WORLD AGRICULTURAL PRODUCTION PART 2:

May 1998

This reports includes the weather briefs, production briefs, and commodity feature articles from the full World Agricultural Production circular, with the exception of some of the statistical tables and charts. This report draws on information from USDA's global network of agricultural attaches and counselors, official statistics of foreign governments, other foreign source materials, and results of office analysis. Estimates of U.S. acreage, yield, and production are from the USDA Agricultural Statistics Board, except where noted. This report is based on unrounded data; numbers may not add to totals because of rounding. The report reflects official USDA estimates released in the World Agricultural Supply and Demand Estimates (WASDE-338) May 12, 1998.

The report was prepared by the Production Estimates and Crop Assessment Division, FAS, AGBOX 1045, 14th and Independence Ave., Washington, DC 20250-1045. Further information may be obtained by writing to the division, or by calling (202) 720-0888, 9516, or by FAX (202) 720-8880.

We plan to issue PART 2 of this circular every month, normally 5 working days AFTER the release of Part 1. The next issue of World Agricultural Production, Part 1, will be available electronically after 3:30 pm local time on June 15, 1998.

WEATHER BRIEFS

NORTHWESTERN AFRICA: SHOWERS STABILIZE EASTERN WHEAT YIELDS

During March, Morocco, Algeria, and Tunisia received below-normal rainfall, worsening conditions for winter grains which were in the reproductive phase of development. From April 1-11, showers brought some relief to reproductive and filling winter grains. However, rainfall was somewhat scattered and light. In southern Morocco, rainfall was insufficient to halt the downward trend in crop condition. Most of northwestern Africa was dry during the week of April 12-18. Light rain continued to stabilize conditions in northern Morocco. Crop conditions continued to decline in southern Morocco, Algeria, and Tunisia due to persistent dryness during the winter wheat grain filling stage. From April 19 through May 5, widespread rain fell in Algeria and Tunisia, bringing relief to late and immature crops. However, these rains were thought to be generally too late to significantly improve yield prospects. Northern Morocco was drier, with northern winter grains receiving less than 10 millimeters per week of rainfall.

SOUTH AMERICA: NORTHERN ARGENTINA AND SOUTHERN BRAZIL REMAIN WET

During March, below-normal rainfall favored corn and sunflowerseed maturation and harvesting in the major growing areas of Argentina and Brazil. Heavier rainfall in northern Argentina and Paraguay caused concerns for maturing cotton. In Rio Grande do Sul, Brazil, excessive rainfall slowed soybean harvest and reduced its quality. During the first week of April, moderate-to-heavy showers continued to slow soybean harvest in Rio Grande do Sul and Parana, Brazil. Heavy showers continued in northern Argentina, slowing cotton harvest. By week's end, drier and more favorable weather returned, aiding cotton maturation. Dryer weather also favored summer crop harvest in central Argentina. From about April 8-18, excessive showers in northern Argentina and southern Paraguay caused flooding and some damage to mature cotton. Moderate showers across central Argentina slowed summer crop harvest. During this period, widespread moderate-to-heavy showers covered the major soybean-growing areas of southern Brazil, slowing harvest. The week of April 19 was another wet week across northern Argentina and southern Paraguay. The rainfall exacerbated flooding and damaged mature cotton and delayed its harvest. In central Argentina, scattered showers slowed summer crop harvest. In southern Brazil, moderate showers in southwestern Parana and northwestern Rio Grande do Sul slowed soybean and cotton harvest and reduced their quality. The period of April 26 through May 2, ushered in drier weather in northern Argentina, which eased flooding. Continued dryness is needed for resumption of the cotton harvest and preservation of its quality. Showers again slowed summer crop harvest and possibly reduced soybean and sunflowerseed quality in central Argentina, while heavier showers slowed corn harvest in southeastern Buenos Aires. Also, moderate-to-heavy showers again caused harvest delays and reduction of soybean quality in Parana and Rio Grande do Sul, in southern Brazil.

