NOTE: AO has 10 issues in 2001.  Please note that reports are released in one
month, BUT THE ISSUE DATE IS FOR THE FOLLOWING MONTH; e.g., the May 2001
issue is released in April.

AGRICULTURAL OUTLOOK -- SUMMARY                 April 18, 2001
May 2001, ERS-AO-281
   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. Field Crop Planting Intentions Decline in 2001
   Planting intentions in 2001 for the eight major U.S. field crops (corn,
soybeans, wheat, barley, sorghum, oats, cotton, and rice) total 251.5 million
acres, down 1.3 percent from last year's planted area.  Expansion in hay area
will more than offset the decrease.  While lower expected prices and higher
fertilizer and fuel costs pulled down corn planting intentions by 4 percent,
benefits from the government marketing loan program upheld producer
incentives (per-unit returns) for soybeans and cotton. Farmers intend to
plant a record 76.7 million acres of soybeans and the largest cotton area
(15.6 million acres) since 1995.  Despite higher expected prices for wheat,
planting intentions are down 4 percent to 60.3 million acres as dry soil
conditions last fall delayed and reduced seeding in the Southern Plains.
William Lin (202) 694-5303; wwlin@ers.usda.gov

Farm Credit Use Expected to Rise Slightly
   Total farm business debt will rise just 1.2 percent to $182.8 billion in
2001, the smallest projected increase since debt dipped slightly in 1992.
With limited potential gains in farm prices this year following relatively
low levels in 2000, farmers remain cautious about debt expansion. High levels
of direct government payments to farmers (including emergency assistance) and
adequate levels of working capital and off-farm earnings are limiting
farmers' demand for credit. Farmers have been maintaining or improving their
balance sheets by applying some of the additional government payments to
existing debt. Jerome Stam (202) 694-5365; jstam@ers.usda.gov
   Average interest rates for farm loans from commercial banks should dip
below 9 percent by midyear and may drift slightly lower in the second half of
2001, following the Federal Reserve's easing of monetary policy earlier in
the year. Should U.S. economic growth in the second half of 2001 and the
first half of 2002 strengthen as expected, interest rates on agricultural
loans are likely to rise slightly in the winter or spring of 2002. Paul
Sundell (202) 694-5333; psundell@ers.usda.gov

Forces Shaping Global Food Demand & Agricultural Trade

Recent shifts in trade patterns reveal dramatic changes in global food demand
that will likely continue well into the future. Bulk commodities (primarily
grains and oilseeds) now make up less than 30 percent of the value of world
agricultural trade, compared with 41 percent in 1985, and processed
consumer-oriented products such as meat, beverages, bakery products, and
snack foods make up a growing share. Driving these shifts are changes taking
place in both developing and developed countries, particularly income growth.
Food purchasing power has increased for most consumers in the world as
average real per capita income levels doubled from 1960 through 1998. Growth
in urbanization, interest in food quality, and concerns about food safety
standards are also shaping demand and influencing future prospects for food
consumption and international trade. Anita Regmi (202) 694-5161;
aregmi@ers.usda.gov

Canada's Agriculture: 5 Years After Transportation Subsidies End

The 1995 repeal of Canada's Western Grain Transportation Act (WGTA) ended
government support that had lowered producers' cost of transporting grain to
export ports from the Prairie Provinces-Alberta, Manitoba, and Saskatchewan.
Subsidized freight rates had helped encourage grain exports and diverted
grains away from domestic enterprises. The elimination of freight subsidies
has reduced returns for traditional grains such as wheat and caused shifts to
relatively minor nontraditional crops such as dry peas, which have become an
important part of successful low-cost livestock operations. Rising
transportation costs for producers have also led to retention of feed in the
Prairie region to support the expanding livestock sector. Suchada Langley
(202) 694-5227; slangley@ers.usda.gov

Poor Winter Weather Reduces Beef Supply 
Cold, wet conditions have limited cattle weight gain in feedlots since late
November, resulting in lower marketing weights, delayed marketings, and a
very tight supply of market-ready animals. With buyer demand strong,
competition for the reduced supply of beef, particularly higher quality beef,
has pressed retail prices toward the record levels of the early 1990s. Ron
Gustafson (202) 694-5174; ronaldg@ers.usda.gov

Agri-Environmental Payments to Farmers: Rewarding Environmental Performance

Initiating a program to provide agri-environmental payments to producers
could help maintain past agri-environmental gains, address emerging
environmental problems (e.g., nutrient runoff), and perhaps support farm
income. Such a program, based on use of environmentally sound practices,
could reward high levels of environmental performance on agricultural land or
improvement over past performance. To explore issues of program design,
USDA's Economic Research Service linked farm-level data from the Agricultural
Resource Management Study with several indicators of potential for
environmental damage. The analysis indicates that designing a conservation
program to focus on a specific farm type (e.g., large family farms) is not
likely to solve a particular agri-environmental problem. Likewise, focusing a
farm program on a particular environmental issue is not likely to solve farm
income problems nationally or for specific categories of farms. Roger
Claassen (202) 694-5473; claassen@ers.usda.gov 

Moving Farmers Toward New Production Practices 
What motivates U.S. farmers to adopt environmentally beneficial production
practices? USDA's Economic Research Service examined the impact of a range of
factors, including government programs, farmers' technical knowledge, land
tenure, and natural resource characteristics of farms (e.g., soil type and
climate), using survey data from farmers in 10 watersheds spread throughout
the country.  Among the findings is that education has a significantly
positive effect on farmers' willingness to adopt practices that require
specialized knowledge (such as biological pest control).  Regional resources
proved to be a frequent factor in decisions to adopt certain practices,
confirming that site-specific information on resources is vital in explaining
the success or failure of conservation efforts and programs. Margriet Caswell
(202) 694-5540; mcaswell@ers.usda.gov



Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available April 19 at
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/2001/

   
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