1/ Assesses ability of farm businesses to repay both principal and interest. 2/ Shows the farm sector's ability to service debt out of net income. P

Preliminary. F - Forecast.

1/ This estimate is based on USDA survey data which is then adjusted to account for the Nation's 2.2 million farms. Farms are grouped into four categories based on their farm incomes and debts relative to assets. The categories of financial stress are: Favorable-positive net cash household income and debt-to-asset ratio of .4 or less; Marginal Solvency.. positive net cash household income and debt-to-asset ratio above .4; Marginal Income-negative net cash household income and debt-to-asset ratio of .4 or less; Vulnerable--negative net cash household income and debt-to-asset ratio above .4.

1/ Commodity loans less payments. 2/ Less than $50 million.
Preliminary. F Forecast.

P

COMMODITY OUTLOOK

U.S. AGRICULTURAL TRADE

* The current USDA forecast of fiscal 1990 agricultural export volume shows exports of 146 million tons, down slightly from the fiscal 1989 total of 148 million. A revised forecast will be published on February 27, 1990. On the basis of the latest USDA global supply and demand assessment, the revised export forecast will be larger, and will likely exceed the fiscal 1989 total. U.S. corn, cotton, and soybean exports are expected to increase in 1990, offsetting an expected drop in wheat and soybean meal exports.

* Compared with its 1986 low of 110 million tons, U.S. export volume in 1990 will be about one-third higher in 1990. Similarly, the U.S. share of world trade has returned to near its long-term average of 25 percent.

* The slight rise in the dollar that occurred in late 1988 and 1989 will reverse in 1990. The U.S. dollar is expected to depreciate slightly, on average, in our major agricultural markets over the course of this year. Lower U.S. interest rates and higher interest rates abroad, especially in Japan and Europe, explain most of the decline.

* However, on average, the dollar likely will appreciate against the currencies of our major competitors. The weak economies of Brazil and Argentina, in particular, may lead to rapid nominal and real devaluation of the currencies of those countries to spur exports.

* The value of fiscal 1990 U.S. agricultural exports is forecast to decline more than $1 billion from 1989's $39.7 billion. Lower prices for most grains and oilseeds largely account for what is expected to be the first decline in export value since fiscal 1986. High-value exports are expected to continue growing, but at a slower pace in 1990. High-value exports have particularly benefitted from favorable exchange rates and overseas economic growth since the mid-1980's.

* U.S. agricultural imports in fiscal 1990 are forecast to decline slightly to $21 billion, $500 million below fiscal 1989's record-high. Imports that compete with domestic agricultural production are expected to about equal last year's record $15.2 billion. Competitive imports have risen for 7 consecutive years. Noncompetitive imports are expected to fall for the fourth consecutive year, largely because of lower coffee prices.

* The U.S. agricultural trade surplus is expected to fall in fiscal 1990, from $18.2 billion to about $17 billion. Rapid export growth fueled increases in the surplus between 1986 and 1989, leading it to more than triple from a $5.4 billion low.