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DIARY
Book 350
January 22 - 24, - 1941
BBook
Page
350
185
Belgium
See War Conditions
-CCalifornia-Texas Oil Company, Limited
See War Conditions: Foreign Funds Control
Campbell, Thomas D. ("Wheat King"), Hardin, Montana
HMJr asks Haas for report - 1/23/41
a) Report in Book 352, pages 75 and 231
Discussion with Purvis, Watson (White House), and
Wickard - 1/30/41: See Book 353, pages 44, 46,
51, and 66
Chen, K. P.
For recommendation as Chairman of new Chinese
Stabilization Committee, see War Conditions: China
China
See War Conditions
Coast Guard
Navy taking over considered unwise at this time by
Gaston - 1/23/41
246
a) Discussion at 9:30 meeting - 1/24/41
326
-DDanube Basin
See War Conditions: Germany
-EExport Freight
See War Conditions: Export Control
-FFederal Bureau of Investigation
Klaus memoranda - 1/22/41, 1/24/41
a) Wenner-Gren (Axel) report
94,319
Financing, Government
Debt Limitation, Tax-exempt Securities, etc.:
Conference with FDR; Bell and Sullivan also present 50
1/22/41
a) Debt limit discussion: FDR objects to any
move which could be interpreted as Treasury
conviction that appropriations cannot be
made beyond stabilized debt limit
1) HMJr invites Harrison, George, Barkley,
Doughton, and Cooper to discuss - 1/22/41
a) Bell memorandum describing conference 1/23/41
1) Various exhibits,
Economic phases discussed at 9:30 meeting - 1/24/41
a) Economist similar to Viner to check effects
Bill as introduced in House - 1/24/41
82
160
163,165,171
320
306
- F - (Continued)
Book
Page
Financing, Government (Continued)
National Defense Notes:
Conference; present: HMJr, Murphy, Haas, Odegard,
Hadley, and Bell - 1/22/41
Salomon Brothers, Discount Corporation, and
Devine estimates on new note - 1/23/41
350
6
202
Hadley to visit Chicago and investigate "what
went wrong with last note issue" - 1/25/41:
See Book 351, page 1; Book 352, page 218
a) Jones and HMJr discuss - 1/27/41:
Book 351, page 236
b) Federal Reserve Bank of New York reports
on response to offering - 1/27/41:
Book 351, page 335
c) Hadley report: Book 351, page 341
Finland
See War Conditions
France
See War Conditions
Freight, Export
See War Conditions: Export Control
- G-
General Counsel, Office of
Report of Legislative Section activities before
Congress - 1/22/41
Germany
See War Conditions
-H-
Harriman, Averill
See United Kingdom, Ambassador to
Henderson, Leon
See War Conditions: Price Control
-LLend-Lease Legislation
See War Conditions
Lumber
See War Conditions: Price Control
-MMachine Tools
See War Conditions: Purchasing Mission; U.S.S.R.
-0Oil
See War Conditions: Foreign Funds Control
95
-PBook
Page
350
287
Peacock, Sir Edward
See War Conditions: Purchasing Mission
Price Control
See War Conditions
-RRevenue Revision
See also Financing, Government
Excess-Profits Tax Act of 1940 - suggested plan
for granting relief under: Tarleau memorandum 1/22/41
a) Sullivan explains status and why he is
not prepared - 1/24/41
332
-TTaxation
See Revenue Revision
UU.S.S.R.
See War Conditions
United Kingdom
See War Conditions: Military Planning; United Kingdom
United Kingdom, Ambassador to
Harriman, Averill)
Wiley, John
)
Winant, John
Frankfurter and HMJr discuss - 1/23/41
186
-WWar Conditions
Airplanes:
Deliveries by purchasers and types,
1/1/40--1/18/41
151
Belgium:
British-Belgian trade agreement concerning Belgian
Congo and Ruanda Urundi - 1/22/41
148
China:
Central Reserve Bank report on deposits with forty
Chinese banks in Shanghai - 1/22/41
Kung sent personal greetings from HMJr by Currie 1/24/41
116
284
a) Chen recommended as Chairman of new
Chinese Stabilization Committee
Exchange market resume' - 1/22/41, etc
Export Control:
Export freight situation: Haas report - 1/22/41
119,215,317
139
- W - (Continued)
War Conditions (Continued)
Finland:
Book
Page
350
118
Stabilization Fund with Finland again discussed
by Procope and Cochran - 1/22/41
Foreign Funds Control:
California-Texas 011 Company, Limited, discusses
conversion of sterling receipts, at the
official rate, into free dollars - 1/22/41
123
British agreement relating to French Cameroons
and French Equatorial Africa arranged with
de Gaulle's Council of Defense - 1/22/41
Opening of safe-deposit boxes in occupied
territory by force postponed by Germany until
149
France:
January 31, 1941
209
Germany:
Danubian agricultual assistance to Germany
discussed in Foreign Agriculture (Department
of Agriculture publication) - 1/22/41
124
Lend-Lease Legislation:
Revised figures of British gold and dollar assets
sent to Committee on Foreign Affairs
a) Copy sent to Tinkham - 1/22/41
Arrangements made for hearing before full
Committee - 1/27/41
British press reports - 1/23/41
Berle's speeches in Middle West discussed by
9:30 group - 1/24/41
86
182
241
329
a) Hull apologizes for having testified
that bill was drafted in Treasury; Berle's
speeches to be watched for same statement
Military Planning:
Reports from London transmitted by Butler -
1/22/41, etc
Price Control:
Henderson asks HMJr to "watch over Division"
during his absence of several weeks - 1/23/41
Lumber: Henderson asks HMJr to reiterate right
152,252,311
191
granted Federal agencies for flexibility in
the application for specifications for lumber -
1/23/41.
194
Purchasing Mission:
See also War Conditions: Lend-Lease Legislation
Wool: HMJr asks Foley to assign staff member to
problem so that it can be worked out quickly 1/22/41
2
Plan worked out by which Army and Navy will certify
to FDR placing of orders for $883 million worth
of United States-type material after which FDR
will direct Jones to place orders - 1/22/41
a) Machine tool contracts cleared - 1/22/41
128
up to January 16, 1941
132,133
Summary of orders: Preliminary report for period
39
- W - (Continued)
Book
Page
War Conditions (Continued)
Purchasing Mission (Continued):
$1g billion in orders: HMJr, Stimson, Knox, Jones,
Knudsen, McCloy, and Young discuss difficulties
of immediate placing - 1/22/41
350
137-A
a) For FDR's memorandum asking speed in (1)
Reconstruction Finance Corporation taking
over British payments made for plants, and
(2) War Department taking over of materiel
payments made by British, see Book 380, page 234
Peacock (Sir Edward) publicity to be released as
decided by British - 1/23/41
Assets: HMJr concurs in Gifford plan to refrain
158
from selling for balance of week as a test of
whether British selling has caused depression
of New York market - 1/23/41
a) Conference; present: HMJr, Bell, White,
Purcell, Foley, Schenker, Louchheim,
Phillips, Gifford, Pinsent, and Cochran -
1/24/41
United Kingdom:
Belgian-British Trade Agreement concerning Belgian
Congo and Ruanda Urundi - 1/22/41
Agreement relating to French Cameroons and French
Equatorial Africa arranged with de Gaulle's
Council of Defense - 1/22/41
158,159
263
148
149
U.S.S.R.:
Machine tool purchases arranged for by Liaison
Committee reported to FDR - 1/24/41
a) Hull sent copy of memorandum
299
302
Wenner-Cren, Axel
See Federal Bureau of Investigation
Wheat
See Campbell, Thomas D. ("Wheat King")
Wiley, John
See United Kingdom, Ambassador to
Winent, John
See United Kingdom, Ambassador to
Wire Tapping
Entire question to be considered by Senate; Irey, etc.,
to be asked to testify - 1/24/41
Wool
See War Conditions: Purchasing Mission
324
1
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 22, 1941
Secretary Morgenthau
TO
FROM
Mr. Cochran
At 9:25 this morning Dr. White asked me by telephone if I would attend to the
clearance through the Department of State of the letter upon British assets and
liabilities which had just been completed for submission to Congress, and which I
had checked with Dr. White after coming out of the meeting held at 9:10, in the
Secretary's office. Dr. White sent me the Secretary's memorandum to him of
January 21 requesting this clearance.
I immediately sent a special messenger to Dr. Feis' office taking my copy ofthe
statement. Dr. Feis had not yet arrived. but I insisted to his secretary that he
give immediate attention to the document as soon as he came in, and then call me back,
since we hoped to deliver this at the Capitol at 10 o'clock and thereafter have it
released.
I called Dr. Feis' office again a few minutes after sending the document, and
spoke with Mr. Livesey upon learning that Feis had not yet arrived. Livesey
promised to try to get the document cleared with Secretary Hull by 10 o'clock.
Messrs. Cox, Kuhn and Schwarz went on to the Capitol with the arrangement that
Mr. Kuhn would telephone me back at 10 o'clock to see if I had obtained the necessary
clearance.
Not having heard from the State Department by 10:05, when Mr. Kuhn called me
back, I reached Dr. Feis on another telephone, while Mr. Kuhn waited. Feis told me
that he had just discussed the document with Secretary Hull. Secretary Hull deferred
to Secretary Morgenthau as to the wisdom of giving publicity to the statement in
question. Secretary Hull desired further to make sure that the British agreed to
such publicity. Feis said that naturally the State Department had not been able to
go into the technical accuracy of the document.
I assured Dr. Feis that the document had been carefully checked by the British
Treasury officials, as well as by the Board of Governors of the Federal Reserve
System and the Department of Commerce. These had all agreed with the Treasury on
the draft in question, and on publicity being given thereto. I thanked Dr. Feis for
having taken the matter up with Secretary Hull and promised to send over clean conies
of the document in its final form. Upon terminating the conversation with Dr. Feis,
I gave the necessary clearance to Mr. Kuhn at 10:10.
3mg.
2
January 22, 1941
10:40 a.m.
H.M.Jr:
Hello.
Operator:
Mr. Foley.
Ed Foley:
Yes, Mr. Secretary.
H.M.Jr:
Ed, on the English contract situation, Jones
thinks it's a mistake for one of his corporations to buy this English wool for fear
that it might offend some of the Western
states who then might be against the bill.
F:
Yeah.
H.M.Jr:
I raised the question of whether we couldn't
get a group of private banks in New York to
loan this money. Now, I had hoped that
the wool was still in the hands of the wool
growers, but it isn't, but if you would
assign to Philip Young one of your ablest
men 80 that he could work just on this wool
deal, you see, and see if we can't work
something out to help the English.
F:
O.K. I'11 pick somebody and have them get
H.M.Jr:
in touch with Phil right away.
Well, give us one of your really tough fellows.
F:
O.K., Mr. Secretary.
H.M.Jr:
Will you?
F:
You bet.
H.M.Jr:
What's the name of that man who was over at
W.P.A. or P.W.A. with you?
F:
Chuck Kades?
H.M.Jr:
Yeah. What's Chuck doing?
F:
Well, he works on taxes and things of that
kind with me. I can put him on it or put
somebody on it that would be more familiar
with the Johnson Act and the Neutrality Act.
3
-2H.M.Jr:
Who would that be?
F:
Well, it would be Huntington but Huntington
H.M.Jr:
has been sick and his man is Feidler. I can
put him on it.
Well, I'll leave it to you because I want
a job on this if there 18 any possible way
of doing a job. See?
F:
Yeah.
H.M.Jr:
We want it done and done fast.
F:
All right. Well, I'11 put Feidler on it
and I'll look at it myself.
H.M.Jr:
O. K.
F:
O. K.
4
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 22, 1941
TO
Secretary Morgenthau
FROM
Mr. Cochran
Mr. Pinsent, Financial Counselor of the British Embassy, telephoned me at
10:50 this morning. He said that Sir Edward Peacock would probably leave Lisbon
by plane tomorrow. It was Pinsent's understanding that the plane which was to have
left Lisbon on Sunday has been delayed until this date. Pinsent now asks whether
the Secretary would approve the British idea of releasing upon Peacock's departure
from Lisbon the press communique which the Treasury had worked over with Sir Frederick
Phillips. The British believe it more satisfactory to take the Lisbon departure
rather than the uncertain hour of quitting Bermuda as the proper time of the release
of the communique. I told Pinsent I would speak to the Secretary on this point.
Seeto memo
buy
Corhran from
dated 1/03/41- -
KMP.
5
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 22, 1941
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. T. Carlyle Gifford telephoned me from New York at 11:30 this morning.
He reminded me that during the past five days the New York stock market had dropped
about five points. He said that he had been able to keep up the totals of his sales
for the last day or two to a fairly good figure only through disposing of certain
lots of United States Government bonds. He now feels that the market has been drop-
ping too steadily. He is inclined to move a little gently in the sale of his securities in the immediate future to see if British official sales may have been
responsible for the pressure.
I told Mr. Gifford that I was bringing his daily statements to the attention
of the Secretary and would also let the Secretary have the above information.
to Cachran
from see memo Sun M.P.
6
January 22, 1941
12:20 p.m.
RE OPEN MARKET
Present:
Mr. Murphy
Mr. Haas
Mr. Odegarde
Mr. Hadley
Mr. Bell
Mrs. Klotz
H.M.Jr:
If it is to be a five year, what has it got
Haas:
One. It is very sweet.
H.M.Jr:
And a three quarters, how far can I go?
Hadley:
Three years and eleven months.
H.M.Jr:
Talk up.
Hadley:
Three years, eleven months.
H.M.Jr:
Are you fellows together?
Haas:
That is right.
Murphy:
Well, we thought that it would probably be
H.M.Jr:
What do you recommend now?
Murphy:
If you cut that three months further, to
to be?
better - that was the recommendation we sent
you yesterday afternoon.
September, 1944 --
7
-2Haas:
That is sweet enough.
H.M.Jr:
Now Dan, let's see what you have got.
Bell:
First of Boston says that a three quarters
per cent maturing December 15, 1944, will
go if the amount is not over 750 million.
They say that if you want to go out the full
five years, it will take a one per cent coupon
but they are afraid the one per cent coupon
will have an adverse effect on all the other
outstanding issues, and they do not recommend
it. If it is over 750 - if it is more than
700 million, they all recommend two issues.
H.M.Jr:
well, you and I know it is going to be 600 at
Bell:
Yes. Repp and Belmar, the Discount Corporation,
the moment.
said that their first choice would be a three
quarters per cent note for December 15, 1944,
and they would think that that ought to sell
somewhere around 19 to 22/32nds. You could
sell five eights, March '44, a half per cent,
December '43, and possibly a three eighths,
March '43.
H.M.Jr:
Could I read the stuff, if you have got it
typed?
Bell:
Yes, it is all typed. It is underlined a
little in spots, but you can read it. It is
quite large. I was just giving you the summary.
H.M.Jr:
I will give it back to you.
Bell:
Do you want me to continue?
H.M.Jr:
Please.
Klotz:
It is small type.
8
-3Bell:
Repp says that if it is 500 million, three
quarters, December '44, and if it is over 500
million, he would recommend a three quarters
September '44. That is what Murphy just
gave you. Devine. If the Treasury wanted
to do a five year, it would take one per cent.
He doesn't recommend. His first choice from
the point of view of the market would be to
sell 500 million of half per cent notes due
September 15, '43. He said the market is thin
and the people are likely to check around and
see whatever it is going to do owing principally
to the recent reserve of Congress about the
Reserve System.
The second choice would be a three quarters
per cent note of September 15, 1944, which
he believes would not affect the market as
much as the longer seven eighths or one per
cent note. Burgess and Kane says it is a
matter of taste. You could start at a half
per cent coupon and work up. Their first choice
is a half per cent note or a 43. However, the
three quarters per cent would go but you would
have to shorten the maturity one year over the
other, and the other was -Hadley:
December, '45.
Bell:
So this would come back to December '44. Green
of the Chase National said if the offer is over
500, he would recommend two issues. His first
choice is also a half per cent note, March, '43,
However, he believed the Treasury could sell a
three quarter per cent note of September 15, '44,
or a five year one but he would not recommend
the latter. His choice of two issues - well,
that is in cases of two issues.
Garner of Guaranty's recommendation is for a
three quarters, September, '44. That is about
9
-4-
all of it. September '44 at three quarters
per cent seems to be the consensus.
H.M.Jr:
Now, who am I going to call up?
Bell:
I would call Rouse and let - you could call
Klotz:
H.M.Jr:
Did you congratulate him? (Sproul)
I don't know.
Bell:
You did that the day of the dinner.
H.M.Jr:
Did I? I don't think I wrote him a letter.
Klotz:
Is it too late now?
H.M.Jr:
Yes.
Bell:
George, what do you figure the September '44,
Haas:
Twenty-three.
H.M.Jr:
Bell:
Murphy:
Sproul if you want to, but Rouse has been
following it all morning and Devine and hepp
are standing by.
three quarters, will go to?
(To McKay) If Professor Odegarde is here,
tell him to come in. He can sit here and
listen. Have you spoken to the Fed?
No, I haven't.
Yesterday we recommended the December '44, and
Mr. Haas and I had some conversation this
morning, and he thought it would be better if
we sweetened it by three months, because of the
general bearish tone, and that is how we happened
to be saying September now rather than December.
It is upping the premium from 18 to 23.
10
-5H.M.Jr:
You know we are going to have to be back
Haas:
I would rather do that than make this too big
again in a courle of weeks for another 500
million.
now. The fact that you have announced it,
I
think, is important - to stay by it.
H.M.Jr:
The 500?
Haas:
Yes.
H.M.Jr:
Dan thinks if we make it six we might be able
to get by until the 15th of March.
Hadley:
I think the market would like it much better
if we could do a little more now and be out
until the 15th of March.
H.M.Jr:
So would I.
Bell:
That would give you 650 or 660, somewhere along
H.M.Jr:
I would love to do a five year and show what
this Federal Reserve monkey business has cost us.
there.
That is the way I would like to do it. There
is no way to show it.
(Professor Odegarde entered the conference.)
(Telephone conversation with Mr. Devine follows:)
11
January 22, 1941
12:35 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Devine.
Mr. C.J.
Devine:
Hello, Mr. Secretary.
H.M.Jr:
How are you?
D:
Fine, and you?
H.M.Jr:
Well, I'm alive.
D:
I guess they keep you very busy, don't they?
H.M.Jr:
Yes, they do.
D:
How do you ever keep track of everything?
H.M.Jr:
Well, I don't know.
D:
Just keep going I guess.
H.M.Jr:
D:
That's it. I thought you were going to come
down here and help me.
Well, I tell you, you see what I did the end
of the year. I liquidated the corporation
and formed a partnership 80 I could jump out
any time.
H.M.Jr:
D:
Yeah. Well, if you're at all interested
I really am, I'm on the fence. That's why I
liquidated the corporation. It cost me
$370,000 in taxes to do that which I'd never
have to pay if I just remained as I was but
I thought if I did jump and want to do something
else why I wouldn't have 80 many ramifications
to go through.
H.M.Jr:
Well, why don't you come down here Friday
D:
All right. Suppose I drop down on Friday.
H.M.Jr:
10:00 o'clock.
and talk to me. The issue will be over then.
12
-2D:
10:00 o'clock Friday.
H.M.Jr:
Yeah. Now, let me ask you this. What does
D:
it look like to you?
Well, I've gone over the thing since I talked
with Rouse and Miller up at the Fed. this
morning and I feel this way: have you got
the time to go over the whole thing?
H.M.Jr:
I've got all the time in the world.
D:
All right. To sell a one, it's too rich in
the first place, in the second place I
wouldn't like to lend the impression that
the first Defense Note was going at 3/4ths
and the second one at 1 and the third one
might go at 1-1/4. That's 8 why I don't like
a 1, plus the fact that it's worth at least
par and 3/4ths. Then the next one would be
7/8ths. Well, 7/8th would have to be June,
1945. That issue would go over and go over
well. of course again it has to some extent
an effect that the first was 3/4ths, this one
was 7/8ths and the next is 1, but not as great
as the first one.
H.M.Jr:
Yeah.
D:
My preference would be a 3/4ths, same coupon,
due in 31 years. You could make it August 1st,
1944 and it would positively be worth at least
101 slightly below or slightly more, it
wouldn't change the coupon, it wouldn't hurt
the outstanding 3/4ths
H.M.Jr:
Wait a minute, Chris, let me see. I've got
a table here before me. You're talking about
a 3/4ths, 4 years and what?
D:
A 3/4ths, 31 year note.
H.M.Jr:
Yes, 31 year. Just a minute. 3 year, 3/4ths.
D:
Now how do you price that?
I price that, a 3 year, 3/4ths at about
between & 60 and a 62.
H.M.Jr:
Yeah, and how much premium?
13
-3 D:
That would be somewhere around par and 1/2.
A 61 on an August maturity is exactly par
and 1/2.
H.M.Jr:
D:
I see.
Now if you wanted to be a little more
generous, which you truly do not have to be,
why you could make it June, 1944.
H.M.Jr:
How about September?
D:
September is a shade over the line.
