AGRICULTURAL OUTLOOK                  October 23, 2002
November 2002, ERS-AO-296
             Approved by the World Agricultural Outlook Board
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AGRICULTURAL OUTLOOK is published 10 times in 2002 by the Economic Research 
Service, U.S. Department of Agriculture, Washington, DC 20036-5831. Please note 
that this release contains only the text of AGRICULTURAL OUTLOOK -- tables and 
graphics are not included. 
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CONTENTS

BRIEFS
Broilers Headed for Record Production & Consumption 
Export Share of U.S. Ag Production Is a Stable 21 Percent

COMMODITY SPOTLIGHT
U.S. Rice Market Facing Record Supplies, Low Prices
Price Recovery Elusive for Cotton
Sweet Potatoes: Getting to the Root of Demand
Will the Farm Act Get Pulses Racing? 

WORLD AGRICULTURE & TRADE
EU Enlargement: The End Game Begins
China's Increasing Presence in Global Trade of Vegetables & Fruits

RESOURCES & ENVIRONMENT
U.S. Organic Farming: A Decade of Expansion

RESEARCH & TECHNOLOGY
Precision Agriculture Adoption Continues to Grow


IN THIS ISSUE

Broilers Headed for Record Production & Consumption 

The U.S. broiler industry has seen continuous yearly gains in production since 1975, with 2002 
likely to again set a record.  U.S. broiler consumption this year should also set a record, fed 
by strong consumer demand and competitive prices relative to other meats.  Broiler exports, 
however, are forecast down in 2002.  In contrast to broilers, turkey consumption has not kept 
pace with production, and with exports down, stocks have grown.  Egg production and consumption 
will likely show only modest gains in 2002, and egg exports are expected to be down. David 
Harvey (202) 694-5177 djharvey@ers.usda.gov

Export Share of U.S. Ag Production Is a Stable 21 Percent

The export share of total U.S. agricultural production was 21 percent in 2001, equal to 2000 
and the average since 1996.  For crops alone, export share has also been stable, averaging 24 
percent from 1996 to 2001, and the export share of livestock products has averaged 6 percent.  
While export shares of crops in recent years are lower than in the 1980s and the first half of 
the 1990s, the export share of livestock products is higher now than in the 1980s. Alberto 
Jerardo (202) 694-5266 ajerardo@ers.usda.gov

U.S. Rice Market Facing Record Supplies, Low Prices

Rice prices in the U.S. are at their lowest level in more than 15 years, the result of weak 
global prices and a second consecutive year of record supplies at home.  Despite a bearish 
price outlook and expectations of a huge carryover, U.S. rice producers cut plantings just 3 
percent in 2002.  At planting, most producers estimated returns to rice production to be higher 
than for alternative plantings. The projected 2002/03 (August-July) U.S. season-average farm 
price of $3.50-$4 per hundredweight, is down from $4.17 a year earlier and the lowest since 
1986/87. U.S. rice exports in 2002/03 are projected to be strong, up 3 percent from 2001/02, 
due in part to expanding global rice trade since 2000.  Nathan Childs (202) 694-5292 
nchilds@ers.usda.gov 

Price Recovery Elusive for Cotton

Commodity prices around the world have been relatively low since the late 1990s, and 2002 
cotton prices remain about 30 percent below the 1990-94 average.  While prices of some major 
field crops have recovered from their recent lows, cotton and rice have been left behind. 
Global ending stocks for cotton, rice, wheat, corn, and soybeans are all expected to fall 
during 2002/03, but cotton and rice prices defy the rising trend currently enjoyed by other 
crops.  Stocks are contracting substantially more for wheat, corn, and soybeans than for 
cotton, particularly in the U.S.  China's role in world cotton and rice consumption is greater 
than for the other crops, and China appears likely to continue the cotton stock reductions 
initiated several years ago. Stephen MacDonald (202) 694-5305 stephenm@ers.usda.gov

Sweet Potatoes: Getting to the Root of Demand

For many Americans, sweet potatoes have a strong holiday connection (Thanksgiving, 
Christmas/Hanukkah, and Easter), but this root crop remains a popular vegetable year-round in 
the American South and in Asia, Africa, and Brazil. Two basic types of sweet potatoes are grown 
in the U.S--moist-flesh types (which feature sweet, orange, soft, moist flesh when cooked) and 
dry-flesh types (which have dry, starchy, firm flesh when cooked). The moist types account for 
most of U.S. output.  The U.S. is the world's 10th- largest producer of sweet potatoes. 
Production in 2001 was the third highest since 1965. Over the 1999-2001 period, U.S. sweet 
potato growers produced an average of 13.5 million hundredweight from 90,500 harvested acres, 
and farm cash receipts averaged $214 million. 
Gary Lucier (202) 694-5253 glucier@ers.usda.gov

Will the Farm Act Get Pulses Racing? 

Dry peas, lentils, and small chickpeas--pulse crops--are relatively minor in acreage, supply, 
and use in the U.S. compared with corn, soybeans, and wheat.  However, pulses could be poised 
for expansion due to their inclusion in the 2002 Farm Act.  New marketing loan benefits, 
combined with agronomic advantages and a growing number of processors, may increase the 
attractiveness of planting pulses, particularly in the Northern Great Plains.  Accommodating an 
increased supply will likely require expansion of current markets and creation of new ones. 
Gregory K. Price (202) 694-5315 gprice@ers.usda.gov 

EU Enlargement: The End Game Begins

Ten Central and East European (CEE) countries are engaged in intense negotiations with the 
European Union (EU) for eventual membership.  The EU's official position is that 8 of the 10 
will be ready to join in 2004--Poland, Hungary, the Czech Republic, Slovakia, Slovenia, 
Estonia, Latvia, and Lithuania. Accession could bring significant changes in production and 
trade for the CEEs.  Impacts on world trade are likely to be small, but enlargement could alter 
U.S. exports to the region.  U.S. grain exports to the CEEs have already dwindled, but the U.S. 
could lose much of its share of the large poultry market as EU sanitary requirements are 
adopted.  At the same time, rising CEE incomes resulting from EU membership could create 
opportunities for larger U.S. exports of other high-value products. Nancy Cochrane (202) 694-
5143 cochrane@ers.usda.gov

China's Increasing Presence in Global Trade of Vegetables & Fruits

China raised its profile in the global market for vegetables and fruits in the 1990s, 
increasing its export value of those products by 33 percent between 1992-94 and 1998-2000, from 
$2.3 billion to $3.1 billion.  With improvements in production, marketing, and transportation 
technologies, China strengthened its competitive position to eighth place in the world 
vegetable and fruit export market. Though a relatively low-volume importer, China expanded its 
import value of vegetables and fruits more than fourfold to reach $413 million during the same 
period. Sophia Wu Huang (202) 694-5257 sshuang@ers.usda.gov

U.S. Organic Farming: A Decade of Expansion

American farmland under organic management has grown steadily for the last decade, with acreage 
for major crops more than doubling between 1992 and 1997, and again between 1997 and 2001. 
Certified organic pasture (including ranchland) also doubled between 1997 and 2001.  Even so, 
some European countries are ahead of the U.S. in organic production.  USDA's national organic 
standards, which took effect in October 2002, incorporate an ecological approach to farming and 
are expected to generate further interest in organic products among farmers and consumers. 
Catherine Greene (202) 694-5541 cgreene@ers.usda.gov

Precision Agriculture Adoption Continues to Grow

Precision agriculture (PA), a relatively new technology-based approach appearing during the 
early 1990s, incorporates modern information technologies into the management of agricultural 
inputs and production practices. PA technologies fall into two broad categories: spatial and/or 
temporal sensing (e.g., yield monitors), and application control also known as variable-rate 
technology (VRT).  Corn and soybean farmers have been the most rapid adopters of PA sensing 
technologies-yield monitor use grew to over 25 percent of soybean acres in 2000, and to over 33 
percent of corn acreage in 2001. Variable-rate application technologies use information from 
sensing technologies to vary application rates and timing for seed, fertilizer, and pesticides. 
Fertilization of corn and soybeans has been the most widespread use of VRT. Stan Daberkow (202) 
694-5535 daberkow@ers.usda.gov


BRIEFS: Livestock, Dairy & Poultry

Broilers Headed for Record Production & Consumption

The U.S. broiler industry has seen continuous yearly gains in production since 1975, with 2002 
likely to again set a new record. U.S. broiler consumption this year should also set a record, 
fed by strong consumer demand and competitive prices relative to other meats. In contrast, 
turkey consumption has not kept pace with production, and with exports down, stocks have grown. 
Egg production and consumption will likely show only modest gains in 2002, and egg exports are 
expected to be down. 

Broiler production for 2002 is estimated at 32.4 billion pounds, 3.5 percent higher than the 
previous year. Production is growing as higher numbers of birds are slaughtered and average 
weight increases. Broiler production growth should slow in late 2002, with the number of 
broiler chicks for growout in the fourth quarter forecast to be only slightly higher than the 
previous year. 

Broiler consumption reached a record 20.8 pounds per person (retail-weight basis) for the 
second quarter of 2002. Overall per capita broiler consumption for 2002 is expected to total 
just over 80 pounds, an increase of 3.8 pounds from 2001 and a new annual record. High domestic 
availability of broiler meat from expanding production and weakening exports have made prices 
very competitive relative to other meats and helped to promote consumption.

Broiler exports for 2002, forecast at 4.9 billion pounds, will be 12 percent lower than 2001 
but close to the amount shipped in 2000. Second quarter 2002 broiler exports totaled 1.12 
billion pounds, down 20 percent from the same period in 2001 primarily due to restrictions 
imposed by Russia on poultry imports from the U.S. Exports to Russia over the first 7 months of 
2002 were 29 percent lower than the same period in 2001, but seem to be picking up again. The 
141 million pounds shipped to Russia during July were lower than exports in June, but 
considerably higher than in April or May. Exports to other major markets, such as Hong 
Kong/China and Japan, have also been lower this year. Shipments to Japan declined due to a 
series of bans on imports of U.S. poultry products prompted by avian influenza outbreaks in 
some U.S. broiler and turkey flocks. Mexico and Korea were the only major markets where broiler 
exports increased over the first 7 months of 2002 compared with a year earlier.

Turkey production is expected to total 5.6 billion pounds in 2002, up 2 percent from the 
previous year. Over the past decade, turkey production in the U.S. has increased at about the 
same pace as population, and per capita consumption has remained relatively flat at 17.3-18.2 
pounds annually. Over the first 8 months of 2002, U.S. turkey production totaled 3.8 billion 
pounds, 3 percent higher than during the same period in 2001. The increase in production, 
coupled with flat exports and flat domestic consumption, has resulted in higher stocks of whole 
turkeys and turkey parts. On September 1, 2002, turkey stocks were 682 million pounds, 25 
percent higher than the previous year, due mostly to an increase in turkey parts (up 64 
percent). The higher stocks put downward pressure on prices, with prices for turkey drumsticks 
and wings falling more than prices for whole turkeys and breast meat. 

Turkey exports totaled 262 million pounds over the first 7 months of 2002, down 4 percent from 
the same period in 2001. Lower volumes to Mexico, Russia, and Korea accounted for most of the 
decline. Mexico, by far the largest export market for U.S. turkey products, imported 45 percent 
of U.S. turkey exports in 2001. Sluggish economic conditions there led to a 1.3-percent drop in 
the first 7 months of 2002 compared with a year earlier. The drop in exports to Russia, the 
second-largest market for U.S. turkey exports, was far more drastic--58 percent lower than 
during the same 7 month period in 2001. Import restrictions that curtailed broiler exports to 
Russia also affected turkey exports. 

Lower turkey exports to Mexico, Russia, and Korea have been partially offset by a strong 
increase in shipments to Hong Kong, up 111 percent over the first 7 months of 2001. Contingent 
on continued strong exports to Hong Kong and resumption of turkey shipments to Russia, overall 
turkey exports in 2002 are expected to total 456 million pounds, down 6 percent from 2001.

Egg production in 2002 is expected to total 7.22 billion dozen, 1 percent higher than in 2001. 
Over the first 8 months of 2002, egg production was 4.78 billion dozen, up less than 1 percent 
from the same period in 2001. Layers in production on September 1, 2002, totaled 336.5 million 
birds, 1 percent higher than the previous year. Layers producing table eggs totaled 278 
million, while there were 58.4 million layers producing hatching eggs.

Egg use has been increasing and is forecast to total 6.08 billion dozen in 2002. Continuing 
strong growth is the breaking-egg market, which provides egg products for the food processing 
industry and pasteurized liquid eggs for the food service industry. Though August 2002, 1.25 
billion dozen eggs, approximately 31 percent of all eggs produced for table use, went to the 
breaking-egg market. This volume was up 4 percent from the same period in 2001. While 
production of eggs for table use grew slightly over the first 8 months of 2002, wholesale egg 
prices averaged 4 percent below those for the same period of 2001. However, wholesale prices 
for eggs in July and August 2002 were above year-earlier levels and are expected to remain 
higher during the second half of 2002.

Hatching-egg use also increased in the first half of 2002 and is forecast to continue upward 
into 2003. Most the increase will come from higher hatching of eggs to produce chicks going 
into broiler production. 

Egg exports in 2002 are forecast at 182 million dozen, down 4 percent from 2001. Through July 
2002, egg exports were 99 million dozen, 3.8 percent lower than during the same period in 2001. 
The bulk of the decrease was due to a strong decline in exports to Japan, again the result of 
Japan's weak economy and its bans on imports of U.S. poultry products. Partially offsetting the 
lower shipments to Japan were larger exports to Canada (up 3.4 percent) and Belgium (up 97 
percent). Almost all the increase in shipments to Belgium was processed egg products for use in 
the food service sector. 

David Harvey (202) 694-5177 djharvey@ers.usda.gov
Fawzi Taha (202) 694-5178 ftaha@ers.usda.gov

For more information see the ERS briefing room on poultry and eggs
www.ers.usda.gov/briefing/poultry/


BRIEFS: Agricultural Trade

Export Share of U.S. Ag Production Is a Stable 21 Percent

Export share--the ratio of export volume to output (production volume, including stocks)--
measures the portion of domestically-produced supply that is shipped abroad. The aggregate 
export share of total U.S. agricultural production was 21 percent in 2001, equal to the rate in 
2000 and the average since 1996. The export share of U.S. crop production has been stable, 
averaging 24 percent from 1996 to 2001, and the export share of U.S. livestock products has 
averaged 6 percent. While the export share of crops in recent years is lower than in the 1980s 
and in the first half of the 1990s, the export share of livestock products is higher now than 
in the 1980s.

In general, as export share increases, U.S. farm income becomes more dependent on exports. 
Export share is influenced by factors such as prices and exchange rates, which are in turn 
affected by agricultural, trade, and macroeconomic policies. Demand for exports is further 
influenced by income growth, tastes, brand-name preferences, and product quality. Factors 
affecting supply include abnormal weather, production costs, pest infestation, and trade 
barriers, including those related to food safety.

As U.S. exporters and foreign competitors faced dismal to depressed prices for farm commodities 
in world markets starting in 1998, the dollar's exchange rate assumed a weightier role in 
determining U.S. export competitiveness. With weak import demand, competition for markets 
becomes more dependent on exchange-rate-adjusted prices. As the dollar appreciated in value 
over the past 6 years, the export shares of U.S. crops and livestock products remained flat. 
Depreciated foreign currencies and comparatively strong U.S. domestic demand for food were 
contributing factors to the stable shares. During the 1990s, U.S. per capita food consumption 
continued its rise from 1,900 pounds in the 1980s to more than 2,000 pounds in 2000.

In 2001, however, export shares for a number of commodities appeared to rebound slightly. 
Export shares of poultry meat and pork increased from 2000 to 2001, as did shares of fruits, 
nuts, vegetables, rice, cotton, tobacco, oilseeds, and vegetable oils. In some cases, such as 
vegetables, lower production estimates in 2001 helped raise their export share. But in general, 
higher export volume, particularly of horticultural products, was responsible for the boost.

