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                 November 20, 2001
December 2001, ERS-AO-287
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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Cotton Production Up, Demand Down

Cotton is experiencing greater weakness in world prices than grains and other 
crops.  World cotton prices, down 39 percent from a year earlier as of October 
2001, have suffered from slackening demand, coinciding with rebounding world 
production.  Larger crops of cotton in the world's major producing countries in 
2001/02 have resulted from favorable weather and government policies, among 
other factors.  The largest production gains occurred in China, up 3.5 million 
bales, and in the U.S., up 3 million bales.  The global economy is forecast to 
rebound in 2002/03 and foreign cotton mill use to expand.  With the largest 
share of world stocks in a decade, the U.S. will be in a unique position to 
supply the growing need for cotton fiber around the globe. Leslie Meyer (202) 
694-5307; lmeyer@ers.usda.gov

Sweet Peppers: Saved by the Bell

Over the past two decades, consumption of sweet bell peppers has been on the 
rise in the U.S.  Given continued strong demand, U.S. growers harvested 12 
percent more bell pepper acreage in 2000 than a year earlier. Bell peppers are 
produced and marketed year-round, with domestic shipments peaking during May 
and June and import shipments highest during winter months (20 percent of 
fresh-market demand is satisfied by imports). Grown commercially in most 
states, bell peppers are shipped by 6,271 farms into the fresh and processing 
markets.  From 1998 to 2000, annual farm cash receipts for sweet bell peppers 
averaged $535 million--with an estimated retail value of over $1.7 billion. 
Gary Lucier (202) 694-5253; glucier@ers.usda.gov

EU Preferential Trading Agreements:
Heightened Competition for U.S.

Although the European Union (EU) has pursued global multilateral trade 
negotiations within the World Trade Organization (WTO) and extends most-
favored-nation treatment to the U.S. and other WTO members, it also 
participates in more nonglobal preferential trading agreements (PTAs) than any 
other WTO member.  Over two-thirds of EU imports come from countries with such 
agreements, which do not include the U.S.  PTAs provide lower tariffs and other 
more favorable terms for imports from preferred trading partners, and recent 
reciprocal agreements also provide advantages for EU exports. For the EU, 
preferential agreements provide enhanced control over imports and are a tool to 
maintain domestic commodity prices. The EU is the worlds largest agricultural 
importer and the second-largest exporter, making it an important market for the 
U.S. as well as a competitor. EU PTAs disadvantage U.S. exports to EU markets 
while providing advantages to EU exports in the markets of EU preferred 
partners. Gene Hasha (202) 694-5193; ghasha@ers.usda.gov

U. S. Crop Insurance:
Premiums, Subsidies, & Participation

U.S. crop insurance programs, which have traditionally been limited to yield 
insurance products, now include a variety of insurance products. The type of 
insurance and the coverage level that producers choose, as well as the 
riskiness of producing a particular crop in a particular area, determine the 
premium.  Since the early 1980s, the Federal government has been subsidizing 
premiums, effectively lowering the cost of crop yield and revenue insurance 
coverage to producers. Producers pay only a portion of the actuarial or risk-
based premium plus a small administrative fee, while the U.S. government pays 
the balance. Increases in premium subsidies in 2001 and the addition of premium 
discounts in 1999 and 2000 have increased participation in insurance programs, 
and producers have moved to higher coverage levels.  Robert Dismukes (202) 694-
5294; dismukes@ers.usda.gov

Dairy Industry to Encounter 
Uncertain Climate of Demand in 2002 

Recent years have seen strong demand for dairy products; prices were generally 
robust except when rapid expansion in milk production temporarily overcame 
demand.  But in 2002, softening economic conditions probably will result in 
less vigorous demand growth for cheese, butter, and dairy products overall. 
Milk production is expected to grow by almost 3 percent in 2002, more than 
projected growth in demand. A price drop seems certain, with the extent of the 
fall highly uncertain and largely related to softness of demand. James Miller 
(202) 694-5184; jjmiller@ers.usda.gov

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