H.M.Jr:
You mean - which way?
D:
I think it is a little bit too lean.
H.M.Jr:
Well, this time you're much more on the
rich side than you've been before. Why is
that?
D:
Well, no matter what you sell, no matter what
you sell, if you sell over 500 million the
allotment is going to be at least 20%. Now
for two reasons: I've been checking with
banks around all the way across the country
through the wire system here in our offices
and I find out this feeling, that they are
not going to go in for quite as many this
time because they want to see what's going
to happen to this Reserve bill and they
know that there is plenty more coming.
That's why I made over at the Federal this
morning the suggestion that to be eagey,
if you sold 1/2 of 1% note due in September 143
why it wouldn't necessarily cause the market
to run away but it would be a stabilizing
influence on the market.
H.M.Jr:
D:
If we did what?
If you sold a 1/2 of 1% note due in September
143 - now I realize that's short and you do
not have to sell anything that short, but
the effect on the market would be to stabilize
it. It may temporarily do a little better
because the tendency would be - well, we're
not going to get additional higher coupons
on each successive piece of financing. It
would stabilize the market; I have no doubt
about that.
14
4
H.M.Jr:
Well, what premium would that have?
D:
Not 80 much, par and 10/32nds perhaps.
Somewhere around a 38 basis.
H.M.Jr:
D:
But you think 1/2 of 1% would stabilize it?
Absolutely. The shorter you make this
issue - bear in mind, I think you can sell
anything you want in the market, the market
isn't that poor, but it has a tendency and
has had a tendency to drift. The feeling
I would get of the market - it's sort of a
wishy-washy market, it hasn't any firm tone
underlying it at all. It could very easily
go off a point or 1-1/4 points in the next
two or three weeks. Now a shorter note would
tend to eliminate some of that feeling and
sort of stabilize the market at this level
H.M.Jr:
and it may, as I say, even have a tendency
to rally which would worry me.
Yeah. Well
D:
But as the best bet, the 3/4ths.
H.M.Jr:
You're a little nervous this time, aren't
you?
D:
Just a little bit. I'm nervous from the
standpoint that I'd like to see you pick
the right thing and have it go over well
because it is the beginning of a lot of
financing.
H.M.Jr:
Yeah. Well, I don't see how you price the
D:
Well, I price the September '43 on about
September, 143. Our boys say about 4/32nds.
a 3/8ths basis. Let's see - I price it close
to a 3/8ths basis. After all you have
September 1 to '43 outstanding now and
September 1's - I'm sorry, I'm very sorry.
I said - let me see. Yeah, September 1
to 43 right now are running .19. Now
certainly additional notes in there are worth
a 38.
15
-5H.M.Jr:
Well, we've got slide rules and the boys
can figure it, but I get how you feel on it
anyway.
D:
H.M.Jr:
Yeah.
Are you going out for lunch or will you be
around in case I want to call you again?
D:
I'11 be right here until I leave here tonight.
H.M.Jr:
O. K.
D:
Thank you.
H.M.Jr:
I'll be seeing you Friday at 10:00 o'clock.
D:
Yeah.
H.M.Jr:
Good-bye.
D:
Good-bye. Thank you very much.
16
-6H.M.Jr:
I thought you (Odegarde) might be interested
in seeing how we price this stuff. How did
you do?
Odegarde:
H.M.Jr:
I got in on the middle of it.
Well, you know you just got in at the start.
This is the first one. We have never done it
so late, but we could only get in to see the
President this morning.
Hadley:
Here are his estimates on that '43 stuff. They
seem quite out of balance.
(Telephone conversation with Mr. Sproul follows:)
17
January 22, 1941
12:40 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Sproul.
Allen
Sproul:
H.M.Jr:
S:
H.M.Jr:
Hello, Mr. Secretary.
Hello, Allen.
I'm sitting here with Mr. Rouse. Hello?
Well, if you had the responsibility of
writing the ticket, how would you write it?
S:
Well, do you want me to answer or Mr. Rouse
H.M.Jr:
of the market this morning.
Well, I've had what Rouse thinks through Bell.
S:
H.M.Jr:
S:
to answer in the light of his discussions
I see. Looking at it both from your standpoint and the market standpoint I'd write
it for 3/4ths for September 44 and go up
to whatever amount of cash you need to carry
you up into March; that is, assuming that
would be something - a billion or under..
Well, we're talking 5 or 600 millions.
Well then down in 500 or 600 millions I think
a 3/4ths for September 44 would be the best
bet both from your standpoint and the
market standpoint.
H.M.Jr:
I'm kind of interested in a 1/2 of 1%.
S:
Well, there are some people in the market
particularly interested in that I understand.
They think it would be put away and kept
away better than anything else you could put
out but it seems to me it brings the maturity
pretty close in when you consider the amount
of financing and refinancing that is going to
have to be done in the next two years.
H.M.Jr:
True but which would stabilize the market
more: 1/2 of a percent note or 3/4ths?
18
-2My guess would be that the 1/2 would because
S:
there d be less secondary distribution on it,
it would be more largely taken and put away.
What maturity did you have in mind there?
We had suggestions anywhere from March 43
to September 43, the latter getting out as
far as September 43, I think, is going out
pretty far.
H.M.Jr:
Well, I don't know how our boys have figured
it. Let me ask them a minute. (Talks aside).
Well, our boys say here that they wouldn't
want to go any closer than March 43. They
figure that at 10/32nds. What do you figure
that?
S:
Just a minute. (Talks aside). The same.
H.M.Jr:
The same. Is that enough, Allen?
S:
H.M.Jr:
I think it is enough for 1/2% yes. Plenty.
You see - well, I needn't tell you, it's
water over the damn, but that Federal Reserve
System statement, you know, has got us all
upset.
S:
Well, there are other elements in the market
too. I think that is certainly one of them
but there are others.
H.M.Jr:
Well, such as.
S:
Well, such as the whole financing program
H.M.Jr:
Allen, do you think that if I did a 1/2%
S:
H.M.Jr:
which is ahead of us. I think the market
has that in mind too. They don't expect I don't think that we can go through this
whole financing program on the present level
of interest rates.
it would be a sign of weakness?
No, I do not. No.
Well, do you mind sticking around a little
bit 80 I can call you back? You see, the
President was 45 minutes late this morning
80 it has made me late all along the line.
1
19
1/
Talks aside.
H.M.Jr:
How do you go about it?
D. W. Bell:
March 143 seems as thin as we want to go.
Mr. Murphy:
Our curve
D. W. Bell:
Our curve runs a little higher, but I
should say March 143.
20
-3S:
H.M.Jr:
(Laughs). You ought to speak to him about
that.
Well, he had to tell us the story of how
he held up Marie Dressler on the top of a rail
while she made a baby bond speech and then
she fell over backwards on him and a policeman and crushed the two of them, and that
took fifteen minutes.
S:
H.M.Jr:
S:
H.M.Jr:
S:
(Laughs). Well, it's interesting anyway.
Well, you see what you've got ahead of you.
How are we going to sell bonds?
I'd pick someone a little less hefty.
Yeah, but she had a good voice. All right.
Well, I'll be here and Bob Rouse will be
here.
H.M.Jr:
S:
If you don't mind, another ten or fifteen
minutes.
All right.
21
-7Bell:
June, '43, has a billion dollar maturity,
and September, '43, has a billion six with
the October 15 bonds which come in there.
H.M.Jr:
Six?
Bell:
No, the 450 million of the '43 is '43-'47,
three eights, and the October '43 is a billion
four of the '43-'45's.
H.M.Jr:
How about the five eights? You see, they have
Hadley:
Three years.
H.M.Jr:
Two, one, '44.
Bell:
Well, you have got two billion dollars maturing
in March, 15. You have got 500 million of notes
maturing in March '15 and then there is a billion
got that 13/32nds. They have got it here --
and a half of bonds callable in April, '44, so
that you could have financing in February,
March, and April.
H.M.Jr:
We will have them every month from now on anyway.
Have they got a copy of this? I don't want to
hear afterward that they are apart from us.
Are you fellows together that we could do two
years, one and a half - do it three, 15, '43?
Hadley:
Yes.
Murphy:
Yes.
Haas:
Yes.
(Telephone conversation with Mr. Eccles follows:)
22
-8H.M.Jr:
Now I want to call up Repp.
Bell:
Yes, Herbert Repp, Discount Corporation.
H.M.Jr:
This will give you (Odegarde) a little insight
Odegarde:
It doesn't give me any insight on how you keep
them straight.
H.M.Jr:
What, what these people tell you?
Odegarde:
How you follow all these different issues and
H.M.Jr:
on how you decide to borrow 500 or 600 million
dollars.
maturity dates and so on.
I read your memorandum and I was very enthusiastic
about it; and we have got to go to town next
week.
Odegarde:
Did you read it all?
H.M.Jr:
Every last word of it, and some of it twice.
We are going to try to get a bill introduced
next week.
Odegarde:
Were there any additions to those suggestions?
H.M.Jr:
No, the main thing that I want you to think
about is who in town has done the best publicity
job; and if you can make up your mind who has
done the best kind of job, we will just borrow
him and if he makes good we will keep him.
Take this man in AAA. Who is the man who has
done the best job, and I will just borrow him
and if he makes good, I will just take him over.
If you could be thinking along those lines. I
mean, that is better, I think, than going on
the outside, don't you?
Odegarde:
Better.
23
January 22, 1941
12:50 p.m.
H.M.Jr:
Hello.
Operator:
Chairman Eccles.
Marriner
Eccles:
Hello.
H.M.Jr:
Marriner, good morning.
E:
Hello, Henry. How are you today?
H.M.Jr:
Oh, I'm a little under the weather but
E:
What's the matter? Got the flu or something?
H.M.Jr:
No, just a little bit over-tired, but as the
E:
(Laughs).
H.M.Jr:
that's just
family says, that's not news.
Marriner, I got out late from seeing the
President 80 I'11 have to work late on this I mean, I'm up against the clock on this
financing and I suppose you've been in touch
- we re being advised anywhere from - to sell
a 1/2% note up to 3/4ths, somewhere in there.
The 1/2% would be March 15, 1943.
E:
Well, here's the way I look at the thing.
The December 44 in the 3/4 note in the market
this morning would be about 100-18/32nds.
The September 44 3/4 note, that's three
months shorter maturity, is 23/32nds.
H.M.Jr:
You're a few 32nds higher on both of those.
That's immaterial.
E:
Well, it depends on which one of your fellows
you talk with.
H.M.Jr:
That's right.
The fellow that - we've usually been right
on this and - well, I mean, there's one of
your fellows and Pizer have been right
on this thing.
E:
24
-2H.M.Jr:
E:
Yeah.
Well, anyway, there isn't an awful lot of
difference. Now, there'd be no question about
the September, certainly no question about
it, at 23/32nds. That does look to be quite
a premium however for that short a maturity.
On the 1/2 of 1% yield, of course that would
put it into the 143 class.
H.M.Jr:
E:
That's right, March 15th.
Well, you could put it in June. I think
you can put it in June 43. That's only a
2-year note and that still gives you a
premium of 1/2 point. Now 1/2 a point is a
better premium on a 2-year note
H.M.Jr:
I think you're wrong on that Marriner.
well, 15/32nds.
E:
H.M.Jr:
Well, our boys gave me 2 years, 3/15/43,
E:
You mean on March 143?
H.M.Jr:
Yeah.
E:
Well, they're figuring - I don't know how
and I think it had 10/32nds.
they figure it. Well, anyway it doesn't
June of course would be a little over 2 years 2 years and 3 months and a 2-year note would
certainly suit me. I feel and I have felt
right along that the shorter the maturity,
make much difference. A 2-year note then -
until Congress has determined what they are
going to do with reference to this whole
situation, the better, because the banks
are going to take all of this stuff anyway
and a lot of this stuff will sooner or later
be refunded, we hope, into savings 80 that
the shorter the maturity, as far as I'm
H.M.Jr:
E:
personally concerned, the better.
Yeah. You wouldn't care then
I wouldn't care personally at all. I
haven't talked to the others about it. They
seemed to express some preference for the
2 and 3/4s the other day on the September '44
3/4 note. Now of course that 16 a little
25
-3-
H.M.Jr:
E:
over 2 year longer note. I think if I were
doing it personally, I would take the 2-year
note in the 1/2.
Well, the 2-year in the 1/2.
2-year at 1/2, yeah - the 143 maturity, with
1/2% coupon.
H.M.Jr:
E:
Yeah. That's what you prefer.
I would personally prefer that but I don't
feel very strongly about it. How do you
feel?
H.M.Jr:
E:
Well, I've only talked to a few people and
I'm surprised that they seem to think that
the market 18 a little bit more nervous
than I realized and they think that a 1/2%
coupon, that they'd put it away in a box
and there'd be less dealing in it and it
would be a stabilizing influence.
Well, I think it's - you're getting a little
lower yield, you're only paying 1/2% for
2-year money, you're only paying 1/2 for over
2-year money and before the 2-year period is
over the whole picture 18 going to have to
be revamped anyway in the light of developments during the next two years which are
inevitable. You're going to have to do a
lot of financing through baby bonds and
savings and so forth 80 that if you've got
these short maturities I would sooner save
the - shave the 1/4 of 1% for the Treasury
on it inasmuch as it's going to be a short
maturity anyway.
H.M.Jr:
Of course the other criticism is, well, if
you can go three years why go two, but
either one would satisfy you?
E:
H.M.Jr:
Either one would satisfy me.
All right. Then if it's agreeable we'll
work on it a little bit more and Bell will
call you back a little later.
26
4
E:
-
I'11 check with Piser and see where he's
off on these estimates because apparently
he's figured a little bit higher
H.M.Jr:
Would you tell Piser to stay at his phone
during lunch hour 80 we can call him?
E:
Yeah, I'll tell him to do that and see
where he's off on these premiums here because
he must have had some basis for figuring
this and apparently there is quite a little
difference.
H.M.Jr:
Well, if he could stay at his phone 80 our
boys could call him back
E:
I'11 tell him to do that.
H.M.Jr:
Thank you.
E:
All right. Good-bye.
27
-9H.M.Jr:
Out of all these 117 men - Mr. Odegarde listed
117 - not men, but offices of press relations
in Washington, 117 different groups. Is that
right?
Odegarde:
There are 117 information offices serving
H.M.Jr:
And no correlation between them whatsoever.
Odegarde:
Well, there is the correlation you get through
H.M.Jr:
But if you could be thinking very hard, and I
think you might talk to Lowell today - if you
136 agencies.
Lowell Mellett.
and Ferdie Kuhn could ask to see him and say,
"Now who is the very best man who has done an
outstanding job and we want to borrow him,
rather than go out and try to get somebody new."
Odegarde:
The suggestion was made the other day in Agriculture
that the best job might be done by someone who
is an administrator rather than press relations.
H.M.Jr:
No. I want a fellow on that just oozes ideas,
is going to give me ten times as many ideas.
On the administrative side, we are all right.
Odegarde:
That was my suggestion.
H.M.Jr:
We are all right on the administrative side, but
this setup that you had - to call for the
second men, wasn't it? It was a director of
publicity, isn't that what you call it?
Odegarde:
Yes.
H.M.Jr:
It wouldn't be WPA, would it?
Odegarde:
I don't think so.
28
- 10 H.M.Jr:
Would it be three A's?
Odegarde:
I want to see the people over in Securities.
H.M.Jr:
Would you hit that today?
Odegarde:
Yes, I will do that.
(Telephone conversation with Mr. Repp follows:)
29
January 22, 1941
1:00 p.m.
Robert
Repp:
Hello, Mr. Secretary.
H.M.Jr:
How are you?
R:
Fine, thank you.
H.M.Jr:
It's going to be tough today, you won't have
a chance to refer to your partner - going to
have to make up your own mind.
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
(Laughs). You know we never talk anyway.
Oh, no. You just come down in the same drawing
room and never talk to each other.
Yeah, that's right.
Well, now if you had to write the ticket
how would you write it?
Well, it would depend on the amount,
Mr. Secretary.
Well, between 500 and 600 million.
Between $500 and $600 millions, in that amount,
I would do a December, 1944, 3/4.
Wait a minute, now. Wait a minute.
December, 3/4s, huh?
R:
Yeah.
H.M.Jr:
What do you figure that?
R:
That would be worth about par and 1/2 to
par, 19/32nds.
H.M.Jr:
I see. How uneasy is the market, Repp?
R:
Why the market is - it is uneasy, Mr. Secretary.
It's awaiting various news items that will
come out concerning the general plan of
financing and the uncertainty in the market
is the thing that is making it uneasy. of
course it realizes it will have to take
30
2-
larger amounts in the next year or year and
a half and they are waiting for the thing
to be refined a little bit so they can base
their judgment as to how to adjust their
positions and what they are expected to do.
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
Well, let me ask you this: which would
stabilize the market more, 1/2 of a percent
note or 3/4's.
I should say a 3/4.
Really. I see. Will they put it away?
I think they will, yes, in that amount.
And it will go well?
It will go quite well, yes.
Which would go better, 1/2 of a percent or
3/4' 8?
R:
H.M.Jr:
R:
I would say a 3/4 in the amount 5 or 600
million, a 3/4.
Is that right?
Yes, that's my opinion. Of course, an issue
of this type appeals to your larger banks
throughout the country and they also are the
secondary market for it. A coupon at this
rate hasn't a generally wide appeal although
it will be subscribed. Now last time we had a
$4 billions worth subscription and it is
reasonable to expect we'11 have the same or
possibly slightly less and the allotments
will be a little larger.
H.M.Jr:
R:
H.M.Jr:
R:
But you favor a December 15th?
For an amount - I just want to make myself
clear on that - for an amount not to exceed
$600 million.
That's right.
Anything larger than that I would go to a
September, 1944.
31
-3H.M.Jr:
And how did you figure the premium on that?
R:
Between 16 and 19/32nds.
H.M.Jr:
O. K. Well, just a second and let me speak
to Bell. Just hold on a minute. (Talks aside).
O. K., Repp. Thank you.
R:
All right, Mr. Secretary. Good-bye.
32
- 11 Murphy:
I talked to Piser this morning, Mr. Secretary,
and he had the same figures that we had for
everything except the five year. That is the
basis of Eccles' statement that part of the
staff had the same results.
H.M.Jr:
I see. Who haven't I called now?
Bell:
You have called them all. You said you would
call Sproul back.
Klotz:
Yes, you told him to wait.
H.M.Jr:
Each fellow write on a piece of paper, the
four of you, whether you want a half or three
Haas:
quarters and put your initials on it.
This will be a landslide.
H.M.Jr:
Do you think so?
Klotz:
He peeked.
H.M.Jr:
Did he peek?
Klotz:
Yes.
H.M.Jr:
Well, Mr. Bell is for three quarters, September '44.
Mr. Hadley is for a three quarters. George is
for a three quarters. Aw, they are all for a
three quarters.
Now, I am going to be very, very honest. I
was leaning for the half until I heard that
Eccles was for it. - (Laughter) - It will look
much better from his standpoint, you see. If
it is a half a per cent, he said it didn't
hurt the market if we brought in a half, but
if we come along with a three quarters and
have to go about two years shorter, it shows
how much his statement hurt.
33
- 12 Bell:
You have got a direct comparison now with
H.M.Jr:
Yes.
Hnas:
And what Devine said --
H.M.Jr:
Of course, I never would be influenced
Bell:
I just don't see the difference, George, between
a half and three quarters in this market.
Haas:
No, even Devine who suggested it came back and
the other financing.
by anything like personal feeling. (Laughter)
said three quarters was the first - you know,
even Devine, when you finally pinned him down,
the last word he said, "Well, three quarters
was the first choice, even though he suggested
the half.
Hadley:
I think if you had a half you would give an
indication to the market that you didn't have
confidence in the market. I think if you stick
to the same coupon, it is better instead of
backing down on such a short term, unless you
want to go through a lot of explanations to
the market.
Murphy:
Absolutely.
H.M.Jr:
Hadley is on the low on all of this, but I
think he is playing safe this time.
(Telephone conversation with Mr. Piser follows:)
34
January 22, 1941
1:08 p.m.
H.M.Jr:
LeRoy M.
Hello.
Piser:
Hello.
H.M.Jr:
Piser, this is Morgenthau speaking.
Yes, Mr. Secretary.
P:
H.M.Jr:
How do you figure a 3/4 note, I mean, to
P:
For September 44 I get a premium of 23/32nds.
H.M.Jr:
price it to sell.
Just one second, please. September 44 you
get how much?
P:
23/32nds.
H.M.Jr:
And is that your choice?
P:
That would be my first choice, yes.
H.M.Jr:
September of 44. And that's your first
choice. What's your second choice?
P:
My second choice would be a December '44,
which I get at a premium of 18/32nds.
H.M.Jr:
P:
Don't you think that's a little thin?
That might be, yes. That's the reason for
choosing September first, that plus the fact
that the maturities already in September 44
are smaller than in December 44.
H.M.Jr:
Thank you, but you'll stand by won't you
until we get through on this?
P:
Yes.
H.M.Jr:
Thank you.