The Significance 
Of Export Shares

Export shares gauge the size of foreign markets relative to the domestic market. They represent 
the capacity of U.S. farmers to supply customers outside the U.S. on the basis of price, 
product quality, and quantity or volume requirements. Over time, export shares reflect long-
term demand and supply conditions as well as production costs in the U.S. relative to foreign 
markets. 

Red meat and poultry meat export shares have trended upward. Beef and pork export shares have 
climbed steadily since the 1980s, except in 2001 for beef. Export shares of poultry meat have 
also consistently increased, except in 1998. However, dairy products and other animal products 
(tallow, hides, fish, and shellfish) show generally declining export shares reflecting the 
combination of weaker world demand and more abundant world supply. Since 1996, the export 
volume of U.S. animal products has risen at a pace faster than domestic animal production.

The gain in export shares for beef and pork from the 1980s is the result of a number of 
domestic and foreign factors. U.S. per capita consumption of red meat has declined since the 
1970s. At the same time, steady gains in per capita income in many foreign markets raised 
demand for high-value products such as meat. Russian demand for chicken meat, which was 43 
percent of total U.S. chicken meat shipments in 2001, has climbed steadily, except in 1999 when 
it collapsed along with the Russian currency. And, as foreign demand for U.S. meat goes up, so 
does domestic demand for feed grains and oilmeal. As a result, export shares of U.S. coarse 
grains and oilseeds have remained flat since 1997.

Rising U.S. supplies of fruits, nuts, and vegetables, coupled with improved packaging, 
preservation, and transportation technology, have expanded foreign sales. In 2001, 29 percent 
of noncitrus fruit production was exported, compared with 12 percent in the late 1980s. Almonds 
led the surge in export share of tree nuts, which grew from 45 percent in the 1980s to 68 
percent in 2001. Even as per capita consumption of fruits and vegetables in the U.S. rose over 
the past 2 decades, production grew faster in response to rising foreign demand. Improved 
storage equipment and facilities also made larger exports feasible, while lower trade barriers 
and shipping costs further boosted competitiveness of U.S. horticulture products. Overall, the 
volume of U.S. crop exports has risen since 1997, except in 2001 when it dropped 500,000 tons.

The overall U.S. export share appears stable at 21 percent despite the strong dollar and 
increased foreign competition. This ability to supply foreign markets even when import demand 
is relatively low indicates a level of competitiveness on which future potential sales can be 
based.  

Alberto Jerardo (202) 694-5266 ajerardo@ers.usda.gov

BRIEFS BOX

Measuring Export Share

Ideally, export shares apply to primary commodities with minimal value added, since processing 
may add or subtract weight that changes the original content. Food preparations, fruit juices, 
and wine are examples of products that have significant value-added content. Since value adding 
occurs largely outside the farm sector, processed exports that differ considerably from their 
primary production content do not provide an accurate measure of the farm sector's total output 
and sales. 

A related measurement problem occurs when spoilage or waste is not accounted for. As such, 
export shares are lower if waste is not subtracted from production. However, data on waste are 
not widely available and, when estimated, are usually combined with feed and seed use. Thus, 
export shares are not adjusted for wasted production.

Since exports can include products that were in storage, the difference between beginning and 
ending stocks is added to the volume produced when calculating export share. This adjustment is 
generally larger for less perishable commodities. Thus, export share is based on actual market 
supply rather than harvested production in a given year. The result is a more stable export 
share pattern.


COMMODITY SPOTLIGHT

U.S. Rice Market Facing Record Supplies, Low Prices

Rice prices in the U.S. are at their lowest level in more than 15 years, the result of weak 
global prices and a second consecutive year of record supplies at home. Despite a bearish price 
outlook and expectations of a huge carryover, U.S. rice producers cut plantings just 3 percent 
in 2002. At planting, most producers estimated returns to rice production--including payments 
under the government marketing loan program--to be higher than returns from alternative crops. 

The 2002/03 (August-July) U.S. season-average farm price (SAFP) for rough rice is projected at 
$3.50-$4.00 per hundredweight (cwt), down from $4.17 a year earlier. The 2002/03 SAFP is the 
lowest since 1986/87, and the SAFP has dropped every year since 1997/98. In 1996/97, the SAFP 
was the highest since 1980/81 at $9.96 per cwt. 

Monthly cash prices have weakened as well. In October, USDA reported the August 2002 U.S. rough 
rice average cash price at $3.72 per cwt, down $1.38 from a year earlier and the lowest since 
July 1987. The September mid-month price was an estimated $3.79 per cwt.

Prices for U.S. milled rice have also declined. Prices for high-quality Texas long grain rice 
were reported at $198 per ton in mid-October, down $45 from a year earlier. Prices were as low 
as $164 in June 2002. Prices for medium grain rice--grown mostly in California--actually 
strengthened early in the 2001/02 market year, a result of an almost 12-percent cut in 
California production that year. However, prices began to drop last spring after producers 
indicated an 11-percent increase in California plantings in 2002. By mid-October, high-quality 
California medium grain milled rice was reported at $265 per ton, down $22 from April. 

Because the U.S. exports more than 40 percent of production each year, events in the global 
market have strong impacts on the U.S. rice sector. The U.S. accounts for about 1.5 percent of 
global production and nearly 12 percent of exports. Because the U.S. produces high-quality rice 
for domestic and export markets, it is often at a price disadvantage to lower quality rice from 
low-cost exporters such as Thailand and Vietnam. Since June 2001, India has been the lowest 
priced exporter, a result of substantial export subsidies. China, Pakistan, and Burma are also 
major exporters. 

U.S. Rice Plantings 
Drop 3 Percent in 2002  

Despite several years of declining prices, U.S. farmers planted more than 3.2 million acres of 
rice last spring, just 3 percent below a year earlier. Plantings are projected smaller in 2002 
in all producing states except California. Long grain, which accounts for more than 75 percent 
of U.S. rice acreage, is responsible for all of the decline. 

At planting, the price outlook for long grain was lower than for medium/short grain. Long grain 
plantings this year are estimated at 2.54 million acres, a 6-percent drop from a year earlier. 
In 2001, the U.S. long grain crop was a record 165 million cwt. In contrast, combined 
medium/short grain plantings are projected at 693,000 acres in 2002, 12 percent above a year 
earlier. In 2001/02, a 23-percent drop in production (to 47.7 million cwt) boosted medium/short 
grain prices.

Six states account for more than 99 percent of U.S. rice production. Nearly all U.S. long grain 
rice is grown in the South--primarily in Arkansas, Louisiana, Mississippi, Missouri, and Texas. 
California produces more than two-thirds of the U.S. medium/short grain rice, Arkansas and 
Louisiana nearly all the rest. Although not included in National Agricultural Statistics 
Service estimates, smaller amounts of rice are grown in other states, with Florida accounting 
for most. 

Last winter, when farmers made final planting decisions for the 2002 crop, payments to rice 
producers under the marketing loan program averaged $3.14 per cwt, less than a dollar below the 
reported farm price at that time. Under the marketing loan program, when world prices are below 
the commodity loan rate, eligible producers are entitled to payment rates equal to the 
difference between the adjusted world price by class (as calculated by USDA) and the loan rate 
for rough rice. The average loan rate for all classes of rice (long, medium, and short) is 
fixed at $6.50 per cwt. By mid-May, payment rates had dropped below $2.90 per cwt when world 
prices rose slightly. Weaker world prices boosted payment rates to $3.28 by October, less than 
50 cents below reported U.S. prices at the time.

U.S. Production & Exports
At Near-Record Levels

The 2002/03 U.S. rough rice crop is projected at nearly 212 million cwt, fractionally below the 
2001/02 record. The yield, estimated at a record 6,608 pounds per acre, is up 3 percent from a 
year earlier and is the fifth consecutive year of rising average yield. The U.S. average yield 
has risen nearly 17 percent since 1998, indicating stronger annual yield growth than achieved 
during the previous decade. The stronger yield growth is due primarily to the release of 
several new higher yielding varieties in the South. In contrast, average yields in California 
remain below records achieved in the 1990s.

Beginning stocks of all rice for 2002/03 are estimated at 39 million cwt, up 37 percent from a 
year earlier and the largest since 1993/94. Imports in 2002/03 are projected at 13 million cwt, 
down fractionally from last year's record. The larger carryin more than offset the slight drop 
in production, boosting 2002/03 total supplies 4 percent to a record 263.9 million cwt. 

The supply situation varies somewhat by class. For long grain, a 130-percent increase in 
beginning stocks to 26.8 million cwt--the largest since 1987/88--more than offset a 5-percent 
drop in production to 157.4 million cwt. This boosts long grain supplies 4 percent to a record 
193.5 million cwt. For combined medium/short grain rice, a 32-percent drop in beginning stocks 
to 10.7 million cwt nearly offsets a 14-percent increase in production to 54.5 million cwt. At 
68.9 million cwt, medium/short supplies are more than 2 percent larger than a year earlier. 

In 2002/03 the U.S. is projected to export 97 million cwt (rough basis), up 3 percent from a 
year earlier and second only to the 1994/95 record of 99 million cwt. In 1994/95, emergency 
imports by Japan accounted for much of the expansion in U.S. rice exports. In 2001/02, the U.S. 
exported 94.1 million cwt of rice, 13 percent more than a year earlier. Rough rice exports 
accounted for most of the expansion. 

For 2002/03, rough rice exports--projected at a record 32 million cwt--are fractionally above a 
year earlier. Milled rice exports--projected at 65 million--are up 4 percent. Several factors 
account for the strong pace of U.S. rice exports since 2001/02. 

First, Mexico and Central America continue to import record amounts of rice, with all but a 
tiny fraction coming from the U.S. More than 90 percent of these imports are rough rice, nearly 
all long grain from the South. The U.S. is the only major exporter allowing rough rice exports. 
In 2001/02, Central America nearly doubled its rice imports from the U.S., and Mexico's imports 
of U.S. rice increased by more than 20 percent. Competitive U.S. prices, plentiful supplies, 
and declining rice production in both Mexico and Central America are behind the strong import 
growth in this region. 

Second, the U.S. price differential over comparable grades of Thai rice declined substantially 
from July 2001 through August 2002. From more than $105 per ton in August 2001, the U.S. price 
differential over Thai rice virtually disappeared by late May and remained at this record low 
level through August 2002. However, the combination of slightly higher U.S. prices and 
weakening Thai prices pushed up the difference to $20-$30 per ton in September and October. 
From 1996/97 through 2000/01, the U.S. price differential over Thai rice averaged $91 per ton. 
Thailand--the world largest rice exporter--is a major U.S. competitor, especially in certain 
Middle East countries and South Africa. In recent years, India has successfully penetrated 
these markets as well. 

Third, global rice trade has expanded every year since 2000, rising from 22.8 million tons 
(milled basis) in 2000 to a forecast 26.2 million in 2003--the second highest on record. Strong 
import growth by several top buyers--primarily Indonesia, Iran, Iraq, Nigeria, the Philippines, 
and Saudi Arabia--is responsible for most of the global trade growth since 2000. 

Long grain accounts for the bulk of the expansion in U.S. rice exports. In 2001/02, long grain 
exports jumped nearly 13 percent to 73.5 million cwt, with rough rice exports to Mexico and 
Central America accounting for most of the increase. Long grain exports are projected to 
increase more than 3 percent to 76 million cwt in 2002/03, second only to the 1994/95 record of 
81.4 million cwt. For combined medium/short grain rice, 2001/02 exports jumped 15 percent to 
20.6 million cwt. The first purchases of U.S. rice by South Korea (under its WTO minimum-access 
requirement) plus a large food aid sale to Uzbekistan were behind much of the growth. For 
2002/03, medium/short grain exports are projected to be the largest since 1987/88 at 21 million 
cwt. 

U.S. Rice Consumption 
Continues to Rise

Both total and per capita U.S. rice consumption continue to rise, with 2002/03 domestic 
consumption (not including seed use) projected at a record 121 million cwt, up almost 3 percent 
from a year earlier. Domestic consumption has expanded almost 3 percent a year since the mid-
1990s, about half the rate reported during the previous 15 years but still ahead of population 
growth. 

Factors driving expanded domestic consumption include: 

*  a growing share of Asian-Americans and Hispanic-Americans in the population (groups whose 
per capita rice consumption is much higher than the U.S. average); 

*  greater demand for ethnic foods; 

*  a variety of new rice products; 

*  versatility of rice as an ingredient in other foods or as a side-dish; and 

*  effective marketing.

U.S. per capita rice consumption has been rising steadily since the late 1970s. For 2002/03, 
per capita consumption is projected at a record 26.3 pounds, up about a quarter of a pound from 
a year earlier and double the 1978/79 level. USDA's long-term forecast projects continued 
expansion in per capita rice consumption over the next decade.

The domestic market (including consumption of imports) has expanded as a share of total use 
over the past 22 years as well. In 1980/81, the domestic market, including seed and residual 
(unaccounted loses and unreported use) accounted for 40 percent of total use, with the 
remainder exported. By 1999/2000, the domestic market accounted for nearly 60 percent of total 
use. In 2001/02 and 2002/03, the domestic market's share dropped slightly as exports rose, but 
the domestic share is projected to expand over the next decade. Food use has accounted for 
nearly all of the expansion in domestic use since the mid-1980s.

Long grain rice accounts for the bulk of U.S. consumption. For 2002/03, long grain consumption 
is projected at a record 88.7 million cwt, an increase of 3 percent from a year earlier. Most 
table rice in the U.S. is long grain. Processed foods--such as packaged mixes--use mostly long 
grain rice. For medium/short grain rice, domestic use is estimated at 36.3 million cwt, up 1 
percent from a year earlier but well below the 1997/98 record of 44.2 million cwt. Breakfast 
cereals are a major processed food use for medium grain rice. Beer manufacturers and some food 
processors can shift among rice classes based on price and availability.

Imports account for a growing share of U.S. rice consumption. In 2001/02, imports of nearly 
13.2 million cwt represented 11 percent of domestic use (excluding seed use), compared with 
less than 1 percent in 1980/81. Nearly all U.S. rice imports are varieties not currently grown 
in the U.S. Jasmine rice from Thailand accounts for 70-80 percent of U.S. rice imports. Basmati 
from India and Pakistan accounts for about 15 percent. Italy, Australia, and Egypt supply most 
of the rest. Imports are projected to continue increasing at a slightly faster pace than 
overall consumption.

Ending stocks for 2002/03 are projected at 41.9 million cwt, about 8 percent larger than a year 
earlier and the highest since 1986/87. Both long and medium/short grain stocks are projected 
higher in 2002/03. U.S. rice prices will likely face substantial downward pressure for several 
years due to large domestic supplies. 

Global Prices 
Remain Low

Global prices are just 10-15 percent higher than 30-year lows reported during much of 2001, 
despite 3 consecutive years of declining global production and ending stocks. In mid-October 
2002, export prices for Thailand's 100-percent Grade B were quoted at $193 per ton, $20 per ton 
above a year earlier but well below the 20-year average of more than $260. 

Thai prices are currently being supported by large-scale government intervention purchases. In 
the global market, Thai prices continue to face substantial downward pressure from record 
shipments of subsidized exports from India and lack of major new sales. Record or near-record 
production in major rice importing countries and continued subsidized exports from India are 
likely to prevent a significant increase in global prices in the near term. 

From April through October 2001, global prices were the lowest in nearly 30 years, with prices 
for Thai 100-percent Grade B averaging just $175 per ton. Prices began to pick up in November 
2001 and by mid-June 2002 were up $25-$35 per ton, due largely to Thai government intervention 
purchases, concern by some importers over potential El Nio crop damage in 2002/03, and a 
temporarily tight supply situation in Vietnam. Prices have dropped $15-$20 since July 2002 as 
the Thai government sold some of its rice stocks and exportable supplies have increased in 
Vietnam. 

