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                           February 20, 2001
March 2001, ERS-AO-279
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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Hog Producers' Returns to Moderate in 2001

Pork production in 2001 is forecast up 2 percent from 2000, based on market 
hog inventory, pig crops, and farrowing intentions reported in December. 
As a result, hog prices in 2001 are expected to average in the low $40's 
per cwt, compared with nearly $45 in 2000 and the mid$30's in 1998 and 
1999. With low feed prices expected to continue, producer returns should 
remain above breakeven (returns equal to cash costs) for most of the year. 
Leland Southard (202) 694-5187; southard@ers.usda.gov.  

Cutbacks in Potato Acreage Likely in 2001.

Record-high U.S. potato stocks and a corresponding drop in grower prices 
are prompting growers to plant fewer acres this year. To what extent growers 
will cut back remains in question as they evaluate market potential for 
alternative crops such as dry beans, wheat, sugar beets, and soybeans. A 
record harvest last fall (471 million cwt of potatoes) accounts for the 
current abundance of spuds and lower grower prices, which for October-
December 2000 averaged 15 to 20 percent below year-earlier prices. Charles 
Plummer (202) 6945256; cplummer@ers.usda.gov 

Conservation Tillage Firmly Planted in U.S. Agriculture

Farmers across the nation used conservation tillage (no-till, ridge-till, 
and mulch-till) on more than 109 million acres of farmland in 2000, 
amounting to over 36 percent of U.S.  planted cropland area and up 
from 26 percent in 1990. Use of no-till expanded threefold during the 
decade to reach more than 52 million acres, due partly to implementation 
of conservation compliance plans required to remain eligible for farm 
program benefits. Conservation tillage together with other crop residue 
management practices helps reduce soil erosion, slow nutrient and pesticide 
runoff, and cut farmers' fuel costs. Carmen Sandretto (202) 694-5622; 
carmens@ers.usda.gov 

Changing Dynamics in Produce Marketing

A large share of today's fresh produce is sold directly by shippers to 
retailers, bypassing intermediaries and terminal wholesale markets. Price 
may be just one component of a more complex shipper/retailer sales 
arrangement that could include off-invoice fees to retailers such as 
promotional fees or rebates, as well as services such as automatic 
inventory replenishment. In addition, while the fresh produce industry 
has traditionally marketed primarily through daily sales arrangements, 
the volume requirements of very large produce buyers and the demand for 
reliable, yearround availability and quality of produce is making longer 
term arrangements-i.e., contracts-more desirable for both shippers and 
retailers. Linda Calvin (202) 694-5244; lcalvin@ers.usda.gov 

Marketing Fees Reflect Supplier-Supermarket Relationship

In supplier-supermarket arrangements for marketing a variety of products, 
the use of marketing fees to retailers-e.g., rebates, shelfplacement fees, 
and advertising allowances-is becoming more common. Specialized fee 
agreements between suppliers and food retailers may be fixed payments 
or may vary with the quantity exchanged in the transaction or with 
volume of sales of a particular product. Most controversial  is the 
"slotting" fee, a lump sum paid by suppliers to retailers for introducing 
new products to supermarket shelves. From the anticompetitive perspective, 
marketing fees are  the result of changing balances in supplier vs. 
retailer market power, but the procompetitive view argues that fees help 
to enhance market efficiency. Carolyn Dimitri (202) 694-5252; 
cdimitri@ers.usda.gov 

Crop Production Capacity in Europe 

From Spain to Ukraine, agricultural production is pursued under a vast 
array of agronomic and political conditions. In Western Europe, policies 
in recent decades have maintained high farm prices and provided income 
payments to farmers, often leading to surplus production. The region has 
been a large grain exporter for over two decades. In the countries of the 
former Soviet Union (FSU) and in Eastern Europe where countries had been 
under Soviet influence, withdrawal of consumer and producer subsidies 
following political independence in the early 1990's resulted in lower 
crop yields and production. In the decade ahead, Europe as a whole will 
continue to be a net exporter of grain, although the magnitude of exports 
will depend partly on the ability of the FSU, particularly Russia and 
Ukraine, to develop institutions and policies to accommodate the new 
market conditions, encourage investment in the agricultural sector, and 
increase production capacity. David R. Kelch (202) 6945151; 
dkelch@ers.usda.gov 

Institutional Reform in Russia

Russia is a key customer for U.S. agricultural exports, especially meats. 
But the institutions inherited from the Soviet Union make it a relatively 
high-cost and risky country in which to do business. Western exporters 
operating in Russia face substantial costs in transporting meat between 
ports and provincial regions, in obtaining information about agricultural 
markets, and in enforcing contracts. Unreformed institutions not only 
function poorly in a market environment but have withstood most attempts 
to alter them. A recent Economic Research Service study shows that most 
of the Russian livestock market, for example, is isolated from world 
markets-in great part a result of the high costs of doing business within 
the country. Stefan Osborne (202) 694-5154; sosborne@ers.usda.gov.

END_OF_FILE