P:
All right, sir.
35
- 13 H.M.Jr:
I guess that is what we will do. I can see
why Eccles wants to do a half. Are you all
together?
Haas:
Yes, that little difference, Mr. Secretary,
that has come up in this price - the error
in this is larger than the difference between
us.
H.M.Jr:
The air is what?
Klotz:
The are a --
Haas:
Error.
H.M.Jr:
I couldn't tell which he was talking about.
Murphy:
The area of error is smaller. (Laughter)
H.M.Jr:
I think it will be - what, September?
Bell:
That would be mine.
H.M.Jr:
Who is this fellow Hendricks they spoke about
Bell:
He is the personnel man in the Department of
Agriculture. He has been there a number of
over there?
years. He took Dr. Stockberger's place. He
has been there for a century, almost.
H.M.Jr:
That isn't the kind of man I want, is it?
Bell:
No, I don't think so. I think the best man in
Agriculture is Eisenhower; but again, Eisenhower
has been in the Government service a long time
and it is a little bad. They get their ideas
along Governmental lines, and they don't get
any ideas.
Klotz:
How about our own people?
36
- 14 H.M.Jr:
We haven't got any. They are there, but this
is going to be so vast - we will take everything
they have, but I am not satisfied. They will
stay there.
Bell:
Well, I think this ought to be separate from
that thing downstairs.
H.M.Jr:
You do?
Bell:
Yes.
H.M.Jr:
But you would use Bryan?
Bell:
Yes, but I would leave him there on savings
bonds and under Public Service. That is a
manufacturing end. Let's leave that alone
and put your publicity aside on that organization.
(Telephone conversation with Mr. Sproul follows:)
37
January 22, 1941
1:12 p.m.
H.M.Jr:
Hello.
Operator:
Sproul.
Allen
Sproul:
Hello.
H.M.Jr:
Well now, refresh my memory, will you?
What' 8 your No. 1 choice, Allen?
I
S:
My No. 1 choice was the 3/4 of September 44,
but if you have in mind as a prime consideration
the thing that would require the least market
readjustment, I would then say the 1/2% and
while you could go out to September '43 on
that, I think with that requirement in mind
I'd do it for the shorter period, possibly
March 43.
H.M.Jr:
S:
Well, we've been around the lot and it's
pretty well in agreement here in the Treasury
on September 44, 3/4's percent.
Well, that would be my first choice. I
think it would be better from your stand-
H.M.Jr:
point and would be good in the market.
600 million.
9:
600.
H.M.Jr:
Is that all right?
S:
Sounds good to me.
H.M.Jr:
Well, it's sold.
Good. All right. We'll be ready.
S:
H.M.Jr:
Thank you.
38
- 15 H.M.Jr:
How is that, Mr. Bell? I didn't tell any
Bell:
Well, it would have taken longer if you had.
funny stories, either.
Do you want anything before you go to lunch?
I haven't written anything this time. You had
me in the dark.
H.M.Jr:
Before I go to lunch? Just a smile. No, you
get the thing ready and any time - I will tell
you what I am going to do.
39
January 22, 1941
10:35 a.m.
RE BRITISH PURCHASING PROGRAM
Present:
Mr. Purvis
Mr. Young
Mr. Phillips
Mrs. Klotz
H.M.Jr:
Well, we had unbelievable success. I will
talk a little fast; and then if there is
anything I overlook, Philip Young can explain.
I am due at the White House.
Purvis:
Quite.
H.M.Jr:
To boil down what has happened, the Army and
Navy are proposing to certify to the President
of the United States that they can place the
orders for the 883 million dollars worth of
United States type stuff, and that is going
to - when they have certified to the President,
the President directs Jones and Jones will go
ahead and order the stuff.
Now, what he is proposing to do is to order -
place an order for a third of the 883, give
the manufacturer a firm order for a third and
say that the balance will be coming along as
we need it, because Knudsen said if they got an
order for a third, they could get started,
you see, of what the total amount is. The
reason they are doing it so gingerly is that
they are afraid if they splash the 883, it
would hurt the bill because they say they have
found a way to do it, and they don't need the
40
-2bill and they circumvent it, you see, and
Stimson - when Jones came through with this
this morning without any pressure on him he said he worked until midnight on this.
He said he worked all afternoon and he worked
until midnight, but when he came through with
this suggestion, Stimson was knocked off his
pins and didn't know whether he was ready to
do it.
Purvis:
That is very interesting.
H.M.Jr:
Is that right?
Yes, that is right.
Young:
H.M.Jr:
He was knocked off his pins and didn't know
whether he was ready to do it, and McCloy was
very helpful on that; and Frank Knox said,
Purvis:
"Well, whatever Stimson will do I will do.
So that there is a sort of broad authority to
get ahead with 883, but to go at it on the
basis of placing a third and giving the manufacturer the chance to know that it is working
out to a bigger sum.
H.M.Jr:
Oh yes.
Purvis:
A bigger quantity.
H.M.Jr:
He will know, for instance - if you want a
million 800,000 from the York Safe & Lock,
and they know that the order is a million
800,000 but he gets an order for 600,000, with
Purvis:
an option on the balance
That enables him to start his planning
and get it going.
41
-3H.M.Jr:
Now, as to the English type stuff, they
Purvis:
It sounds to me like Champaigne for lunch.
H.M.Jr:
T am going to tell this to the President when
propose to continue with these deals of
buying up your contracts of United States
standard stuff.
I see him at eleven. I just want to get this
over to Sir Frederick. They are going to
continue - McCloy - buying un your United
States standard contracts; but whatever money
becomes available from that, they would like
you to use it on your English standard stuff,
you see, and Stimson said if that is not what
they are going to do, he said, "I will issue
an order to stop it now.
In other words, if they are successful in
getting 45 million or five million from buying
up these contracts, they would like you to use
that money, whatever they can make available,
for English standard stuff. Is that agreeable
to you?
Phillips:
That is agreeable.
Purvis:
Oh yes.
H.M.Jr:
Because I understood from Young that you were
not sure about it.
Purvis:
Well, we can manage that.
H.M.Jr:
And Jones is going to continue to buy un
whatever plants he can. That will go ahead
just the same. I mean, Jones will continue
to buy any plant that you have got - I mean,
if you have paid for a powder factory, he will
buy it and if you have got anything else that
you can sell, he will buy it; and whatever
42
-4dollars you get from that will go toward
your English.
Now, he doesn't feel that he can buy this wool
for this reason, that if he bought 250 million
pounds of wool, that the whole western block
of wool growers might go against this bill,
but I got this idea some time ago from Lovett,
and he thought you could get un a bunch of
bankers in New York who could buy this wool
provided that this wool was still in the hands
of the growers or in private citizens' hands
in Australia.
Phillips:
I am afraid we have taken over the whole crop,
lock, stock, and barrel. However, I will look
into that and see what we can do.
H.M.Jr:
well, if you could, and ask Foley to lend them
Cox on this to help them.
Young:
Yes.
Purvis:
Yes. He is an ingenious --
Young:
Cox is up on the Hill.
H.M.Jr:
Well, tell Foley to give them somebody, you
see, to assign somebody. I will tell Foley
myself.
(Unrecorded telephone conversation with
Mr. Foley:)
H.M.Jr:
He says Huntington Cairns would normally do
it, but he is sick; so it will be Fiedler.
So, they are leaving it to us to work on the
English stuff, you see; and the shape it is
in now, if Stimson - and we have got to rely
on McCloy and I think that within a day or
so they will get these letters to the President
43
-5and begin to move in on this list of stuff
which I have given them, and then if Sir
Frederick and you and I can see where we
can raise every dollar available to get for
the 375 million - to get it for the British.
And then at the last minute McCloy brought up
the 300 million for the airplane plant, but he
brought it up too late. It was brought up
too late in the meeting, and you could see
that Stimson got all confused.
Purvis:
It was dangerous.
H.M.Jr:
So somebody said, "Well, let's forget about it,"
but we can bring it up again; but you see we
started I think on December 2, the President
said this is what he wanted done, and it has
taken from now until the - from December 2
until now to get Jones to do this.
Purvis:
Still my congratulations, because I think that
is not too long a time knowing the difficulties
of this situation.
H.M.Jr:
Well, you could have knocked me over with a
pin, but I called him up yesterday and told
him, and the meeting which I thought he was
going to come to yesterday, the disagreeable
one, he ducked it; and he said, "I didn't come
because I didn't want to get upset with
Marriner Eccles so I didn't come." He said,
"I was working on this until midnight. The
answer has been there all the time, but he
wouldn't do it. The way I put it to them was
this.
"Gentlemen, there is a billion and a half to
be ordered; and if we do everything that we
can, we can raise about 10% of what they need."
44
-6And I think finally Jones has got it through
his head - he again went through the motions,
"Why can't they put up the securities as
collateral, and I finally explained to him
that all that collateral was up once and we
can't put it up twice.
Purvis:
Which, as a banker, he should appreciate.
H.M.Jr:
I think it is in pretty good shape.
Purvis:
Actually, perhaps some of this getting other
people to knowing something about it may have
helped. The pressure is apparently - all of
them begin to feel that something has got to
be done.to help.
H.M.Jr:
Oh, it is a combination of spices which finally
make the pudding.
Purvis:
Since December 2. But I think it is a good
job. I am immensely relieved. I frankly
couldn't sleep last night.
H.M.Jr:
Well, I made up my mind - I was staying
behind. I am going over on financing to
see the President. I made up my mind - I
have been pacing the floor since a quarter
of si X this morning - that I was going
to say to the President, "Nowlook, I haven't
bothered you with this, but it has got to the
point where you have just got to set an after-
noon aside and knock their heads together.
But now I can go over and say, "I have saved
it." But the amusing thing was, already
Stimson kind of backed away from it, but I
think he is going to be all right.
Young:
He will be all right.
45
-7H.M.Jr:
My estimate of McCloy has gone up, though.
Purvis:
I think the thing you can say for McCloy is
that he is terribly keen to do it, and he trys
all sorts of ways and means.
H.M.Jr:
Awfully anxious to do it. And Knudsen was fine
and then another thing, which they said, and
T am passing this on to you, that after the
bill goes through, they said for the first
time that they expect to order United States
and British standard stuff, but I wouldn't
take that too seriously. And the other thing
that they are going to do - Phil, remember
this - they are going to comb your list of
so-called English and they think there are
a number of things in there that can be
brought across the line.
Purvis:
That, of course, is the most hopeful line.
H.M.Jr:
Like the Beaufort guns.
Purvis:
Might, which is an international thing. I
was saying that to McCloy yesterday. It is
accepted in every country.
H.M.Jr:
McCloy said,"After all, it shoots and it throws
things and if it does for the english, why
can't it for United States."
Purvis:
And it also does for the English and the French.
H.M.Jr:
He says, "It throws things so if it does it
for the English, why can't it for United States.
Purvis:
It is a common sense attack.
H.M.Jr:
I think it is - now, Sir Frederick, if you
would be exploring where you can raise some
46
-8 money for the English stuff and then maybe
tomorrow we can get together again.
Purvis:
Excellent.
H.M.Jr:
this is what Mr. Young gave me this morning.
(Referring to Attachment No. 1)
I didn't give them -Young:
The copies.
H.M.Jr:
I didn't think it was good for them.
Young:
I didn't either.
Purvis:
Did you have some more?
H.M.Jr:
Some figures that George has on what you have
ordered to date.
Phillips:
When you say ordered from, it may mean that
this has been taken before.
H.M.Jr:
I don't know, but I didn't raise it today.
I asked for a statement last week. It has
Purvis:
just arrived. They have probably been working
together. I will probably get my copy today,
too.
H.M.Jr:
I got this this morning, but I thought it might
muddy the waters a little bit.
Purvis:
Oh, I think that could be locked away for good.
Young:
We will give you a copy of it. (Laughter)
Purvis:
It is probably done in conjunction.
47
-9H.M.Jr:
I think that is a good day's work.
Purvis:
Congratulations and many thanks again for
the determination with which you have gone
at it. That would make it look as if it
would move after the initial decision was
taken, because that depends on the spirit,
doesn't it?
H.M.Jr:
The spirit was fine, and I think all the
dinners and parties that you have attended
all bore fruit and you see, we started off by
Knox saying, "Well, what about my plan," and
I said, "Well, if you listen I think you will
see what happens to it," but it all went through.
The spirit is here. And this will move now.
It is really settled.
Purvis:
Thank you.
48
INTERIM FINANCING
(Million Dollars)
1. Total amount recoverable from British contracts
for U.S. type war materials:
(a) For advance payments on contracts
$430
(b) For payments for plant facilities 1
$109
Total
$539
2. Amounts may be recovered as follows:
(a) Advance payments, by transfer of
British contracts for U.S. type
material to U.S. - Total appro-
priation available - Var Department
$230, 000,000.00, yielding British
(b) Plant facilities payments, by sale
of British plant facilities to RFC,
yielding British
$ 45
$109
Total recoverable by British
3. Balance not recovered
Additional War and Navy Department appro-
priations might be available as basis of transfer
of additional U.S. type contracts to U.S.
The time required to effect a recovery of
the above sums is so great as to diminish seriously
the usefulness of the plan as a means of recovering
funds available for British contracts.
1
Non-recoverable items excluded.
$154
$385
49
(Million Dollars)
4. Amounts urgently required for British
type war materials:
For product
$345
For plant facilities
$ 31
Total
$376
5. Amounts recoverable from transfer of con-
tracts and plant facilities (see item "2")
$154
Balance of British type contracts for which
no funds available
$222
6. Amounts urgently required for U.S. type
war materials:
For product
$836 2/
For plant facilities
$ 48 2
Total
Additional requirement for aircraft plant facilities for contracts to be placed after February
U.S. type contracts for which no funds available
2/
These figures do not include approximately $200,000,000
of contracts for U.S. types (plus $22,000,000 of plant
facilities) originally proposed to be placed with the
$230,000,000 of War Department funds referred to in 2 (a)
above.
$884
$300
$1184
50
MEMORANDUM
January 22, 1941.
TO:
FROM:
Secretary Morgenthau
Mr. Sullivan
SUBJECT: Conference at the White House.
Present: President Roosevelt,
Secretary Morgenthau,
Under Secretary Bell,
Mr. Sullivan.
The Secretary presented the President with a memorandum dealing
with pending finances of 500,000,000 National Defense notes. The
President commented on how poor we were and asked Under Secretary
Bell how much money we had on March 4, 1933, and Mr. Bell replied
$156,000,000. The President approved the immediate issuance of the
500,000,000 National Defense notes and then discussed the raising of
additional cash in the amount of 1 billion dollars and the refunding
of 13 billion dollars of maturities in March. He suggested our consideration of a type of securities which would be cashable at par at
all times and said he thought it would serve the double purpose of
(1) freeing the people from the fear of not being able to get the
cash when they needed it, and (2) preventing deflation by preventing
these bonds from dropping very far below par.
The Secretary presented the memorandum on the legislation to
make all future issues of Federal securities taxable. The President
objected to any move which could be interpreted as Treasury conviction
that appropriations could not be made beyond the stabilized debt limit.
The Secretary and Mr. Bell explained to him they would have no diffi-
culty in increasing the debt limit and that it would be much easier to
work the problem out with Congress. The President then stated that no
definite amount to which the limit should be increased should be formally recommended by the Treasury and that this bill should be a com-
mittee bill rather than a Treasury bill.
The Secretary then presented the President with the memorandum
relating to reciprocal taxation of Federal, State and municipal securities. The President inquired if this was along the lines of the Glass
Plan and Mr. Sullivan replied that it was not, that this bill called
for taxation of all future issues of State and municipal securities
by the Federal Government and taxation of future issues of Federal
securities by the States. The President nodded approval but did not
indicate whether or not this should be a Treasury bill or a committee
bill.
Ths
51
January 22, 1941
TO THE PRESIDENT:
The Treasury's working balance is, at the present time,
down to $742,000,000 and by the end of January 10 will be deva to
apprexiantely $500,000,000. IS is, therefore, accessary for us
to raise as additional amount of new cash as this time to meet heavy
expenditures for the next thirty days. I propose, therefore, offering ea Thursday of this week $500,000,000 of National Defense notes,
the income from which will be subject to all Federal taxes.
If our legislation to miss the debt limit and to tax the
income from all Federal securities is passed before the middle of
February, I contemplate as issue of Reconstruction Finance Corpora-
tion securities during that month in the amount of about $500,000,000.
This will enable that Corporation to meet its commitments as well as
return to the Treasury some $350,000,000 of capital funds as recen-
sended is your 1941 Budget. If this legislation is not consted by
that time, I may have to offer another is of Defense notes.
When this legislation is passed, I also contemplate leaning
before March fifteenth around $1,000,000,000 of Treasury cocusities
for new each and, is addition, refunding $1,222,000,000 of securities
saturing ea March fifteenth. IS is hoped that the treasury eas as
this time issue a long-term Treasury bond, the inconclusive from which will
be subject to all Federal tame.
INDIALA
52
MEMORANDUM FOR THE PRESIDENT
There is attached a draft of a bill relating
to the public debt and the status of future Federal
obligations from the standpoint of exemption from
taxation, which I propose to recommend to Congress if
it meets with your approval.
The bill entitled "A Bill To amend the Second
Liberty Bond Act, as amended, and for other purposes,"
would accomplish the following objectives:
(a) It would fix the ceiling on the
public debt at $60,000,000,000, an increase
of $11,000,000,000 over the present statutory
combined debt limit of $49,000,000,000. The
new limit, of course, would not include
guaranteed obligations issued by the Recen-
struction Finance Corporation and similar
agencies.
(b) It would give the Secretary of the
Treasury greater and more flexible authority
53
.2over Savings Bonds as a financing medium by
giving him discretion (1) to fix their denominations, (2) to determine the aggregate
face amount of them which may be held by one
person at one time, and (3) to issue them on
an interest-bearing as well as a discount basis.
(c) It would authorize the Secretary
of the Treasury to issue, in the same manner
as Savings Bonds are issued, a new obligation
similar to the old War Savings Certificate
called a "Treasury Savings Certificate."
(d) It would eliminate the partition
between the general debt limitation of
$45,000,000,000 and the National Defense
limitation of $4,000,000,000, and would
repeal that sestion of the Revenue Act of 1940
which earmarks certain taxes lovied under
that Act for the purpose of retiring, over
a five-year period, any National Defense
obligations issued under the National Defense
debt limitation.
54
-2.
(e) It would remove from all Federal
obligations (including those of corporations
and other agencies of the Government) issued
in the future the privileges of exemption
from Federal taxation which they now enjoy.
1-21-42
55
A BILL
To amend the Second Liberty Bond Act, as
amended, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may be
cited as the Public Debt Act of 1941.
Sec. 2. Section 21(a) of the Second Liberty Bond Act, as amended,
is hereby further amended to read as follows:
"Sec. 21. The face amount of obligations issued
under the authority of this Act shall not exceed in
the aggregate
outstanding at
any one time."
Sec. 3. Section 22 of the Second Liberty Bond Act, as amended (U.S.C.,
title 31, sec. 757c) is hereby amended to read as follows:
"Sec. 22. (a) The Secretary of the Treasury is
authorized to issue, from time to time, through the
Postal Service or otherwise, United States savings
bonds and United States Treasury savings certificates,
the proceeds of which shall be available to meet any
expenditures authorized by law, and to retire any outstanding obligations of the United States bearing
interest or issued on a discount basis. The various
issues and series of the savings bonds and the savings
certificates shall be in such forms, shall be offered
in such amounts, subject to the limitation imposed by
section 21 of this Act, as amended, and shall be issued
in such manner and subject to such terms and conditions
consistent with subsections (b), (c), and (d) hereof,
and including any restrictions on their transfer, as the
Secretary of the Treasury may from time to time prescribe.
"(b) Savings bonds and savings certificates may be
issued on an interest-bearing basis, on a discount basis,
or on a combination interest-bearing and discount basis
and shall mature, in the case of bonds, not more than
twenty years, and in the case of certificates, not more
than ten years from the date as of which issued. Such
bonds and certificates may be sold at such price or prices,
56
-2and red eased before maturity upon such terms and conditions
is the Secretary of the Treasury may prescribe: Provided,
That the interest rate on, and the issue price of savings
bonds and savings certificates and the terms upon which
they my be redeemed shell be such BE to afford an investment yield not in excess of three per centum per
annum, compounded semianmually. The denominations of
savings bonds and of savings certificates shall be such
BE the Secretary of the Treasury may from time to time
determine and shall be expressed in terms of their maturity
values. The Secretary of the Treasury is authorized, in
his discretion, at any time or from time to time, by regulation to fix the amount of savings bonds and savings certificates that may be held by any one person et any one
time.
"(c) The Secretary of the Treasury may, under such
regulations and upon such terms and conditions as he may
prescribe, issue, or cause to be issued, stamps, or may
provide any other means to evidence payments for or on
account of the savings bonds and savings certificates
authorized by this section, and he may, in his discretion,
make provision for the exchange of savings certificates
for savings bonds.