For 2002/03, global rice production is projected at 381.2 million tons (milled basis), down 
15.1 million from a year earlier and the smallest since 1996/97. India, the second-largest rice 
producer and a major exporter, accounts for most of this year's decline, following one of the 
worst monsoons in a century. Even with the smallest crop in a decade, India has enough rice to 
remain a top exporter. In addition, production in China--the world's largest rice producer--has 
declined sharply since 1999/2000, resulting from policy changes designed to encourage farmers 
to shift rice land to more profitable enterprises. Despite several years of declining 
production, China remains a major rice exporter. In contrast to China and India, rice 
production in top Asian importing countries--Indonesia, the Philippines, Bangladesh, and 
Malaysia--is projected to remain at or near record levels this year.

Global ending stocks for 2002/03 are projected at 105.5 million tons, a 20-percent drop from 
2001/02 and the lowest since 1987/88. China accounts for the bulk of the decline in global 
stocks since 2000/01 as it attempts to draw down its burdensome rice stocks--much of it poor 
quality--which it began to accumulate in the early 1980s. India's stocks have also declined 
sharply from the 2000/01 record. For 2002/03, the global stocks-to-use ratio for rice is 
projected to be nearly 26 percent, slightly higher than wheat (22 percent) and well above 
coarse grains (15 percent).  

Nathan Childs (202) 694-5292 nchilds@ers.usda.gov 

A detailed explanation of programs affecting rice producers is located on the ERS Web Site at  
www.ers.usda.gov/briefing/rice/policy.htm


COMMODITY SPOTLIGHT

Price Recovery Elusive For Cotton

Commodity prices around the world have been relatively low since the late 1990s, and cotton 
prices remain about 30 percent below the 1990-94 average. While prices of some major field 
crops have recovered from their recent lows, cotton and rice have been left behind. Global 
ending stocks for cotton, rice, wheat, corn, and soybeans are all expected to fall during 
2002/03 (August-July), but only cotton and rice prices defy the rising trend currently enjoyed 
by other crops. Stocks are contracting substantially more for wheat, corn, and soybeans than 
for cotton, particularly in the U.S. Also, China's role in world cotton and rice consumption is 
larger than for these other crops, and through 2002/03 China appears likely to continue the 
stock reductions initiated for most major crops several years ago. 

The interaction of prices, production, and consumption is similar for most agricultural 
commodities. Major field crops like cotton, rice, wheat, corn, and soybeans are produced with 
at least similar if not in fact interchangeable inputs. Macroeconomic events tend to affect 
crops in a consistent manner across the board, and the agricultural policies of major producing 
and consuming countries also generate effects that are similar across a wide spectrum of crops. 
Less commonly, weather events that produce unexpected levels of output can affect a number of 
crops simultaneously.

From the late 1990s through 2001, cotton, rice, wheat, corn, and soybeans were all affected by 
the macroeconomic environment, particularly the strong U.S. dollar, and a slowing world 
economy. Agricultural policies in the U.S., China, and India, while each very different, were 
similar for several crops within each country: the U.S. marketing loan programs and emergency 
payments protected U.S. producers' returns, China's efforts to shrink government stocks shifted 
grain and cotton trade flows toward exports, and India's high rice and wheat support prices 
resulted in a shift toward exports as well.

During 1995-2001, world crop prices generally fell, and 2001/02 corn, wheat, and soybean prices 
averaged 10-20 percent below their average levels from the first half of the 1990s. Rice prices 
dipped 32 percent lower and cotton 43 percent. By August 2002, wheat prices had improved such 
that they were 14 percent above their 1990-94 average, and corn and soybean prices were each 
within 3 percentage points. But, cotton and rice prices remained about 30 percent below the 
1990-94 average. 

"Excess" Consumption 
Across Commodities

Generally, the correlations among commodity prices can also be observed in the correlation of 
"excess" consumption of five crops--cotton, rice, wheat, corn, and soybeans. Excess consumption 
of a commodity is the amount that world consumption exceeds production in a given year, divided 
by the total level of consumption of the commodity. Since shocks that affect these five crops 
are often common, the trends and yearly fluctuations in excess consumption will be related. 

Early in the 1990s, consumption of these five commodities generally exceeded production, and 
prices rose. During the latter half of the 1990s the opposite held true, and recently the trend 
has reversed once again. Interestingly, during 2002/03, consumption is expected to exceed 
production for all five of these crops.

The trends in excess consumption roughly correspond to trends in world economic growth. 
According to the International Monetary Fund (IMF), world economic growth, which averaged 3.9 
percent annually during 1994-97, and subsequently slowed with the Asian financial crisis, fell 
to 2.2 percent in 2001 and 2.8 percent in 2002. 

Differential response to income shocks might be one factor leading to different consumption and 
price behavior for cotton. The other commodities are food or inputs into food production, and 
consumers have less latitude with food consumption in a given year than with clothing and other 
goods. This could in part explain why cotton's excess consumption was the most consistently 
negative of these commodities starting in marketing year 1996/97, with the onset of the Asian 
financial crisis.

A number of other commodities have prices as low as cotton, particularly industrial inputs. 
According to data from the IMF, copper, coffee, sugar, and tin prices through August 2002 were 
even further below their 1990-94 averages than were cotton prices. Groundnut, lead, and prices 
for both hardwood and softwood logs were all at least 25 percent below average in August 2002. 
Metals and hardwoods are industrial inputs, as are a number of other commodities with strong 
price correlations with cotton. In fact, the correlation between these prices and cotton prices 
is generally higher than between cotton and grains. For example, cotton's world price has shown 
an 80-percent correlation with copper prices since 1990 and a 79-percent correlation with 
rubber. In contrast, cotton's correlation has been only 47 percent with wheat, and 53 percent 
with corn. Despite profound differences in production, cotton and other industrial inputs see 
correlated price changes as economic growth ebbs and flows.

Another macroeconomic development affecting all these commodities is the strength of the 
dollar. Relatively undifferentiated goods whose producers have little market power are 
particularly likely to see price changes driven by currency fluctuations, and agricultural 
commodities are a good example. Since strength of the U.S. dollar in part reflects developments 
within the U.S., the dollar has strengthened with respect to virtually every currency in the 
world. However, some currencies have weakened more against the dollar than others, and some 
countries have little involvement in one commodity but a great deal in another. 

Thus, the impact of the dollar on world prices of various commodities can differ greatly. For 
example, Argentina and Brazil account for a larger proportion of world soybean production (42 
percent) than any other commodity. Their currencies have also weakened more than virtually any 
other country recently. Weighted for foreign soybean production, the U.S. dollar strengthened 
by about 80 percent between January 2001 and October 2002. In contrast, the equivalent 
production-weighted measure for cotton strengthened by only 12 percent, and for rice only 2 
percent. Weighted by corn production, the dollar strengthened 20 percent and for wheat 
production 7 percent. The relative ranking of expected dollar impacts holds over longer time 
periods as well, so relatively low cotton and rice prices compared with other commodities do 
not seem attributable to a greater exchange-rate effect.

Also, China's recent accession to the WTO indicates its increasing integration into world 
markets, but this integration is still incomplete. Thus, China's agricultural policy decisions 
are driven by internal developments to a greater extent than if China were more fully 
integrated into the world economy. Since China is either the world's largest (rice, cotton, and 
wheat), or world's second-largest (corn and soybean meal) consumer of the commodities examined 
here, shifts in its agricultural policy can correspondingly affect world markets of these 
products. A substantial portion of the world's excess consumption in recent years is 
attributable to China's efforts to reduce its enormous government stocks. While much of the 
data on China's agriculture has been questioned at one time or another, it is clear that China 
either has been importing less in recent years or has been exporting more. One result is 
growing commodity stocks outside China, particularly rice and cotton. 

Near-Term Outlook for 
U.S. Stock-Holding 

While foreign cotton stocks in 2002/03 are projected to be the lowest in 8 years, U.S. stocks 
are expected to remain at relatively high levels when compared with the 1990s. U.S. cotton 
stocks are projected at 6.8 million 480-pound bales in 2002/03. Although 11 percent lower than 
a year ago, U.S. cotton stocks remain an astonishing 90 percent above the 1990-99 average. 
Consequently, the U.S. has increased its share of world cotton stocks considerably as foreign 
countries, such as China, have reduced theirs.

The buildup in U.S. stocks in 2001/02 was largely the result of a record crop, as the rise in 
production outpaced gains in demand. At the same time, 2001/02 foreign production matched its 
record output of 10 years earlier, pushing world supplies to their largest level ever. This 
abundant global cotton supply, along with the economic recession that began in the U.S. in 
2001, resulted in low world cotton prices in 2001/02. Subsequently, lower prices led to 
reductions in prospective cotton production in 2002 and also contributed to an increase in 
worldwide cotton demand. 

In the U.S., area planted to cotton in 2002 decreased by 9 percent to the lowest in 4 years. As 
planting time approached this spring, alternative crops became relatively more profitable. 
Declines in 2002 cotton area were largely the result of cotton farm prices falling to 30-year 
lows last season. In addition, incentives guaranteed under revenue insurance programs were less 
attractive this year due to the lower prices. 

Across the Cotton Belt, planted area declines were prominent and, as a result, 2002 production 
is currently projected at 18.1 million bales, more than 2 million bales (11 percent) below last 
season's record. Furthermore, lower cotton production is expected in each region, except the 
Southwest (Texas, Oklahoma, and Kansas), compared with 2001/02. Production in the Southwest is 
forecast 17 percent above last season as harvested area is projected to be the highest in 3 
years, while at the same time, yield is forecast to be the second highest ever. Meanwhile, 
higher yields in the Delta and West regions only partially offset the effects of the 
significant area declines experienced this season. In contrast, Southeast yields, despite only 
a slight reduction in area are projected to be the second lowest in 7 years as severe dryness 
prevailed throughout much of the growing season. Overall, U.S. cotton yield is estimated at 674 
pounds per harvested acre, 4 percent below 2001 but the second highest since 1996. In contrast, 
U.S. soybean yields are the second lowest since 1995, while corn and wheat yields are the 
lowest since 1997 and 1991, respectively.

While U.S. output is expected lower this season, demand for U.S. cotton is currently projected 
up 1 percent to 18.9 million bales, with mill use rising slightly and exports holding constant. 
Unlike the previous decade, the bulk of U.S. cotton is now going to foreign mills as spinning 
capacity in the U.S. has declined dramatically. Domestic mills have been under tremendous price 
pressure from imports as the U.S. dollar recently reached heights not seen in over a decade. In 
fact, U.S. imports of cotton products have risen for 13 consecutive years and counting. As a 
result, many U.S. mills have had to restructure their businesses, and many plants have closed. 
The decline in the U.S. spinning industry has indeed put an additional burden on the U.S. to 
export its cotton to limit stock building. Last season, U.S. exports were near 75-year highs 
and are projected to remain near this level in 2002/03. 

With the U.S. becoming more dependent on cotton exports, global supply and demand play a larger 
role in the U.S. cotton market. Global supply and demand are currently driving down world 
prices. While cotton is an annually produced commodity subject to shocks similar to other field 
crops, cotton prices, at the present time, seem to be more closely associated with nonfood 
industrial inputs, such as copper. Global manufacturing has seen a sluggish rebound from recent 
world economic activity. Prices for cotton and some other nonfood inputs have languished while 
grain prices have recovered following this summer's drought.  

Stephen MacDonald (202) 694-5305 stephenm@ers.usda.gov
Leslie Meyer (202) 694-5307 lmeyer@ers.usda.gov

COMMODITY SPOTLIGHT BOX 1

Calculating Excess Consumption
Excess consumption in this article is simply calculated as (consumption - production) / 
consumption. It measures the difference between global consumption and production as a 
proportion of the total consumption of a given commodity in a given year.

For example: USDA's estimate of world production is subtracted from estimated world 
consumption. This difference is divided by the estimate of consumption to calculate a 
percentage which is comparable across commodities. The difference is calculated as a percentage 
of consumption rather than production since consumption has less annual variation than 
production.  Weather shocks introduce substantially more variability into annual agricultural 
production than to consumption.

Averaging the estimates of excess consumption over more than 1 year removes the effects of 
weather shocks. A weather-driven change in production, or a temporary consumption shock, may 
induce an offsetting change in planted area and production or consumption in the next year. A 
moving average over 3 years removes these offsetting changes, providing a clearer picture of 
the economic conditions facing each commodity.


COMMODITY SPOTLIGHT

Sweet Potatoes: Getting to the Root of Demand

For many Americans, "sweet potato" invokes thoughts of holiday cheer. While sweet potatoes 
certainly boast a strong holiday connection (Thanksgiving, Christmas/Hanukkah, and Easter), 
this root crop also remains a popular vegetable year-round in the American South and in Asia, 
Africa, and Brazil. In the southern U.S., sweet potatoes are also referred to as yams, although 
few true yams are grown in the U.S. 

Two basic types of sweet potatoes are grown in the U.S--moist-flesh types (which feature sweet, 
orange, soft, moist flesh when cooked) and dry-flesh types (which have dry, starchy, firm flesh 
when cooked). The moist types, also known as dessert-types or soft-fleshed varieties, account 
for most of the output in the U.S. and are also the types frequently--and imprecisely--referred 
to as "yams." 

The U.S. is the world's 10th- largest producer of sweet potatoes. China produces 85 percent of 
the world's crop, followed by Indonesia (2 percent), Vietnam (2 percent), and Uganda (1 
percent). In China, an increasing share of the crop has been shifting into animal feed (largely 
for hogs) and industrial markets (largely for starch) over the past 30 years. 

Over the 1999-2001 period, U.S. sweet potato growers produced an average of 13.5 million 
hundredweight (cwt) from 90,500 harvested acres, and farm cash receipts averaged $214 million. 
According to the 1997 Census of Agriculture, sweet potatoes are grown on 1,770 farms--down 34 
percent from 1992 and 44 percent from 1987. About 25 percent of area is irrigated, with about a 
third of this acreage in California, which is entirely irrigated. Since 1992, Louisiana growers 
have doubled their irrigated area to 30 percent. Only 9 percent of North Carolina's crop is 
irrigated. 

The long-term downward spiral in production that began after the Depression has been reversed. 
Since reaching a trough in 1988, U.S. sweet potato production has trended higher, rising 15 
percent between 1989-91 and 1999-2001. Production in 2001 was the third highest since 1965. 
U.S. acreage (1.1 million) and production (48 million cwt) peaked in 1932. 

North Carolina Is Top 
U.S. Producer

Except for California, the U.S. sweet potato industry is concentrated largely in the Southeast. 
North Carolina, Louisiana, and California are the top three producing states and accounted for 
about 79 percent of the U.S. crop during 1999-2001. Mississippi and Alabama round out the top 
five states. Production in Mississippi, since bottoming out in 1989, has trended upward, 
increasing eightfold to 2.2 million cwt by 2001--the highest since 1946.

During 1999-2001, North Carolina accounted for about 37 percent of the U.S. sweet potato crop 
and 29 percent of the farms growing sweet potatoes. With production trending upward the past 8 
to 10 years, the state has remained the leading producer since 1970. When USDA crop estimates 
began in 1868, Georgia was the leading producer, with North Carolina second. The majority 
(about three-quarters) of North Carolina's output is sold in the fresh market, with the 
remainder sold for processing or used for seed stock. North Carolina markets fresh sweet 
potatoes year-round throughout the country, with substantial volume moving to New York, 
Baltimore, and Chicago. Sweet potatoes contribute about 20 percent of the state's vegetable 
cash receipts. 

Louisiana, the second leading sweet potato producer, accounted for about 24 percent of the U.S. 
crop during 1999-2001. Louisiana was the leading sweet potato state from 1943 to 1969. A 
majority of its output is used for processing (largely canning). However, the fresh-market 
share has likely been rising as much of the growth in the state's output over the past 8-10 
years appears to have gone into the fresh market. Fresh markets for Louisiana include Chicago 
and Detroit. At $46 million, sweet potatoes account for 57 percent of the state's vegetable 
cash receipts.

California, with one-fourth the acreage of North Carolina and the highest yields in the 
industry, is the third leading producer of sweet potatoes, accounting for 18 percent of the 
U.S. crop during 1999-2001. As in North Carolina and Louisiana, production has been trending 
slowly upward over the past 8-10 years. More than 75 percent of the crop is likely sold in the 
fresh market annually. Major fresh markets for California growers include Los Angeles, San 
Francisco, and Seattle. At $63 million, sweet potatoes account for just 1 percent of the 
state's vegetable cash receipts.