CANADA: LINGERING WINTER COLD RESTRICTS CROP PROGRESS

During the last week of April 26 through May 7, dry weather across the Prairies favored spring fieldwork. Temperatures averaging 2 to 5 degrees C above normal helped warm topsoils throughout the main agricultural districts. However, there were some exceptions, where lows remained below -2 degrees C, restricting planting operations. As of May 10, moisture reserves are generally favorable in western and southern growing areas. More rain is needed from central Saskatchewan to the north and east. In the east, winter wheat is greening in southern growing areas and breaking dormancy elsewhere, although the recurrence of sub-freezing temperatures limits vegetative growth.

PRODUCTION BRIEFS

BRAZIL: SOYBEAN PRODUCTION UP BASED ON GOOD HARVEST RESULTS

Brazilian soybean production for 1997/98 is forecast at a record 30.7 million tons, up 0.7 million or 2 percent from last month, and up 3.9 million or 15 percent from the previous record of last year. Harvested area for 1997/98 is forecast at 13.0 million hectares, up 1.2 million from last year. The upward revision is due to good harvest results, especially in the states of Mato Grosso, Goias, Rio Grande do Sul, and Parana. Production was believed to be limited by dryness during December and January in the states of Parana, Sao Paulo, and Mato Grosso do Sul, and more recently by heavy rains that have hampered harvesting. The new record forecast indicates that these problems were in some cases not as severe as once feared and that any losses are being more than compensated for by good yields in other areas. As of April 30, harvest was 87 percent complete, behind last year's progress of 96 percent, but equal to the 5-year average.

ARGENTINA: RAINS AND FLOODS REDUCE COTTON, RICE, AND SUNFLOWERSEED PRODUCTION

Excessive rains and floods in Argentina have caused heavy losses in the cotton crop. Cotton production for 1997/98 is estimated lower this month at 1.4 million bales, down 0.5 million or 26 percent from last month and 6 percent from last year's output of 1.5 million. The dramatic reduction from a forecast high of 2.1 million bales in March, has resulted from excessive rainfall and flooding in the Northeast provinces of Chaco, Formosa Santa Fe, and Corrientes. Cotton losses resulted from a host of moisture related insect and disease problems in marginally-affected areas, while cotton in the hardest hit areas was submerged and much can not be harvested. Harvest area for 1997/98 was cut from 1.0 million hectares to 0.8 million.

Sunflower area, while not flooded like cotton, has suffered from a prolonged period of late-season, excess rainfall which has reduced yields and frustrated harvest efforts. Production for 1997/98 is estimated lower this month at 5.0 million tons, down 0.2 million or 4 percent from last month and down 0.4 million from last year. Area is unchanged this month at 3.1 million hectares. As a result of the continuing rains, the production forecast for the sunflowerseed crop has been reduced over each of the past four months, from a January forecast of 6.0 million tons. The crop is characterized by immature light-weight flowers, poorly-filled seeds, and the presence of various diseases.

Rice is estimated lower this month at 0.585 million tons (milled), down 0.185 million or 24 percent from last month, and down 0.195 million from last year's record. Area was reduced to 0.2 million hectares, down from 0.225 million last month. Like cotton, rice has suffered from recent floods in Corrientes and neighboring provinces. Yield and quality had already suffered due to cool, moist conditions earlier in the season. The recent rains have interrupted the harvest and many growers are unable to move the rice to commercial facilities for drying due to flood-related transportation problems.

CHINA: PEANUT ESTIMATE RAISED

China's 1997/98 peanut production is estimated at 9.6 million tons, up 0.8 million from last month, but down 0.5 million or 5 percent from last year's crop. The revision is based on official statistics recently published by the Chinese Government. Area is estimated up 0.1 million hectares from last year to 3.7 million, but abnormally hot and dry summer weather hurt yields on the North China Plain, particularly in Henan, southern Hebei, and western Shandong Provinces. These three provinces account for more than 60 percent of China's total peanut production. The peanut crop in eastern Shandong, Anhui, and Jiangsu benefitted from moderate rainfall in August, and the weather was generally favorable in southern China, where about 20 percent of the crop is grown.