"(d) For purposes of tuxation any increment in
value represented by the difference between the price
paid and the redemption value received (whether at or
before maturity) for savings bonds and savings certi-
ficates shall be considered as interest. The savings
bonds and the savings certificates shall not bear the
circulation privilege.
"(e) The appropriation for expenses provided by
section 10 of this Act and extended by the Act of
June 16, 1921 (U.S.C., title 31, secs. 760 and 761),
shall be available for all necessary expenses under
this section, and the Secretary of the Treasury is
authorized to advance, from time to time, to the
Postmaster General from such appropriation such sums
as are shown to be required for the expenses of the
Post Office Department, in connection with the handling
of bonds, certificates, and stamps or other means pro-
vided to evidence payments.
"(f) The board of trustees of the Postal Savings
System is authorized to permit, subject to such regulations as it may from time to time prescribe, the withdrawal of deposits on less than sixty days' notice for
57
-3-
the surpose of acquiring savings bonds and savings
certificates which may be offered by the Secretary
of the Treasury; and in such cases to make payment
of interest to the date of withdrawal whether or not
: regular interest payment date. No further original
issue of bonds authorized by section 10 of the Act
approved June 25, 1910 (U.S.C., title 39, sec. 760),
shall be mode after July 1, 1935.
"(g) At the request of the Secretary of the
Treasury the Postmaster General, under such regula-
tions as he may rescribe, shall require the employees
of the Post Office Department and of the Postal Service
to perform, without extra compensation, such fiscal
agency services as may be desirable and practicable
in connection with the issue, delivery, safekeeping,
redemption, or payment of the savings bonds and savings
certificates, or in connection with any stamps or other
means provided to evidence payments."
Sec. 4 (a). Notwithstanding any other rovision of law all obligations
issued under authority of the Second Liberty Bond Act, as amended, and all
obligations which by their terms bear interest or which are sold on a discount basis issued under authority of any other law by any instrumentality,
corporation or agency of the United States or by any other corporation or
entity created by, organized under, or established pursuant to authority
contained in, any Act of Congress shall, as to both principal and interest
or other increment, be subject to all taxes now or hereafter imposed by
the United States: Provided, That any such obligations which the United
States or any such instrumentality, corporation, agency or entity has, prior
to the effective date of this Act, contracted to issue at a future date,
shall when issued bear such tax exemption privileges as are provided in the
law authorizing their issuance.
(b). The provisions of this section shall, with respect to such ob-
58
ligations, be considered as amendatory of and supplementary to the res-
pective Acts or parts of Acts authorizing the issuance of such obligations,
as amended and supplemented.
Sec. 5. Section 32 of the Act approved June 13, 1898, as amended
(U.S.C., title 31, sec. 756), section 6 of the First Liberty Bond Act, 18
amended (U.S.C., title 31, sec. 755); section 6 of the Second Liberty Bond
Act, as amended (U.S.C., title 31, sec. 757); section 5(d) of the Second
Liberty Bond Act, as amended (U.S.C., title 31, sec. 754(d)); and sections
301 and 302 of title III of the Revenue Act of 940 (54 Stat. 526); are
hereby repealed.
Sec. 6. Nothing contained in this Act shall be deemed to alter
or amend in any way the terms of any of the obligations described in
section 4 hereof, issued prior to the effective date of this Act, or to
impair or otherwise affect any rights, privileges, or remedies accruing
to the holders of such obligations under the terms thereof or under the
laws authorizing their issuance.
Sec. 7. This Act shall become effective on the first day of the
month following the date of its approval by the President.
59
MEMORANDUM FOR THE PRESIDENT
There is attached a bill relating to the
status of state and municipal obligations from the
standpoint of exemption from taxation which I propose
to recommend to Congress if it meets with your
approval.
The purpose of the bill is to provide the balance
of the legislation necessary to enable us to complete
our program of elimination of tax-exempt securities.
This purpose would be accomplished by:
(a) Making obligations issued in the
future by any State, Territory, municipality,
or other public body subject to income taxation
by the Federal Government. To permit public
bodies to take advantage of favorable market
conditions, provision has been made for the
refunding of outstanding callable bonds with
tax exemption for the same period as the
original issue.
60
-2(b) Consent to non-discriminatory
taxation by States of the interest on all
Federal obligations issued in the future.
I think it would be good strategy to have this
bill acted upon by Congress after Congress has acted
upon the proposed bill dealing with the taxable status
of future Federal securities.
LJB/EHFJr/fm
1/21'41
9.747 Ths
61
(The dates herein used are based on the assumption that the bill
will be enacted in April, 1941. so that an interval of
about 60 days will exist between its enastment
and the date separating the taxable issues
from the tax-exempt issues.)
A BILL
To provide for the reciprocal income taxation of public obligations, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled That this Act may be
cited as the "Public Bond Tax Act of 1941.
Sec. 2. Section 22(b)(4) of the Internal Revenue Code is
amended to read as follows:
*(4) TAX-FRKE INTEREST.- the extent provided in section 116(b).
interest upon obligations issued by (A) a State, Territory, or any
political subdivision thereof, or the District of Columbia, or any
agency or instrumentality of any one or more of the foregoing OF (a)
a corporation organised under Act of Congress, if such corporation is
an instrumentality of the United States (as defined in section 116(b));
or (0) the United States or any of its possessions. Every person own-
ing any of the obligations emmerated in clause (a). (3), or (c) shall,
in the return required by this chapter, submit a statement showing the
number and amount of such obligations owned by him and the income re-
ceived therefrom, in such form and with such information as the Commissioner may require."
Sec. 3. Sections 25(a)(1) and (2) of the Internal Revenue Code
are mended to read as fellows
62
-2"(1) INTEREST ON UNITED STATES ORLIGATIONS.-The
amount received as interest upon obligations of the United
States if such interest is included in gross income under
section 22, and if under the Act authorising the issue of
such obligations, as amended and supplemented (including
the amendatory and supplementary provisions of section 4
of the Public Debt Act of 1941). such interest is exempt
from normal tax.
"(2) INTEREST ON OBLIGATIONS OF INSTRUMENTALITIES OF
THE UNITED STATES.-The amount received as interest upon
obligations of a corporation organised under Act of Congress,
if (A) such corporation is an instrumentality of the United
States (as defined in section 116(b)): and (B) such interest
is included in gross income under section 22; and (c) under
the Act authorising the issue of such obligation, as amended
and supplemented (including the amendatory and supplementary
provisions of section 4 of the Public Debt Act of 1941). such
interest is exempt from normal tax."
Sec. 4. Section 116 of the Internal Revenue Code is amended by
inserting after subsection (a) a new subsection to read as follower
"(b) TAX-FREE INTEREST.-Inter upon obligations issued
(1) before July 1, 1941, by a State, Territory, or any political
subdivision thereof, or the District of Columbia, or any agency
or instrumentality of any one or more of the foregoings or
(2) by a corporation organised under Act of Congress, if such
-3corporation is an instrumentality of the United States, or
(3) by the United States or any of its percessions. In the
case of obligations of the United States issued after
September 1, 1917 (other than postal savings certificates
of diposit). and in the case of obligations of a corporation
organised under Act of Congress the interest shall be except
only if and to the extent provided in the respective Asts
authorising the issue thereof, as amended and supplemented
(including the amondatory and supplementary provisions of
section 4 of the Public Debt Ast of 1941). and shall be of
cluded from gross income only if and to the extent is is
whelly - from the taxes imposed by this chapter. The
term 'instrumentality of the United States' moms instrumentality, corporation or agency of the United States, or
any other corporation or entity created by, organized under,
or established personal to authority contained in, any Act
of Congress. For the purposes of this subsections
"(1) In determining whether - obligation
is issued after June 30, 19th. and ahother - obligation is issued after the date of emailant of the
Public Bend Tax Ast of 194 (hareinafter called
'martment date) it shall in either ease be comsidered to be issued after mash date, if any part of
the payment therefer is received by the obliger after
such date, or delivery thereof is made by the obliger
after such date.
63
-4*(2) Obligations which merely replace lost,
mitilated, defaced, or destroyed obligations, or or
ligations of larger or smaller denominations, and of
ligations in registered form or with coupons which
merely replace obligations with coupons or in regis-
tered form, shall be treated as if they were the or
ligations replaced.
"(3) (A) If the terms of an obligation issued before
July 1, 1941, the maturity of which on enactment date is
later than June 30, 1941. are, after enactment date,
changed se as to increase the principal amount or interest
rate or to extend the maturity, them such obligation shall
(as to interest meaning for any period after the date of
the change or June 30, 1941, whichever is later) be con-
sidered as issued after such later date.
"(s) In the case of an obligation issued after the
enactment date and before July 1. 1941, such obligation
shall (as to interest scerning for any period after June 30,
1941) be considered as issued after June 30, 1941. if any
part of the proceeds of the issue of which the obligation
is a part, or if any obligation of the issue, is deveted
to the retirement or refunding of an obligation the maturity
of which on enastment date was later than December 31, 19th.
For the purposes of this subparagraph, December 31, 1941.
shall be considered the maturity, on enactment date, of
an obligation the interest on which ceases to FULL before
64
65
-5. January 1, 1942, by reason of such obligation being
called for redemption in accordance with the terms
thereof as they existed on enactment date.
"(4) If an obligation is issued after June 30,
1941 (hereinafter called 'refunding obligation'), and
if ((A) the issue of which it is a part
(hereinafter called 'new issue') is issued for
the purpose of refunding one or more obligations
(hereinafter called 'refunded obligations'); and
"(B) all refunded obligations have the same
exemption expiration date, as defined in subparagraph (J): and
"(0) no obligations, other than those of the
new issue, have been issued for the purpose of refunding any of the refunded obligations; and
"(D) the aggregate principal amount of the
new issue is not in excess of the aggregate principal
amount of the refunded obligations; and
"(E) interest on each of the refunded oblige
tions conses (by reason of such obligation, being
called for redemption, in accordance with the terms
thereof as they existed on enactment date, or the
date of issue, whichever is later) to run upon a
date not more than seven months after the date upon
66
which interest on the refunding obligation begins
to runs and
"(F) interest on each of the refunded obligetions, for the period at the and of which 11 ceases
to run by reason of such call for redemption, is
considered as interest on an obligation issued before
July 1, 1941; and
"(a) the refunding obligation, in its terms,
states the exemption expiration date of, and identi-
fies, the refunded obligations and
*(R) the interest rate on the refunding oblig
tions for any period ending on or before the exemption
expiration date of the refunded obligations is not
higher than the interest rate which any of the funded obligations had, or would (if such obligation
had not been called for redemption) have had, for the
corresponding period;
then the refunding obligation shall be considered as issued
before July 1. 1941, as to so much of the interest as accrues
for any period ending before or on the exemption expiration
date of the refunded obligations, and shall be considered
as issued after June 30, 1941, as to the / of such
interest. For the purposes of this paragraph
"(1) several obligations shall be considered
as one issue, only if inch is identical with all
-7
the others in materity, interest rate, terms and
conditions, and resitals, but the fast that the
denominations differ, or that I are registered
and some in coupon form shall be disreganded.
"(3) Exemption expiration date* means*(1) with respect to a refunded obligation issued before July 1, 1941, the date of
naturity which the obligation had on June so,
1941,
#(11) with respect to a refunded obligation issued after June so, 1941, the date as
of which interest thereon would (if the chilgation had not been called for redemption)
have ceased to be considered as interest on
an obligation issued before July 1, 1941.
See. 5. (a) The United States hereby consents to the taxtien,
under an income tax, of interest upon, and gain from the sale or
other disposition of. obligations issued after June so, 1941, by
the United States, any Territory or possession or political division thereof, the District of Columbia, or any agency or in
strumentality of any one or more of the foregoing. w any duly
constituted taxing authority having jurisdiction to tax such
interest and gain, if such taxation does not discriminate against
such interest or gain because of its source. The consent given
in this section shall not affect those obligations issued after
67
-8June 30, 1941 which the United States or any agency or instru-
mentality thereof has prior to June 30, 1941 contracted to issue
at a future date with such tax exemption privileges with respect
to taxation by any State, county, municipality, or local taxing
authority as are provided in the law authorizing their issuance,
as amended and supplemented. As used in this subsection, agency
or instrumentality of the United States includes any corporation
of the United States and any corporation or entity created by,
organized under, or established pursuant to authority contained
in, any Act of Congress.
(b) For the purposes of this section(1) In determining whether an obligation is issued
after June 30, 1941, it shall be considered to be issued
after such date if any part of the payment therefor is received by the obligor after such date, or delivery thereof
is made by the obliger after such date.
(2) Obligations which merely replace lost, mitilated,
defaced, or destroyed obligations, or obligations of larger
or smaller denominations, and obligations in registered
form or with coupons which merely replace obligations with
coupons or in registered form, shall be treated as if they
were the obligations replaced.
(c) The provisions of this section shall, with respect to
any obligation, be considered as amendabory of and supplementary
to the respective Acts or parts of Acts authorizing the issue of
such obligation as amended and supplemented.
68
69
January 22, 1941
MEMORANDUM FOR THE PRESIDENT:
In your Budget Message you made the following statement:
I as assuming that the Congress will
accept the recommendation of the Secretary of
the Treasury that the earmarking of taxes for
retirement of defense obligations be repealed; . ..
The Budget document shows, based on the program set out
therein, that the gross public debt will be $49,157,000.00 on
June 30. 1941, and $58,367,000,000 on June 30, 1942. Those two
figures do not take into consideration the future accruals on
Savings Bonds nor any contemplated aid to Great Britain. According to Treasury estimates, the balance of the borrowing authority
under the combined debt limitations of $49,000,000,000 will be
exhausted in May of this year. It will, therefore, be necessary
for the Treasury to ask Congress for an immediate increase in our
debt limitation, and we should like to ask at the same time the
elimination of the partition between the general limitation and
the National Defense limitation, and the repeal of the provisions
setting up the special fund into which earmarked taxes are to be
deposited for the purpose of retiring any outstanding National
Defense securities.
In view of the Budget program and the additional financing
which may be expected of the Treasury under the Lead-Lease Bill for
70
Great Britain, I recement that the public debt limitation be
fixed at $60,000,000,000.
The following table above the Treasury's financing problem
for the next eighteen months (exalusive of Savings Dents, Treasury
bills, and Trust funds):
January June, 1941
July, 1941June, 1942
Total
(In millions of dollars)
Treasury New cash
$ 3,500
$ 10,250
1,726
6,750
1,464
New cash
560
1,000
Refundings
-
1, 678
1,560
1,678
$10,892
$ 16,678
Defendings
3,190
Governmental Corporations:
5.786
71
January 22, 1941
2:36 p.m.
H.M.Jr:
Hello.
Cong. Doughton's
Yes,
Secretary:
sir, Mr. Secretary.
H.M.Jr:
Is Mr. Doughton in town?
S:
Yes, sir, he is.
H.M.Jr:
Well, I've got to know whether he can come
tomorrow morning or not. I've got
Mr. Cooper all tied up.
I know that he can come but I will contact
him from the floor immediately, Mr. Secretary,
Senator Harrison, Senator George and
S:
and then call you back.
H.M.Jr:
S:
I wish you would. I've really got to know.
All right, sir. I know that he can but
I'11 confirm that immediately. I'll go
over there myself.
H.M.Jr:
And will you call back?
S:
Yes, sir. I'11 go over there right now.
H.M.Jr:
Thank you.
January 22, 1941
2:58 p.m.
H.M.Jr:
Hello
Operator:
Congreseman Doughton.
Robert
Doughton:
H.M.Jr:
D:
Secretary, this is Bob Doughton. How are
you, Henry?
I'se all right. How're you?
First rate, thank you. I just, through my
secretary, got your kind invitation.
H.M.Jr:
Yeah.
D:
What's the occasion and how long will we
probably be down there?
H.M.Jr:
Well, the occasion is this: I saw the
President today and we need some changes
D:
H.M.Jr:
D:
H.M.Jr:
in our law about raising our money. I want
to draw your attention to the fact that
we're approaching the debt limit.
Death limit.
Debt limit - not death.
(Laugh) Well, I'm glad it's debt, not death.
No, death and taxes. This is debt, and then
this question about tax exempts on Governments.
D:
H.M.Jr:
Well, that's one thing I've been thinking I'd
come down and discuss with you and see if you
were going to press that and if so we'd better
get at it. We've got a tax bill - if we're
not why it wouldn't be 80 important.
What are you doing around 9:30 tomorrow
morning?
D:
Well, these National Defense people wanted
an amendment to this excess profits tax bill
and they want it done - get through Congress
before the 5th of February. There's a deadline there that they say has got to be
72
73
-2removed or it'11 hamper their National
Defense program. I introduced a Joint
Resolution today and was going to call my
Committee in the morning at 10:30 but I
can do it a little later. I haven't called
it yet and of course I'll come to your
meeting.
H.M.Jr:
Well, if you could be here at 9:30 if you're not here there's no use having
any meeting.
D:
H.M.Jr:
How's that?
If you don't come, there won't be any
meeting.
D:
Well, but I'11 come.
H.M.Jr:
All right.
D:
We'11 probably be down there an hour or
two, won't we?
H.M.Jr:
God, I hope not.
D:
Well, probably how long would you expect?
H.M.Jr:
Oh, an hour.
D:
9:30 to 10:30. Think I could safely call a
meeting for 11:00?
H.M.Jr:
I think it would be safe.
D:
Up here?
H.M.Jr:
Yes, sir.
D:
Well, I'11 just call my meeting then for
11:00 to consider my Joint Resolution.
H.M.Jr:
Fine.
D:
Who all will be in our meeting tomorrow?
H.M.Jr:
Well, if it's agreeable to you, I thought
I'd have Senator Harrison, Senator George
and Jere Cooper.
74
-3 D:
H.M.Jr:
D:
Always happy to have Senator Harrison, oh,
yes, and Senator George and Jere Cooper.
That's
in mind.about all unless you had somebody
No, I wouldn't have anybody unless you wanted
to invite old man Tom. He is the
ranking Democrat. He's not - we haven't
organized any sub-committees yet you know,
but I think he told me he was going home
today anyhow.
H.M.Jr:
Well, then, that leaves him out.
D:
Yeah, he's mighty good always and I think
would appreciate a little recognition. I
think he has felt a little hurt that some
boys below him on the committee have received
more recognition although he hasn't complained.
He's one of the loveliest characters in the
world. Well, all right, just whoever you
want to invite, you know, is always satisfactory and pleasing to me.
H.M.Jr:
Well, 9:30 tomorrow morning?
D:
At your office.
H.M.Jr:
Yes.
D:
I'11 be there and I'11 set my meeting for
11 o'clock.
H.M.Jr:
Wonderful.
D:
And then you think I'11 be able to get back?
Yes, sir!
H.M.Jr:
D:
H.M.Jr:
Thank you very much.
Thank you.
75
January 22, 1941
3:00 p.m.
RE DEBT LIMIT
Present:
Mr. Bell
Mr. Sullivan
Mr. Schwarz
Mr. Kuhn
Mr. Foley
Mrs. Klotz
H.M.Jr:
While I am waiting for Bell to come in,
what did you do on the Hill?
Kuhn:
We couldn't get to Bloom until after the
hearing. He said he would have to call
his committee together and put that in the
record before releasing it, so he held up
the press releases. That means we are going
to have to hold up the letter to Tinkham
until we get word to him.
H.M.Jr:
You don't know what happened?
Kuhn:
Not after that.
H.M.Jr:
He is going to let you know?
Schwarz:
We will get word back as soon as the committee
has approved that as a part of the record.
He suggested holding it up until Friday or
Saturday, and we urged him to speed it along
because the longer that difference in the
Federal Reserve figures and ours is unreconciled, the more editorials we might
have, questions.
76
-2He said he would do it.
H.M.Jr:
I am trying to clear a half dozen things.
Dan, tomorrow morning at 9:30 I expect
Harrison, George - I have heard from them.
Also Doughton and Cooper. I haven't heard
from Doughton, but I have got his man on the
floor trying to get him. They are coming in
here at 9:30, at which time I am going to put
up what we talked to the President, and I
want Foley and Sullivan here; but I am looking
to you to have ready for me what we took over
to the President, except to change it so that
we won't ask for a fixed amount. We will draw
their attention to the fact that if we borrow
all of this money, we will exceed the debt
limit; and we are just bringing it to their
attention, to have it read the way the
President asked us to do it, you see, which
leaves it open. But we will carry it out.
I expect to tell them that my position is
that I would like to see it raised to an
amount equal to what has been appropriated.
So there is no misunderstanding, I am looking
to you to have it here at 9:30.
(Telephone conversation with Mr. Doughton
follows
77
-3Sullivan:
I think it is Tom Collins from Brooklyn.
H.M.Jr:
Did you know about this?
Sullivan:
This is an amendment which merely allows them
to go beyond February 5 and certify these
defense things.
H.M.Jr:
This isn't the thing that you talked about
after we left the President?