Exports 
Sprouting

The U.S. is self-sufficient in production of sweet potatoes and is a net exporter. Export sales 
totaled $14 million in 2001, while imports were valued at $4 million. Only about 1 percent of 
sweet potato consumption is satisfied through imports. Few imports enter the continental U.S., 
with most volume (97 percent in 2001) moving directly from the Dominican Republic into Puerto 
Rico. 

Until recently, U.S. trade in sweet potatoes has not been a significant factor in the market. 
Since the early 1990s, U.S. sweet potato exports have been on the rise. Between 1989-91 and 
1999-2001, fresh/frozen sweet potato export volume nearly tripled to 43 million pounds. More 
than 3 percent of supply is now exported--up from 1 percent a decade ago. Canada remains the 
major market for U.S. sweet potatoes, but substantial gains have been realized in the United 
Kingdom (UK). 

While volume shipped to Canada has increased, its share of U.S. exports has declined. In 2000, 
Canada accounted for 91 percent of U.S. export volume. This slipped to 82 percent in 2001 and 
stood at 71 percent through the first 6 months of 2002. Meanwhile, the UK's share has risen 
from 6 percent in 2000 to 24 percent during the first half of 2002. 

The Seasonal 
Factor

Although some sweet potatoes are sent to market directly after harvest, most sweet potatoes are 
marketed from storage after curing. Curing involves keeping a freshly harvested crop in a 
heated, humid room (typically 7-10 days but sometimes longer) to allow the skin to heal and 
set. Curing also allows the sugar content of the sweet potato to rise (as starches are 
converted to sugars), making cured roots sweeter than those sold "green."  

Some varieties can be stored for as long as a year in controlled-atmosphere storage. Because of 
their soft flesh, shrinkage and loss while in storage (as much as 2 percent a month) tends to 
be greater than for white potatoes. Sweet potatoes are typically washed, graded, and sometimes 
waxed before being shipped to market.

The period surrounding major holiday celebrations continues to dominate sweet potato sales. 
Sweet potato shipments are strongest during the fourth quarter (October-December), moving about 
39 percent of fresh sweet potatoes. The combination of holiday demand and large harvest-period 
volume (harvest activity peaks in October) keeps shipments strong during this quarter. 

Although market demand during the holidays remains robust, its share has weakened over the past 
decade with the industry working to expand year-round markets (especially in areas other than 
the South). In fact, shipment volume during the "off-season" (May-August) increased to 22 
percent of annual market shipments during the early 2000s. This is up from 19 percent in the 
1990s and 18 percent during the 1980s, reflecting improved storage quality and suggesting an 
expansion in demand outside traditional market windows. 

Seasonal price movements are those that regularly occur within a year, and are more pronounced 
when a crop is harvested and then marketed from storage. Sweet potato prices generally reach 
their seasonal highs during July and August as storage supplies run low and the new season 
begins. Prices reach seasonal lows in October with the peak of harvest. After adjusting for 
inflation, shipping point (grower) prices for sweet potatoes have remained constant over the 
past decade. Retail prices are not reported for sweet potatoes. 

Season-average sweet potato shipping-point prices gained an average of 33 cents per cwt each 
year between 1970 and 2001. The price of sweet potatoes averaged $16.10 per cwt (f.o.b. 
shipping point) during the 1999-2001 seasons, up 6 percent from the previous 3 years (1996-98), 
and 23 percent above the 1989-91 average. Through September 2002, the index of producer prices 
for sweet potatoes averaged 8 percent below a year earlier.

Per Capita 
Use Steady

On average, more than three-quarters of the annual U.S. sweet potato crop is sold as human 
food. Nonfood uses include animal feed (5-9 percent), seed (7-9 percent), farm household use 
(about 2 percent), and shrinkage and loss. In the U.S., about a quarter of the sweet potatoes 
sold for food are processed into canned products (including baby food). About 4 percent of 
sweet potatoes sold for food are processed into frozen products. A small amount (2 to 3 
percent) is chipped or dehydrated. This leaves about two-thirds of sweet potato sales for the 
fresh market.

During 1999-2001, U.S. sweet potato consumption averaged an estimated 1.2 billion pounds. On a 
per capita basis, this works out to 4.1 pounds--unchanged from 1989-91 but down from 4.7 pounds 
in 1979-81. During 2001, fresh-market use was estimated to be 2.9 pounds per person, with the 
remaining 1.4 pounds sold as processed products (largely for canning). Total sweet potato 
consumption is similar to mushrooms but exceeds green peas, cauliflower, and asparagus. 

Per capita use of sweet potatoes trended downward between the 1920 peak of 29.5 pounds and the 
early 1930s before surging briefly during the Depression. In the mid-1930s, per capita use 
embarked on a long downward trend, which lasted through the early 1980s. Despite twice falling 
to a record-low 3.7 pounds in 1993 and 1999 (due to weather-reduced output), sweet potato use 
has largely stabilized since the mid-1980s--hovering around 4.1 pounds. The recent stability in 
consumption likely reflects:

*  industry efforts to expand fresh sweet potato use beyond the holiday niche; 

*  increased consumer recognition of the nutritional qualities of sweet potatoes; 

*  introduction of sweet potato chips and fries; and

*  better quality due to improved storage and handling techniques.

While consumption has undoubtedly received a boost from these factors, several opposing forces 
appear to be offsetting the industry's attempts to raise use. These include:  

*  increased away-from-home eating; 

*  attraction to ethnic and spicy foods; and

*  greater diversity in the nation's population.

For most vegetables, the latter three market forces have been instrumental in driving 
consumption higher over the past two decades. However, the sweet potato market appears to have 
more in common with the cabbage market than, for example, the onion or broccoli markets. 
Cabbage and sweet potatoes are similar in that both have suffered long-term declines in 
consumption after peaking earlier in the last century. Both are hardy staples with some 
storability, much like white potatoes. 

But white potato growers have been able to offset declining interest in fresh potatoes with 
rising sales of frozen and dehydrated products (AO October 2002). These products are also 
featured in the rapidly expanding food-service arena and are widely accepted by most ethnic 
groups.

Sweet potatoes have had minimal success in the food-service industry, where much of the growth 
in food consumption has taken place since the 1960s. Although the industry has developed and 
marketed sweet potato fries, chips, and other new products, widespread adoption has remained 
elusive. However, the addition of sweet potato side dishes by various national restaurant 
chains appears to promise future growth in this market segment. 

While vegetables like garlic and onions have benefited from a broadening of the national diet 
to include various ethnic foods, sweet potatoes have been largely left behind. Burgeoning 
Hispanic and Asian populations over the past 20 years have brought renewed demand for peppers, 
onions, tomatoes, and dry beans, but the sweet potato industry has realized few benefits since 
these two ethnic groups are not major consumers of the moist dessert type of sweet potatoes 
that dominate the U.S. market. Many of these growing ethnic markets prefer the dry-flesh 
varieties common to their homelands.

Sweet potatoes have been called a "nutritional powerhouse"--frequently ranked among the most 
nutritious of all vegetables. Because of their orange/yellow color, they are very high in beta 
carotene (higher than carrots), which is converted by the body to vitamin A. They also contain 
the carotenoids lutein and zeaxanthin. Sweet potatoes also provide a substantial amount of 
vitamin C, are a good source of vitamin B6 and dietary fiber, and provide small amounts of 
several other vitamins and minerals, such as potassium, manganese, and folic acid. 

Like white potatoes, sweet potatoes are multipurpose vegetables. Fresh-market sweet potatoes 
can be baked, microwaved, broiled, grilled, and boiled, but can also be used in a wide variety 
of recipes such as green salads, casseroles, pasta sauces, plate garnishes, dipping vegetables 
(fresh-cut sticks), relish trays, sauted vegetable medleys, soups, stews, and stir fry. They 
also appear in processed forms as frozen (sliced, diced, french fried, pattied, twice-baked), 
dried/dehydrated (flakes, flour, chips), and canned (cut/sliced, candied, mashed, baby food, 
pie fillings). Sweet potatoes are also used in manufacturing other prepared foods such as bread 
products, custards, cookies, pies, and cakes. In some countries, alcohol is distilled from 
sweet potatoes.

Although there are no price or income support programs for sweet potatoes, USDA has regularly 
purchased processed sweet potato products for use in school lunch and other feeding programs. 
During fiscal years 1997-2001, USDA purchased about 8 million pounds annually (product weight) 
valued at about $4 million (95 percent were canned). This year, based on purchase offers 
released in August and September, USDA plans to purchase up to 30 million pounds (product 
weight) of fresh, canned, and frozen sweet potato products for donation to child nutrition and 
other domestic food assistance programs. 

Who Eats 
Sweet Potatoes?

On any given day, 1 to 2 percent of Americans consume at least one food containing sweet 
potatoes, according to data derived from USDA's 1994-96 Continuing Survey of Food Intakes by 
Individuals. This trails such popular foods as french fries (13 percent), catsup (16 percent), 
and garlic (18 percent). Fresh-market sweet potatoes are used on any given day by nearly 1 
percent of consumers, while processed products (frozen, canned, and dried) appear on the plates 
of less than 1 percent of U.S. consumers daily. The low incidence of daily consumption likely 
reflects the seasonal nature of sweet potato demand and the relatively low adoption rates by 
the food-service and industrial foods industries. 

More than many other mainstream vegetables, sweet potatoes are consumed at home (89 percent). 
This partly reflects the seasonal nature of the market with the incidence of home cooking 
featuring traditional holiday favorites, as well as the lack of convenient products that can be 
used in restaurant and institutional settings. 

In the away-from-home market, fast food accounts for just 2 percent of sweet potato 
consumption, with standard full-service restaurants accounting for another 5 percent. Other, 
largely institutional outlets account for another 4 percent of consumption. Few ethnic 
restaurants (e.g., Italian, Chinese, Lebanese, Korean, and Indian) use sweet potatoes in their 
cuisine. Since the USDA survey in 1996, fresh-market use of sweet potatoes has likely increased 
in full-service restaurants from the 3 percent indicated at that time, with recent 
introductions of sweet potato sides on menus. 

Sweet potatoes are most popular in the South, where the majority are produced. As defined by 
the Census, the South is the largest region, accounting for 35 percent of the nation's 
population, 42 percent of fresh-market sweet potato consumption, and 54 percent of processed 
consumption. Per capita use of all sweet potatoes in the South was estimated to be 5.7 pounds 
in 2001, followed by the Midwest (4.3 pounds), and the Northeast (3.9 pounds). Those in the 
West eat the fewest sweet potatoes (2.6 pounds), with processed products amounting to 0.8 
pounds. 

Consumption figures from the USDA food-intake survey revealed that Black consumers exhibit a 
greater preference for sweet potatoes than other consumers--an estimated 7.4 pounds per person 
in 2001 (4.2 pounds processed and 3.2 pounds fresh). Black consumers, who make up 13 percent of 
the U.S. population, accounted for 21 percent of sweet potato consumption--about 70 percent 
greater than the U.S. average. This may largely explain the higher consumption in the South, 
since Census data also indicate that more than 50 percent of Blacks reside there. 

Whites (non-Hispanic) consumed slightly more fresh sweet potatoes (3 pounds) than the national 
average (2.9 pounds), but consumed proportionately fewer processed sweet potatoes (1.1 pounds) 
than the average (1.4 pounds). Among Hispanics, Puerto Ricans were found to consume more than 7 
pounds per person, with part of their supply imported from the Dominican Republic.

Middle-income consumers appear to favor sweet potatoes most. Households with incomes between 
131 percent and 350 percent above the poverty level (the cutoff point for food stamp 
eligibility is 130 percent of the poverty level) represent 42 percent of the U.S. population, 
but consume 47 percent of all sweet potatoes. When looking at the fresh market, both middle- 
and upper-income consumers reported eating proportionately more than their population shares. 
For processed products, middle- and lower-income consumers reported consuming more than their 
respective population shares, while the upper-income group consumed substantially less. 

In the aggregate, sweet potato consumption is relatively similar among males and females with 
males (4.5 pounds) eating slightly more per capita than females (4.2 pounds). In general, 
consumption (largely of processed products) starts strong with children under 12 years of age, 
likely reflecting use of baby food and sweet candied products. Use then declines sharply as 
children reach their teens, with teenage girls eating less than 1 pound per capita. Consumption 
then begins to pick up as people reach adulthood, with per capita consumption more than 
doubling for females aged 20-39 (2.8 pounds) and 40-59 (6.9 pounds). Males 60 years of age and 
older account for 7 percent of the population but consume 16 percent of all sweet potatoes--the 
equivalent of 10.5 pounds per person in 2001 and the highest among all age groups. Females in 
this age group were the second strongest consumers, with the equivalent of 7.1 pounds per 
person. This suggests that a taste for sweet potatoes may be acquired with maturity. 

Based on production and use data, it appears that U.S. sweet potato demand has stabilized 
during the past decade and may be poised for growth. Substantial promotional efforts made by 
national and state industry associations likely played a role in stemming the long-term 
declining trends in per capita use. However, it seems clear that further concentrated effort 
will be required to coax the highly nutritious sweet potato out of the holiday shadow and into 
everyday life.  

Gary Lucier (202) 694-5253 glucier@ers.usda.gov
Jane Allshouse (202) 694-5449 allshouse@ers.usda.gov
Biing-Hwan Lin (202) 694-5458 blin@ers.usda.gov

COMMODITY SPOTLIGHT BOX 2

Sweet Potatoes--What They Are, & Are Not

Sweet potatoes are not yams. The yam is a starchy tropical root crop of Asian or African 
origin, unrelated to the sweet potato family. Nor are sweet potatoes (Ipomoea batatas) related 
to white (Irish) potatoes. 

The word "yam" was originally derived from the African word "nyami."  But what is marketed in 
the U.S. as a "yam" is really a type of sweet potato. True yams bear no relationship to the 
sweet potato. The roots, which tend to be big, rough, and starchy, are grown in tropical areas 
largely outside the U.S. In some areas, the term "yam" has been used in marketing to 
differentiate moist-type sweet potato varieties from the less common dry types. When used to 
refer to sweet potatoes, the word "yam" must be accompanied on labels with the words "sweet 
potatoes" under USDA requirements.

The outer skin of a sweet potato tends to be smooth and can vary in color from coppery orange 
to pale yellow with several variations, including purple. The inner flesh can range from white 
to yellow to red with deep orange flesh most common today. The so-called dry varieties of sweet 
potatoes tend to be dry, light in color, and firm in texture when cooked.

Native to tropical America (likely from South America), sweet potatoes are part of the morning 
glory (Convolvulaceae) family. Columbus observed them during his expeditions to the West 
Indies, while DeSoto later found sweet potatoes growing in what is now Louisiana. Native 
Americans were reportedly growing sweet potatoes in present-day Georgia when English settlers 
arrived. 

The Incas of South America and Mayans of Central America reportedly grew several varieties, one 
for food and others for coloring materials to use in paints. As a tropical plant, sweet 
potatoes do not thrive in cool weather and therefore did not readily become popular in Europe, 
even in the warmer regions of the Mediterranean. Sweet potato seed stock is thought to have 
been spread by Spanish and Portuguese explorers to various regions of the world. 

Sweet potatoes for commercial use are grown largely from transplants--plantlets (slips or 
sprouts) produced from the roots of the previous crop. These are most commonly produced from 
certified root stock, but can be produced from farm-held seed stock.

In some countries, the leaves and shoots of the sweet potato plant are also used for food, as 
they are a nutritious leafy green, high in iron and vitamins A and C. In many parts of Africa, 
sweet potatoes are a staple food crop. In Uganda and Kenya, growers chip and sun-dry a portion 
of the crop for later use.

