The FAPRI 2003 World Agriculture Outlook presents final projections of FAPRI's agricultural outlook on world agricultural production, consumption, and trade. FAPRI projections assume average weather patterns worldwide, existing policy, policy commitments under current trade agreements, and recent policy changes such as the Farm Security and Rural Investment Act of 2002. FAPRI projections do not include conjectures on potential policy changes such as the various proposals under consideration in the WTO Doha Round negotiations. The major macroeconomic drivers of the 2003 FAPRI baseline are the deepening crisis in Latin America,; full economic recovery in many countries in the next two years, and the U.S. dollar's mixed relative value on world markets.

In the Mid-Term Review (MTR), the European Commission proposed a series of changes to the Common Agricultural Policy (CAP). An important part of these changes was significant decoupling of support payments from production. In this paper, a partial equilibrium model of the EU agricultural sector is used to estimate the potential impacts of the MTR proposals on EU and world agricultural markets over the period 2004-2009. Effects of the MTR proposals are evaluated by comparing estimated outcomes under the proposals to those that would result under a current-policy baseline. The changes that are made in the MTR have the effect of reducing the production of the major commodities by varying amounts based on the importance of payments in production and the degree to which these payments are currently production inducing. For example, total area harvested for nine major crops falls by about 2 percent under the MTR proposals. In the livestock sector, however, where current payments are strongly coupled and form a large part of producers’ income, the reductions in production are projected to be more significant.

Contributed paper selected for presentation at the 25th International Conference of Agricultural Economists, August 16-22, 2003, Durban, South Africa.

Most of the large scale modeling systems used in the analysis of agricultural policies produce deterministic projections. In reality, however, the agricultural sector is subject to a high degree of uncertainty as a result of fluctuations in exogenous factors such as the weather or macroeconomic variation. A stochastic approach can provide additional information to policy makers regarding the implications of this uncertainty, through the use of stochastically generated projections. This paper also shows how deterministic analysis may result in systematic errors in the projection of some variables. As an applied example, the FAPRI model of the US agricultural sector is simulated stochastically to analyse the impact of proposals for the new US farm bill.

The Food and Agricultural Policy Research Institute (FAPRI) prepares a preliminary agricultural outlook on world agricultural production, consumption, and trade every fall. This is followed by an outside review, re-evaluation of projections, and completion of the final baseline in January. The FAPRI 2000 World Agricultural Outlook presents these final projections for world agricultural markets. A companion volume, the FAPRI 2000 U.S. Agricultural Outlook, presents the U.S. component of the baseline. FAPRI projections assume average weather patterns worldwide, existing policy, and policy commitments under current trade agreements. FAPRI projections do not include conjectures on potential policy changes, such as those resulting from the likely eastward enlargement of the European Union (EU). The baseline predicts recovery of world agricultural production, consumption, and trade, but with remaining price weakness for crops. Stock-to-use ratios in world crop markets remain high despite the strong recovery of Asian and Latin American economies. Above-average yields kept world production high relative to demand in 1999. In contrast, pork and beef prices are increasing significantly above their 1999 level. The physical volume of U.S. agricultural exports is projected to reverse the downward trend of fiscal year (FY) 1999, whereas the value of agricultural exports continue to decline for one more year before recovering because of low crop prices in 2000/01. World crop trade is projected to increase by 55 million metric tons (mmt) in the coming decade, with the United States capturing 49 percent of the expanded market, but still unable to increase its market share by a large percentage. Following this expansion of the market, grain prices increase by 35 percent in the projection period, but still stay well below the peak of 1995/96. The increase in world crop trade reflects the increasing specialization occurring in world agriculture. Increased market access and land scarcity in many Asian economies induce them to import grains and oilseeds to meet their feed demand. Developing Asia remains the fastest growing market for corn in the next decade. With implementation of Agenda 2000 reforms, the EU will reduce its wheat domestic price relative to the world price and will export wheat without subsidies after 2004, constraining gains in market shares for the United States. EU barley exports will expand significantly in the coming years but are likely to be constrained by General Agreement on Tariffs and Trade (GATT) commitments on export subsidies after 2004. World meat trade will increase by 31 percent over the next decade. The United States has become a competitive producer and exporter of meat products. In the coming decade, the United States will experience the largest meat export growth rates among major exporters of beef, pork, and broilers. U.S. exporters capture more than 70 percent of the growth in trade, increasing their share of the combined meat markets from 23 percent in 1999 to 37 percent in 2009. Meat imports are recovering and expanding rapidly in Japan, South Korea, and Taiwan. In Japan, the share of imports in consumption increases from 38 percent in the 1990s to 49 percent at the end of the next decade. Taiwan meat imports will triple from 1990-1999 levels to 2000-2009 levels, driven by imports of beef, non muscle pork products, and the opening of the poultry market. Recovery of Asian food demand will prompt dairy prices to grow by about 1 percent per year over the next decade. Total milk production is projected to increase, with particularly strong growth in the United States, Mexico, Argentina, and Brazil. Most of the growth occurs through yield increases. Per capita cheese consumption is expected to grow by 1 to 2 percent a year in most countries.

This material is based upon work supported by Cooperative States Research Education and Extension Service, U.S. Department of Agriculture, under Agreement No. 00-34228-8988 and Missouri Department of Agriculture proposal #00112091.

In response to a request from Senator Tom Harkin, the Food and Agricultural Policy Research Institute (FAPRI) evaluated the effects of a uniform 10 percent reduction in program crop acreage in the United States. Specifically, FAPRI analyzed the effects on price, trade, consumption, and production in the eight program-crop markets and all related markets. FAPRI also investigated both the domestic and international implications of this reduction in U.S. planted area. In particular, FAPRI analyzed whether a decrease in U.S. production would be accommodated by a decrease in domestic use and inventories and corresponding changes in foreign production, use, and inventories.

Presented to the Missouri House of Representatives, Committee on Agriculture, Jefferson City, MO, by Gary Adams and Scott Brown.

The cornerstone of the 1977 and 1981 Farm Bills for crops is a buffer stock-supply management program involving the farmer-owned reserve and acreage adjustment instruments. Among the several reasons normally cited for adopting this type program is price and income stability. However, recent swings in commodity prices, net farm income and government program costs have stimulated widespread interest in farm program redesign and modification in 1985.

Most of the large scale modeling systems used in the analysis of agricultural policies produce deterministic projections. In reality, however, the agricultural sector is subject to a high degree of uncertainty as a result of fluctuations in exogenous factors such as the weather or macroeconomic variation. A stochastic approach can provide additional information to policy makers regarding the implications of this uncertainty, through the use of stochastically generated projections. This paper also shows how deterministic analysis may result in systematic errors in the projection of some variables. As an applied example, the FAPRI model of the US agricultural sector is simulated stochastically to analyse the impact of proposals for the new US farm bill.