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BEYOND THE NUMBERS
GLANCING BACK AT 2001
This year had more than its fair share of dramatic events. It is interesting to look back at the developments that had important impacts on the business of agriculture. Below is a summary of some of the most noteworthy developments in 2001:

10. USDA revised China's grain use and stocks, cutting use and boosting stocks. For example, China's current rice carryover went from 20 million tonnes to 95 million tonnes. Similar changes were made to wheat and coarse grains. The higher stocks dampened optimism that China would need to import grain following back-to-back droughts in 2000 and 2001.

9. The explosion in soybean production in South America accelerated in 2000 and 2001. Last season, Argentina's farmers added almost 1.7 million hectares (4.2 million acres) and another 700,000 for the current crop. Production is up more than 150 percent from levels of the early 1990s. Expansion in Brazil has been more muted, but data suggests a 10 percent increase in area this year, with production up 20 percent from two years ago.

8. At the beginning of the year, natural gas prices soared, causing huge problems for nitrogen fertilizer producers. High gas costs forced a cutback in production and fertilizer prices rose dramatically, encouraging farmers to plant less corn in 2001 and reduce application rates. Acreage declined 3.5 million acres from 2000.

7. For much of the year, livestock prices were the bright spot in the U.S. farm sector. Cattle prices were well above year ago levels and hog prices matched the profitable levels recorded in 2000. Milk prices were near record levels for most of the year. But the slowing economy coupled with a sharp cutback in travel following 9-11 hurt demand and caused a plunge in cattle and hog prices.



6.
China was admitted to the World Trade Organization in December, which was too late to impact 2001. However, over the next few years this could prove to be a watershed event. China has agreed to eliminate export subsidies and establish tariff rate quotas on most bulk commodities. The hope is that this will lead to a boom in exports of U.S. products to this huge market.

5. U.S. ethanol production is booming as several states prepare to stop using MTBE as a fuel oxygenate. At the end of 2000, U.S. ethanol production capacity was estimated at 1.85 billion gallons annually. The industry expanded capacity aggressively to about 2.46 billion gallons on line or under construction as of the end of 2001.

4. Livestock diseases both helped and hurt U.S. agriculture in 2001. Foot and mouth disease in Europe boosted U.S. meat exports, especially for pork early in the year. But toward the end of the year, Japan detected BSE, causing a dramatic drop in beef demand. U.S. beef exports to Japan have been hurt by the collapse in foreign demand.

3. Crops got off to a poor start with the fall of 2000 planted wheat crop. Spring planted crops were also plagued by adverse weather early in the season, especially in the western Corn Belt. Wheat production did fall below 2 billion bushels, to the lowest level since 1988. But corn, soybean and cotton production were above the levels indicated by crop condition ratings and anecdotal field reports.

2. The farm bill debate is another development that will have little impact on 2001, but has long-term implications. The 1996 Farm Bill does not expire until after the 2002 crops, but Congress was scurrying to get a bill passed in 2001. The motivating factor is the money authorized for the farm bill last April. The budget committees added more than $70 billion over the next 10 years to the baseline, which totaled more than $90 billion. The authorization was based on expectations of a large budget surplus. However, the surplus is long gone due to the economic slowdown and the government spending caused by the terrorist attacks. But because of the way Congress works, the money is still available until the next budget resolution is passed.

1. The effects of 9-11 permeate the whole economy. The U.S. economy was already sliding toward recession in mid-summer. But the terrorist attacks ended any thoughts that a recession could be avoided. Consumer confidence plunged, people stopped traveling and industries directly affected began laying off large numbers of employees. Government spending spiked higher as policymakers moved to help certain sectors and provide disaster relief. The big questions at the end of 2001 are how deep will the recession be and how long will it last? AM


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