COMMODITY SPOTLIGHT BOX 3

The Carver Connection

George Washington Carver, well known for his work with peanuts, also figured prominently in the 
sweet potato industry of the early 20th century. According to the George Washington Carver 
Foundation at Tuskegee University, Mr. Carver counseled growers in the South to rotate crops to 
help condition and enrich depleted soils. To this end, he helped increase production of sweet 
potatoes by creating new markets for growers through development of a myriad of products 
derived from sweet potatoes. Notable products included textile dyes, stains, shoe polish, 
starch, inks, wood fillers, hog feed, alcohol, sugar, candy, vinegar, and various dehydrated 
products.


COMMODITY SPOTLIGHT

Will the Farm Act Get Pulses Racing?

Dry peas, lentils, and small chickpeas--pulse crops--are relatively minor in acreage, supply, 
and use in the U.S. compared with corn, soybeans, and wheat. However, pulses could be poised 
for expansion due to their inclusion in the 2002 Farm Act. New marketing loan benefits, 
combined with agronomic advantages and a growing number of processors, may increase the 
attractiveness of planting pulse crops, particularly in the Northern Great Plains. 
Accommodating increased supply is likely to hinge on expanding current markets and creating new 
ones. 

Location, Location, 
Location

In the U.S., dry peas and lentils have traditionally been produced in the Palouse, an area 
centered along the borders of eastern Washington, northern Idaho, and northeast Oregon. 
Chickpeas, on the other hand, have long been grown in California. Since the mid-1990s, acreage 
of all 3 crops has expanded to the Northern Great Plains, with North Dakota emerging as the 
region's leader. 

Most dry peas grown in the U.S. are green, but yellow pea acreage increased 12-fold between 
1993 and 2001. Harvested acreage of green peas and lentils has trended upward slightly over 
time. Chickpea acreage has soared since the late 1980s, reaching 128,000 in 2001.

The relatively flat terrain of the Northern Great Plains is more conducive to large-scale pulse 
production than the steep hills and valleys of the Palouse. Pulse production in the Pacific 
Northwest requires specialized harvesting equipment, while farmers in the Northern Great Plains 
use standard equipment (the same machinery as for cereal grains) to harvest their crops, giving 
them a cost advantage over growers in the Palouse. Abundance of relatively inexpensive land in 
the Northern Great Plains compared with the Pacific Northwest is another factor in the rapid 
expansion of pulse production in the Northern Great Plains.

The two regions differ somewhat in the pest problems they face. Pulse production in the Palouse 
may be affected by insect pests, fungi, and diseases. While farmers in the Northern Great 
Plains typically do not experience severe insect infestations, they deal with more severe fungi 
and disease problems than do farmers in the Palouse. However, this situation may change if 
aphid and lygus bug infestations become more severe and economically costly in the Northern 
Great Plains. 

One of the primary problems affecting pulse crops is aschochyta blight, a lesion-causing fungus 
that devastates chickpeas and severely damages lentils. Peas may be afflicted by powdery 
mildew, which stunts growth and affects seed yield and quality, and by fusarium wilt, which 
results in seed decay and collapse of the plant from rotting roots. Lentils can be adversely 
affected by powdery mildew as well as by sclerotinia white mold.

Lack of commercial pesticides makes pest control difficult. In the past, chemical companies did 
not register their products for these crops with regulatory authorities due to the high 
research and development costs and the relatively small sales compared with other field crops. 
In crop protection, there are two types of approval for chemical usage: full-label and Section 
18. Full-label products are granted complete approval, and sales are unrestricted. Section 18 
approval allows the U.S. Environmental Protection Agency to permit emergency use of 
unregistered pesticides for a temporary period of time--usually one growing season--under 
special circumstances, such as disease, heavy pest pressures, or ineffectiveness of other 
products. Producers will have more pest control options as chemical companies register their 
products for pulses. 

Marketing 
Issues

The USA Dry Pea and Lentil Council (USADPLC), an industry group, is the primary organization 
promoting dry peas, lentils, and chickpeas. The USADPLC emphasizes premium quality, and thus, 
most U.S. pulses are channeled to food use (domestic and export). Current studies conducted by 
USDA's Agricultural Research Service and land-grant universities on dry peas and lentils are 
focusing on increasing yields, multiple disease resistance, sustainability and agronomic 
adaptation, seed shape and color, and cooking characteristics. For chickpeas, these 
organizations are working to increase resistance to aschochyta blight and to develop a large 
seed. In some markets, such as in India, price premiums are paid for larger seeds. State trade 
associations are also involved in marketing and research.

Low prices in the domestic and world markets (relative to U.S. production costs) have limited 
pulse production in the U.S. Also dampening production prior to 2002 was uncertainty over 
benefits relative to other crops that receive government payments--the marketing loan gains and 
loan deficiency payments that shield growers from substantial price risk. Thus, many producers 
opted for program crops with marketing loans, and grew pulses only when they were agronomically 
beneficial. 

Virtually all pulses are marketed through processors. Pulses are sold to processors who clean, 
sort, and grade them. Processors decorticate (shell) lentils and split peas for the domestic 
market, but exports are usually cleaned only. Chickpeas are not typically split. 

A portion of production is grown under contract, but over 80 percent is sold in the spot 
market. Contracts usually specify both quantity and price. Processors may contract with growers 
to ensure that they fulfill their own contracts with food manufacturers. In many cases, growers 
sell their crops to the processors that sold them seed. Longstanding relationships have 
developed between producers and processors, since the number of processors is relatively small.

Domestic pulse prices are based on USDA grading standards. While prices are discounted for 
lower quality, premiums are sometimes paid for quality superior to the U.S. No. 1 grade (e.g., 
Spanish-quality lentils and high-quality green peas). Some processors believe that the quality 
of pulse crops in the Palouse is more consistent than in the Northern Great Plains. 

Processors base payments to producers, in part, on processor margins and world prices. In the 
case of dry peas, U.S. prices are greatly affected by Canadian supply. Canada is the world's 
largest producer of dry peas, and Canadian infrastructure keeps shipping costs relatively low. 
Canadian dry peas are transported by rail to export ports in bulk quantities, and the newer and 
larger port facilities have invested in high-speed equipment that loads product directly onto 
ocean vessels without damage. 

Prices received by U.S. lentil growers depend primarily on demand from India, where consumption 
is high and production usually falls short of use. In that country, wheat and rice are more 
attractive because they are higher yielding and more profitable than pulses. The Indian 
government also offers procurement programs and higher support prices for wheat and rice. 
Exportable supplies from major competitors (Australian and Canadian) also affect U.S. lentil 
prices. 

Domestic chickpea prices depend on conditions in major foreign markets such as Turkey and 
Mexico. Stiffening international competition and larger domestic supply have led to declining 
U.S. pulse prices.

Dry peas, lentils and chickpeas are branded by processors in the Palouse, but not in the 
Northern Great Plains where the industry is still developing. Product branding will likely 
appear in North Dakota in the near future. Processors use brand names and logos to invoke 
images of quality and instill loyalty among customers. In most instances, one brand covers 
several different kinds of pulses. Some processors use different brand names to indicate 
various quality levels. Several firms use different product lines for domestic and export 
markets.

U.S. domestic food use of dry peas, lentils, and chickpeas is small, with pulses sold mainly to 
food manufacturers (e.g., soup makers) and bagged for sale in grocery stores. U.S. per capita 
dry pea and lentil consumption (all uses) has remained below 1 pound annually for three 
decades. While per capita consumption declined for many years, it rose rapidly during the 
latter half of the 1990s as output expanded in the Northern Great Plains, although it is 
unclear whether the additional supply was used for human consumption or for feed.

In recent years, 47 percent of dry pea and lentil production was exported for feed and food 
uses, including U.S. food aid. Export shipments of yellow peas and chickpeas were significantly 
smaller. In 2001, a large portion of dry pea exports was shipped to the Philippines, the 
European Union (EU), Canada, and India. The EU uses dry peas for animal feed, while Canada is 
strictly a pass-through market, with U.S. shipments continuing on to other countries. In 2001, 
the U.S. exported most of its lentils to the EU and African countries. The primary markets for 
larger, U.S. kabuli chickpeas are India, Canada, and the EU (especially Spain). USDA's 
Commodity Credit Corporation (CCC) is a substantial purchaser of pulses. The CCC obtains 
commodities from processors and then ships them as food aid (particularly to African nations).

The USADPLC is attempting to expand sales of high-quality U.S. products (particularly lentils 
and canned peas) in the EU. Following successful efforts in Spain, the organization is focusing 
on Italy, Germany, and France. The association is also marketing food-grade peas and value-
added items (snacks and canned peas) in Southeast Asia, especially the Philippines and 
Indonesia. 

Feed peas are also being promoted in Southeast Asia and China, where they are used to 
manufacture starch. In addition, the USADPLC is taking steps to promote high-quality, branded 
U.S. products (such as chickpeas) in the Middle East and North Africa to meet demands of the 
rising middle class in those regions.

Most processors export through brokers rather than directly, as brokers typically have many 
contacts and specialize in certain markets. In addition, brokers are knowledgeable about 
designing contracts and have the financial capability to absorb risks (e.g., currency 
fluctuations and default). In certain instances, large processors export directly, usually to 
low-risk countries such as Europe and, to a lesser extent, Asia. 

Due to its relatively high pulse prices, the U.S. is at a disadvantage in the world market. The 
price levels are primarily the result of four factors:  

*  U.S. pulses are high-quality commodities, commanding price premiums. Many price-sensitive 
segments of foreign markets are unwilling to pay significant premiums for U.S. quality, 
especially when lower cost pulses from other countries are plentiful. For example, India 
imports many of its pulses from Burma, Canada, and Australia, where both prices and quality are 
lower than in the U.S. 

*  U.S. transportation costs are relatively high. Long distances cause high trucking costs, 
particularly in the Northern Great Plains. Rail rates to ports are also high. 

*  U.S. exporters bag and containerize shipments in order to maintain quality. While this 
results in less product damage, the process is more costly than bulk shipping. 

*  The high value of the U.S. dollar relative to other currencies makes U.S. exports more 
expensive than those from other countries. 

The U.S. competitive position is also affected by the relatively small acreage planted to dry 
peas, lentils, and chickpeas. This makes it difficult for the U.S. to consistently produce 
enough pulses to supply countries that could rely on them as a primary source of protein (e.g., 
India) or animal feed.

New Marketing Loan 
Programs: How Much Impact?

The new marketing loan programs in the 2002 Farm Act mark the first time that pulse growers can 
receive farm program benefits if prices are low. Supporters expected these programs to help 
stabilize producer revenue, expand existing markets, and develop new ones. During the 2002/03 
and 2003/04 crop years, loan rates are set at $6.33 per cwt for dry peas, $11.94 per cwt for 
lentils, and $7.56 per cwt for small chickpeas. Loan rates will average about $0.12 per cwt 
lower in the 2004/05-2007/08 crop years.

USDA's Farm Service Agency announced that the loan rates and repayment rates for these pulse 
crops will reflect U.S. No. 1 grade quality. However, discounts will be applied to both loan 
and repayment rates for grades of lower quality that are placed under loan. All grades of a 
particular commodity will be eligible for a marketing loan benefit payment equal to the 
difference between the commodity's national loan rate and repayment rate, thereby providing 
producers protection from low prices. 

Despite the promise of marketing loan benefits to producers, acreage planted to lentils and 
chickpeas fell in 2002. At planting time, the 2002 Farm Act had not been passed, and pulse 
farmers apparently responded to low commodity prices rather than potential marketing loans. In 
contrast, dry pea acreage rose in 2002, due mainly to higher market prices. 

This year's drought seems to have resulted in lower yields and some quality loss in the 
Northern Great Plains. However, damage to the Canadian crop is much more severe.

Will the new Farm Act significantly boost acreage? The incentive to plant dry peas, lentils, 
and small chickpeas would have been higher if repayment rates had been based on U.S. No. 3 
grade quality. Reduced price risk may encourage planting. High wheat prices will also likely 
discourage pulse plantings in 2003. Even with marketing loans, planting flexibility 
restrictions will limit the impact on small chickpea acreage.

Factors in addition to the Farm Act provisions will come into play when considering the future 
of the industry. Given relatively small domestic food use, other markets need to be developed 
and/or expanded in order to accommodate any increases in supply. Many processors and industry 
representatives believe that a significant increase in domestic pulse consumption is unlikely 
without the introduction of new food products. Potential avenues being investigated include 
value-added processing, which could help the development of such products as snacks, bread, 
noodles, and precooked/dehydrated products.

Research has shown that dry peas can be used successfully in feed rations, providing sufficient 
energy and protein. However, their relatively high price, combined with significant 
transportation costs from production regions to feed-deficit areas, make peas less attractive 
than corn and soybean meal. Feed use could be an enormous market if pea production expands and 
transportation infrastructure improves to the point where their delivered prices are 
competitive with other feed inputs. The U.S. industry is taking steps to develop new markets 
overseas with value-added products and the inclusion of peas in feed rations in Asian 
countries.

Domestic transportation infrastructure has been a constraint, particularly in the Northern 
Great Plains. High transportation costs may hinder market expansion unless the situation 
improves. 

Processors, exporters, and industry representatives generally agree that if production of these 
commodities does expand, it will likely occur in the Northern Great Plains rather than in the 
Palouse, because of greater land availability, lower land costs, and flatter terrain. While 
production outside this region is possible, expansion will likely be constrained by the fact 
that pulses are cool-season crops. Pulse acreage may increase in Nebraska, eastern Montana, 
Colorado, and Wyoming, while Arizona and New Mexico could see greater acreage planted to 
chickpeas. 

Differences in the qualities produced may aid the industry's expansion. Producers in the 
Palouse foresee the market for these pulse crops becoming segmented, with the Palouse supplying 
premium grades and the Northern Great Plains producing feed-quality and lower quality food-
grade pulses. A dedicated supply of lower grade pulses may increase the feasibility of a feed-
pea market as well as boost the competitiveness of U.S. exports in the world market.  

Gregory K. Price (202) 694-5315 gprice@ers.usda.gov 

COMMODITY SPOTLIGHT BOX 4

Pulses Add Nitrogen to the Mix

Dry peas, lentils, and small chickpeas fall within the general category of "pulse crops," which 
are members of the leguminosae (pea) family. The ability to fix nitrogen in the soil reduces 
the need for fertilizers. For this reason, pulses are generally grown in rotation with other 
crops. 

Specifically, bacteria in the soil called rhizobia infect the roots and form nodules that take 
gaseous nitrogen from the air and convert it into a form plants can use. Pulses have a high 
nitrogen requirement, and innoculants are often used to increase the rhizobia population in the 
soil and aid the nitrogen fixation process. Innoculants may be used to treat either the seed or 
the soil. Granular-based innoculants are costly but popular, due to their ease of use.

COMMODITY SPOTLIGHT BOX 5

Small Chickpeas: How Small?

Small chickpeas are defined as those that drop through a 20/64 screen. Both the desi and kabuli 
types can meet this definition. Desi chickpeas are naturally small, but the kabuli type is 
generally larger. Kabuli chickpeas may fall through the sieve if they are small-sized varieties 
or have been affected by adverse weather and/or agronomic conditions.


WORLD AGRICULTURE & TRADE

EU Enlargement: The End Game Begins

Ten Central and East European (CEE) countries are engaged in intense negotiations with the 
European Union (EU) for eventual membership. The official position of the EU is that 8 of the 
10 will be ready to join in 2004--Poland, Hungary, the Czech Republic, Slovakia, Slovenia, 
Estonia, Latvia, and Lithuania. Two others--Bulgaria and Romania--are farther behind in their 
preparations and are not expected to be ready for membership until 2008.

In December 2000, EU heads-of-state drafted the Treaty of Nice to adapt EU institutions to the 
increased political complexities of a Union of 27 rather than 15.  In October 2002, Ireland 
became the last current EU member to ratify the treaty, removing the final legal obstacle to 
enlargement.

Accession could bring significant changes in the structure of agricultural production and trade 
for the CEEs themselves, including large increases in output of feedgrains, beef, and poultry. 
Impacts on world trade are likely to be small, but enlargement could alter the mix of U.S. 
exports to the region. U.S. grain exports to the CEEs have already fallen almost to zero as 
their livestock sectors have declined, so enlargement would have little impact on that market. 
But the U.S. could lose much of the large poultry market as CEEs adopt specific EU sanitary 
requirements. At the same time, a rise in CEE incomes as a result of EU membership could create 
opportunities for larger exports of other high-value products. 