Sullivan:
Not at all, sir, and we are keeping strictly
out of this. You remember they tried to get
Treasury in last summer, to join in the
certification, and so when Mr. Greenbaum
came over, I told him that we neither approved
or disapproved. We interposed no objection,
so we don't want to get in on it. This is a
defense matter, and none of our affair.
H.M.Jr:
Oh, this is where all those three agencies
certify?
Sullivan:
That is right, and they haven't been able to I think - I don't know. Have you heard about
anything being decided on it, Dan?
Bell:
No.
H.M.Jr:
Then if they are having a meeting tomorrow,
it is very timely that we have this meeting
in the morning. I have got a call in for
Barkley and the Speaker to tell them about
this meeting. After eight years I learned
a little
But I am looking to you,
Dan, to have that thing.
Bell:
Yes, I will have it.
H.M.Jr:
All right. We will have the same thing we
took to the President, except --
78
-4Bell:
Current financing.
H.M.Jr:
We won't mention a figure. Now, I think we
ought to show them what the borrowing is
going to be just the way it was in that
thing, for six months and 18 months.
Bell:
H.M.Jr:
All right. There is 17 billion dollars piled
up there for financing.
Would you have a figure - what the figure
would be if it included - to raise the debt
up to the amount of the appropriations.
Bell:
Sixty-three billion dollars if you include
the estimates in the Budget.
H.M.Jr:
Because you know Harry Burns said he would
go along.
Bell:
Yes.
H.M.Jr:
Now, do you (Sullivan) want to ask me anything
between now and 9:30 tomorrow morning?
Sullivan:
No, sir.
H.M.Jr:
Do you, Ed?
Foley:
No.
H.M.Jr:
Anybody else?
Foley:
Are you going to use the same bill, Dan,
except just use the figure out, or are you
going to use the other one that doesn't mention
any figure? You know we had it both ways,
yesterday.
Bell:
No, we will use the bill with a blank figure.
79
-5 -
H.M.Jr:
The Secretary, I think, made it quite plain
to the President that he thought a figure
ought to go in, but we wouldn't put it in.
The President tried his best to - doesn't
want the Treasury to name a figure, and he
has changed a little bit from his Budget
message. He wants us to say that it is
Congress responsibility. I have done that
Bell:
consistently, Ed. Is that right?
That is right.
Schwarz:
You have done that in all your public
Bell:
And I think the figure ought to be fixed
statements.
up at this meeting tomorrow and ought to go
in that bill when they introduce it.
Sullivan:
They will mention a figure, but I can't go
along with the President on this.
He also said that was to be a committee bill.
H.M.Jr:
They are all committee bills.
Bell:
Yes, they are all committee bills.
H.M.Jr:
Except those bills which are Foley Bills. (Laughter)
H.M.Jr:
Well, that is about all. Ed, you have got
word that you are to go up with me on the
Hill at 3:15 tomorrow?
Foley:
Yes.
H.M.Jr:
All right. After this, I am going home.
I am under the weather. Has anybody got
anything else for me?
80
-6Kuhn:
You asked yesterday for the full text of
what Bell said about the direct investments.
I have been through it, and there is nothing
in a long speech on that subject except what
was in the newspapers. I have it here if
you want it.
H.M.Jr:
I would hate to see it.
Kuhn:
There is no need of it.
Schwarz:
I brought along the text of Norman Thomas'
talk this morning. I don't think you need
that either.
H.M.Jr:
No. O.K., gents.
Bell:
Then your three o'clock meeting is off? It
H.M.Jr:
That is very mean of you, Dan.
Bell:
It is all right with me. I would just put
is Federal Reserve.
it in the safe permanently.
H.M.Jr:
Nell:
H.M.Jr:
Why?
I don't think I would pull it out until I
have to.
Oh I am, but I am not going to answer it
today.
Foley:
Is Hull going on first or is this just a
H.M.Jr:
This is a - what do you call it --
Foley:
Rehearsal.
H.M.Jr:
Rehearsal. This is a strategy meeting tomorrow.
preliminary?
81
-7Foley:
Oh, I see, I thought we were appearing.
H.M.Jr:
No, this is a strategy meeting.
Foley:
Because I had to call in for Barkley to find
out what happened, but I got your message
so I canceled the call.
Kuhn:
Monday morning I think they start.
Foley:
Oh, is it? I didn't hear.
Kuhn:
It was just on the ticker.
H.M.Jr:
Okeydoke, gents.
82
January 22, 1941
3:19 p.m.
H.M.Jr:
Hello, Henry talking.
Sen. Alben
Barkley:
Yeah.
H.M.Jr:
Alben, just to keep my lines straight with
you, tomorrow morning I've asked Harrison
and George and Doughton and Jere Cooper to
come in to talk about some legislation we
need on the debt limit and on this taxing
Federal bonds and so forth and so on.
B:
Yeah.
H.M.Jr:
Now how would you like me to keep you posted
B:
Why, all right. I'd be glad for you to.
H.M.Jr:
so that I can get your advice?
Would you want me to do it before tomorrow
or after the meeting tomorrow or how would
you like me to do it?
B:
H.M.Jr:
B:
Well, anyway you want to.
Well, you tell me and I'11 do it the way
Well, maybe you'd better wait until afterwards.
H.M.Jr:
And then get in touch with you?
B:
Yeah.
H.M.Jr:
O. K., because
B:
If you want me to come to the meeting, I
can do that.
H.M.Jr:
Oh, I'd love it.
B:
Well, what time is it?
H.M.Jr:
9:30, at the Treasury.
B:
Well, if you want me to do it .....
83
-2H.M.Jr:
B:
Well, I hesitated to ask you because I
know how busy you are.
But still I can get the information better
right
there than I could - and save your time
too.
H.M.Jr:
Well, that would be wonderful.
B:
All right.
H.M.Jr:
9:30.
B:
9:30.
H.M.Jr:
Thank you so much.
B:
All right. Good-bye.
84
January 22, 1941
3:25 p.m.
H.M.Jr:
Hello.
Operator:
Speaker Rayburn.
H.M.Jr:
Hello.
Sam Rayburn:
Henry?
H.M.Jr:
Yes, Sam.
R:
Down in our District we have a chief bank
examiner who has reached the retirement
age. Now there are a lot of bankers writing
about him and 80 forth and so forth. Now,
if you feel like extending it why that I
think would be all right with all of us, but
if you decide not to do that, there's a
fellow down there who is his assistant named
Sanelin who's a mighty, mighty good man.
H.M.Jr:
R:
Now, let me get this straight. Who is the
fellow who is going to resign?
Collier. Collier has reached retirement age -
he's 70.
H.M.Jr:
R:
Collier.
He's the Chief down in that Dallas District,
and his Chief assistant, or whatever they
call it, is a man named Sanelin.
I say if it is decided not to extend
Mr. Collier's time why this man Sanelin
is a powerful good man.
H.M.Jr:
San, tip me off. Which way would you like
it?
R:
Well, Collier of course is 70 and he's hard
of hearing and
H.M.Jr:
O. K.
R:
See what I mean?
H.M.Jr:
O. K.
R:
All right.
85
-2H.M.Jr:
R:
H.M.Jr:
Now, let me ask you one?
Yes.
Tomorrow morning into my office are coming
Barkley, Harrison, George, Bob Doughton
and Jere Cooper on some legislation that we
need and we talked to the President about it
this morning. It has to do with the debt
limit and taxing Government bonds and State
bonds and if you weren't too busy I'd
consider it a great compliment if you'd come
and sit in with us.
R:
H.M.Jr:
R:
What time is it?
It's at 9:30.
Yeah, that'11 be all right. I'll be there,
unless I get tied up somehow and I don't
think I will.
H.M.Jr:
R:
H.M.Jr:
Well, if you could and could spare the time
why it would be very helpful to me.
Fine. Thank you, Henry, I'11 be there.
Thank you.
86
January 22, 1941.
My dear Mr. Tinkhams
Before receiving your letter of January 18th
I had prepared further information, including detailed
figures, for submission to your Committee. I - sending herewith a copy of this material which has now gone
to your Chairman.
You will find, I think, that this material
answers the questions which you have reised.
Sincerely yours,
R
Non. George Holden Tiskham,
House of Representatives,
Washington, D. C.
1-22-41
M.Kuhnandothere Brought
back and sent to Mr. Tinkham
by Special Messenger 3:25
by Kuhn's office.
FILE COPY
87
C
The Secretary of the Treasury
Washin to
COPY
January 21, 1941
My dear Mr. Bloom:
When I appeared before your Committee on January 15, I
presented figures of the British dollar position as submitted
to me by the British Treasury. Since then the British
Treasury has communicated to me a more recent figure of
their gold holdings. I submit this revised figure to you
without delay, as I want the Committee to have the latest
information in the possession of the Treasury.
The figure the British had previously submitted to me
of their total gold holdings (as of January 1, 1941) was
$238 million; the revised figure is $292 million, or $54
million greater. The earlier British table included $33
million of gold scattered in various parts of the world,
and not available for payments here; the new table makes
this figure only $30 million, which means that 33 million
more are available for use. On the other hand, the British
Treasury has submitted to me an additional debit item of
$21 million, representing commitments already made on account
of forward exchange contracts. This figure was not in our
possession on January 15th and did not appear in my original
table of British liabilities.
The difference between the present total and my earlier
total is, therefore, a net increase of $36 million in British
dollar and gold assets which are available to pay for war
supplies in this country.
The following table of the United Kingdom's gold and
dollar assets contains the revised figure of gold holdings
on December 31, 1940, and to that extent supersedes the
table I presented to you on January 15th. The present
table includes also a set of figures which the British
Treasury has just given us as to their gold and dollar
exchange position on August 31, 1939, just before the
outbreak of war. All the figures in the present table
are supplied by the British except the estimate of private
dollar balances, marked with an asterisk, which is taken
from United States Treasury data.
88
-2Gold and Dollar Exchange Assets of U.K.
Aug. 31, 1939 Dec. 31, 1940
(In Millions)
Gold
Official dollar balances
Private dollar balances
Marketable U.S.
securities
Direct and miscellaneous
investments in U.S
Total gold and dollar
exchange assets
$2,038
$
292
50
54
545
305
950
616
900
900
$4,433
3
2,167
From the total British gold and dollar exchange assets of
32,167 million on December 31, 1940, the British exclude as
unavailable $305 million of private dollar balances regarded
as necessary for the conduct of business, $30 million of gold
scattered in different parts of the world, and $21 million
(the figure I mentioned earlier in this statement) on account
of forward exchange contracts. This leaves a total of $1,611
million in gold and dollar exchange assets which the British
regard as available, as compared with a figure of $1,775
million in the original table I presented to the Committee.
It may be of interest to you to compare the British
figures of their position on August 31, 1939, with the
figures published in the Federal Reserve Bulletin of
January, 1941. The Federal Reserve Bulletin estimated
British gold and dollar resources as of August 31, 1939,
8.6 follows:
(In millions of dollars)
Gold
Dollar balances
Market securities
Direct and miscellaneous
investments in the U.S
Total
$2,000
595
1,050
1,185
$4,860
89
-3The only significant difference between this estimate
of the Federal Reserve Board and the British Treasury
statement is in the figures of marketable securities
and direct and miscellaneous investments in the United
States.
The Federal Reserve Board's estimates of the United
Kingdom's holdings of U. S. securities and direct and
other investments in the United States as of August 31,
1939, were based on U. S. Department of Commerce data.
The difference of $130,000,000 in market securities is
as might be expected between estimates built up from entirely independent sources of information -- particularly
as nominee accounts are involved and the dates as of
which the British have valued their investments differ
somewhat from those of the Department of Commerce. Both
estimates are based on market values. The Department of
Commerce estimates of the value of so-called direct and
miscellaneous investments do not purport to represent
liquidating value since these figures are based on book
value and on the capitalization of earnings, respectively.
The figure of the British Treasury for direct and miscellaneous investments, stated to be "not in excess of
$900 million", is a tentative estimate that will be revised as more exact information as to the sum of such
investments is obtained by the British Treasury and as
evidence of their liquidation value accumulates.
How was it possible for British assets to shrink
so rapidly between the start of the war and the end of
1940? The shrinkage, as you will have seen from the first
table submitted today, amounted to $2,316 million. The
explanation will be found in the following table of the
balance of payments of the British Empire, excluding
Canada and Newfoundland, with respect to all transactions
requiring settlement in dollars or in gold. This table,
which I now submit to the Committee, was compiled by
economists of the Treasury Department, the Department
of Commerce and the Federal Reserve Board, on the basis
of data supplied by the British Treasury.
90
-4-
Estimated Gold and Dollar Expenditures and Receipts of British
Empire, Excluding Canada and Newfoundland, from
September 1, 1939 to December 31, 1940*
(In Millions of U.S. Dollars)
Gold and Dollar Expenditures
A. Payments to the United States by United Kingdom.
1. On British Government orders in the
United States
Goods delivered
$660
Advance payments
Capital assistance
2. For other merchandise imports from
the United States
3. For shipping, interest, etc
Shipping disbursements
Interest and dividends
$1,380
570
150
705
125
Miscellanoous (chicfly film
royalties)
48
24
B. Payments to the United States by Empire
countries, excluding U.K. and Canada
1. For commodity imports
2. For shipping, interest, etc
$ 40
Interest and dividends
Shipping (net)
197 $2,282
435
48
483
8
C. Payments by Empire countries, excluding Canada,
to areas outside the U.S. requiring gold or
dollars
1. Payments by Empire countries (chiefly
U.K.) to areas outside the U.S. and
Canada requiring gold or dollars
2.
Gold payments by Empire countries to
Canada and Newfoundland (net) **
D. Withdrawal of Capital
1. By American and others, through sale
of free sterling to American importers
2. By repayment of outstanding export
credits As required by our Neutrality Act
3. By liquidation of forward exchange
position in dollars
Compiled from data furnished by British Treasury
For details see supplementary table appended.
550
225
775
300
200
235
735
91
-5Gold and Dollar Expenditures
(Cont.)
E. Residual - Miscellaneous items and errors
of estimation
$ 71
Total gold and dollar requirements for all
transactions.
4,346
Gold and Dollar Receipts
A. Receipts from United States by United
Kingdom
$ 205
1. From merchandise exports
2. From interest, shipping, etc.
Interest and dividends
Shipping earnings
Remittances from insurance
140
345
$ 85
companies
35
20
B. Receipts from United States by Empire
countries, excluding U. K. and Canada
1. From merchandise exports
2. From tourist travel, remittances,
etc. (net)
640
30
670
C. Dollar receipts by Empire countries, excluding Canada, from areas outside
the U. S.
D. Receipts from sale of Emoire gold
(new production and dishoarding)
Total gold and dollar receipts by Empire
countries, excluding Canada
50
965
$2,030
Total drain on gold and dollar resources of
British Empire, excluding Canada and
Newfoundland, Sept. 1, 1939 to Dec. 31, 1940
Total gold and dollar requirements for
all transactions
2,316
$4,346
-6-
92
Supplementary Table
Estimated Expenditures and Receipts of Canada and Newfoundland
with the Rest of the British Empire from September 1, 1939 to
December 31, 1940
(In Millions of U.S. Dollars)
A. Payments to Canada and Newfoundland by
Empire countries
1. For purchases from Canada and New
foundland by the United Kingdom.
2. For purchases from Canada by other
Empire countries
Other
payments to Canada by Empire
3.
countries
$795
125
10
$930
B. Receipts from Canada and Newfoundland by
Empire countries
1. From merchandise exports to Canada
and Newfoundland by U.K
170
by other Empire countries
100
2. From merchandise exports to Canada
3. From interest and dividends paid by
Canada to United Kingdom
85
Forces
20
4. Other U.K. receipts from Canada,
principally Canadian Exoeditionary
375
British Empire deficit with Cannda and
Newfoundland on merchandise, interest and
dividends, etc
Canadian assistance to U.K. -- repatriation of
British-held Canadian securities and increase
in sterling balances held by Canada
Gold payments by British Empire countries with
Canada and Newfoundland Sept. 1, 1939 to Dec. 31,
1940
I hope the foregoing figures will be helpful to the
Committee.
Sincerely,
(Signed) HERRY MORGENTHAU, JR.,
Secretary of the Treasury.
Honorable Sol Bloom, Chairman
Committec on Foreign Relations,
House of Representatives,
Washington, D.C.
555
330
225
93
G.C. HAMELIN
GEORGE HOLDEN TINKHAM
SECRETARY
10th DISTRICT MASSACHUSETTS
Congress of the United States
COMMITTEE ON FOREIGN AFFAIRS
House of Representatives
Washington, D.C.
January 18, 1941
The Honorable
The Secretary of the Treasury
Washington, D. C.
Dear Sir:
May I ask how you explain the discrepancies
between your statement before the House Committee on Foreign
Affairs in relation to British financial resources and the
more or less rough estimates made by the Board of Governors
of the Federal Reserve System in August, 1939? Then, I
understand British gold assets were calculated to be about
$2,000,000,000, compared with slightly more than one-tenth
of this amount now; holdings of United States securities,
at $1,080,000,000 then, against $616,000,000 now; dollar
balances, private as well as official, $595,000,000 then,
$359,000,000 now. In other words, there was a total shrinkage between these two sets of figures covering liquid assets
from $3,675,000,000 to $1,213,000,000. With the non-liquid
assets, representing direct and other investments, the disparity was less marked, it is true, being $1,185,000,000
then and about $900,000,000 now.
ble.
I should appreciate an answer as soon as possiSincerely yours,
GEORGE HOLDEN TINKHAM
S
94
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
STRICTLY CONFIDENTIAL
DATE
January 22, 1941
Secretary Morgenthau
TO
Mr. Klaus
FROM
FBI reports:
December 18, 1940--January 6, 1941. Surveillance of Axel Wenner-Gren continued. It appears, among other things, that Axel Wenner-Gren is in communication with H. A. Brassert Company, which is said to control practically all the
iron ore needed in German war industries and acts as holding company for Goering's
stockholdings in these concerns. Brassert is said to be related to Goering.
Wenner-Gren is said to claim that he was called to Europe during the FinnishRussian conflict to act as mediator and that he felt it was he who influenced
Goering against dragging Sweden into the war.
January 16. An informant who claims to have been in charge of Austrian
counterespionage prior to the Anschluss says that a German agent and spurious
refugee called Weisblatt is now in South America trying to establish a base
in some country which could be used as a landing point for thousands of German
pivilian planes to constitute an effective reminder to the United States as to
The German aerial power; Weisblatt was the main German agent in Spain prior to
the Spanish civil war and was active in France prior to the capitulation and
left France for Brazil and Argentina on a passport given him by Abetz (according to the informant).
January 17. Vera Montgomery appears to be working with the Brady brothers
of Dallas, Texas, on an oil deal, the details of which are not yet known to FBI;
Klots, husband of Vera, has said that he is going to Washington because "they
said they needed someone down there" and has advised his wife to "be careful."
January 18. The National Chemical Corporation, 82 Wall Street, New York
City, offered in October 1940 for delivery by Clipper 2,000 kilograms of fine
silver and 1,000 kilograms of fine platinum to someone in Switzerland and proposed to ship high speed steels on an export license with or without navicert
to Lisbon.
821
95
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE JAN 22 1941
TO
Secretary Morgenthau
FROM Mr. Foley
Re: Final report on activities of
Legislative Section. Office
of the General Counsel, during
the 76th Congress.
It is gratifying to be able to report to you that from the standpoint of the number of bills enacted the 76th Congress was the most
successful one we have had since the establishment of the Legislative
Section in this office in the summer of 1934 and the centralization
in it (with some exceptions) of Treasury legislative activities. The
following summary of the record of this office during the three
Congresses in which it has been in existence tells the story:
Number of Treasury
sponsored bills
actively pending
Congress
Number of
at the end of the
Treasury sponsored
Congress which
bills enacted
76th (1939-40)
50
75th (1937-8)
35
74th (1935-6)
40
failed of enactment
8
11
8
A considerable number of Treasury measures of real importance
were included among the fifty bills enacted during the 76th Congress.
96
-
Thus, the following were among the bills enacted during the 3rd
session of that Congress:
legislation providing a uniform method of restricting and
regulating the delivery of Government checks drawn to
payees residing in foreign countries where, in the opinion
of the Secretary of the Treasury, there is not reasonable
assurance of actual delivery of such checks to the payees
and the ability of the payees to negotiate the checks for
full value;
legislation covering gaps in existing law with respect to
the Treasury's authority to sell, exchange, or otherwise
deal with railroad securities acquired by the Government
as an incident to Federal control of the railroads during
the last war;
legislation (which we have been trying to get enacted for
several Congresses) simplifying the accounts of the Treasurer of the United States by covering into the Treasury as
miscellaneous receipts the balance of the so-called 5% fund
relating to deposits for redemption of national-bank and
Federal Reserve bank notes, which are no longer being issued;
legislation removing all possible doubts about the regulatory
authority of the President and the Secretary of the Treasury
in connection with foreign funds control and ratifying action
previously taken in this field;
legislation authorizing an increase in the size of the White
House police force;
legislation eliminating an administratively troublesome requirement in connection with the use of vehicles for Government travel;
legislation giving the Secretary of the Treasury necessary
additional authority in connection with his statutory
responsibility of preventing the importation from abroad
of piratical copies of works copyrighted in the United
States;
several important pieces of Coast Guard legislation, including
an amendment to the act providing a system for the retirement
and placing out of line of promotion of commissioned Coast
97
-3Guard officers so as to incorporate in that act changes
which experience under it shows are necessary to make it
workable, and an omnibus bill making a large number of
necessary amendments to existing Coast Guard laws in the
interests of clarification and better administration;
legislation (which we have been seeking for a number of
years) authorizing payment by the United States of the
expenses of returning to their homes the remains, families,
and effects of Federal employees dying abroad, and the remains of Federal employees dying while travelling on offi-
cial business in this country; and
legislation covering disallowances and adjustments amounting
to about $170,000 in the accounts of the chief disbursing
officer and the present and former Treasurers of the United
States.