UNITED STATES: CROP CONDITION AND PROGRESS

A rainy weather pattern persisted throughout the month in the eastern half of the United States, limiting fieldwork and delaying planting, especially in the Southeast. Cotton growers barely had time between storms to prepare and plant fields, keeping progress well behind normal as the month ended. The wet weather also delayed the normal beginning of the corn planting season in the Corn Belt. But as the end of the month neared, the western Corn Belt dried and farmers were able to make

excellent planting progress. However, the eastern Corn Belt remained wet and planting remained behind normal in Illinois, Indiana, and Ohio. Nationally, by month's end, planting was ahead of normal and on a record pace in Minnesota.

Above normal temperatures and dry weather from the Great lakes westward through the northern Plains and Pacific Northwest allowed farmers to make rapid progress in sowing small grains. By the end of the month, most of the Nation's spring wheat, barley, and oats crops were planted. However, dry weather was slowing germination and crop growth, especially in the central and northern High Plains.

The mild, early spring temperatures also coaxed winter wheat out of dormancy earlier than normal and provided good growing conditions for most of the month. Around mid-month, a cold front that brought below freezing temperatures as far south as northern Texas did little damage to the crop. But by the end of the month, dry weather was beginning to stress the crop in the High Plains from

Texas to the Canada border. In the eastern Corn Belt, wet weather was responsible for the decline in the crop condition. Despite the late-month deterioration, winter wheat was in better condition at month's end than in recent years.

Fieldwork and planting were frequently delayed by rain in the Southwest and California. In addition, below normal temperatures persisted for most of the month, keeping soils unfavorably cool until late-month, causing cotton growers to delay planting. A late-month warm up allowed Southwest farmers to make good progress, but planting remained behind the 5-year average as the month ended. In the Southeast, cool, wet weather persisted through the end of the month, causing cotton and peanut planting to fall farther behind. Rice growers had well over half of their crop seeded, despite the rainy weather.

FORMER SOVIET UNION: WEATHER AND CROP DEVELOPMENTS

In April, above-normal precipitation fell in Belarus, western and northern Ukraine, and central and eastern Russia (Central Region, Central Black Soils Region, and the Volga Valley). Most of this precipitation occurred from April 1-20, hampering planting operations of spring grain and early sugar beet. Planting, helped by generally dry weather, likely began on schedule in southern Ukraine and the North Caucasus region in Russia. Unseasonably mild weather in April favored greening of winter grains in Ukraine, extreme southern areas in Russia, Belarus, and the Baltics. However, during the first 20 days of the month, unseasonably cold weather prevailed in central and northern Russia, delaying greening in winter grains and spring planting. During the last 10 days in April, mild and generally dry weather in most areas favored winter grain development and spring planting. By month's end, crop progress for winter grains ranged from jointing in Ukraine to greening in northern Russia. Since early May, continued mild and generally dry weather in Ukraine allowed spring grain and summer crop planting to progress without delays and promoted winter grain development. In Russia, light showers accompanied a warming trend, maintaining favorable conditions for winter grains and spring sown crops in the south and increasing soil temperatures for spring grain planting in the north.

In crop areas east of the Urals, spring grain planting usually begins in May. In April, unusually cold, wet weather prevailed over major spring wheat producing areas in Kazakstan and Russia, preventing early season fieldwork. Moisture accumulations since last fall have been near to above normal in Russia and Kazakstan, providing adequate to abundant soil moisture conditions for the upcoming growing season. Recently, although a rapid warming trend increased soil temperatures for upcoming spring grain planting, widespread showers hampered early fieldwork.