The Enlargement 
Timetable: Can It Be Met?

Some key issues need to be resolved before the CEEs can join the EU, and it is not at all 
certain that all eight will be ready to join by 2004. If the CEEs are to meet that deadline, 
all negotiations must be completed before the Copenhagen Summit on December 13, 2002. At that 
summit, the EU will officially decide which candidates are eligible to join and will invite 
those candidates to begin the ratification process. For candidates not meeting the December 
deadline, accession could be delayed indefinitely.

In 30 policy areas, known as chapters, the EU and the candidate countries must reach agreement 
before they can be invited to join. These chapters cover areas such as free movement of capital 
and labor, judicial institutions, transportation, fisheries, regional policies, industrial 
policy, taxation, and agriculture. Most of the chapters are now closed (meaning the EU and the 
candidate countries have reached an agreement on the issues.)

For most of the candidates, the only remaining chapters to be completed are agriculture, 
competition, and budget and finance. The competition chapter mainly concerns national-level 
programs providing tax breaks and other assistance to foreign investors, and officials in the 
candidate countries do not expect this to be much of a problem. The budget and finance chapter 
concerns new members' contributions to the EU budget and is somewhat contentious because the 
candidate countries want to ensure that they are not net contributors to the EU budget (i.e., 
that they not pay in more than they benefit). 

The agriculture chapter is the most difficult of the open chapters, and there are serious 
issues to be resolved before it is closed. There are two subchapters: one concerning 
veterinary, sanitary, and phytosanitary issues, the other concerning direct government payments 
to producers. Many of the candidates have completed negotiations on the first subchapter and 
have won transition periods for the requirements that are most difficult to satisfy. But a far 
more contentious issue is the level and timetable over which the direct payments currently 
enjoyed by farmers in the EU will be extended to farmers in the new member countries (AO 
October 2002). The EU, concerned about the budget impact of enlargement, is proposing to phase 
in these payments over 10 years, starting with 25 percent in the first year after accession. 
CEEs have refused so far to accept such a proposal, insisting on equal treatment. The outcome 
of these negotiations will have some effect on levels of agricultural output but an even 
greater impact on the eventual structure of agriculture in the new member countries.

A related issue is whether new members will be allowed to maintain national-level policies. In 
the current EU there are no national support programs, only one common agricultural policy. But 
some candidate countries, such as Hungary and Poland, provide significant levels of both market 
price support and a variety of investment aids and direct income support. If CEE farmers lose 
the support they now enjoy and then get only 25 percent of the support currently going to EU 
farmers, the result could be a significant loss in net income for some CEE farmers. The 
consensus that seems to be emerging is that CEE governments will be allowed to continue levels 
of national support necessary to keep their farmers on a par with farmers in the current EU-15.

Enlargement Will Change 
Some Commodity Markets

USDA's Economic Research Service (ERS) analyzed the potential impact of enlargement on 
commodity markets in CEE countries, assuming no change in EU agricultural policy from the 
Agenda 2000 agreement. The analysis focused on the three largest agricultural producers among 
the eight CEEs expecting to join in the first wave--Poland, Hungary, and the Czech Republic. 
The analysis used a partial equilibrium model known as ESIM.

In the early 1990s, producer prices in the CEEs for most commodities were substantially below 
those in the EU. Researchers therefore concluded that accession could lead to enormous 
increases in CEE output of both crop and livestock products. In recent years, however, there 
has been considerable convergence between CEE and EU prices. Of particular interest in 
observing relative prices in 2000:

*  Wheat prices in Poland and Hungary were above the EU intervention price. The Czech wheat 
price was only marginally below the EU price.

*  Corn prices in Poland and the Czech republic were above the EU price. The Hungarian price 
was slightly below.

*  Rye prices, on the other hand, were still substantially below the EU intervention price.

*  Pork prices were nearly the same in the CEEs and the EU.

*  CEE beef and poultry prices remained substantially below the EU price.

Two of the most important reasons for this convergence are changes in exchange rates and the 
intervention policies pursued by the CEEs. Since 2000, Polish, Czech, and Hungarian currencies 
have appreciated against the euro. In addition, in an effort to align their policies with those 
of the EU, the CEEs have intervened strongly in some markets, particularly grain. 

A third reason is quality, which is particularly important for pork. Prices used for comparison 
were prices paid for the top grade of the EU grading system. The grading system evaluates 
carcasses mainly in terms of lean meat content. In the three CEE countries, the average lean 
meat content has been increasing, and an increasingly higher share of pork meets the top three 
grades of the EU grading system. This trend is the result of a steady trend towards 
consolidation in the meat industry and investment support provided by CEE governments (see AO, 
January 2002 for more discussion).

Following are highlights of the potential impacts of the three countries' membership in the EU 
as indicated by ERS analysis:

*  CEE wheat output declines in Poland and Hungary. Production rises slightly in the Czech 
Republic, but total output for the three declines. Total wheat output for the 18 EU member 
countries declines, and net exports decline.

*  Output of barley and rye increases in all three CEEs. The three remain net importers of 
barley, but the combined imports of these crops decline. The three produce large surpluses of 
rye, adding to already high EU intervention stocks.

*  CEE pork output and consumption change little.

*  CEE beef output rises, but, because most CEE cattle are dual purpose dairy/beef animals, 
output rises are constrained by the EU dairy production quota. Even so, consumption falls 
drastically as prices rise, leading to higher net exports.

*  CEE poultry output and net exports rise.

*  Output and consumption of oilseeds change little.

Direct Payments: 
EU & CEE Proposals

Two sets of direct payments were considered in the ERS analysis:

*  For arable crops--i.e., grains and oilseeds--EU producers receive a per hectare payment 
calculated as a per ton amount multiplied by a so-called reference yield. These were introduced 
in the 1992 Common Agricultural Policy (CAP) reform as "compensation payments" intended to 
compensate EU producers for cuts in support prices that came with the reform. The reference 
yield is defined for each region based on historical average yields for that region. These 
payments are also subject to a regional area ceiling, again based on recent historical 
averages.

*  There are a variety of payments for beef cattle: a suckler calf premium, paid twice yearly 
for each calf, and a premium for bulls and steers, paid twice in a lifetime. There is also a 
slaughter premium paid per animal at slaughter. All these premia are limited by regional herd 
ceilings based on historical averages and limits on stocking density (number of animal units 
per hectare.)

The payments were intended to be decoupled from production decisions, but in fact, most 
analysts agree they are only partially decoupled, in that farmers must be operating their farms 
in order to receive the payments.

The EU Commission has been concerned about the cost of extending the full range of these 
payments to producers in the new member countries. In light of that concern, the Commission on 
January 30, 2002 issued its formal position regarding direct payments. The proposal calls for a 
10-year transition period before CEE producers are eligible for the full range of direct 
payments enjoyed by current EU members. CEE producers will receive only 25 percent of the 
payments in the first year following accession, gradually increasing to 100 percent by the 10th 
year. 

The CEE candidates have so far refused to agree to such a transition period, arguing that the 
single-market competition rules require equal treatment. They claim this will relegate CEE 
farmers to permanent second-class status, and that it will be impossible to compete with EU 
producers who receive greater income support. The EU Commission, in turn, contends that 
extending 100 percent of the payments to CEE producers in the first year following accession 
would slow down the restructuring of CEE agriculture that the Commission believes is essential 
if the new members are to be competitive in the single market.

A related issue under negotiation is the level at which the various supply controls under the 
CAP will be set for the new members. One set of supply controls involves the ceilings at which 
the direct payments will be capped. The other concerns national production quotas for milk and 
sugar. The EU has proposed to set these ceilings at the 1995-99 average area, yield, and herd 
levels. The candidates have all requested higher ceilings.

For each commodity, the candidates are requesting limits close to what they view as their 
potential. In most cases these are levels achieved in the 1980s during the Communist era. Since 
those levels were achieved in a system of high subsidies and distorted output prices, it is not 
clear that in a free market such levels would be economically feasible.

In fact, ERS analysis suggests that the differing positions on direct payments will not have a 
great impact on production. Two scenarios illustrate the results for Poland.

*  Scenario 1 is the EU proposal: a 10-year phase-in with ceilings based on 1995-99 averages; 
Polish farmers receive 25 percent of payments the first year after accession. 

*  Scenario 2 represents the Polish request: Polish farmers receive 100 percent of the payments 
in the first year following accession, and ceilings are set at the levels requested by the 
Poles.

The results suggest that, for the most part, these differing positions would not greatly affect 
output of arable crops and meat. However, the dairy quota could make a larger difference. 
Poland currently produces over 12 million tons of milk per year. The EU proposal would entail a 
significant decline in Polish milk output. Results are similar for Hungary and the Czech 
Republic.

However, the two proposals would have greater implications for farm income. Changes in farm 
income will be more serious if the candidate countries are forced to give up national support 
policies. One Polish expert estimated that if these policies are cancelled and Polish wheat 
producers do not receive full direct payments, their revenue could fall by 30 percent. 
Declining farm income, coupled with strict EU quality, sanitary, and veterinary regulations, 
could force many small producers to leave farming.

The EU proposes to offset the lower payments with increased funding for rural development 
through the Structural Funds, a program that already exists for funding development in 
disadvantaged regions in the current EU. The hope is that these funds will generate 
nonagricultural employment in rural areas, absorbing the labor forced out of agriculture.

U.S. Trade with an 
Enlarged EU

The transition of the CEEs toward a market economy has already brought about significant 
changes in U.S. exports to the CEEs, and EU enlargement could bring further changes. In the 
late 1980s, the principal products exported to the region were wheat, corn, and soybeans. As 
the region's livestock sectors declined, demand for these products fell off and U.S. exports of 
these commodities to the region dropped sharply. However, there was also a significant increase 
during the last decade in U.S. poultry exports to the region, principally to Poland and the 
Baltic States. Enlargement is likely to have little impact on U.S. grain exports to the CEEs, 
but the U.S. could lose much of the poultry market.

Declining feed demand is not the only reason for declining demand for U.S. grain. U.S. corn 
exports have also been affected by zero tolerance for ragweed seed on the part of Poland and 
Bulgaria. U.S. wheat exports have been undercut by low-priced Black Sea wheat--primarily from 
Russia and Ukraine, and to a lesser extent from Bulgaria and Romania. 

Upon accession, the candidate countries will be required to give up their ban on ragweed seed, 
since the EU does not maintain a zero-tolerance policy. However, all EU restrictions on 
genetically modified corn will apply, and CEE corn output will also likely rise, thus reducing 
demand for imported corn. According to ERS analysis, CEE and EU net wheat imports could rise 
slightly with an enlarged EU. But it is likely that this demand will be met by Black Sea rather 
than U.S. wheat.

The U.S. poultry market in the CEEs was worth $83 million in fiscal year 2001. The EU currently 
bans all U.S. poultry meat because of a ban on treating carcasses with chlorine. Unless the 
issue is resolved, all acceding CEE countries will also ban U.S. poultry upon accession. 
Transshipments through Poland and the Baltic countries to Russia would be allowed to continue. 

However, other markets could expand after accession. During the past decade, the U.S. has 
expanded exports of a number of high-value products. Products that bear watching include pet 
foods and snack foods, especially raisins, popcorn, and nuts. To the extent that EU accession 
generates higher incomes for the CEE populations, demand for these and other processed and 
packaged foods could rise.

Prospects for U.S. exports also depend on developments in the CEE livestock sectors. Any rise 
in CEE livestock output could increase demand for soybeans and other nongrain feeds. The U.S. 
has also developed a market for animal genetics--baby chicks, bull semen, and cattle embryos--
in the region. The principal customer for these products so far has been Hungary, but if 
accession stimulates greater poultry output and the development of specialized beef herds, 
demand for such products could rise in other CEE countries.

Such promising developments can come about only if accession results in higher incomes for the 
CEE populations. Any potential for rising income depends in turn on creation of new and higher 
paying jobs in the region. Unemployment is already high in some of the candidate countries--
reaching 18 percent in Poland in 2001. Accession will almost certainly decrease agricultural 
work in countries such as Poland, particularly if the EU prevails on the issue of direct 
payments. Whether this labor can be absorbed by other sectors is an open question.

Next Few Months 
Are Critical

The December Copenhagen Summit will decide which candidates are ready for EU membership. The 
accession treaties will be signed in March. After that, the treaties must be ratified by EU 
member states, and each candidate will hold a referendum. 

The outcome of the ratification process is by no means guaranteed. Some member states have 
serious doubts about the benefits of enlargement. Likewise, there is serious opposition to EU 
membership in some of the candidate countries--Poland's farmers are strongly opposed, and there 
is considerable ambivalence in the three Baltic countries. To a large extent, the outcome of 
referendums in the candidate countries will depend on the results of the ongoing agricultural 
negotiation.  

Nancy Cochrane (202) 694-5143 cochrane@ers.usda.gov


WORLD AGRICULTURE & TRADE

China's Increasing Presence In the Global Trade Of Vegetables & Fruits

China raised its profile in the global market for vegetables and fruits in the 1990s. As one of 
the world's top exporters of vegetables and fruits, China increased its export value of those 
products from $2.3 billion to $3.1 billion between 1992-94 and 1998-2000, a rise of 33 percent. 
With improvements in production, marketing, and transportation technologies, China has 
strengthened its competitive position in the world market, particularly for vegetables. Though 
a relatively low-volume importer, China also expanded its import value of vegetables and fruits 
more than fourfold to reach $413 million during the same period.

A Large Net 
Exporter 

During 1998-2000, China's exports ranked eighth in world exports of vegetables and fruits 
(including pulses and tree nuts) and amounted to nearly eight times the level of imports. China 
had trade surpluses in all groups of fruits and vegetables, except for a relatively small 
deficit in fresh fruits. Processed products (canned, frozen, dehydrated) represented the 
largest component of China's trade surplus in vegetables and fruits. 

Export composition. With the substantial growth in China's vegetable and fruit exports in the 
1990s came changes in the composition of exports. The most dramatic was in juices, whose export 
value increased 18-fold from 1992-94 to 1998-2000 and whose share of China's total export value 
of vegetables and fruits increased from 0.4 to 4 percent during the same period. Export shares 
of other categories of vegetables and fruits changed as well, but less dramatically:

*  processed products, from 60 to 64 percent of China's vegetable and fruit exports;

*  fresh vegetables, from 13 to 14 percent;

*  fresh fruits, no change (6 percent for both periods); 

*  pulses, from 14 to 8 percent; and

*  tree nuts, from 7 to 5 percent. 

Export markets. Asia has been the dominant destination for China's vegetable and fruit exports, 
accounting for 68 percent of China's overall vegetable and fruit exports during 1998-2000. The 
European Union (EU) was a distant second, taking 14 percent. Asia was the leading destination 
for all categories of China's vegetable and fruit exports: fresh fruits (75 percent), fresh 
vegetables (79 percent), processed vegetables and fruits (69 percent), tree nuts (65 percent), 
pulses (54 percent), and juices (29 percent). 

While Asia is the largest export market for China's juices, its market share is comparable to 
those of the EU (25 percent) and the U.S. (27 percent). Expansion of China's juice exports to 
non-Asian countries occurred only recently and not without consequences. The dramatic surge of 
imported Chinese apple juice to the U.S. led to rulings in May 2000 by the U.S. Department of 
Commerce and U.S. International Trade Commission that the U.S. may impose antidumping duties of 
up to 52 percent on apple juice from China.

Import growth and sources. While China has been a major exporter in overall vegetable and fruit 
trade for years, it has been a minor importer. But, in the 1990s, its import growth outpaced 
export growth, albeit from a lower base. Fresh fruit imports have dominated China's overall 
imports of fruits and vegetables, increasing steadily from less than 20 percent of the total 
import value of fruits and vegetables in the early 1990s to more than 60 percent in 2000. As a 
result, China has had a small trade deficit in fresh fruits since 1998.

