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                        May 18, 2001
June-July 2001, ERS-AO-282
     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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Situation and 
Outlook Summary 
Agricultural 
Outlook

United States
Department of
Agriculture

Economic
Research
Service

May 18, 2001

Abundant Farm Commodity Supplies Shape Markets
Large supplies of major U.S. field crops are expected again 
in 2001/02, keeping downward pressure on farm prices for the 
fifth consecutive year, according to USDAs first forecast for 
the season. U.S. soybean supplies for 2001/02 are expected to be 
record large and average farm price is forecast to drop about 5 
percent from 2000/01. Corn prices are expected to remain 
relatively unchanged, as higher carry-in stocks of corn largely 
offset lower production. Wheat deviates from the general 
projection, with production expected to decline 12 percent and 
season-average farm price to rise 16 percent (midpoint of 
forecast range). Gregory K. Price; (202) 694-5315; 
gprice@ers.usda.gov

Production of red meat and poultry in 2002 is forecast at 
nearly 83 billion pounds, up 1 percent from that expected this 
year, and marginally higher than record production in 2000. 
Continuing increases in pork and poultry production, bolstered by 
profitability and continued low corn and soybean meal prices, 
will more than offset a modest decline in beef production. 
Although red meat and poultry supplies are at record levels, 
relatively strong domestic and foreign demand is maintaining 
prices. Leland Southard (202) 694-5187; southard@ers.usda.gov

Mexican Cattle Exports to the U.S.: Current Perspectives
For generations, cattle have played a key role in bilateral 
trade between the U.S. and Mexico, and the composition of cattle 
trade has remained relatively constant over the years. The U.S. 
exports breeding stock and cattle for slaughter to Mexico, while 
Mexico exports primarily feeder cattle (young stock to finish 
gaining weight in feedlots) to the U.S. The U.S. is expected to 
remain a major market for Mexican cattle producers, who raise 
cattle suited for feeding with seasonal forage supplies. Leland 
Southard (202) 694-5187; southard@ers.usda.gov

China's Fruit & Vegetable Sector in a Changing Market Environment 
Chinas longstanding potential as a strong competitor in 
international fruit and vegetable trade will likely be realized 
over the next several years. Although China exports less than 1 
percent of its fruit and vegetable production, private-sector 
investment--both domestic and foreign--is currently creating 
world-class operations that deliver high-quality fruits and 
vegetables within China and to international markets. Growth in 
domestic demand for fruits and vegetables, improvements in 
marketing practices, and Chinas future agricultural production 
policies will largely determine how soon and how strongly Chinas 
produce sector affects U.S. and world markets. Dennis A. Shields 
(202) 694-5331; dshields@ers.usda.gov

Using Farm Sector Income as a Policy Benchmark
Measures of farm sector income are valuable indicators of 
how well U.S. agriculture is performing, but they may not fully 
capture the financial situations of farmers and farm families. 
Intended policy outcomes and actual results often diverge because 
aggregate measures do not reveal the wide variations in income 
and circumstances among various farm groups and do not reflect 
off-farm income and wealth. In addition, aggregate measures do 
not reveal farmers problems with servicing their debt and do not 
give any indication of how many farms fail financially. James 
Johnson (202) 694-5570; jimjohn@ers.usda.gov

High levels of government payments to the U.S. farm sector 
have forestalled a significant drop in national farm income in 
recent years. While payments boost both profitability and 
household income, they enhance rates of return disproportionately 
for farms that have low and high rates of return relative to 
other farms. Likewise, the effect of direct payments on farm 
household income is greatest for households with the lowest and 
highest measured levels of economic well-being. Jeffrey Hopkins 
(202) 694-5584; jhopkins@ers.usda.gov

Government Payments to Farmers Contribute to Rising Land Values

The value of agricultural land depends largely on its 
expected future earnings from farming. Income from government 
payments indirectly supports farmland values and contributes to 
higher rents, generally benefiting farmland owners. But for 
farmers who rent a large share of the acreage they operate, 
higher rental rates raise fixed costs and increase the risk of 
operating losses if commodity prices and government payments 
decline. ERS analysis indicates that the contribution of 
government payments to U.S. farmland value rose from about 13 
percent during 1990-97 to 25 percent during 1998-2001. James Ryan 
(202) 694-5586; jimryan@ers.usda.gov

Falling Prices & National Farm Policy: The Case of the Northern 
Great Plains
Fluctuating crop prices and farm incomes can affect the 
economic well-being of rural communities and even entire regions. 
This is especially so in the Northern Great Plains--Kansas, 
Nebraska, and North and South Dakota--where farm production and 
food processing account for one-fifth of total regional output 
and almost one-tenth of regional employment.

Low crop prices during 1998-2000 triggered marketing loan 
benefits (MLBs) and emergency Market Loss Assistance payments 
(MLAs), propping up farm income and generating spillover effects 
throughout the regional economy. A regional economywide model 
shows that MLBs reduce job losses in crop production and cut by 
half the negative effect of low prices on gross regional product. 
MLA-type lump-sum transfers do little to offset reductions in 
crop-sector production and employment induced by low crop prices. 
Stephen Vogel (202) 694-5368; svogel@ers.usda.gov

Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available 5/21 at 
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-
bb/2001/

END_OF_FILE