Tom Puterbaugh (202) 720-2012

FEATURE COMMODITY ARTICLES

1998/99 WORLD GRAIN PRODUCTION OUTLOOK

World grain production (wheat, coarse grains, and rice) for 1998/99 is forecast at a record 1,890.7 million tons, up 2.2 million or less than 1 percent from 1997/98. World wheat production is forecast at 597.0 million tons, down 13.7 million or 2 percent from last year. Although a recent sharp decline in wheat prices reduced winter wheat plantings in the United States and intentions for spring grains in the United States and Canada, the EU-15 maintained wheat area and is forecast to produce a record wheat crop. Wheat production is projected lower in the United States, China, Argentina, Canada, Eastern Europe, and the FSU-12. In China, yield and production are forecast to decline from last season's record level, but the crop is likely to be the second largest wheat harvest on record.

World 1998/99 coarse grain production is forecast at 906.8 million tons, up 9.3 million or 1 percent from 1997/98 mainly due to increases in the United States, China, and Brazil. Global coarse grain area is projected to increase as corn area reaches a record level, more than offsetting a 30-year low for barley area. Stronger corn prices relative to other crops have encouraged producers to plant additional corn area in the United States. China and Brazil's corn production are forecast higher as area expands and they recover from the effects of poor weather. Production in Eastern Europe is forecast lower as yields return to an average level after last season's bumper corn crop. Output in Argentina is forecast lower than a year earlier; however, yield is increasing at a rapid rate as producers use improved technologies and the crop is expected to be the second largest on record.

World 1998/99 rice production is forecast at a record 387.0 million tons, up 6.7 million or 2 percent from 1997/98. Assuming normal weather, record total foreign output is projected due to a continued increase in the adoption of improved technologies. In addition, the strong world rice prices likely will encourage major exporting countries to plant more area. In the United States, the rice crop is forecast to be the second highest on record. Assuming normal weather, Indonesia should rebound from the affects of the recent El Nino-related drought.

Individual country level supply and distribution estimates will be detailed for rice on July 10, 1998.

Timothy Rocke, Grain Chairman
Phone: (202) 720-1572
Email: rocke@fas.usda.gov

INDICATIONS FOR 1998/99 WORLD COTTON PRODUCTION

World cotton area and production for the 1998/99 season depends on several factors with cotton prices and those of competing crops playing a crucial role. Cotton production also is influenced by domestic and world financial conditions, government policies, and weather. The Cotlook A-Index represents the price level of international raw cotton offered to the market on a daily basis from several cotton trading countries. Generally, a direct relationship exists between cotton area and production and the price index for the previous year. During the first nine months of 1997/98 marketing year, the index has dropped 16 cents per pound with this April's price, 14 cents below that of April 1997. This factor alone suggests that cotton area and production next year will drop below the 33.5 million hectares and 88.6 million bales currently estimated for 1997/98. However, output depends also upon the price level of other crops in relation to the price of cotton, production costs associated with cotton production, and government policies. The preliminary forecast indicates that world cotton area and production in 1998/99 could decline to 32.5 million hectares and 86.5 million bales, with China and the United States contributing the largest declines.

In China cotton production for 1998/99 is highly uncertain. A continuation of circumstances that have plagued cotton production in the recent past, including environmental factors as well as from governmental actions, indicate that production will decline from the 19.7 million bale output of 1997/98. For the 1998/99 season, China has announced a new procurement price for domestically produced cotton which is substantially lower than the price paid to farmers in 1997/98. In addition, to the lower value, the procurement price will be allowed to fluctuate up to 5 percent, presumably at the discretion of Provincial Officials. The only exception to this is in Xinjiang province, where no limits are being placed on the amount of price movement. The effect of the lower price on area and production should be mitigated by lower prices for grains and oilseeds and the timing of the government's price policy announcement. The announcement was made in early April at the time farmers were developing their cotton seedlings for field transplantation. Another indication for lower output for next year is the new land use policy. Late in the 1997/98 season, China changed its land use policy to permit growers in certain regions along the Yellow River to stop growing cotton. This new policy reflects growers' disenchantment with cotton production given high financial and labor costs and difficulties marketing their cotton. Reductions in cotton area in the Yellow River area are in addition to continuing shifts in area from the North China Plain to other areas, especially Xinjiang province. Some of the areas where cotton is expanding provide higher yields and are less prone to disease and insects. In the North China Plain, farmers are switching to other crops that provide a higher return on investment and require less costly inputs, especially labor. Grains and vegetables are the most frequently mentioned alternative crops, especially in northern provinces of the North China Plain.