Most of these fresh fruits come from South America and Asia, which together accounted for 82 
percent of China's fresh fruit imports in 1998-2000. However, anecdotal evidence suggests that 
a substantial amount of fresh fruit enters China via Hong Kong and is not captured in the 
official data. 

Destination: 
Japan

The dominance of Asia in China's vegetable and fruit export market during the 1990s can be 
attributed largely to one country:  Japan. Forty-seven percent of China's fruit and vegetable 
exports in 1998-2000 went to Japan, up from 38 percent in 1992-94. Meanwhile, China's exports 
to other Asian countries declined--from 27 to 20 percent. 

Japan received 55 percent of China's processed fruit and vegetable exports and half of its 
fresh vegetable exports during 1998-2000. To a lesser degree, Japan is also a strong market for 
China's exports of other fruits and vegetables, with the notable exception of fresh fruits. 
Japan received only 3 percent of China's fresh fruit exports, while other Asian countries 
imported 72 percent. 

China's advances into Japan's lucrative fruit and vegetable market challenged the market 
position of other suppliers, most notably the U.S. China and the U.S. have long been the two 
leading suppliers for Japan's overall imports of fruits and vegetables, together accounting for 
nearly 60 percent of the market during 1998-2000. In 1999, China displaced the U.S. as the 
leading supplier of fruits and vegetables to Japan. U.S. share of the Japanese market for fruit 
and vegetable imports declined from 32 percent during 1990-92 to 29 percent during 1998-2000, 
while China's share increased almost uninterruptedly from 17 percent to 30 percent during the 
same period.

Though China has surpassed the U.S. in overall market share in Japan's imports of vegetables 
and fruits, competition between the two countries is limited mainly to specific products.

In the category of processed fruits and vegetables, the growth of China's exports to Japan in 
the 1990s was largely in frozen vegetables. Japan imported a wide range of frozen vegetables 
from China, including legumes, spinach, and mixed vegetables. In contrast, Japan's imports of 
processed products from the U.S. have been concentrated in a few items. Potatoes (both frozen 
and other processed), sweet corn (both frozen and canned), and raisins have together accounted 
for more than half the value of U.S. processed products imported by Japan. A negligible portion 
of Japan's imports of potatoes and sweet corn came from China.

Frozen vegetables have traditionally dominated Japan's imports of U.S. processed products, and 
throughout the 1990s, these U. S. frozen vegetable shipments were largely prepared potatoes 
(mainly french fries) and sweet corn. These two vegetables accounted for 73 percent and 15 
percent, respectively, of Japan's imports of U.S. frozen vegetables during 1998-2000. While 
China's share of Japan's import market for frozen prepared potatoes and frozen sweet corn was 
negligible, the U.S. was the leading supplier of Japan's imports of these two frozen 
vegetables, with a market share of 87 percent and 80 percent, respectively, during 1998-2000. 
As a result, competition between China and the U.S. in Japan's import market for processed 
products in general and frozen vegetables in particular tended not to be serious.

In contrast, Chinese fresh vegetables pose strong challenges to the U.S. in the Japanese 
market, though the U.S. and China export different types of fresh vegetables to Japan. During 
the 1990s, China substantially increased its value share in the Japanese market for fresh 
vegetables across the board. Notable examples of market share gains between 1990-92 and 1998-
2000 are mushrooms (from 20 to 65 percent), radishes (from 3 to 76 percent), peas (from 46 to 
99 percent), leeks (from 82 to 91 percent), and garlic (from 92 to 99 percent). These five 
accounted for 85 percent of Japan's fresh vegetable imports from China during 1998-2000. 

In addition, firms operating in China increased their market share in Japan for newer fresh 
vegetable exports. Examples were edible brassicas, mainly broccoli and cabbages (from 2 to 11 
percent), onions (from almost 0 to 16 percent), carrots and turnips (from 3 to 76 percent), and 
spinach (from 17 to 64 percent). 

Japan's leading fresh-market vegetable imports from the U.S. during 1998-2000 were concentrated 
on edible brassicas, mostly broccoli; onions, including shallots; and asparagus. The U.S., like 
China, enlarged its market shares of these vegetables. Between 1990-92 and 1998-2000, edible 
brassicas from the U.S. went from an 80-percent share to 84 percent of the Japanese market; 
onions from 28 to 52 percent; and asparagus from 28 to 20 percent. For asparagus, China's very 
small share increased from 0.3 percent to just 1.1 percent. So, at least for two major U.S. 
fresh vegetable exports to Japan, China provides serious competition.

An Emerging Market for 
U. S. Exports 

In the 1990s, China substantially increased its overall imports of fruits and vegetables--to 
the benefit of U.S. exporters. China's imports of fruits and vegetables from the U.S. increased 
from $15.7 million in 1992-94 to $68.9 million in 1998-2000. Among all categories of these 
imports, fresh fruits grew the fastest, although the U.S. market share was relatively small. 
U.S. share in China's fresh fruit import market grew from less than 4 percent in 1992-94 to 
nearly 10 percent in 1998-2000. If bananas, China's dominant fresh fruit import, were excluded, 
this growth would be even more dramatic  from 8 percent to nearly 27 percent during the same 
periods. 

Grapes, citrus fruits, and apples accounted for 98 percent of China's major fresh fruit imports 
from the U.S. during 1998-2000. The upswing in fresh fruit imports was due in part to China's 
relaxation of trade barriers, particularly its stringent phytosanitary regulations, since the 
mid-1990s. For example, China's direct imports of U.S. citrus fruits (mainly oranges) surged in 
2000 following the Agreement on U.S.-China Agricultural Cooperation which, effective in early 
2000, lifted Chinese phytosanitary restrictions on importation of U.S. fresh citrus fruit and 
other commodities (meat, poultry products, and wheat).

China's imports of U.S. processed products also increased substantially, although to a lesser 
degree than fresh fruit. In particular, imports of processed potatoes (both frozen and other 
processed) and sweet corn (both frozen and canned) accelerated in the 1990s, reflecting rapid 
westernization in the Chinese diet as incomes increased, mainly in coastal areas. These 
products accounted for nearly 75 percent of China's imports of U.S. processed products during 
1998-2000, increasing from 25 percent during 1992-94. 

The outlook for China's performance in the global market for vegetables and fruits will 
undoubtedly be shaped by broad-based agricultural and trade policies. But, it may also be 
affected by a recent development in its primary export market, Japan. 

Japanese officials recently detected excessive pesticide residue in imported Chinese produce, 
and earlier this year began testing all vegetables imported from China for chemical residues. 
As a result, some of Japan's food producers have reduced their use of selected Chinese-grown 
vegetables because of food safety concerns, while others intend to upgrade their product safety 
inspection processes to monitor the quality of Chinese-grown vegetables. Depending on how 
Chinese food and agricultural industries respond to these findings, China's status as the lead 
supplier of vegetables to Japan may be affected.

China's entry into the World Trade Organization in December 2001 will most likely lead to 
relaxation of trade barriers, which, combined with the effects of two decades of robust 
economic growth, may result in significant increases in imports.  

Sophia Wu Huang (202) 694-5257 sshuang@ers.usda.gov

Further Reading

For more information, visit the ERS web site:  

Huang, Sophia Wu. "China Increases Exports of Fresh and Frozen Vegetables To Japan," 
www.ers.usda.gov/publications/vgs/aug02/vgs292-01/vgs29201.pdf

Huang, Sophia Wu. "China:  An Emerging Market for Fresh Fruit Exporters," special article in  
www.ers.usda.gov/publications/fts/mar02/fts297.pdf

Foreign Agriculture Service, USDA. GAIN Report # JA2034, Aug. 19, 2002.

WORLD AGRICULTURE & TRADE BOX

This article draws on data from the Global Agricultural Trade System (GATS), prepared by USDA's 
Foreign Agricultural Service. GATS in turn uses data from the United Nations Trade Statistical 
Office.


RESOURCES & ENVIRONMENT

U.S. Organic Farming: A Decade of Expansion

American farmland under organic management has grown steadily over the last decade, with 
acreage for major crops (e.g., corn and soybeans) more than doubling between 1992 and 1997, and 
again between 1997 and 2001. Certified organic pasture (including ranchland) also doubled 
between 1997 and 2001, following USDA's lifting of restrictions on organic meat labeling in the 
late 1990s.

The rapid increase kept pace with consumer demand for organically produced food, which grew 
rapidly throughout the 1990s--20 percent or more annually. According to industry data, retail 
sales of organic products more than doubled between 1992 and 1996 to $3.5 billion, mirroring 
the growth in acreage during this period. The growth in demand has continued. By 2001, U.S. 
organic sales exceeded $9 billion, according to estimates from the International Trade Centre, 
and accounted for approximately 2 percent of total food sales. USDA's national organic 
standards and labeling rules, which went into effect in October, may potentially act as a 
marketing tool, generating further interest in organic products among farmers and consumers.

A decade in the making, USDA's new organic standards incorporate an ecological approach to 
farming that fosters cycling of resources and protection of biodiversity. Behind each organic 
label is a system of agricultural production and processing that meets a comprehensive system 
of national standards. The standards apply to the entire production system, not just individual 
practices such as use of specific inputs.

Producers who shift to organic farming systems from chemical-intensive systems must make 
changes across the broad spectrum of their production inputs and practices. An increasing 
number of farmers in the U.S. have taken on that challenge in recent years, meeting production 
and processing standards set by state and private organizations that have now been codified and 
expanded in the national standards. 

Other Countries 
Ahead 

U.S. farmers and ranchers have added a million acres of certified organic cropland and pasture 
since 1997 (certified by state or private organizations), bringing the total to 2.35 million 
acres in 48 states in 2001. According to USDA's Economic Research Service (ERS), farmers and 
ranchers certified about 1.3 million acres of cropland and 1 million acres of pasture and 
rangeland in 2001. Overall, certified organic cropland and pasture accounted for 0.3 percent of 
U.S. cropland and pasture in 2002, although for some crop sectors, particularly fruits and 
vegetables, the proportions were much higher. Examples include organic apples (3 percent of 
that crop's acreage), organic carrots (4 percent), and organic lettuce (5 percent).

Even so, the U.S. trails other countries in organic numbers. According to a worldwide survey in 
2001 by a private research firm in Germany, the U.S. ranked fourth in land area managed under 
organic farming systems, behind Australia (with 19 million acres), Argentina (6.9 million 
acres), and Italy (2.6 million acres). Brazil, Germany, the United Kingdom (UK), Spain, France, 
and Canada also ranked among the top 10 countries in total organic area. In percentage of total 
farmland managed organically, the U.S. did not make the top 10. The leaders here were 
Switzerland (9 percent of total land area under organic management), Austria (8.6 percent), 
Italy (6.8 percent), Sweden (5.2 percent), the Czech Republic (3.9 percent), and the UK (3.3 
percent). 

While government intervention in the U.S. has focused primarily on market facilitation, at 
least two states--Iowa and Minnesota--have begun subsidizing conversion to organic farming 
systems as a way to capture the environmental benefits of these systems. Also, a number of 
universities have begun multidisciplinary organic research trials in recent years. One 
nonprofit group, the Organic Farming Research Foundation in Santa Cruz, California, started a 
grant program in 1990 for scientist-farmer teams to study organic production and marketing 
systems. 

During the last several years, a number of USDA agencies have launched new programs and pilot 
projects to help organic producers address production and marketing problems and risks. And the 
Farm Security and Rural Investment Act of 2002 (Farm Act) includes several small but 
groundbreaking initiatives on research and technical assistance for organic farmers. For 
example, the Act authorizes $5 million for a national cost-share assistance program to help 
organic farmers with small operations cover a substantial portion of the costs of 
certification. European countries with high levels of conversion to organic farming have been 
providing direct financial support for conversion since the late 1980s. 

California Leads in Cropland, 
Colorado in Pasture

California, with mostly fruits and vegetables, and North Dakota, with wheat, soybeans, and 
other field crops, were the top two states in 2001 for certified organic cropland. Farmers in 
California had nearly 150,000 acres under certified organic management, and North Dakota 
producers followed closely with nearly 145,000 acres. Minnesota, Wisconsin, Iowa, and Montana 
were other leading states in terms of total certified organic cropland. Every state but 
Mississippi and Delaware had some certified cropland. Certified organic cropland increased 
significantly in most states in the U.S. between 1997 and 2001, more than doubling in 12 
states. Pasture more than doubled in 24 states. 

The organic farm sector differs substantially from the conventional farm sector in having a 
higher proportion of cropland devoted to vegetable production. While total vegetable acreage in 
the U.S. accounts for under 1 percent of total U.S. cropland, certified organic vegetable 
acreage accounts for nearly 5 percent of the total cropland under certified organic management. 
Certified organic vegetables were grown in more states than any other organic crop.

The top three states for certified organic pasture in 2001 each had over 100,000 acres--
Colorado (514,000 acres), Texas (221,000 acres), and Montana (137,000 acres). Forty other 
states also had certified pasture in 2001, most with less than 20,000 acres. Organic animal 
production systems were certified in 37 states in 2001, up from 23 states in 1997. 

The number of certified organic beef cattle, milk cows, hogs, pigs, sheep, and lambs was about 
72,000 in 2001, up nearly 4-fold since 1997. Dairy has been one of the fastest growing segments 
of the organic foods industry during this period, and milk cows accounted for over half of the 
certified animals. Poultry raised under certified organic management showed even higher levels 
of growth during this period. Certified organic layer hens, broilers and other poultry 
increased over 6-fold between 1997 and 2001. In 1999, USDA eased organic labeling restrictions 
for broilers. As a result, farmers rapidly expanded certified broiler production, increasing 
from 38,000 birds in 1997 to nearly 2 million birds in 2000, and over 3 million in 2001. 

Organic expansion has not been uniform in the U.S. Between 1997 and 2001, nine states, over 
half in the South--Georgia, Louisiana, South Carolina, Tennessee and West Virginia--showed an 
overall decline in certified organic farmland. In general, the South has had less certified 
organic farmland than other regions, and small, local nonprofit enterprises have performed most 
of the certification in these states. A number of these certifying enterprises dropped their 
certification programs when national rules were implemented, likely causing some dislocation 
among certified growers in the region. However, several new certification programs have 
recently emerged in the South--including a state program in South Carolina and a local private 
program (Florida Certified Organic Growers and Consumers) that has expanded to other states--to 
fill in for services lost during the transition. 

Organic farmland also receded in Florida and Idaho between 1997 and 2001 because large organic 
wild-crop operations for St. John's wort and saw palmetto berries (harvested from land not 
maintained under cultivation) discontinued their certification in those states. Idaho 
experienced severe drought conditions between 1997 and 2001, which lowered planted acreage in 
both conventional and organic farm sectors. Organic acreage also fell substantially in Alaska 
because the large ranches that had experimented with organic livestock production during the 
late 1990s decided to pursue other activities.

Small Farms 
Still Reign 

Recent ERS research provides the first-ever estimates of the number of certified organic 
operations by state. California has the most, with slightly over 1,000 operations in 2001, up 
12 percent from the previous year. Following California are Washington (548 operations), 
Wisconsin (469), Minnesota (421), Iowa (384), Pennsylvania (281), Ohio (265), New York (264), 
Vermont (251) and Maine (244). Only 3 of the top 10 states in number of certified operations--
California, Minnesota, and Iowa--are also in the top 10 for certified cropland acreage. 

Many of the top states in number of certified operations--particularly in the Northeast and 
Mid-Atlantic regions--are states with a high proportion of small farms that grow fruits and 
vegetables for direct marketing to consumers. Even in California, where the majority of very 
large organic fruit and vegetable operations are located, most of the organic farms are small. 
Recent analysis of organic farm trends by the University of California indicates that the 
state's organic farms remained small (under 5 acres on average) throughout the late 1990s. 
Average size of certified organic farms is up in California and the U.S. as a whole, as 
existing organic farmers expand and new large-scale operations become certified. Small-scale 
farms remain prevalent. 

