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March 2, 2001

Low commodity prices prompt LDP legislation
Citing a projected fourth consecutive year of low commodity prices received by America's farmers, Reps. Jo Ann Emerson (R-MO) and Marion Berry (D-AR) introduced legislation raising the payment limitation on loan deficiency payments (LDPs) and marketing loan gains. The legislation, H.R. 339, amends the Food Security Act of 1985 to increase the maximum amount of marketing loan gains and loan deficiency payments that an agricultural producer may receive during crop years 2001 and 2002 from $75,000 to $150,000.
Source: Governmental Relations Bulletin, Feb. 14, 2001

U.S. nitrogen imports take big jump in 2000
The Fertilizer Institute reports that for July through November 2000, U.S. nitrogen imports were up more than 27 percent over 1999 and anhydrous ammonia imports were up 17 percent. For the month of November 2000, anhydrous ammonia imports were up 37 percent over November 1999, nitrogen solution imports were up 74 percent, urea imports were up 56 percent, and ammonium nitrate imports were up 59 percent.
Source: Doane's Agricultural Report, Jan. 26, 2001

Commission proposes flexible income safety net
The 21^st Century Commission report to Congress includes broad recommendations on strengthening the income safety net, enhancing risk management programs and improving conservation programs and incentives. The report stated that a flexible income safety net is needed to bolster farm income during periods of economic challenge. Low commodity prices, according to the report, have made existing farm policy tools "inadequate" to address economic challenges faced by America's farm and ranch families over the past few years.

Among its income-related recommendations, the Commission is call ing for continuation of regular farm program (AMTA) payments and the addition of a countercyclical income support program. The countercyclical program, which the commission calls Supplemental Income Support (SIS), would support farmers when gross income levels fall below a certain percentage of historical income. Under the program, no payments would be made if aggregate income is higher than the historical reference level. When made, payments would be decoupled from commodity prices and yields, and, the Commission believes, would be allowed under terms of the World Trade Organization agreement.
Source: AFBF, Executive Newswatch, January 30, 2001

Corn and soybean stocks up, wheat down
Corn stocks in all positions on Dec. 1, 2000 totaled 8.52 billion bushels, up 6 percent from Dec. 1, 1999 and the highest level since 1987. Of the total stocks, 5.55 billion bushels were stored on farms, up 7 percent from a year earlier. Soybeans stored in all positions on Dec. 1, 2000, totaled 2.24 billion bushels, up 3 percent from Dec. 1, 1999. On-farm stocks estimated at 1.22 billion bushels, were up 6 percent from the same period a year ago. Off-farm stocks at 1.02 billion bushels were 1 percent lower than Dec. 1, 1999. All wheat stored in all positions on Dec. 1, 2000 totaled 1.80 billion bushels, down 4 percent from a year ago. On-farm stocks are estimated at 623 million bushels, down 4 percent from last year. Off-farm stocks, at 1.18 billion bushels, are down 5 percent from a year ago.
Source: NASS:USDA, Grain Stocks, Jan. 11, 2001

Canada, Mexico and Asia imports grow
U.S. processed food imports from Canada, Mexico, Southeast Asia, and South Asia more than doubled in value in fiscal 2000 from 1990. These countries supplied $17 billion of U.S. processed food imports in 2000, almost half of all processed imports and 44 percent of all agricultural imports. While the EU was the single largest source of imports in 2000 ($8.6 billion), Canada, Latin America, and Asia are gaining and are not far behind. Imports from Thailand and Indonesia grew substantially because of their depressed currencies following financial crises in 1997-98. India is another up and coming source, especially for nuts, fish and other prepared foods.
Source: U.S. Agricultural Trade Update, Jan. 25, 2001

Strong dollars hurts U.S. agricultural producers
The value of the dollar has increased sharply in the last several years.

Between April 1995 and September 2000, the U.S. real agricultural trade-weighted exchange rate (based on bilateral exchange rates weighted by share of exports) appreciated by 25 percent, reversing about 10 years of a declining dollar value.

In addition, the U.S. dollar has appreciated even more against currencies of trade competitors, making U.S. producers less competitive in world markets.

Between April 1995 and September 2000, the U.S. dollar appreciated 42 percent relative to currencies of U.S. competitors.

The exchange ratethe price of a currency in terms of another currencyis arguably the single most important variable in determining the economic environment for trade sectors.

Exchange rates affect trade by determining the relationship between international and domestic prices. Changes in the real (inflation-adjusted) exchange rate result in the raising or lowering of prices of U.S. goods in local currency terms around the world.

An appreciating dollar raises the price of U.S. goods on the international market, while a depreciating dollar lowers these prices.

Exchange rate movements are particularly important for agriculture sectors in countries like the U.S., where exports account for a major portion of agricultural production.
Source: Economic Research Service/USDA, Agricultural Outlook/January-February 2001