In the Former Soviet Union (FSU), cotton production for 1998/99 is forecast above the 7.3 million bales output estimated for 1997/98. As in past years, two opposing forces continue to influence the size of the cotton area. Each country needs to maintain or expand area to earn hard currency through its cotton exports. On the other hand, they also need to increase food production to feed their growing populations. In addition to their food supply concerns, these countries continue to experience increases in land salinity caused by cotton production. As a result, the governments have encouraged a shift out of cotton cultivation to alternative crops. Uzbekistan is the FSU's largest cotton producer with production regulated by the government. At present, the Government's policy for 1998/99 is to stabilize area at and hold production near the 1997/98 level of 5.4 million bales. Turkmenistan, the second largest producer in the FSU, has had difficulties in maintaining production in recent years. In 1996/97 output declined to 0.6 million bales but recovered in 1997/98 to 0.9 million. The government's action to privatize agricultural land in 1997/98 apparently resulted in sufficient incentives to reverse the downward spiral in production. However, cotton prices have remained low and input and machinery remain in short supply. Unless significant programs are enacted to address these problems, production is likely to remain stable at the current level of 900,000 bales of 1997/98.

In Pakistan, cotton output for 1998/99 is likely to be near the 7.0 million bales estimated for 1997/98. Factors pointing to reduced production include a lower price relative to last season, difficulties with pest control and area shifts to sugarcane in the Punjab. On the other hand, strong demand by the Pakistani textile industry and exporters under the free trade regime continue to support production. Also, the government's plan of wide scale distribution of insect and virus resistant varieties for planting in 1998/99 will help to maintain cotton production near 1997/98 levels.

In India, despite high domestic prices during the ongoing 1997/98 marketing season, cotton area in 1998/99 is likely to decline with output near the five-year average. Growers are expected to reduce area in response to heavy losses suffered in the current season, particularly in Punjab and Andhra Pradesh, due to untimely rains and pest attack. Factors influencing cotton planting for the 1998/99 season are: end-of-season price for the 1997/98 crop; 1998 monsoon rainfall situation; pest and weather related problems encountered by the cotton farmers during the current year; and the 1998 export outlook for cotton yarn. The net impact of all these factors could be a marginal decline in cotton planting this year from the near record level of 9.0 million hectares for 1997/98. Output is projected to be near the five-year average of 12.0 million bales, well above the 1997/98 weather-reduced crop of 11.2 million bales. Because of the cotton losses in northern states and Andhra Pradesh, farmers may switch to other competing crops such as rice, coarse cereals, and sugarcane. In Andhra Pradesh, tobacco, chillies, and coarse cereals are the favored crops over cotton. However, the likely cotton area decline in these states would be partially offset by increased cotton area in some of the central and southern states where the return from cotton this year has improved.

U.S. cotton production is estimated at 16.7 million bales, down 2.1 million bales, or 11 percent from the 1997/98 level. USDA's March 1 survey of producers' planting intentions indicated that area will decline 4 percent, with the largest regional reductions in the Southeast and Delta, where growers are shifting area to crops with lower production costs, especially corn. Applying historical average abandonment and yield rates provides preliminary estimates of 12.3 million for harvested acres and 650 pounds per harvested acre for yield. As of May 3, cotton planting progress lagged the 5-year average, with significant delays due mainly to excessive rainfall in California, the Delta States, Georgia, and South Carolina. An updated survey of acres planted will be published on June 30; USDA's first objective yield crop estimate will be published on August 12.

Individual country level supply and distribution estimates will be detailed for cotton on July 10, 1998.

WORLD COTTON AREA, YIELD, AND PRODUCTION

* = 480-pound bales
p = preliminary
Ronald R. Roberson, Cotton Chairperson
Phone: (202) 720-0879
E-mail: roberson@fas.usda.gov