The 2nd session of the 76th Congress was, of course, the short,
special session which was restricted to consideration of the Neutrality
Bill. No Treasury legislation was enacted and, indeed, only one public
law of any character, aside from the Neutrality Act, became law during
this session.
Among the important Treasury measures enacted during the 1st
session of the 76th Congress were the following:
the Second Liberty Bond Act amendment removing the
$30,000,000,000 bond limitation partition from the
Public Debt authorization;
legislation extending and streamlining the highly
successful Government Losses in Shipment Act which
this Department sponsored and obtained enactment of
in 1937;
several important Coast Guard measures, including the
so-called Coast Guard national defense bill authorizing
the construction of three large cutters, establishment
of an Alaskan base and air station, and the purchase of
fifteen seaplanes, a bill increasing the line officers
of the Coast Guard by 154 and establishing the rank of
98
-4rear admiral for the offices of Assistant Commandant and
Chief Engineer of the Coast Guard, a bill establishing a
voluntary and involuntary retirement system for Coast
Guard enlisted men of 20 years or more service, and a bill
establishing the Coast Guard Reserve to be composed of
private yachtsmen and motorboat owners who will voluntarily
assist the Coast Guard and encourage law observance;
several important Treasury law-enforcement measures, in-
cluding a bill to subject to forfeiture vessels, vehicles,
and aircraft used to facilitate violation of the narcotic laws,
the counterfeiting laws, and the National Firearms Act;
a big relief bill covering disallowances and adjustments in
the accounts of present and former Treasurers, disbursing offi-
cers, and others (this bill, one of the largest of its kind on
record, covered over $1,100,000 in disallowances and adjustments, and dealt with matters which had been hanging fire for
many years, some dating back to wartime days); and
the bill extending the powers of the President relating to the
Stabilization Fund, the devaluation of the dollar, and the pur-
chase of silver, until June, 1941 (this bill, as you will
remember, gave us the hottest fight we had during the entire
Congress).
Eight Treasury sponsored bills were actively pending in Congress at
the final adjournment on January 3, 1941. These bills, of course, died
with the end of the Congress and will have to be reintroduced and pressed
to enactment in the 77th Congress. Some of them failed of enactment in
the 76th Congress because they were introduced too late in the last
session to get consideration, and some were stalled by opposition from
other governmental agencies (the Comptroller General in one case, and
the United States Employees' Compensation Commission in another) or
from private interests. We are satisfied that we can secure the enactment of most, if not all, of these bills during the new Congress.
We also, of course, did a great deal of work on other legislation, notably the various Revenue Acts of 1939 and 1940, the Social
Security Act amendments of 1939, various defense measures of 1940
99
-5(all of which were enacted into law), and the big 1939 lending bill,
which did not become law. None of these bills, however, strictly
speaking, could be described as a Treasury bill.
Aside from the foregoing, the Legislative Section of this
office handled a total of 1154 Treasury reports on legislation
during the 76th Congress. Of this number, 696 were reports to
committees of Congress, 223 were reports to the Bureau of the Budget
on pending or proposed legislation, and 235 were reports to the
Bureau of the Budget on enrolled bills to assist the President in
determining whether or not to approve these bills.
The Legislative Section transacted legislative business with
the legislative counsel of both the House and Senate, and worked
with, and appeared before, virtually all the major and many minor
committees of both Houses of Congress, during the 76th Congress.
In addition, it drafted, or assisted in drafting, much legislation
not covered by this report, such as bills which are still in process,
bills which have been submitted to, but not yet cleared by, the Bureau of the Budget, bills which were completed but which, for one
reason or another, the appropriate administrative officers decided
not to submit to Congress at this time, bills prepared as a courtesy
accommodation to members of Congress, etc. The Legislative Section
also opposed legislation objectionable to the Treasury Department and
drafted, or participated in drafting, a considerable number of Executive Orders, Proclamations, and proposed Reorganization Plans. In
addition, this Section did a large amount of research work on
100
-6legislative and other problems of interest to the Department, and
generally endeavored to keep the various bureaus and branches of
the Department advised about all phases of legislative matters in
which they were interested.
The National Defense Program, during the last session of Congress
and the accelerated legislative activity in connection therewith, resulted in a considerable increase in the Legislative Section's work in
order to keep the many interested Treasury officers advised about the
progress of, and other matters of interest to them in connection with,
defense legislation. In this connection, also, the Section has cooperated with the Legislative Reference Service of the Library of
Congress in preparing mimeographed analyses of defense bills and
legal memoranda of various kinds for the use of the Defense Commission.
The attached progress report shows, in tabular form, the results
we obtained during the 76th Congress in connection with bills sponsored
by the Treasury.
E.N.7h
FINAL PROGRESS REPORT ON TREASURY
LEGISLATION DURING THE 76th CONGRESS.
A. TREASURY SPONSORED BILLS ENACTED
DURING 76th CONGRESS.
I. Treasury sponsored bills
enacted during First
Session of 76th Congress
(1939).
BRIEF EXPLANATION
BILLS
1. H.J. Res. 110
Permits acceptance of medal from Greece.
APPROVED
Mar. 28, 1939
PUBLIC OR
PRIVATE NUMBER
Private Res. No. 1
(S.J. Res. 75) Coyle,
Commander Henry- foreign
decoration
2. S. 529
Relief of Margaret
Authorizes payment of balance due as compen- Apr. 15, 1939 Private No. 26
sation for post office site.
Rose Uncapher
3. H.R. 3231
Coast Guard Mailing
of firearms
4. S. 2244 (H.R. 5836)
Lizzie Beck bequest
5. S. 595 (H.R. 5738)
Coast Guard 20 year
retirement
Extends to Coast Guard officers privileges May 15, 1939 Public No.
enjoyed by officers of other military
services of sending firearms through mails.
77
Authorizes the U.S. to accept certain real May 22, 1939 Public No. 84
estate devised to it by Lizzie Beck, Mena,
Ark.
Establishes voluntary and involuntary retirement system for enlisted men with 20
years or more service.
May 24, 1939 Public No. 87
-2I. Treasury sponsored bills enacted
during First Session of 76th
Congress (1939). - (Continued)
PUBLIC OR
BILLS
BRIEF EXPLANATION
APPROVED
PRIVATE NUMBER
6. S. 1876 (H.R. 4982)
Increases line officers of Coast Guard by
154, and establishes rank of rear admiral
May 24, 1939
Public No. 89
7. H.R. 4131 (S. 528)
Relief of Melvin
Compensates enlisted man for personal
May 31, 1939
Private No. 46
Authorizes Secretary of the Treasury to
construct three cutters, establish Alaska
base and air station, and purchase fifteen
seaplanes. Over $14,000,000 involved.
June 2, 1939
Public No. 104
Authorizes demolition of old post office
June 13, 1939
Public No. 128
Establishes voluntary reserve of private
June 23, 1939 Public No. 152
Coast Guard readjust
commissioned personnel for offices of Assistant Commandant and
Chief Engineer.
property lost in fire at Nome, Alaska.
Gerard Alvey
8. S. 1369 (H.R. 4246)
Coast Guard national
defense
9. S. 2404 (H.R. 6017)
Portland, Oregon,
Courthouse
10. H.R. 5966 (S. 2258)
Coast Guard Reserve
building.
yachtsmen and motorboat owners to assist
Coast Guard and encourage law observance.
11. H.R. 3325
Stabilization Fund
Continues powers relating to stabilization July 6, 1939 Public No. 165
fund, devaluation of the dollar, and
12. S. 2167 (H.R. 5349)
Authorizes reimbursement of Coast Guard
Coast Guard Hurricane
Relief
purchase of silver.
personnel for losses of personal property
in 1938 hurricane.
July 15, 1939
Private No. 93
-3I. Treasury sponsored bills enacted
during First Session of 76th
Congress (1939). - (Continued)
BILLS
13. H.R. 5346 (s. 1953)
Relief of Mrs. A. R.
Barnard and others
BRIEF EXPLANATION
PUBLIC OR
APPROVED
PRIVATE NUMBER
Provides compensation for loss of life and July 15, 1939 Private No. 95
motorboat in attempt to help Coast Guard
boat.
(Stephens, Prairie,
and Mrs. Needles)
14. H.R. 5748
Second Liberty Bond
Act amendment
15. H.R. 5375 (s. 2166)
Coast Guard Nautical
Education
16. S. 1882 (H.R. 5896)
Relief of Thomas A.
Ross
Removes $30,000,000,000 bond limitation
July 20, 1939 Public No. 201
Authorizes Commandant of Coast Guard to
August 4, 1939 Public No. 258
partition in the Public Debt authorization.
detail officers to state and territorial
nautical schools to give nautical instruction.
Compensates Coast Guard enlisted man for
loss of personal property in a fire in
Nome, Alaska.
17. S. 1156 (H.R. 2742)
Transfers target range at Morehead City,
Morehead City Target North Carolina, from War Department to
Treasury. (Coast Guard)
Range
18. H.R. 7288 (s. 2859)
Lighthouse Service
personnel
August 4, 1939 Private No. 125
Provides for the induction into the Coast
Guard military establishment in ranks,
grades, or ratings appropriate to their
qualifications, experience and lengths of
service as determined by the Secretary of
certain professional, scientific, and other
personnel of the Lighthouse Service which
was transferred to the Coast Guard by Re-
organization Plan No. II.
August 5, 1939 Public No. 268
August 5, 1939 Public No. 291
4
-
I. Treasury sponsored bills enacted
during First Session of 76th
Congress (1939). - (Continued)
BILLS
19. H.R. 5611
Coast Guard District
Commanders and con-
structors
BRIEF EXPLANATION
APPROVED
PUBLIC OR
PRIVATE NUMBER
Places District Commanders and constructors August 5, 1939 Public No. 292
in the line of the Coast Guard and
abolishes the district commander and
constructor corps, thus doing away with
the last of the special service corps of
the Coast Guard.
20. H.R. 6555
Evidence - purchase
of
Permits advance of funds elsewhere appro- August 7, 1939 Public No. 339
priated by Congress to narcotic and
customs officers to purchase evidence
and information of violations of narcotic
and customs laws.
21. S. 1899
Surgeon General -
Assistant to
22. H.R. 6021 (S. 2473)
Akron, Ohio, post
office
Creates office of Assistant to Surgeon
General with rank of brigadier general
and authorizes detail of Public Health
August 9, 1939 Public No. 345
Repeals law fixing minimum price of
$100,000 for sale by Government of old
August 9, 1939 Public No. 356
Service officers to serve in such office.
post office building and site at Akron,
Ohio.
23. H.R. 6556
Seizure and for-
feiture of vessels,
vehicles and aircraft
Provides for seizure and forfeiture of
vessels, vehicles and aircraft used in
violating narcotic, and counterfeiting
laws and National Firearms Act.
August 9, 1939 Public No. 357
5
I. Treasury sponsored bills enacted
during First Session of 76th
Congress (1939). - (Continued)
BILLS
24. S. 1540
National Advisory
Health Council pay
25. H.R. 6747
Lighthouse Service
retirements
BRIEF EXPLANATION
PUBLIC OR
APPROVED
PRIVATE NUMBER
Permits Secretary of the Treasury to compen- August 10, 1939 Public No.
364
sate nongovernmental members of the National
Advisory Health Council at rate of not to
exceed $25 per diem instead of $10.
Permits retirement at age of 64 instead of August 10, 1939 Public No.
370
65 of certain Lighthouse Service personnel
who have 30 or more years of service and
whose positions may be abolished as a re-
sult of the consolidation of the Lighthouse
Service with Coast Guard effected by Reorgani-
zation Plan No. II.
26. H.R. 6614
Extends scope of Government Losses in Ship- August 10, 1939 Public No. 378
Government Losses
ment Act of 1937, which was sponsored by
in Shipment insurance the Treasury, and generally streamlines
bill
27. H.R. 7049 (s. 2706)
Relief of Summers,
Allen, and Sayles,
etc.
that Act and remedies difficulties which
administration of that Act has disclosed.
Adjusts accounts of present and former
disbursing officers and treasurers of the
United States and covers disallowed salary
payments to the late Captain William R.
Sayles in his capacity as Assistant Deputy
Commissioner of Alcohol Tax Unit. Over
$1,100,000 in disallowances and adjustments
are covered by this bill, which makes it
one of the largest of its kind on record.
August 10, 1939 Private No. 250
6-
II. Treasury sponsored bills enacted
during Third Session of the 76th
Congress (1940).
28. S. 2689
Copyright bill
APPROVED
BRIEF EXPLANATION
BILLS
Gives the Secretary of the Treasury and
PUBLIC OR
PRIVATE NUMBER
April 11, 1940
Public No. 450
the Postmaster General authority commen-
surate with their statutory responsibility
of preventing the importation from abroad
of piratical copies of works copyrighted
in the United States or copies which have
not been produced in accordance with the
manufacturing conditions of the Copyright
Act.
29. H.R. 8540
Increase in White
House police force
Authorizes an increase in the White House
April 22, 1940
Public No. 476
30. H.R. 6693
Auto mileage bill
April 25, 1940
Eliminates the requirement that vehicles
used for official travel must be personally
Public No. 485
police force of 1 lieutenant, 1 sergeant,
and 18 privates, thus increasing total
force from 60 to 80.
and exclusively owned by the Government
traveller involved.
31. S.J. Res. 252
(H.J. Res. 522)
Foreign Funds
Control
Removes all possible doubts about the regu- May 7, 1940
Public Res. No. 69
latory authority of the President and the
Secretary of the Treasury in connection with
foreign funds control, and ratifies action
previously taken in this field.
*Note: The second session of the 76th Congress was a short special session in the Fall of 1939 devoted
to the consideration of the Neutrality Bill. No Treasury legislation and only two public acts
of any character were enacted during this session.
-7II. Treasury sponsored bills enacted
during Third Session of the 76th
Congress (1940). - (Continued)
BILLS
32. H.R. 8423 (S. 3599)
The retirement and
placing out of line
BRIEF EXPLANATION
Amends Act of January 12, 1938 (which
PUBLIC OR
APPROVED
June 6, 1940
PRIVATE NUMBER
Public No. 556
provided a system for the retirement and the
placing out of line of promotion of commis-
sioned officers of the Coast Guard) to inof promotion of
Coast Guard officers. corporate changes which experience under
that Act shows are necessary to make it
workable. Principal change is elimination
of officer's right to appear in person or
by counsel before the personnel board and
substitution for this of the right to have
two different personnel boards pass on his
case before he can be finally retired or
placed out of line of promotion.
33. H.R. 8357 (s. 3600)
Coast Guard depot
and servicing base
34. H.R. 9553 (s. 3865)
Omnibus Coast Guard
bill
Provides for enlargement of Coast Guard
June 6, 1940
Public No. 557
June 6, 1940
Public No. 564
depot at Seattle, Washington, and for
establishment of a Coast Guard servicing
base at or near Chattanooga, Tennessee.
Makes a large number of miscellaneous
amendments of existing Coast Guard laws
in the interests of clarification and
better administration. The bill includes
provisions: for adjustments in the retired
rank and pay of officers who have served as
engineer in chief or Assistant Commandant;
clarifying the law relating to the discon-
tinuance and reestablishment of light stations
and Coast Guard stations; relating to the re-
tirement of former Lighthouse Service employees;
defining more precisely Coast Guard liability for
expenses of Coast Guard Reserve boats loaned to
the Coast Guard; etc.
-8- II. Treasury sponsored bills enacted
during Third Session of the 76th
Congress (1940). . - (Continued)
BILLS
35. S. 3307 (H.R. 8097)
Amending Coast Guard
relief bill for
PUBLIC OR
APPROVED
BRIEF EXPLANATION
Amends Act of July 15, 1939 (providing
relief for widow of Vern A. Needles who
June 6, 1940
PRIVATE NUMBER
Private No. 338
lost his life while aiding a disabled Coast
dependents of Vern A. Guard boat) to divide money appropriated by
Needles
that Act to Mrs. Needles ($5000) equally between her and Needles' infant son by a prior
marriage whose existence was not known when
original relief bill passed Congress in 1939.
Relief for heirs of
Authorizes the Secretary of the Treasury to June 7, 1940
transfer to the widow and children of Lt.
Coast Guard
rights to a radio-direction-finding-system
36. S. 3487 (H.R. 8722)
Lt. Clemmer of the
Private No. 350
Clemmer of the Coast Guard the license
invention commercial
rights
assigned
37. S. 3304 (H.R. 7492)
Relief for Private
Kuner of Secret
Service
Validates Frank June 8, 1940
Kuner,
a
Force
private, were
illegel
because
was
a
neither
Kuner was aware this fact.
Private No. 352
nor to he Secret which to which salary of Treasury the Clemmer's, not Service United he payments had technically citizen, States. unintentionally Uniformed the made of though to J.
38. H.R. 9441 (s. 3775)
Accepting grant of
South Carolina land
for Coast Guard
purposes
Accepts the grant to the United States of June 8, 1940
certain land on Sullivans Island (Charleston
County, S. c.) by the State of South Carolina
and authorizes its use by the Coest Guard.
Public No. 582
-9II. Treasury sponsored bills enacted
during Third Session of the 76th
Congress (1940). - (Continued)
BILLS
BRIEF EXPLANATION
PUBLIC OR
APPROVED
June 13, 1940
Authorizes the Secretary of the Treasury
Easement granted over to grant easements for highway and utility
Coast Guard Reservapurposes to the City of Fort Lauderdale,
tion at Fort
Florida, over the Coast Guard Reservation
(known as Base Six) at Fort Lauderdale.
Lauderdale, Florida
Public No. 625
June 25, 1940
Authorizes the Secretary of the Treasury
to grant to the Road Department of the
State of Florida an easement for a road
right-of-way over the Coast Guard Reserva-
Public No. 661
Authorizes payment by the United States of July 8, 1940
the expenses of returning to their homes
the remains, families, and effects of
Public No. 729
39. S. 3959 (H.R. 9349)
40.
PRIVATE NUMBER
S. 3958
Easement granted over
Coast Guard Reserva-
tion at Flagler
Beach, Florida
41. S. 3899
Return to U.S. of
remains of employees
dying abroad
tion at Flagler Beach, Florida.
Federal employees dying abroad, and the
remains of Federal employees dying while
travelling on official business in the U.S.
42. S. 4032 (H.R. 10035)
Penston (Coast Guard)
relief bill
Reimburses Philip A. Penston, Coast Guard
pharmacist's mate, for the value ($1267)
July 11, 1940
Private No. 488
of personal and household effects lost
during the hurricane of September 21, 1938,
at New London, Connecticut.
43. H.R. 10014 (S. 4112)
Amending Transporta-
tion Act, 1920.
Covers gaps in existing law with respect to August 13, 1940 Public No. 766
the Treasury's authority to sell, exchange,
or otherwise deal with railroad securities
acquired by the Government as an incident
to Federal control of the railroads during
the last war.
- 10 -
II. Treasury sponsored bills enacted
during Third Session of the 76th
Congress (1940). - (Continued)
BILLS
44. H.R. 10337 (s. 4274)
Recall to duty of
retired Coast Guard
officers
45. S. 4353
Regulation of
delivery of certain
checks to foreign
countries
BRIEF EXPLANATION
Authorizes the Secretary of the Treasury
to order retired Coast Guard commissioned
APPROVED
October 9, 1940
PUBLIC OR
PRIVATE NUMBER
Public No. 810
or warrant officers to active duty at any
time with their consent.
October 9, 1940 Public No. 828
Provides a uniform method of restricting
and regulating the delivery of Government
checks drawn to payees residing in foreign
countries, where, in the opinion of the
Secretary of the Treasury, there is not
reasonable assurance of actual delivery
of such checksto the payees and the ability
of the payees to negotiate the checks for
full value.
46. S. 3778 (H.R. 9086)
Customs and Immigra-
tion Border Facilities
October 10, 1940 Public No. 830
Authorizes erection of protective gates
and fences, and better buildings than presently authorized, for the enforcement of
the customs and immigration laws along the
Canadian and Mexican borders of the United
States.
Simplifies the accounts of the Treasurer
47. S. 844 (H.R. 2541)
of the United States by covering into the
Simplifying U.S.
