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disaster payments under the Disaster Assistance Act of 1989. However, the estimate does not include $1.8 billion in payments made under the Conservation Reserve Program, which is now funded

through direct appropriations.

In summary, U.S. crop production in 1990 will likely rise

and prices fall for some major crops. However, larger crop marketings are expected to more than offset any price declines. With crop receipts expected to be record high, livestock receipts near last year's record, and overall production expenses holding

steady, 1990 cash farm income should be near the record 1988

level.

Farmers' overall financial position should also improve

as their debt-to-asset ratio continues to decline.

Although the current outlook for u.s. agriculture appears bright, a word of caution is in order. over history, real u.s.

farm prices have trended almost steadily downward due to gains in

production efficiency. These gains have ensured the United States of being competitive in world markets, and U.S. agriculture now depends upon foreign markets for about a third of its major crop production. Future u.s. competitiveness will depend to a large degree on the policies put in place during the

1990's.

That is the reason a successful conclusion to the GATT

negotiations and continuation of market-oriented farm policies began in the 1985 Farm Bill are so important to u.s. agriculture.

Mr. Chairman, that completes my statement.

I would be

pleased to respond to any questions that you or Members of the

Subcommittee might have.

28-510 O - 90 - ll

For release only by . the House Committee on Appropriations

THE 1990 AGRICULTURAL OUTLOOK

Appendix to Statement by

Bruce Gardner
Assistant Secretary for Economics
U.S. Department of Agriculture

before

The House Appropriations Subcommittee on
Rural Development, Agriculture and Related Agencies

February 22, 1990

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49

U.S. and World Meat Overview

U.S. and World Meat Production
U.S. Per Capita Meat Consumption
U.S. Meat Production and Trade
Meat Imports as Percent of U.S. Production
Poultry Exports as Percent of U.S. Production

50 51 52 53 53

Dairy ..

U.S. Milk Production, Use, Prices, and Removals
Milk Production, Number of Cows, and Milk per Cow

54 55

. 56

Livestock ..

Beef Price Spread
Pork Farm to Wholesale Spread .
Pork Wholesale to Retail Spread

57

58 . 59

59

FOOD PRICES ...

.60

61

Consumer Price Index
Marketing Bill, Farm Value, and Consumer Expenditures for

Farm Foods

62

OVERVIEW OF 1990 PROSPECTS

*

The global and U.S. outlook for 1989/90 is for a rebound in commodity output from the weather-reduced levels of the previous season. For most crops, however, consumption will increase more than production causing stocks to decline further from carryin levels. In 1990, world animal product output will rise slightly, lead by an increase in U.S. poultry Domestically, this scenario suggests stable incomes and rising equity for farmers and for consumers, a slower rise in food prices than in 1989.

In 1990/91, assuming trend yields, u.s. and foreign production of many crops will rise, and some stock rebuilding may take place. Crop farmers will be responding to prices at planting time that generally will be above pre-drought levels and to smaller wheat, rice, and cotton acreage reduction requirements in the United States. v.s. meat output could rise 2.5 percent in 1990, with a little more beef, less pork, but 6 percent more poultry.

*

Several uncertainties make the 1990/91 outlook difficult to forecast. While December precipitation improved moisture conditions for U.S. winter wheat, unseasonably warm weather across much of the Great Plains has made wheat vulnerable to renewed cold and more moisture will be need in months ahead for crop development. For U.S. spring-planted crops, timely moisture will be required in the Great Plains and Western Corn Belt. Sweeping political change in the Eastern Bloc nations make those markets highly unpredictable. Finally, agricultural policy will be determined by the outcome of new farm legislation and GATT negotiations. * Net cash income in 1990 is expected to reach more than $50 billion for the fourth consecutive year, exceeding 1989 by 2 to 4 percent. Farmers' .cash receipts will be record high, Government payments will decline with smaller disaster payments and farm production costs may be stable.

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The farm financial picture is favorable. Although farm debt may increase slightly (ending a 6-year trend of debt retirement), rising land values will enhance farmers' assets, bolstering their equity position 4-5 percent. The debt to asset ratio may decline slightly, for the fifth year in a row.

* World grain production is forecast up more than 7 percent in 1989/90, with U.S. output rising 38 percent and foreign up 3 percent. World wheat, coarse grain and rice output are all larger this season. World oilseed production is registering strong gains, while world cotton production is declining.

Global and domestic stocks of most crops, reduced by drought in 1988/89, are likely to tighten further by the end of 1989/90. Although world harvests of most crops were larger this season, use will exceed production, cutting further into ending stocks. World stocks of wheat, coarse grains and cotton will show the greatest decline, while soybean stocks will recover from a reduced level.

* World grain trade, up 2 percent, will be the largest since 1984/85.

The U.S. share of almost 50 percent compares with only 35 percent in 1985/86. The U.S. share of world soybean and product trade, forecast at 35 percent, continues its decline while more competitive prices are raising the share for cotton to 31 percent, best since the mid-1980's.

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