Agricultural Outlook Summary
April 2002 issue, AGO-290
March 20, 2002

USDA Longrun Projections to 2011: Global Developments Play Key Role

In USDA's new longrun, 10-year baseline projections, a recovery in global 
economic growth following the slowdown of 2001-02 leads to stronger U.S. 
exports, gains in agricultural commodity prices, and rising farm incomes over 
the next decade. U.S. agricultural export value and market cash receipts to 
U.S. farmers have improved since the late 1990s when large global production 
and weak global demand pushed prices and trade down. Nonetheless, slow U.S. 
and global economic growth in 2001-02 and a strong U.S. dollar provide a weak 
setting in the near term for the agricultural sector. In the longer run, 
projected improvement in world economic growth, particularly in developing 
countries, provides a foundation for gains in global trade and in U.S. 
agricultural exports.  Paul Westcott; (202) 694-5335 westcott@ers.usda.gov

Imports Increase as Share of U.S. Food Consumption

In the second half of the 1990s, Americans increased the proportion of 
imported foods they consumed.  The rise is attributed partly to greater 
demand for high-value agricultural products that other countries offer, and 
partly to the higher exchange rate of the U.S. dollar, which increases the 
purchasing power of the dollar. The continuous rise in import shares of 
fruits and vegetables is related to improved transport and storage 
technology. For fish and shellfish, domestic production may be unable to keep 
up with consumer demand.  Increasing ethnic diversity of the U.S. population, 
rising consumer incomes, and more open trade agreements induce lower cost 
foreign producers to supply the large U.S. market.  Alberto Jerardo; (202) 
694-5266 ajerardo@ers.usda.gov

U.S. Cotton & the Appreciation of the Dollar 

Exchange rates can have an enormous impact on a country's economy, and the 
dollar's strength has undoubtedly exacerbated the difficulties facing the 
U.S. textile industry during the recent slowdown in U.S. and world economic 
growth. It has also been a factor in lowering cotton prices. When a country's 
currency appreciates, either its share of world trade and production will 
decline or its prices must drop in terms of its own currency.  Unlike 
textiles, cotton production in the U.S. accounts for about the same 
proportion of world production as it did in 1995 and slightly more than in 
1990, and its share of world trade has surged.  However, the dollar-
denominated world price of cotton has fallen by an inflation-adjusted 56 
percent between marketing year 1990 and February 2002. Stephen MacDonald; 
(202) 694-5305 stephenm@ers.usda.gov

Imports & Lackluster Demand Pressure Catfish Prices

In the last 2 years, catfish imports have increased dramatically, in contrast 
to the 1990s when U.S. catfish production was a domestically focused 
industry, with only small amounts of imports and exports.  This rise in 
imports, combined with relatively flat per capita seafood consumption and 
increased inventories of catfish products, has put downward pressure on 
domestic catfish prices. Imports, in fact, play a major role in satisfying 
overall U.S. seafood demand. A strong dollar relative to most other 
currencies will encourage further growth in seafood imports. Although the 
markets for catfish products may be somewhat depressed, producers whose feeds 
are primarily grain-based should be able to take advantage of expected 
relatively low grain prices. David Harvey; (202) 694-5177 
djharvey@ers.usda.gov

Calculating Damages in WTO Trade Disputes

Since its inception in 1995, the World Trade Organization (WTO) dispute 
settlement system has received over 200 notifications of trade disputes. 
While most disputes have been settled, in only three cases has the Dispute 
Settlement Board (DSB) had to approve damage awards. The system, which is 
designed to encourage the parties to settle disputes bilaterally, is a major 
achievement. And although no explicit methodology is mentioned in the WTO 
agreements for calculating damages, these three cases suggest the DSB has 
adopted an approach that measures damages simply and transparently and in a 
way that minimizes incentives for WTO member countries to violate their 
agreements.  Although damage awards may appear to simply split the difference 
between defendants' and complainants' estimates, they in fact reflect the 
success of the DSB's straightforward evaluative approach in reducing 
incentives to over- or underestimate damages.  Jason Bernstein; (202) 694-
5165 jasonb@ers.usda.gov

WTO Accession Will Increase China's Agricultural Imports

China's accession to the WTO and further integration into the world economy 
is expected to lead to a wealthier and more stable international food system.  
Under the terms of accession, China's agricultural trade regime will be more 
open and responsive to international markets.  WTO accession is the latest 
initiative in a process of liberalization in China's economy that will also 
benefit U.S. agricultural exports.  A modest increase in China's imports of 
important bulk commodities in the next few years should result from the new 
trade regime under the WTO, but most benefits to U.S. farmers will occur 
several years down the road. Even before China's formal accession to the WTO, 
China's imports of major commodities were expected to increase in the coming 
years due to internal market reforms and gradual economic liberalization.  
Accession must be viewed in the context of China's broader economic 
development and its transition from a planned to a market economy. Bryan 
Lohmar; (202) 694-5226 blohmar@ers.usda.gov

Proposed Requirements for Manure Nutrient Management: Potential Sector 
Impacts 

When manure from animal feeding operations (AFOs) exceeds land application 
needs for crop production, the runoff can enter waterways and impair water 
quality.  The U.S. Environmental Protection Agency has proposed bringing 
additional AFOs under regulation and requiring implementation of nutrient 
management plans (NMPs) by all regulated AFOs, with a decision expected by 
December 2002.  Using a 10-region agricultural model, analysts at USDA's 
Economic Research Service estimated the potential national/regional impacts 
of the proposed NMPs on all regulated AFOs.  In general, the results suggest 
that the proposed NMPs will not be highly disruptive to livestock and poultry 
production and may even increase returns to the overall industry.  The costs 
of developing and implementing NMPs could motivate some shift in animal 
production to regions with greater available land for manure application, 
while decreasing animal production overall throughout the U.S. Jonathan 
Kaplan; (202) 694-5494 jkaplan@ers.usda.gov

Farm Families' Savings: Findings from the ARMS Survey

Savings play a direct role in helping farm households maintain their standard 
of living from year to year as well as complementing other risk management 
strategies. If farmers were able to save during "good times" and draw on the 
reserves, there might be less perceived need for large government outlays for 
disaster assistance and other unearned compensation to decrease income 
variability. In 1999, 78 percent of farm households saved out of current 
income, compared with 50-60 percent of families within the general 
population. Using data from the Agricultural Resources Management Study 
(ARMS) survey, analysts at USDA's Economic Research Services examined the 
influence of several factors on the types and level of farm household saving. 
These factors include size and type of farm, receipt of government payments, 
purchase of insurance, and major source of income (farm vs. off-farm). Ashok 
Mishra; (202) 694-5580 amishra@ers.usda.gov


Approved by the World Agricultural Outlook Board
Full text of Agricultural Outlook will be available March 21, 2002 at 
http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/2002/

