AGRICULTURAL OUTLOOK -- SUMMARY                             November 19, 1997
November 1997, AO-247s
               Approved by the World Agricultural Outlook Board
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This SUMMARY is issued monthly (except January) by the Economic Research 
Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The 
complete text of AGRICULTURAL OUTLOOK will be available within 3 working 
days following this summary release.  Printed copies will be available in 
about 2 weeks.  
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WORLD BEEF TRADE EXPANDING 
WITH RISING INCOMES & TRADE LIBERALIZATION

What Is Influencing World Beef Trade Patterns?

Increases in global incomes and a more liberalized trading environment have
contributed to substantial growth in international beef trade over the past 15
years.  Beef exports among the major traders are projected at 4.8 million tons
in 1997, up 45 percent from 1980.  Although beef is produced and consumed
worldwide, large-scale beef trade is limited to a relatively small number of
countries and represents a small but growing proportion of total consumption.  

Changing production, marketing, and political conditions have played an
important role in the evolution of beef markets.  In addition, health and
sanitary trade barriers predicated on fear of spreading virulent cattle
diseases have, at least for now, limited the international marketing
opportunities of surplus beef producing regions.  Sales in certain markets are
affected by differences in the type or quality of beef produced (e.g., grain-
vs. grass-fed), and by cultural factors such as consumer perceptions of
healthfulness, and preferences for color or size of cuts.  Changes in meat
processing and shipping technology have helped to facilitate trade expansion
by directing specific cuts of meat to particular markets and by increasing
shelf life, permitting fresh product to be shipped a greater distance.

These factors are likely to continue to exert a strong influence on meat
production and trade patterns as meat trade continues to expand through the
next decade.  Global per capita consumption of beef is projected to increase
through 2005 as meat demand rises in countries with rapidly industrializing
and transition economies.  [Shayle Shagam (202) 694-5186]

Cattle Cycle Unlikely to Turn Before 2000

 The much-anticipated turn in the cattle cycle--when the nation's cattle herd
will again begin to expand--appears unlikely to occur before 2000.  For the
second year in a row, disappointing pasture and range conditions and 
record-high hay prices led producers to retain fewer heifers for summer breeding 
than they had anticipated at the start of the year.  Heifer slaughter for the
first
9 months of 1997 was at a near-record pace.  Although beef cow slaughter has
been down since spring and is expected to decline even further over the next
couple of years, without retention and breeding of larger numbers of heifers,
beef cow numbers--and calf crops--will continue to decline at least through
1998, delaying expansion in the cattle herd until after the turn of the
century.  [Ron Gustafson (202) 694-5174]

Interpreting Meat Industry Price Spreads

The farm-to-retail price spread for pork reached a record $1.62 per pound 
in October, attracting renewed attention to the difference between farm and
retail meat prices.  Current price spreads for Choice beef and broilers,
although not at record levels, are also relatively high.  Over time, nominal
price spreads tend to widen as inflation increases the costs of marketing,
processing, and retailing.  Yet the most compelling feature of meat price
spreads for Choice beef, pork, and broilers is that, when adjusted for
inflation, they have remained fairly constant or even decreased slightly over
the past three decades.

By examining price spreads and their components, the timeliness and
completeness of price adjustments among marketing levels, as well as
variations in marketing spreads, can be monitored over time.  For beef and
pork, the farm-to-retail spread has two main components: farm to wholesale 
and wholesale to retail.  The deflated pork farm-to-retail spread is essentially
flat, or decreases slightly, over the past three decades, while the deflated
farm-to-retail spread for Choice beef declines slowly over the past three
decades.  Deflated farm-to-retail spreads for both pork and Choice beef are
driven by strong downward-trending farm-to-wholesale spreads, which more than
offset changes in wholesale-to-retail spreads.  [Kenneth Nelson (202) 694-5185]

Value of Farm Real Estate Up Again for 1996

Agricultural real estate values in the U.S. continued to climb during 1996. 
USDA's estimate for the national average value of all agricultural real estate
(land and buildings) as of January 1, 1997 is $942 per acre, up 5.8 percent
from a year earlier--3.8 percent in inflation-adjusted terms.  Several states
showed double-digit growth.  The increase in agricultural real estate values
during 1996 marks the 10th consecutive year that values have risen since the
national average bottomed out in 1987.

USDA's Economic Research Service (ERS) has been studying agricultural land
values in order to determine the influences of agricultural and
nonagricultural factors.  Among the most influential agricultural factors are
growing conditions and capital investments, including irrigation.  Among
nonfarm factors, the demand for farmland in urban and urbanizing areas,
generated by residential, commercial, and industrial development, is the
predominant influence on farmland values.  Demand for land for recreational
purposes has also been found to contribute to land values, but this is a much
less important value determinant in most areas.  Not surprisingly, the
relative influences of these factors vary among different regions of the
country.  [Dave Westenbarger (202) 694-5626]

Consumers May Benefit as Pork Industry Changes

How the hog industry is organized and how it does business ultimately affects
consumers through prices and product selection.  Production for the open
market is being replaced by multi-year contracts and vertical integration
(e.g., processors owning hog production facilities).  These changing methods
for transferring hogs from producers to packers can reduce packing costs and
improve the quality of pork products for consumers.  Packers may reduce costs
by obtaining a large, stable flow of hogs to minimize under- or
overutilization of facilities, as well as by increasing control over the
quality of hogs.  Consumers stand to benefit through lower prices and/or an
increased supply of higher quality pork products.  

