Ag Outlook Probes Organics, Economics, Food Prices

March 22, 2000

USDA's latest Agricultural Outlook includes several issues of importance to ag interests: the continued expansion of organic agriculture, an economic outlook that sees near-term weakness and a modest increase in food prices on the horizon. An article on biotechnology and implications for corn, soybean and grain handlers also is included.

Certified organic crop land in the United States more than doubled during the 1990s, and two organic livestock sectors, eggs and dairy, expanded even faster, according to a new study by USDA's Economic Research Service.

Producers are turning to organic farming as a way potentially to lower input costs, decrease reliance on nonrenewable resources, capture high-value markets and premium prices and increase farm income, the study shows.

Markets for organic vegetables, fruits and herbs have been developing for decades, and organic grain and livestock markets are beginning to emerge, the study notes.

The farm economy, in the near term, is a repeat of 1999, another article notes. Markets for major commodities, particularly field crops, are very weak as supplies remain relatively large.

Yet an "overall farm economic crisis has not materialized, due in large part to built-in government support and supplemental emergency economic and disaster assistance," the article notes. Higher cattle and hog prices and "a fairly strong national farm balance sheet" are expected this year.

For food prices, the outlook is an increase of 2-3% this year after a 2.1% increase in 1999, the smallest since 1992. The increase this year will be closer to the high end of the projected range if energy prices remain at high levels for six months or more or if there is more demand for meat products than expected.

One key factor in assessing the degree and nature of potential impacts from marketing bioengineered crops to other countries is the export share of use. For U.S. corn that was about 18% in 1998-99 and for soybeans about 42%. "With the United States supplying two-thirds of global corn trade, importers cannot easily satisfy such large demand with alternative sources," USDA says.

Traditional competitive forces, such as prices, appear to the be main driving factors behind changes in observed bilateral trade patterns for soybeans. "The biotech issue has potential to influence world trade flows, and consumer preferences may create two potential markets in the future," the article says.

The full text of Agricultural Outlook is available at http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/2000/.