fed and
feeder cattle will post modest gains as supplies continue to decline.  Leland
Southard (202) 694-5187; southard@ers.usda.gov

Garlic Demand Soars

U.S. garlic use has soared, hitting a record-high 3.1 pounds per person in 1999,
three times the level in 1989.  Despite impressive growth for vegetables such as
broccoli, bell peppers, and carrots, no other vegetable has experienced stronger
growth in demand over the past 10 years.  The strong surge in use during the
1990s likely reflects: rising popularity of ethnic foods and restaurants,
persistent publicity about the health benefits of garlic, and demand from the
health supplements industry.

Vigorous demand has resulted in a doubling of U.S. garlic production over each
of the last two decades.  Output was record large in 1999, and wholesale garlic
prices this spring are a third lower than a year earlier. Farm value of the U.S.
garlic crop is about $200 million. Gary Lucier (202) 694-5253;
glucier@ers.usda.gov

Consolidation in Meatpacking: Causes & Concerns

The U.S. meatpacking industry consolidated rapidly in the last two decades. 
Following the emergence of new and extensive scale economies in meatpacking,
intense price competition led to the exit of higher-cost smaller plants, their
rapid replacement by larger and more efficient plants, and significant increases
in concentration and reductions in costs.    

Meatpacking concentration raises important policy issues.  If larger packers
realize lower costs, then concentration, by reducing industry costs, can lead to
improved prices for consumers and for livestock producers.  However, with fewer
competitors, meatpackers could reduce prices paid to livestock producers and may
be able to raise meat prices charged to wholesalers and retailers. The policy
challenge is to ensure that a highly concentrated industry--a result of
consolidation--does not limit price competition among packers.  James M.
MacDonald (202) 694-5391; macdonal@ers.usda.gov

Rewarding Environmentally Friendly Farming

Interest is growing in broadening the array of government programs that would
improve the environmental performance of agriculture and at the same time
provide income support to agricultural producers.  Government
"agri-environmental" payments programs compensate producers for maintaining
beneficial impacts of agriculture or mitigating adverse environmental impacts. 
Net benefits of agri-environmental payments programs will be greater if
policymakers, in designing the programs, assign higher priority to activities
and practices that are more valued and/or less costly. The cost-effectiveness of
such programs can also be enhanced by building in flexibility--i.e., giving
farmers latitude in selecting or developing practices tailored to their own
farming operations.  Roger Claassen (202) 694-5473; claassen@ers.usda.gov

Marketing Organic Foods

The organic industry has grown at a remarkable rate during the past several
years. Average annual growth in organic food sales is expected to continue at
20-24 percent into the next decade.  Rapid growth in demand presents the organic
industry with a major challenge--to ensure an adequate supply while maintaining
product integrity as commodities move along the marketing chain from growers to
retailers.  Assurance of organic integrity may require 1) certification that the
commodity was grown organically, 2) marketing and manufacturing techniques that
preserve the organic identity of the product, and 3) implementation of a
national standard that defines exactly what "certified organic" means. USDAs
proposed national organic standards, expected to be finalized this year, will
provide a national definition of organic production.  Carolyn Dimitri (202)
694-5252; cdimitri@ers.usda.gov

Farmings Role in the Rural Economy

The U.S. rural economy remains strong, largely unaffected by low farm prices of
recent years. While many view "rural" and "agriculture" as virtually synonymous,
the ability of the rural economy to shake off downturns in the farm sector is a
reminder that agriculture (including ag-related industries such as input
suppliers and food retailing) is not the primary economic engine of rural
America.  Rural Americas nonagricultural economy has grown steadily, outpacing
growth in agriculture, so that agricultures relative importance as a source of
jobs and income has declined.  In general, it is the strength of the overall
economy that has sustained the rural economy.  The growing service orientation
of the U.S. economy suggests that the key to survival and growth for rural
communities is developing and attracting service-sector businesses.  Fred Gale
(202) 694-5349; fgale@ers.usda.gov

Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available 5/23 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