Producers capture a much higher share of the consumer food dollar when they market their 
produce directly to consumers, and USDA and other producer surveys indicate that organic 
farmers market directly much more frequently than do conventional farmers. States and 
municipalities, along with private conservation groups and others, have been fostering the 
development of local markets for the last decade, and the number of these outlets has jumped 
substantially. In the Northeast, mid-Atlantic and other regions, the majority of certified 
organic operations are small-scale farms that produce a variety of vegetable crops, fruits, 
herbs, and flowers for marketing directly to local consumers. 

Small-scale organic farmers are also enhancing the viability of their operations by producing a 
large array of "value-added" products--foods processed on their farm or in farm-owned plants or 
farm-based cooperatives--to sell directly to the consumer in addition to fresh fruits and 
vegetables. According to the Organic Farming Research Foundation's most recent organic producer 
survey, 31 percent of respondents produced value-added products in 1997. The products included 
salsa, syrup, cider, pickles, preserves, dried and canned fruits and vegetables, butter, 
yogurt, cheese, milled flours, meat products, and wine. 

Research Has 
Shown...

A limited, but growing number of studies in the U.S. have examined yields, input costs, 
profitability, managerial requirements, and other economic characteristics of organic farming. 
A 1990 review of the U.S. literature by researchers at Cornell University concluded that 
"variation within organic and conventional farming systems is likely as large as the 
differences between the two systems." More recent U.S. studies at several universities and USDA 
Agricultural Experiment Stations have indicated that price premiums on organic products may 
provide organic farming systems comparable or higher whole-farm profits than conventional 
systems, particularly for crops like processed tomatoes and cotton. 

Under certain circumstances, organic systems may be more profitable than conventional systems, 
even without price premiums. For example, university studies of Midwestern organic grain and 
soybean production have found some organic systems to be more profitable than conventional 
systems due to higher yields in drier areas or periods, lower input costs, or higher revenue 
from the mix of crops used in the system. Recent studies by Washington State University and the 
University of California, comparing organic and conventional systems for apple production, have 
also shown higher returns under the organic systems. 

Net returns to various organic production systems will vary with biophysical and economic 
factors--such as soil type, climate, proximity to markets, and other farm-specific factors--and 
a system that is optimal in one location may not be optimal in another. Also, factors not 
captured in standard profit calculations, such as convenience, longer term planning horizons, 
and environmental ethics can motivate adoption of a particular organic practice or farming 
system. Further research is needed to enhance understanding of the factors influencing returns 
to organic farming systems.

Catherine Greene (202) 694-5541 cgreene@ers.usda.gov
Amy Kremen (202) 694-5543 akremen@ers.usda.gov

USDA information on organic farming:

Agricultural Marketing Service/National Organic Program (NOP) web site at www.ams.usda.gov/nop/

ERS organic farming and marketing briefing room at 
www.ers.usda.gov/briefing/Organic/

"Organic Food Industry Taps Growing American Market," AO, October 2002
www.ers.usda.gov/publications/AgOutlook/Oct2002/

Selected University websites:

University of California, Davis http://agronomy.ucdavis.edu/safs/

University of West Virginia www.caf.wvu.edu/plsc/organic

University of Minnesota http://swroc.coafes.umn.edu/Ocp/main_page.html

RESOURCES & ENVIRONMENT BOX 1

Measuring Adoption of Organic Farming
 
Acreage farmed with certified organic practices is based on data collected from all state and 
private certifiers active in the U.S. during 2000 and 2001. The procedures are similar to those 
used in previous benchmark reports on this sector for the 1992-94 period and for 1997. Data 
from state and private organic certifiers were collected and analyzed, uncertified production 
was excluded, and double-certified acreage was counted only once whenever possible. Fifty-three 
organic certification organizations--14 state and 39 private--conducted third-party 
certification of organic production in 2000 and 2001.

RESOURCES & ENVIRONMENT BOX 2

National Standards Regulate Organic Production & Marketing

USDA's National Organic Program (NOP), authorized under the Organic Foods Production Act of 
1990, facilitates domestic marketing of organically produced fresh and processed food, and 
assures consumers that such products meet consistent, uniform standards. USDA's Agricultural 
Marketing Service (AMS) published the final rule implementing the legislation in December 2000. 
The rule, which went into effect on October 21, 2002, requires that organic farmers and 
processors be certified by a state or private agency accredited under national standards. The 
program establishes:

*  national production and handling standards for organically produced products, including a 
list of substances (inputs) that can and cannot be used, 

*  a national program for accrediting state and private organizations as certifying agents 
under the USDA national standards for organic certifiers,

*  requirements for labeling products as organic or as containing organic ingredients, 

*  rules for importation of organic agricultural products, and

*  civil penalties for violations of these regulations (e.g., falsely claiming a product is 
organic).

These regulations require that organic growers and handlers (including food processors) be 
certified if they wish to market a product as organic, unless they sell less than $5,000 a year 
in organic agricultural products. Retail food establishments that sell organically produced 
agricultural products but do not process them are also exempt from certification.

RESOURCES & ENVIRONMENT BOX 3

International Workshop on Organic Agriculture

On September 23-26, 2002, the U.S. government hosted an Organization for Economic Cooperation 
and Development (OECD) Workshop on Organic Agriculture. Three USDA agencies--the Economic 
Research Service, the Agricultural Marketing Service, and the Agricultural Research Service--
were major government sponsors. The U.S. location provided an opportunity for a broad spectrum 
of U.S.-based groups to participate. 

The workshop: 

*  examined empirical evidence on the economic, environmental, and social impacts of organic 
agriculture in relation to "integrated" or "conventional" farming systems, 

*  identified the conditions under which organic agricultural systems are sustainable,

*  reviewed market approaches and policies used to encourage, certify, and regulate organic 
agriculture, 

*  explored the trade effects of different policies on organic agriculture, 

*  contributed to OECD's work on agri-environmental issues, and 

*  generated practical policy advice.


RESOURCES & ENVIRONMENT 

Precision Agriculture Adoption Continues to Grow

Rapid technological change has been a prominent feature of U.S. agriculture. Increased 
competitive pressures from international and domestic markets, yield potential, and 
environmental concerns motivate farmers to pursue and adopt innovations. A relatively new 
technology-based approach, precision agriculture (PA), appeared during the early 1990s. 

Precision agriculture is generally described as the incorporation of modern information 
technologies into the management of agricultural inputs and production practices. The U.S. 
Congress defines it as "an integrated information and production-based farming system designed 
to increase long-term, site-specific, and whole farm production efficiencies, productivity, and 
profitability while minimizing unintended impacts on wildlife and the environment."

Most definitions of PA stress the management of variability (e.g., in soil quality, nutrient 
levels, and pest infestation), which is common within most fields, in order to enhance economic 
benefits, and to reduce risks to the environment from agricultural production. Precision 
agriculture uses information technologies to match agricultural inputs (e.g., seeds, 
fertilizer, pesticides, irrigation water) with crop needs or potential. Application of inputs 
is customized for different areas within the field, instead of treating a whole field as a 
single unit. 

A site-specific approach allows producers to apply appropriate types and amounts of inputs, 
increase yields, reduce application costs, and maintain the quality of air, land, and water 
resources. PA technologies fall into two broad categories: 

*  Spatial and/or temporal sensing technologies. Yield monitors, yield maps, geo-referenced 
soil maps, and remotely sensed maps are used in detecting and recording variation in yields, 
soil attributes, or crop conditions within a farm field, including pest infestations and water 
or nutrient availability. 

*  Application control technologies. Also called variable-rate technologies (VRT), these use 
information from sensing technologies to spatially vary input application rates and timing for 
seed, fertilizer, and pesticides. Machine guidance technologies linked to the Global 
Positioning System (GPS) are also commercially available to enhance the efficiency of input 
applications and tillage operations. 

Precision agriculture is a suite of technological tools that can be adopted individually or in 
combinations. Data on adoption of PA technologies tend to reflect this diversity.

Using the 
Technological Tools

Among producers of the four major field crops (corn, soybeans, wheat, and cotton), corn and 
soybean farmers have been the most rapid adopters of PA sensing technologies. In general, the 
share of corn and soybean planted acreage using yield monitors, or for which yield or geo-
referenced soil maps were available, was more than twice that of wheat or cotton. USDA's annual 
Agricultural Resource Management Survey found that while use of yield monitors in wheat 
production has grown steadily since 1996--from 6 percent of acreage to about 10 percent in 
2000--use in corn and soybean acreage grew even faster, reaching nearly 30 percent for corn and 
over 25 percent for soybeans. Yield monitor use grew to over 33 percent of all planted corn 
acreage in 2001. 

Cotton yield monitors have only recently become commercially available. Some of the recent 
growth in yield-monitored acreage has likely been facilitated by availability of combines with 
factory-installed yield monitors--an alternative to the retrofitted combines in use in the 
early 1990s.

Somewhat surprisingly, only about a third of corn and soybean acres reporting use of yield 
monitors also report producing a yield map--indicating that most yield monitor data is not geo-
referenced and therefore not available for spatially varying input applications (at least not 
automatically). 

Anecdotal information suggests that, even without geo-referencing, yield monitors can offer 
significant benefits. Besides helping manage field variability, yield monitors may help the 
operator: 

*  guide field improvements, such as drainage and leveling; 

*  monitor moisture levels during harvest to help reduce drying costs; 

*  conduct in-field agronomic experiments (e.g., yield trials on crop varieties). 

Adoption of VRT for input application tends to be much less prevalent among the major field 
crops than adoption of sensing technologies. Although the share of acreage using VRT has 
increased marginally across all inputs and crops over time, the most widespread use has been 
for fertilizer use on corn and soybeans. Many early uses for PA focused on nitrogen and 
phosphate application to corn and soybeans. 

The relatively low VRT adoption rates for other crops and inputs likely reflect the small 
amount of acreage for which geo-referenced yield data are available as well as the scarcity of 
site-specific agronomic recommendations available to producers in many states (e.g., from an 
Extension service or from input or technology dealers). However, by 2000 over 10 percent of all 
cotton and wheat acreage, 17 percent of all soybean acreage, and over 20 percent of corn 
acreage were reported to have geo-referenced soil maps--indicating that many fields have some 
soil information available that would be useful for making spatially variable input decisions. 
The geo-referenced soil mapping data were generated largely through use of GPS technology in 
conjunction with soil testing for such attributes as residual nutrient levels and pH. 

Other survey data indicate that, on about 5-10 percent of corn and soybean planted acreage, 
yield and/or soil attributes are being geo-referenced while variable-rate application of 
fertilizer, pesticides, and/or seeds is also being performed. This is the acreage on which PA 
technologies are being fully utilized to manage inputs. 

Who Adopts Precision 
Agriculture?

Farm-level studies of the economic benefits and costs of complete PA systems, or individual 
components, are limited. However, the adoption rates for yield monitors are an indirect 
indication that producers are deriving economic benefits from this particular technology. One 
of the most comprehensive reviews of studies of PA profitability was conducted by Purdue 
University, which found that about 60 percent of the studies indicated positive returns for a 
given PA technology, about 10 percent indicated negative returns, and the remainder showed 
mixed results.

Farm size is perhaps the most striking attribute positively associated with PA adoption. 
Innovations with large fixed acquisition or information costs are typically less likely to be 
adopted by smaller farms since there are fewer acres over which to spread these costs. 
Estimates of capital costs for a complete yield monitoring information system for one combine 
(i.e., yield monitor, GPS receiver, memory card, computer, software, training, and 
installation) range from $10,000 to $15,000. Despite these costs, even among farms with less 
than $100,000 in annual sales, yield monitors are being used on a substantial share of planted 
corn and soybean acreage.

There is also regional variability in the adoption of PA. Concentration of yield monitor use in 
the Heartland and Northern Crescent regions may be attributed to the fact that yield monitors 
were first introduced for corn and soybean harvesters. These regions are major corn and soybean 
producers, and a sizeable PA service sector has become established there.

What About 
the Future?

Several factors may be impeding more rapid PA adoption: 

*  incompatible components (for example, between different PA technology providers), 

*  lack of well-established, site-specific agronomic relationships (e.g., soil attributes and 
yield) which often vary annually, depending on weather conditions, and across the field; 

*  extensive producer training requirements for implementation;

*  commodity-specific nature of many technologies; and 

*  capital requirements. 

Uncertainties about the impact of adoption on yields and input use have also been cited as 
factors contributing to modest adoption rates for some PA technologies. Despite these 
constraints, analysis by USDA's Economic Research Service (ERS) suggests steady growth in the 
adoption of PA technology during the next few years. 

The active network of public and private research and development organizations involved with 
PA will likely facilitate adoption by generating farm management decision systems that assist 
producers in extracting economic or environmental benefits from their extensive geo-referenced 
soil, plant, and yield data bases. Development of PA technologies for specialty crop and 
livestock production is underway, as is commercialization of on-the-go or real-time sensing and 
input application instruments--allowing, for example, sensing and application to be 
accomplished in one trip over a field. 

The predictable decline in information technology costs, development of more user-friendly 
technology, and growing computer capacity will all promote adoption. Government use of 
geographic information systems (GIS) for extension and technical assistance will expose 
producers to geo-spatial technologies. In addition, technology is being developed for commodity 
trait monitoring (e.g., oil and protein content), identity preservation, and traceability that 
may allow producers to use PA to take advantage of premiums offered in specialty markets.  

Stan Daberkow (202) 694-5535 daberkow@ers.usda.gov
Jorge Fernandez-Cornejo (202) 694-5537 jorgef@ers.usda.gov
Merritt Padgitt (202) 694-5506 mpadgitt@ers.usda.gov

Read more... 

Cooperative State Research, Education, and Extension Service (CSREES), USDA  
www.reeusda.gov/1700/programs/IFAFS/IFAFS.htm   

"Precision Agriculture Technology Diffusion: Current Status and Future Prospects," Proceedings 
of the 6th International Conference on Precision Agriculture, Minneapolis, MN. ASA/CSSA/SSSA, 
Madison, WI, July 14-17, 2002.

"Precision Agriculture in the 21st Century: Geospatial and Information Technologies in Crop 
Management." National Research Council, National Academy Press, Wash., DC., 1997.

National Resources and Conservation Service (NRCS), USDA (2002) 
www.ftw.nrcs.usda.gov/tech_tools.html.

Lambert, D. and Lowenberg-DeBoer, J. Precision Agriculture Profitability Review, 
mollisol.agry.purdue.edu/SSMC

The U.S. Congress defined precision agriculture in Public Law 105-185: Agricultural Research, 
Extension, and Education Reform Act of 1998 [Title IV--Section 403].

RESOURCES & ENVIRONMENT BOX 4
See glossary page 38.

The survey data presented in this article are from USDA's annual Agricultural Resource 
Management Survey (ARMS). This survey collects field-level production input and practice data 
and farm-level economic data. For further information: 
www.ers.usda.gov/briefing/ARMS/howarmsisconducted.htm

RESOURCES & ENVIRONMENT BOX 5

Precision Agriculture Glossary 

Geo-referencing--the process of associating position information (location) with field data, 
such as yields, soil type, soil test results, and insect and weed infestation. 

GPS (Global Positioning System)--a space-based navigation system. Positioning is achieved 
through the use of simultaneously received transmissions from four or more satellites above the 
horizon. A GPS receiver matches latitude, longitude, and altitude information with data 
obtained from a specific site on the field.

GIS (Geographic Information System)--the integration of hardware, software, data, 
organizations, and institutional relations to automate, manage, analyze, and display geo-
referenced information.

Yield monitors--devices that estimate crop yield per area of a field by measuring the quantity 
of the crop and the area covered by the harvester. 

Yield mapping--the process of collecting geo-referenced data on crop yield and crop 
characteristics, such as moisture content, while the crop is being harvested. A yield mapping 
system, typically using GIS, combines the output of a yield monitor with the position 
information provided by a GPS receiver. 

Remote sensing--acquisition of information by a recording device not in physical contact with 
an object being studied. Devices such as cameras, radar, lasers, or radio receivers can collect 
information from remote locations such as airplanes or satellites.

Variable-rate technologies (VRT)--a system that varies the rate of agricultural inputs such as 
seed, fertilizer, and crop protection chemicals in response to varying conditions in specific 
areas of a field.

[Source: National Research Council]


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