Treasurer's accounts Treasury as miscellaneous receipts the
balance of the so-called 5% fund relating
to deposits for redemption of nationalbank and Federal Reserve bank notes which
are no longer being issued.
October 10, 1940 Public No. 832
- 11 II. Treasury sponsored bills enacted
during Third Session of the 76th
Congress (1940) - (Continued)
BILLS
48. H.R. 10246
Jurisdiction over
Stony Point Light
Station Reservation
BRIEF EXPLANATION
APPROVED
PUBLIC OR
PRIVATE NUMBER
October 10, 1940 Public No. 843
Amends Act of July 30, 1937 (authorizing
conveyance by the United States of certain
portions of the Stony Point Light Station
Reservation to the New York Palisades Interstate Park Commission), in order to remove all
doubt as to the State' S criminal and civil
jurisdiction over the property in question.
49. H.R. 10354 ( S. 4231) Provides relief for Guy Allen, chief dis- October 14, 1940 Private No.
Relief for chief
disbursing officer
and present and
certain former U.S.
Treasurers
632
bursing officer, on account of certain
disallowances in his accounts, and for present
and three former Treasurers of the United
States on account of certain unavailable items
in their accounts in check-reclamation and
adjusted-service bond cases. All payments
covered were made in good faith and without
negligence. About $170,000 is involved in all.
50. H.R. 10194 (s. 4139)
Relief for late
John L. Summers,
former Treasury
disbursing clerk
Provides relief for the late John L. Summers, October 14, 1940 Private No. 636
Treasury disbursing clerk on account of
$12,000 in disallowances against his accounts for disbursements made by him in
1934 and 1935 in good faith and without
negligence. Also covers any other similar
disellowances which may be raised against
his accounts more than three years after
he made payment. The Comptroller General
was holding up payment of Mr. Summers' re-
tirement funds to his beneficiaries pending
adjustment of these disellowances.
-12B. TREASURY SPONSORED BILLS ACTIVELY
PENDING IN CONGRESS AT THE END OF
THE 76th CONGRESS (JANUARY 3, 1941).
BILLS
1. S. 3408
Counterfeiting
conspiracies
2. H.R. 10397
(H.R. 10175)
Customs leases
BRIEF EXPLANATION
STATUS AT END
OF 76th CONGRESS
Makes the penalty for conspiring to
violate counterfeiting laws the same
as the penalty for the substantive
offense of counterfeiting.
Bill pending before
Authorizes Customs to enter into ten
year leases on buildings and grounds
abroad. At present they must be re-
Bills pending before
REMARKS
We expect to secure en-
actment of this bill
during the first session
Senate Judiciary
Committee.
of the 77th Congress.
This bill was held up by
objections to certain
phases of it on the part
House Public Buildings
and Grounds Committee.
of the Federal Works
Agency. We hope to iron
newed annually.
these out and get it
enacted during the new
session of Congress.
3. Settlement on
lost or stolen
checks (no
number, bill
not yet intro-
Authorizes the Treasurer of the
United States to make settlement
in advance of reclamation with payees
of lost or stolen checks which have
No bill introduced but Submitted to Congress
too late in the last
Treasury draft bill
and letter of submission session to receive
been paid on forged endorsements.
Banking and Currency
Committee and House Com-
duced)
consideration.
pending before Senate
mittee on Expenditures
in the Executive Departments.
4. S. 3175
Custom faci-
lities at
International
toll bridges
Requires International toll bridges
(1.e., along Mexican and Canadian
Bill pending before
Senate Finance Com-
borders) to furnish free inspectional mittee.
facilities for customs and other
Federal officers necessarily stationed
there.
Opposition of private
interests and the consequent necessity for
public hearings on this
bill prevented the busy
Senate Finance Committee
from considering this
bill during the
- 13 B. TREASURY SPONSORED BILLS ACTIVELY PENDING
IN CONGRESS AT THE END OF THE 76th
CONGRESS (JANUARY 3, 1941). - (Continued)
BILLS
5. S. 3383
Future adjustments in
Treasurer's
accounts
BRIEF EXPLANATION
STATUS AT END
OF 76th CONGRESS
REMARKS
Relieves the Treasurer of the United
States of charges or disallowances
Passes Senate April 10, This bill was pigeon-
proper payments or deliveries of
Expenditures in the
holed by the House
Committee because of the
Comptroller General's
Executive Departments.
objections to it.
Passed House June 17,
This bill died in the
in his accounts arising out of im-
checks and other instruments when
such payments or deliveries were
made without any fraud or negligence
1940; pending before
House Committee on
on the part of the Treasurer or his
employees.
6. H.R. 9995
(S. 4109)
Exchange of
Coast Guard
sites
Authorizes the exchange of two
Coast Guard sites in Florida (one
at Miami Beach and the other at
Fort Lauderdale) for other property
and facilities more advantageous to
1940; pending before
Senate Commerce
Committee.
the Government.
Senate Commerce Committee
because of a feeling on
the part of some members
of the Committee that
Senator Pepper was interested in the matter and
that the Committee had already done enough for him.
There will be no trouble
securing its enactment in
the 77th Congress.
7. H.R. 6767
(s. 3799)
Enforcement
officers' death
and disability
benefits
Authorizes an increase in the death
and disability compensation payable
to Federal enforcement officers and
their dependents when such officers
are killed or disabled while engaged
in hazardous work.
Passed House
This bill was stalled in
March 18, 1940;
pending before
Senate Committee on
the Senate Committee by
Education and Labor.
opposition on the part of
the United States Em-
ployees Compensation
Commission.
- 14 B. TREASURY SPONSORED BILLS ACTIVELY PENDING
IN CONGRESS AT THE END OF THE 76th
CONGRESS (JANUARY 3, 1941). - (Continued)
BILLS
8. S. 4413
(H.R. 10652)
Coast Guard
Auxiliary and
Reserve
BRIEF EXPLANATION
Repeals the Coast Guard Reserve Act
STATUS AT END
OF 76th CONGRESS
Bill pending before the
REMARKS
This lengthy and
Senate Commerce Committee
important bill was
of 1939, and substitutes a Coast
not submitted to
and
the
House
Committee
on
Guard Auxiliary for the Reserve
Congress till October
established by that Act, and creates Merchant Marine and
1940, too late to rea new Coast Guard Reserve patterned Fisheries.
ceive consideration in
after the Naval Reserve.
the 76th Congress.
115
COPY
TELEGRAM RECEIVED
From Rome
Dated January 22, 1940
Secretary of State,
Washington.
51, January 22, 6 p.m.
Council of Ministers on January 20 approved draft
of the 1940-41 budget. Expenditures total 34,895
million lire, revenue 29,002 million, deficit 5,893
million. Appropriations for War, Navy and Air total
10,843 millions or 31% of total budget; this is an
increase of 2,560 millions over present fiscal year.
With two exceptions all Ministries have increased budgets.
The press this afternoon is careful to point out
that the above refers to "normal" budget and that unforeseen events may lead to further increases.
A simultaneous announcement was made of a new
issue of 9 year Treasury bonds at 97 1/2. Subscriptions
begin February 15. Proceeds will be used to finance
the new budget expenditures and to pay off maturing
Treasury notes.
PHILLIPS.
116
(CONFIDENTIAL)
PARAPHRASE
CONFIDENTIAL
A telegram (no. 100) of January 22, 1941, from the
American Consul General at Shanghai reads substantially
as follows:
Deposits have been made with about forty Chinese
banks in Shanghai by the new Central Reserve Bank. Each
deposit, which is in new notes, is twenty-five or fifty
thousand Central Reserve Bank yuan. The Chinese banks
with whom the deposits were made issued ordinary pass-
books of the type used for saving accounts or opened
accounts current and issued check books bearing a rubber
stamp notation to the effect that the checks are to be
paid only in the new currency. No interest was asked
on the deposits or is to be credited to them. Although
it is not confirmed there is a report to the effect that
deposits in the new notes of 100,000 Central Reserve
Bank yuan each have been accepted by the Bank of Com-
munications and the Bank of China. However, according to
the report such deposits have not yet been offered to the
Central Bank of China. The new Central Reserve Bank also
required several selected prominent Chinese commercial
banks also to accept deposits of 500,000 yuan each in
Chinese national currency. This is interpreted as a part
of the policy of the new Central Reserve Bank to use the
Chinese commercial banks as agents for conversions into
Chinese national currency from notes when notes are
presented
117
-2-
CONFIDENTIAL
presented by the public. It is understood that British
and American banks have declined to accept deposits in
the currency of the new Central Reserve Bank. It is the
opinion of Chinese bankers that before long the new notes
in the smaller denominations will be given as change to
passengers by the tramways and buses in the French Concession.
118
January 22. 1941
Files
Mr. Bechras
At nees ea Saturday, January 18, Minister Procepo of Pialand called ea no. He
whether I had been able to obtain any reaction from Secretary Morgeather to
the asked Minister's inquiry made from no in December as to the possibility of a Stabilise-
tion Fund operation for the benefit of Finland. I told the Minister that the
Secretary had been too busy for no to breach this subject to date.
At 10 e'slook yesterday morning I reported Minister Proceps's visit orally to
Secretary Margenthan. I volunteered the idea that I and not think this was a field
is which the Stabilisation Fund should enter. That is. the importance of the Fisa
mark-dollar relationship is not sufficiently important a Stabilisation
Past intervention. This is especially true since Fialand's trade with the United
States has been so considerably out off. and since Finland's trade relationships with
Germany and Bussia have grown. I thought that If the Stabilization Fund entered into
as agreement with Fialand, 11 night logically be called upon to help other unfortunate
countries is Burepe is a way upon which we have not yet embarked (aside possibly from
Jaina). The Secretary thought the assistance could more appropriately come from the
Report-Import Bank, and made the suggestion that Minister Precope see Secretary Jenes.
I told the Secretary that I had already made this suggestion to Minister Process and
had learned that he had already seen Mr. Jenes. The Minister, 11 appeared. had not
received such encouragement from Mr. Jenee on the idea of a further credit, since it
could not be node clear to Mr. Jenes how another leas could DO repaid through Finnish
experts. The Minister still hoped. however, that with a more generous treatment of
Finnish shipping by the British, 18 sight be possible to get out more Finnish pulp
and paper to the United States and he hoped that he could make some arrangement with
Mr. Jenes on these commodities.
It was understood that Minister Procepo would get is touch with no again is a
few days. then he does, I shall emplain the Secretary's position.
Km
119
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 22, 1941
TO
FROM
Secretary Morgenthau
Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
75,000
Sold to commercial concerns
110,000
Purchased from commercial concerns
Open market sterling was again quoted at 4.03-1/2. Transactions of the reporting
banks were:
111,000
-0-
Sold to commercial concerns
Purchased from commercial concerns
The Canadian dollar discount, which widened abruptly to 17-1/4% yesterday afternoon
opened at the improved level of 16% today. It immediately became weak, however, and
again touched the low of 17-1/4% at the close.
The Argentine free peso opened at .2375 this morning, as compared with last
night's close of .2370. The rate remained steady throughout the day, closing at .2375.
Closing quotations for the other currencies were:
Swiss franc
Swedish krona
Reichamark
Lira
Brazilian milreis (free)
Mexican peso
Cuban peso
Chinese yuan
.2321
.2385
.4005
.0505
.0505
.2066
7-7/8% discount
.05-1/2
By order and for account of the Bank of Sweden, the Federal Reserve Bank of
New
York purchased 500,000 Argentine pesos at the free rate from the National City
Bank,
We sold $2,000,000 in gold to the Bank of Portugal, which was added to its
earmarked account.
Under licenses previously issued, the Federal Reserve Bank of New York transfered
from the account of the Central Bank of E1 Salvador gold valued at approximately
$284,900 to account No. 6 of the B.I.S. This transfer raises the amount of gold in
B.I.S. account No. 6 to approximately $1,121,340: gold in this account is owned by the
Central Bank of E1 Salvador and is pledged to secure repayment of credits granted that
ank by the B.I.S.
120
-2-
The Federal Reserve Bank of New York reported that the Central Bank of
E1 Salvador repaid $200,000 of the three-month loans previously made to it by the
Federal. Upon repayment, the Federal transfered $227,820 worth of gold from the
collateral account to the Salvadorean bank's own earmarked account. The amount of
loans outstanding is now $385,000, secured by $435,891 in gold.
The Federal Reserve Bank of New York reported the following gold engagements:
$3,026,000
421,000
from Canada, shipped by the Bank of Canada, Ottawa, to the Irving Trust
Company, New York, for account of the Banque Mellie Iran, Tehran, for
sale to the New York Assay Office.
from Peru, shipped by the Central Reserve Bank of Peru to the Federal
Reserve Bank of New York, to be earmarked for its account.
$3,447,000 Total
The Bombay gold price was equivalent to $34.08, a decline of 3$. Silver was
3/16 lower at the equivalent of 44.87
The prices fixed in London for spot and forward silver were both unchanged, at
23-3/16d and 23-1/8d respectively. The dollar equivalents were 42.10$ and 41.99
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35$.
We made two purchases of silver totaling 175,000 ounces under the Silver Purchase
act. One of these, amounting to 100,000 ounces, represented a sale from inventory,
and the other 75,000 ounces consisted of new production from foreign countries, for
forward delivery.
MM,
CONFIDENTIAL
121
January 22. 1942
Under Secretary Bell
Mr. fechron
Since we have had no word from the British for several days is regard to sage-
tistiess with respect to esabilization lease to Chine. I took - with Mr. Pissent
yestering. at Mr. Bell's suggestion, the question of our time schedule. Mr. Pineent
told as by telephone yesterday evening that he thought Mr. Regure had arrived is
Lester last Saturday. No was suare that Dr. Seeng and Dr. Young have received see-
sages directly free Mr. Begore since the latter reached.lendes. The British Behavior
and treasury efficials here. however, have not had any message from Begure. Pinsent
presided to look into the question.
1/22/41
LONDON
122
KD
Dated January 22, 1941
Rec'd. 3 p.m.
Secretary of State,
Washington.
250, January 22, 8 p.m.
During a call at the British Treasury yesterday, Norman Young of the
Far Eastern Department opened a conversation regarding a draft agreement
concerning credits for Chine that has been received within the last day or
two from Sir Frederick Phillips with a request for the British Treasury's
comments. Since the Embassy is not informed on this subject it is possible only
to report the tenor of Young's remarks which were to the effect that the British
Treasury finds it very difficult to reach any conclusions as to the machinery
proposed, without knowing more as to the policy that it is proposed to follow
vis-a-vis the new Japanese-controlled Central Bank in China. The British
Treasury is apprehensive as to the possibility that substantial portions of the
new credits night find their way into Japanese hands, saying that was based in
part on recent cast experience (reported by them to Phillips by confidential
cable), and partly on the fact that the Japanese have fixed their exchange rate
this time at much more reasonable figure then was the case in North China.
The British Treasury regards this whole problem as an exceedingly difficult one,
as one of the best "headache producers" before it today.
Please inform Treasury.
JOHNSON.
TFV
eh:copy
123
January 22, 1941
Files
Mr. Cochras
At 3:15 this afternoon Secretary Morgenthan called as to his office to seet
Mr. J. A. Heffett, head of the California Texas 011 Company, Limited, whose sais
office is is New York. Mr. Hoffess came to my office and left with as the attached
documents. The first is an office a to his showing what the financial
position of his company may be under certain new regulations of the Lendes Exchange
Central. The second is a circular from the treasurer of his concern setting forth
& nemorandas dated December 12 from the Beak of England is regard to payment for oil
imports into the sterling area, upon which nonoranias number eas is calculated.
Mr. Heffett explained to no that his company is half overd by the Standard
011 of California and half by the Texas Company. It was set up a few years age to
handle business east of the Sues. It has the Bahroia petroless concession. Stace
Dehrois is in a British protectorate, 11 has also been necessary for the concern to
be incorporated is Ganada. AS Ostava it mistains only a lawyer to represent it, its
`stiese being conducted from New York. It is entirely American owned. Its business
essists is producing and distributing petroleum and its products is the Bast, that
is, east of fues, including India, South Africa, Australia, New Zealand, China, The
Philippine Islands, etc.
Mr. Meffett realises that since the business of his company is principally in
the storling area that is may have to expect some measures to prevent the hitherto
free conversion of its sterling reseipts, at the official rate, into free dollars.
No does not yet desire to enter say protest against the Beak of England
regulations as set forth is the attached His company ovidently has
prospered, yielding a prefit of $12,000,000 last year or $1,000,000 per month, all
of which vas brought into United States is dollars and made available to the parent
concerns. Mr. Meffess is taking the procestion, however, of trying to ... what
future prospects may be. If 11 appears that the receipts of his concers are to be
indofinitely blocked is storling, be plans to look around and ... what investments
is real estate, etc., may be made is Australia and other sterling areas is the For
East. Be hopes that the British will at least permit sufficient conversion of sterling
to heep up the New York payroll and other expenses is dollars. It is understood that
Mr. Meffess desires no action on the treasury's side unless w hear from his further.
you
HMC: da: 1.22.41
124
Treasury Department
Division of Monetary Research
Date
To:
19
Secretary Morgenthau
Mr. White
You may be interested
in glancing at this memo.,
based on a Dep't. of Agriculture study, which gives
a definitely lower estimate
of possible Danubian agricultural assistance to
Germany than is commonly
made.
MR. WHITE
Branch 2058 - Room 210
125
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 22, 1941
TO
Mr. White
FROM
Mr. Snider
Subject: Danubian agricultural assistance to Germany.
1. Danubian agricultural surpluses are not sufficient either at present or probably in the near future to
meet the war-time needs of German and German-dominated
populations for food and feedstuff supplies.
2. Particularly on account of unusually adverse
weather and crop conditions and war mobilization, 1940
Danubian surpluses were sharply reduced: 1940-41 wheat
exports will amount to only one-sixth and those of corn
to two-thirds of the 1935-39 average exports; they will
meet only 30% of the pre-war European and 40% of the
greater German wheat exports, and only 6% of the European
and 13% of the German pre-war imports.
3. The inability of Hungary, Rumania, Bulgaria and
Yugoslavia to furnish continental food-deficit countries
with needed supplies is a result of more than temporary
unfavorable weather conditions and the exigencies of mobilization. During 1935-39 total exports of these countries
fell short of German import needs by 36% for feed grains,
95% for butter, 48% for eggs, 92% for oil seeds and 97%
for oilcake. In spite of all efforts Germany actually
obtained only 27% of Danubian wheat surpluses and 47% of
corn exports during that period.
4. The prospects for a future expansion of agricultural production in the Southeastern European countries
126
-2 are not favorable. The existence of unfavorable social
conditions (illiteracy, etc.) and a backward economic
structure (uneconomic distribution of land holdings, lack
of capital, etc.) serves to make an expansion in farm
production in the next few years improbable.
(The above is a condensed summary of a monograph by
Frederick Strauss entitled "War-time Agricultural Sur-
pluses of the Danube Basin," appearing in the December
1940 issue of Foreign Agriculture, a monthly publication
of the United States Department of Agriculture.)
127
VOL. IV, No. 12
December 1940
Foreign
Agriculture
a Review of Foreign
Farm Policy, Production,
and Trade
Issued Monthly by
UNITED STATES DEPARTMENT OF AGRICULTURE
OFFICE OF FOREIGN AGRICULTURAL RELATIONS
WASHINGTON, D.C.
CONTENTS
---
Page
WARTIME AGRICULTURAL SURPLUSES OF THE DANUBE BASIN
705
THE PLACE OF THE DANUBE BASIN IN THE EUROPEAN ECONOMY
705
Role of the Danube Basin before the war
Role of the Danube Basin during the war
708
European needs
708
706
Danubia surpluses
709
RUMANIA
110
The agricultural structure of Rumania
Changes in grain production
Changes in exportable grain surpluses
Effect of and reform on farm efficiency
Effects of soil and climate on grain production
investment in agr leultural machinery
The pattern of Rumanian agricultural production
Land utilization in Greater Rumania
Crop yields and production
710
710
711
712
715
716
717
717
720
The livestock economy
723
Ag' |cultural export trade
Geographic distr |bution of Rumanian foreign trade
German Rumania ade relations
Trade relations - th countries other than Germany
Geog aphic distr ibution of Rumanian farm exports
Potent farm surpluses dur ing and after 1940-41
724
726
726
128
728
he 1940 outlook
The outlook after 1940-1943
730
The five-year plan
132
731
Conclusions
733
MUNGARY
734
735
The 401 |culter structure of Mungary
735
Post-Wor 1d-War land reform measure
Probab . effects of land reform measures
The pattern of Hungar an farm production
Land utilization
Variations in crop yields
738
The livestock economy
740
Export by count of destination
743
cultural export trade
743
The composition of farm exports
Geogr aphic distr bution of farm exports
Potent
farm sur pluses during and after 1940-41
The 1940 41 outlook
The outlook for the next few years
gricultural problem in Tugoslavia
The Pattern
of Tugoslavia
production
economy
744
745
747
748
748
750
751
751
753
753
The agricultural export trade
15
Exports country destination
Compositio ag |cultural exports
Geogr distr bution of farm exports
Potent
during
he 1940-41
outlookand after 1940-41
BULGARIA
738
738
Development of crop acreages
TUGOSLA
736
737
The outlook after 1940-41
75
758
760
162
763
763
164
The agricultur of Bulgaria
Intensification of agriculture
agricultural oduction
Acreage,
yield,
and pr oduction of principal crops
livestock economy
agricultur export trade
Land
The
Changing composition of farm exports
Volume of farm experts
Potent
Total Bulgarian exports by country of destination
Geographic bution of farm exports
he 1940-41 outlook during and after 1940-41
The outlook after 1940-41
765
765
767
768
769
769
771
112
772
773
776
777
778
178
178
ยง
WARTIME AGRICULTURAL SURPLUSES OF THE DANUBE BASIN
By Frederick Strauss
The present war has tended to reduce the food supplies of
continental Europe for two reasons: (1) domestic production in
both belligerent and neutral countries has been adversely affected by shortages of fertilizers, labor, and farm machinery, by
transportation difficulties, and by actual devastation; and (2)
supplies from overseas have been sharply curtailed by the British
blockade. Under these conditions the Danube Basin is of special
significance, since it is one of the chief potential sources of
supply for farm products sorely needed by Greater Germany, Italy,
the conquered countries, and the still neutral countries of
Europe. The objective of this study, therefore, is to determine
the potentialities of the four Danubian countries as sources of
supply for a blockaded Europe during the current war.