ERS examined effects on consumers of changes in pork industry organization. 
ERS estimated potential benefits to consumers, in terms of leaner meat at
lower costs, ranging from $60 to $693 million over one year, depending on the
extent of change in industry organization and how much consumers were willing
to pay for leaner products.  [Steve Martinez (202) 694-5378]

For further information call Randy Schnepf (202) 694-5331 or  Anne Effland
(202) 694-5319. 



Table 1.  Key Statistical Indicators of the Food and Fiber Sector              
                                                 1997          
                                               -------------------------------
                                               I        II     III F      IV F

  Prices received by farmers (1990-92=100)   107       108       107        --
    Livestock & products                      98        99        99        --
    Crops                                    115       117       115        --

  Prices paid by farmers, (1990-92=100)
    Production items                         115       117       116        --
    Commodities & services, interest,        116       117       116        --
     taxes, & wages

  Cash receipts ($ bil.) 1/                   --        --        --        --
    Livestock ($ bil.)                        --        --        --        --
    Crops ($ bil.)                            --        --        --        --

  Market basket (1982-84=100)
    Retail cost                              160       159        --        --
    Farm value                               107       107        --        --
    Spread                                   188       187        --        --
    Farm value/retail cost (%)                24        24        --        --

  Retail prices (1982-84=100)
    All food                                 157       157       158       158
      At home                                158       158       158       158
      Away from home                         156       156       157       159

  Agricultural exports ($ bil.) 2/          14.9      13.2        --        --
  Agricultural imports ($ bil.) 2/           9.1       9.3        --        --

  Commercial production
    Red meat (mil. lb.)                   10,459    10,655    10,941    10,860
    Poultry (mil. lb.)                     7,986     8,491     8,338     8,450
    Eggs (mil. doz.)                       1,587     1,591     1,603     1,655
    Milk (bil. lb.)                         38.9      40.6      39.0      38.3

  Consumption, per capita
    Red meat and poultry (lb.)              49.7      52.2      52.6      53.7

  Corn beginning stock (mil. bu.) 3/       425.9   6,903.7   4,494.1   2,496.6
  Corn use (mil. bu.) 3/                 2,819.1   2,411.9   2,001.3   1,616.3

  Prices 4/
    Choice steers--Neb. Direct ($/cwt)     66.40     66.63     65.65     67-69
    Barrows & gilts--IA, So. MN ($/cwt)    51.06     56.41     54.45     45-47
    Broilers--12-city (cts./lb.)            60.0      59.1      62.0     56-58
    Eggs--NY gr. A large (cts./doz.)        84.9      72.1      79.7     82-84
    Milk--all at plant ($/cwt)             13.47     12.93     12.70    14.10-
                                                                         14.40
  Wheat--KC HRW ordinary ($/bu.)            5.48      4.57      4.49      3.76
  Corn--Chicago ($/bu.)                     3.87      2.86      2.89      2.64
  Soybeans--Chicago ($/bu.)                 7.74      8.54      7.19        --
  Cotton--Avg. spot 41-34 (cts./lb.)       70.73     69.81     71.40        --



                                            1989      1990      1991      1992
                                             ---------------------------------
  Farm real estate values 5/,6/
    Nominal ($ per acre)                     668       683       703       713
    Real (1982 $)                            539       528       521       507

  1/ Quarterly data seasonally adjusted at annual rates.  2/ Annual data based 
on Oct.-Sept. fiscal years ending with year indicated.  3/ Sept.-Nov. first 
quarter; Dec.-Feb. second quarter; Mar.-May third quarter; Jun.-Aug. fourth 
quarter; Sept.-Aug. annual.  Use includes exports & domestic disappearance.  
4/ Simple averages, Jan.-Dec.  5/ 1990-94 values as of January 1.  1986-89
values as of February 1.  6/ The 1989-94 values are revised based on the 1992 
Census of Agriculture.  
F = Forecast; -- = Not available.

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    1997                       1998               
----------       ---------------------------------
  Annual F       I F      II F     III F  Annual F

        --        --        --        --        --
        --        --        --        --        --
        --        --        --        --        --


        --        --        --        --        --
        --        --        --        --        --


        --        --        --        --        --
        --        --        --        --        --
        --        --        --        --        --


        --        --        --        --        --
        --        --        --        --        --
        --        --        --        --        --
        --        --        --        --        --


       158       161       161       162       162
       158       161       162       162       162
       157       160       161       162       162

      56.5        --        --        --      58.5
      36.0        --        --        --      38.0


    42,915    10,727    10,820    11,217    43,737
    33,265     8,530     8,940     9,135    35,460
     6,436     1,605     1,615     1,670     6,580
     156.9      39.2      40.8      38.7     157.1


     208.3      52.6      53.7      55.1     215.9

     425.9     884.0        --        --     884.0
   8,848.4        --        --        --   9,325.0


     66.67     69-73     71-77     71-77     71-76
     51.98     45-47     46-50     47-51     45-49
      59.5     55-59     58-62     60-64     57-62
      79.9     73-77     67-73     72-78     72-78
    13.30-    13.10-    11.85-    12.10-    12.65-
     13.40     13.70     12.75     13.10     13.55
        --        --        --        --        --
        --        --        --        --        --
        --        --        --        --        --
        --        --        --        --        --



      1993      1994      1995      1996      1997
--------------------------------------------------

       736       782       832       890       942
       511       529       550       574       596

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