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               August 20, 2001
September 2001, ERS-AO-284
Approved by the World Agricultural Outlook Board
---------------------------------------------------------------------------
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. 
---------------------------------------------------------------------------
Situation and Outlook Summary 
Agricultural Outlook


United States
Department of
Agriculture


Economic
Research
Service

August 20, 2001
Competitiveness of Argentine & Brazilian Agriculture 
Argentina and Brazil have become increasingly strong competitors with the 
U.S. in grain and soybean trade. U.S. market share of global soybean and 
soybean product exports, for example, shrank from 80 percent during the 1960s 
to just 35 percent in 1998-2000. Over that period, the combined share for 
Argentina and Brazil grew from less than 10 to nearly 50 percent. Combining 
abundant land and favorable climates, Argentina and Brazil are naturally low-
cost producers of soybeans. A primary catalyst in Brazil and Argentinas 
surge in agricultural production and exports in the past decade was the 
economic and political reform undertaken by both countries, including 
deregulation and privatization of domestic marketing systems, restraining 
inflation and interest rates, and easing of trade rules. These reforms opened 
the door to more open trade, strengthened market signals, rapidly expanded 
foreign investment, and increased utilization of agricultural inputs and 
technology. Randy Schnepf (202) 694-5293; rschnepf@ers.usda.gov

Economic Reforms Remain Critical for Argentina 
Argentinas reforms in the early 1990s, despite initial successes, left many 
significant problems untouched. Excessive regulation and labor market 
problems still burden the economy, and the country is now in the midst of a 
3-year recession. Argentinas government recently announced a package of 
policy measures, including a dual exchange-rate system that continues the 
one-peso-to-one-dollar arrangement while providing an indirect devaluation 
for commodity exporters. If successful, the plan could mean potential gains 
in Argentinas share of trade in international commodity markets, by lowering 
export prices. However, of greater concern is the risk of a deeper recession 
and the possibility of a regional spillover of economic difficulties into 
Brazil and beyond. Randy Schnepf (202) 694-5293; rschnepf@ers.usda.gov

Strong U.S. Soybean Demand Keeps Pace with Record Supply
Strong soybean demand is warding off burdensome surpluses, despite the large 
potential harvest this fall. U.S. soybean production is forecast at nearly 
2.9 billion bushels, exceeding last years record by almost 100 million 
bushels. Domestic levels of soybean crushing will be supported in 2001/02 by 
good prospects for soybean product exports and favorable hog values that 
should expand domestic soybean meal consumption. Robust soybean imports by 
China and the European Union have continued to support foreign demand for 
U.S. exports. Nevertheless, record U.S. supplies and large foreign stocks 
(particularly in China and Brazil) are expected to limit price increases. 
Mark Ash (202) 694-5289; mash@ers.usda.gov

China's Grain Policy at a Crossroads
China's grain sector and policymakers are adjusting to internal and external 
pressures that could reshape the industry. As consumers diversify their 
diets, they are demanding less grain but of higher quality. Government 
policymakers and the grain marketing system have been slow to respond to 
changing consumer preferences. As a result, large stocks of low-quality grain 
accumulated in the 1990s. Government policy emphasis is now shifting from 
grain quantity to quality. Chinas accession to the World Trade Organization 
may introduce external competition for both farmers and grain traders that 
will hasten the shift. Fred Gale (202) 694-5215; fgale@ers.usda.gov

New Tax Law Includes Savings for Farmers
The Economic Growth and Tax Relief Reconciliation Act of 2001, signed into 
law on June 7, 2001, reduces both income and estate taxes for most taxpayers, 
including most farmers. For farm sole proprietors, savings over the entire 
10-year phase-in period total $19 billion in Federal income taxes and $3 
billion in Federal estate taxes. James Monke (202) 694-5358; 
jmonke@ers.usda.gov

Mandatory Price Reporting for Livestock Industry
Livestock packers and importers whose operations exceed certain levels must 
now report frequent and detailed information to USDA on price, quantity, and 
characteristics of livestock they buy and sell. The purpose of USDA's 
Mandatory Price Reporting system is twofold: to provide all livestock 
producers with timely market information that will enable them to operate 
successfully in a changing marketing environment, while also meeting consumer 
demand for meat and meat products. Mildred Haley (202) 694-5176; 
mhaley@ers.usda.gov

USDA Conservation Programs: A Look at the Record
Government spending on agricultural conservation programs has nearly tripled 
since the mid-1980s, responding to public demand that farm programs offset 
some of agricultures environmental impacts. The greatest portion of spending 
has gone to support land retirement through the Conservation Reserve Program 
(CRP). This program has significantly reduced erosion and enlarged wildlife 
habitat. Recent USDA studies examine the CRP and other major conservation 
programs of the past 15 years and point to significant benefits from soil 
conservation and wildlife restoration. LeRoy Hansen (202) 694-5612; 
lhansen@ers.usda.gov
Interest by policymakers in the Environmental Quality Incentives Program 
(EQIP) is linked to recognition that many environmental problems can be 
addressed only through improved performance on working farmland rather than 
through land retirement. EQIP provides technical, financial, and educational 
assistance to farmers who improve soil, land, water, and nutrient management 
on farmland. Applications to participate in the program have exceeded annual 
funding, but some farmers, after signing contracts, have opted to cancel out 
entirely or withdraw some of the practices specified in their conservation 
plans. This could have implications for program design and funding. Andrea 
Cattaneo (202) 694-5474; cattaneo@ers.usda.gov

Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available 8/21at 
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/2001/

END_OF_FILE