THE PLACE OF THE DANUBE BASIN IN THE EUROPEAN ECONOMY
The countries of the lower Danube Basin - Rumania, Hungary, Yugoslavia, and
Bulgaria - have long been the most important European producers of staple farm sur-
pluses. Since 1933 National Socialist Germany has been exerting great effort to
bring about an expansion in the farm output of the Danubian countries and to estab-
lish itself as the dominating factor in determining the distribution of their agri-
cultural surpluses.
The importance of the Danube Basin as a potential source of supply for farm
products has been greatly enhanced by the war. The British blockade of Norway, the
Netherlands, Belgium, France, Italy, and North Africa has further increased the demand for the Danubian foodstuffs and feedstuffs. The maintenance of livestock production and the assurance of adequate food supplies generally in the countries under
German domination depend to a considerable extent on the volume of food and feedstuff
supplies forthcoming from the Danubian countries during the war.
Italy and Switzerland also are increasingly attempting to draw upon the agricultural resources of the Danube Basin. Efforts by the United Kingdom to contract
for large deliveries of farm products from Danubian areas were terminated with the
entry of Italy into the war. Exports formerly sent to the British market will now
be available for shipment to the countries under German and Italian domination, as
far as current surpluses allow.
.Foreign
Agricultural
Economist. This article prepared while on temporary detail to the Office of
Agricultural Relations.
705
Foreign Agriculture
706
JARUTJUSIRGA
3MITRAW
It is obvious that the Danube Basin must remain, for the present at least.
the chief potential foreign source of supply for the farm products needed by Greater
Germany and by the conquered and the still neutral European countries. The crucial
question is the extent to which the Danube Basin will be able to meet the sharply
increased demand for such products. For the immediate future, this ability will be
determined largely by current crop conditions, the effects of war on the acreage
planted to various crops, by the efficiency of transportation facilities, and by
changes in domestic consumption brought about by the present war.
An appraisal of potential exports during a long war must take into consideration a number of other important factors, outstanding among them the question of
whether or not the countries of the Danube Basin can adapt their farm practices to
specific wartime demands. The answer to that question involves a consideration of
the structure of the Danubian farm economies, the adaptability of the farm populations to changed conditions, and the possible effects of the war on agricultural
practices. Since these factors vary widely among the four countries of the Danube
Basin, the problem has been approached by treating each of the countries individually.
The question of export potentialities of the individual Danubian countries
in a war of long duration is discussed separately for each country. At this point,
therefore, the reader will be given only a composite picture of the problems involved
in the question of export potentialities of the Danube Basin as a whole, and of the
relation between the magnitude of total potential Danubian surpluses and the total
import needs of a blockaded deficit Europe.
ROLE OF THE DAEURE BASIN BEFORE THE WAR
datt
landly
The European countries now blockaded by the British were far from self-sufficient in essential farm products before the outbreak of war. To indicate the
situation only with respect to such strategic products as bread grains and feedstuffs, blockaded deficit Europe imported about 14 percent of its apparent bread
grain needs and over 20 percent of its total feed-grain requirements. These summary
figures hide the significant fact that in some of the countries the role of imports
was still more important: for instance, the countries now under complete German dom-
ination imported over 50 percent of their bread-grain and nearly 50 percent of
their feed-grain requirements.
Moreover, the relatively favorable position of continental Europe with regard
to most animal products was more apparent than real. Denmark and the Netherlands had
been able to supply the bulk of the import needs of continental Europe for hog products, butter, and eggs. These exports, however, depended largely on the availability
of corn, oilseeds, and oilcake from overseas countries. of the total peacetime net
imports of bread grains and feedstuffs (including feed grains, oilseeds, and oilcake) by continental deficit Europe, the Danube Basin could supply only a minor part.
As shown in table 1, the Danube Basin furnished only 37 percent of the continental European wheat imports, 17 percent of the rye imports, 19 percent of the
corn imports, 3 percent of the oats imports, and 23 percent of the barley imports.
TABLE 1.-Average pre-sar net exports of the Danubian Basin and average pre-war net imports of blockeded continental Europe
BREAD GRAINS
FEED GRAINS
OIL.
OIL
DRY
CAKE
BEANS
WHEAT
OATS
BARLEY
1.000
1.000
1.000
1,000
1.000
1.000
tons
tons
tons
tons
tons
tons
SEEDS
677:
SS:
Tugeolavia
220:
a:
Bulgaria
Total Danube Basis
142:
a:
691:
7323
as:
aas:
389:
148:
58:
...
141
Germany
-7461
-130
Austria
Cascheslevakia
130
126:
118:
-59
177:
994:
315
-
8,030
11:
888:
Norway
Belgium
Motherlands
Total Gorsan-dominated countries
France
--
132
678:
-
1.309:
-149:
Italy
Switzerland
-507
Greece
-507
Total imports
Danube Basin exports as percentage of
Greater Germany's imports
-1761
-1461
134
-19:
475
-5:
a:
4:
397:
9:
68:
.337
1,013:
18:
see:
876:
343:
-183:
ssa:
-356:
-2713
-
-29
-53:
25:
49:
309:
706
-128
256:
2,088:
4391
-402:
-281
as:
361
-1531
-3:
366:
-8661
-46
894
1.012:
-18:
784
9.433:
-94:
616:
-19:
tons
28:
10
11:
sas
13:
01
11:
19:
18:
61
44:
116:
ss:
-
267:
-29:
ss:
6:
-3:
-88:
-77:
-4:
-
1.350:
as:
-103:
-86
as:
104
664
805
-99
-887:
o:
18:
-178:
-6:
-44:
-7:
460
1,373
-66
-176:
-8:
-94
ass
- 664 - 3,191
248
-5513
1,508:
770
-46:
198:
1.0111
451:
-663:
is
6231
100:
-871
-58:
-305:
-773
44:
-537
-107:
-
216:
145:
488:
-28
0:
-a
-13:
-76:
11
0:
0:
-007
5.074
826:
.900
244
-571
.334
190.0
29.7
155.0
50.4
14.00
119.84
1391
64.0
tons
11:
0:
150:
20:
tons
47:
S:
o:
-1:
1
Total Greater Germany
18:
a:
Continental European not imports:
Denmark
66
4:
11
tons
8871
-
615
7.8:
654
320.
-a:
-
18:
-36:
-3:
1:
11:
a
se
se
165:
219
13:
-8:
18:
-20
-1:
136:
as:
51.61
5.1
o
Hungary
9271
0
77:
4
tons
850:
1,000
1.000
.
tons
Rusania
1.000
.000
:
Danubian net exports
.000
.
TOTAL
CORN
FLOUR
1,000
BUTTER
EGGS
TOTAL
RYE
a
COUNTRY
136
3.3
85.41
18.71
23.14
8.1
19.3
34.41
17.1:
Percentage of total deficit Buropean imports: 37.2
Net imports and not exports of oilseeds and oilcake are averages for the 5 years 1933 1937. Oilseeds are in terms of all equivalent
3.7:
1935-1939 average for bread and feed grains, 1935-1938 average for dry beans, butter, and
Net imports (-) are averages for the 4 years 1936-1938
1.2
****
For purely technical reasons France is not classified dominated region.
Although not subject to the British blockade Greece and Switzerland are regular purchasers of Danubian
Compiled from official sources
surpluses
5
residence
Foreign Agriculture
708
To the imports of oilcake necessary for the maintenance of the European live-
stock industry. the Danubian countries contributed little more than percent. With
respect to oilseed imports - the most important raw material for edible fats in most
of these countries - less than 4 percent was derived from the Danube Basin. Most of
these products came from countries to which continental Europe has no access under
present blockade conditions.
Even if Greater Germany had succeeded in monopolizing Danubian surpluses before the war, they still would have met fully the Berman peacetime import needs only
for bread grains and dry beans. During 1935-1939, for example, total Danubian exports fell short of German import needs by 36 percent for feed grains, 95 percent
for butter, 48 percent for eggs, 92 percent for oilseeds, and 97 percent for oilcake.
In spite of all efforts Germany actually obtained only 27 percent of the Danubian
wheat surpluses and 47 percent of the corn exports during that period.
ROLE OF THE DANUBE BASIN DURING THE WAR
Germany now virtually dominates Rumania and Hungary, the most important Danu-
bian surplus producers, and it is safe to anticipate that at best only a small part
of the Yugoslavian and Bulgarian surpluses will find its way to other former cus-
tomers, except Italy.
The relative importance of the Danubian farm surpluses during this war, for
the Axis as well as for total continental European needs, will be determined by two
sets of factors: (1) changed import requirements of the deficit countries as a result of war rationing and specific war influences on their domestic farm production:
and (2) expansion potentialities of Danubian farm surpluses within the next few years.
EUROPEAN BEEDS
It must be assumed that Germany and Italy will do everything possible to main-
tain their productive capacity of war instruments and the striking power of their
armies. Therefore. those countries will endeavor to maintain at least the food
rations that have been in force since the outbreak of the war. On the basis of the
rations now prevailing in Germany, and considering the needs of the army and the
occupational shifts resulting from the war, the wartime needs for most of the products that can be obtained from the Danube Basin are well above peacetime levels. The
minimum wartime German bread grain requirements, for instance, exceed peacetime needs
by roughly 20 percent. These additional needs alone correspond approximately to the
total average Danubian bread grain exports for 1935-1939.
The effects of the war on domestic farm production in most continental European
deficit countries are no less important. Intensive farming methods, built on the
application of fertilizers and intensive labor, prevail in virtually all of those
countries. Germany in particular has since 1933 pursued a. pol icy of increasing yields
per acre by exactly such methods of intensification, accompanied by increased mechanization. Lack of some essential fertilizers, especially phosphates, a varying degree
Danubian Surpluses
709
of labor shortage, reduced numbers of draft animals, impossibility of further mechanization, and shortages of fuel, binder twine, and other essentials, necessarily tend
to curtail farm production in continental Europe. Moreover, since by far the greater
part of the formerly imported feed concentrates will be unobtainable as long as the
British blockade remains effective, meat and dairy production will be reduced in the
highly important livestock economies. In general, domestic production in all of the
continental European deficit countries cannot be maintained during the war, and will
decrease continually as the war is prolonged. On the other hand, the total requirements for bread grains and the import needs for feed grains and feed concentrates are
greater than before the war, at least in the belligerent countries.
DANUBIAN SURPLUSES
The 1940 Danubian surpluses were sharply diminished by adverse weather conditions. The unusually severe winter of 1939-1940 affected most crops, greatly reduc-
ing yields. In addition, the late spring and extensive floods retarded and curtailed
spring sowings: and large-scale mobilization, particularly in Rumania, led to a sizeable reduction of the winter grain acreage in most Danubian countries. To these
handicaps must be added the effect of the territorial changes in Rumania. Bessarabia,
now ceded to the Soviet Union, produced normally one-fifth of the Rumanian wheat and
corn crops, and three-fourths of the oilseeds. The wheat loss this year will be
even more serious, since the arid region of Bessarabia enjoyed favorable crop conditions, whereas crops in the rest of Rumania were short.
Unless the Danubian countries are deprived, by pressure, of part of their own
urgent requirements, the total Danubian exports of wheat will hardly exceed 10 nillion bushels, and those of corn 25 million bushels. This compares with pre-war imports by def icit Europe of 170 million bushels of wheat and 190 million bushels of
corn. The 1940-41 Danubian wheat exports will thus amount to only one-sixth, and
those of corn to two-thirds, of the 1935-1939 exports. They will meet only 30 percent of the pre-war European and 40 percent of the Greater German wheat imports, and
only 6 percent of the European and 13 percent of the German pre-war corn imports.
On the basis of detailed analysis of the social and economic structure of the
Danubian countries, it is believed that there is little likelihood of an expansion in
farm production in the next few years. In some of the countries, peculiarities of
peasants' attitudes, racial habits, and a high degree of Illiteracy make it improbable
that educational methods could accomplish production expansion in a few years, since
traditions and customs are likely to interfere with adoption of new modes of living
and progressive farming methods. The uneconomic size of the farm holdings in Rumania,
Bulgaria, and Yugoslavia remains another serious difficulty hampering rapid improve-
ments in farm conditions. Only a slow process of intensifying the agriculture of
these regions holds out hope for future expansion of production. Even then it
doubtful whether such a process can be carried out without accompanying improvements
in the standard of living of the peasants, a factor that would reduce potentia export surpluses. Other factors that would seem to prevent significant increases of
exportable surpluses within a short time are discussed in the report.
is
Foreign Agriculture
710
RUMANIA
Rumanian economists claim that even before the recent territorial revisions
agricultural production in that country met only 78 percent of the country's actual
food needs. and that exports - constituting 15 to 20 percent of the production - do
not represent actual surpluses. but rather food that should be consumed domestically
In order to furnish sufficient food for the population and at the same time maintain
agricultural exports at existing levels. it is believed that an increase in produc1
tion of nearly 30 percent would be required.
In times like the present. when strong economic and political pressure is
being placed on Rumania to provide increased exports of virtually all farm products,
these opinions night appear to be of merely theoretical interest: yet the bulk of
Rumanian farm exports undoubtedly has been made possible largely as a result and at
the cost of a generally low level of domestic food consumption.
The retarded development of the Rumanian economy, especially of the farm economy. complicates the problem of potential farm exports during the current war. More-
over. in a time of emergency, when a substantial part of the working population is
drafted for military service or shifted into occupations typical of a war economy.
the ensuing rise in food consumption is bound to curtail farm exports. Indications
are, however that German authorities are intent on bringing about a demobilization
of the Rumanian army: and a rigid system of food rationing is under consideration
A number of factors in the structure and operation of Rumanian farm economy.
as well as existing natural conditions, limit the possibilities of expansion in farm
production and make changes in the production pattern unusually difficult at least
during the next 2 or 3 years. Since the primary purpose of this study is to determine the extent to which agricultural surpluses may be forthcoming from Rumania dur-
.ing
the next few years. only those factors pertinent in ascertaining this possibility
will be considered.
THE AGRICULTURAL STRUCTURE OF RUMANIA
In 1939 the population of Rumania was slightly in excess of 20 million. The
predominantly agricultural character of the economy is shown by the fact that in 1939
approximately 80 percent of the gainfully occupied population was engaged in agriculture and forestry and about 9 percent in mining, industry. and transportation. In
spite of the territorial gains resulting from the World War. the occupational distribution did not change noticeably throughout the post-war period.
CHANGES IN GRATE PRODUCTION
The "Old Kingdom" of Rumania. as constituted before the World Mar, was especially important as a producer and exporter of grain. During the 5 years preceding
Since
2 According
to the . Cherdivarencu before the Polytechnic Society of Bucharest in March 1939
problems of grain constitute production the and basis exports of Ausanian fare economy this section deals largely with
Danubian Surpluses
711
the World War 72. percent of the country's wheat production nearly 78 percent of
the rye, about 79 percent of the barley, 41 percent of the oats, and 39 percent of
the corn were exported. 3 The acquisition of the former Austrian province of Bukovina.
the former Hungarian provinces now included in Transylvania, Russian Bessarabia (occupied by Rumania in 1920). and Dobrogea, enlarged the country to more than twice the
size of the old Kingdom. The area that could be seeded to field crops was likewise
increased to more than twice the pre-World-War acreage.
The increase in area, however, did not result in a corresponding rise in grain
production after the World War (see table 2). Characteristic of the pre-World-War
situation was the relative stability in the total acreage sown to various grain crops.
However, a comparison of production before and after the World War shows that during
the post-war period important shifts were taking place almost continuously. During
1928-1932, for example, the production of wheat and rye declined to two-thirds of the
pre-Norld-War level, whereas that of barley surpassed the 1909-1913 production by
more than a third. and that of corn and oats by about 4 percent.
Since 1928-1932 grain crop distribution has again changed noticeably: production of wheat and rye has tended to regain its losses, though still more than 10 and
15 percent. respectively below that of 1909-1913. Corn production, on the other
hand, is now about 10 percent above the pre-World-War level. The production of barley, which increased noticeably during the first decade after the World War, is now
nearly 30 percent below that of 1909-1913: the output of oats has reversed its tendency and is now nearly 40 percent below the 1909-1913 level.
CHANGES IN EXPORTABLE GRAIN SURPLUSES
The development of Rumanian exportable grain surpluses is of special significance. During 1909-1913 the areas comparable with Greater Rumania (encluding annexa-
tions following the World War) exported 44.9 percent of the gross production of
wheat, 41.8 percent of the rye, 49.5 percent of the barley. 28.9 percent of the oats.
and 33.2 percent of the corn.
A fundamental change in Rumania's grain export position is evidenced when the
ratio of exports to production in 1909-1913 is compared with the present ratio. Only
20 percent of the wheat was exported during 1935-1939, as compared with 45 percent in
1909-1913. The decrease in this ratio is even sharper for the other grains: for example, the corn export ratio fell from 33 percent during 1909-1913 to 10 percent in
1935-1939. Only 2 percent of the 1935-1939 production of oats was exported. as conpared with 29 percent during 1909-1913
The 1935-1939 level of exports was without exception still far below that of
1909-1913. despite favorable export conditions and unusually good crops in 1938 and
3 These percentages refer to net production (1.e.. total production less seed.bud and waste).
the ratio of exports to gross production is given in table 2.
4 Recent territorial losses are disregarded throughout the sections dealing with the structure
and pattern of agriculture they are. however, covered on pages 730-731
Foreign Agriculture
712
1939. Only 40 percent of the 1909-1913 volume of wheat, 37 percent of barley, 33
percent of rye and corn. and 4 percent of oats exports was available during 1935-1939.
TABLE 2. Rumanian grain production and net exports, averages 1909-1913,
1928-1932, 1933-1937, and 1935-1939
PERIOD
BARLEY
RYR
OATS
CORN
PRODUC
NET
PRODUC.
NET
PRODUC-
NET
PRODUC
NET
PRODUC
TION
EXPORTS
TION
EXPORTS
TION
EXPORTS
TION
EXPORTS
TION
1,000
1.000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
NET
EXPORTS
.
WHEAT
1.000
bushe) bushe bushe bush Is: bushe Is bushe bushe is bushe Le
014 Kingdom
1909
Greater
1913 93,794 54,434 5.066 2,967 27,133 16,741 30,019 10,421:102,819 38,729
Rumania
:
1909 1913 158,670 71,372 20,027 8.379 65,284 32,772 3,794 18.426:195,555 64.906
1928 1932 107,382 11,363 13,503 1,457 87,307 42,164 66,282 3.062.202.678 37,720
1933 1937 111,788 13,743 14,839 2,355 57,030 18,130 45,792 1,034:197,970 27,806
1935 28,340 17,136 2,743 46,862 11,933 40,009:
100
100
100
100
100
100
17.4
133.7
130.4:
103.9:
16.6
104.1
58.1
73.2:
28.1:
87.4
56.1:
71.8:
5.6:
101.7
42.8
84.5:
32.7
71.8
36.91
62.73
3.8:
108.8
32.5
67.7
15.9
66.6
1933 1937
70.5
19.3
1935 1939
85.7
39.81
:
100
1928 1932
100
:
1909 1913
706:211,891 21,082
100
:
Index
100
Net REPORTS
. percent
Percent.
Percent
Percent
1909 1913
44.9
41.8
1928 1932
49.5:
10.6
10.8
48.3
12.31
15.93
31.5
20.1
16.0
25.5
ages of
Percent
Percent
production
4.61
18.6
2.21
14.0
1.8:
9.9
:
Compiled from official sources
33 2
:
1935 1939
:
1933 1937
28.93
EFFECT OF LAND REFORM ON FARM EFFICIENCT
The reasons for the decrease in grain production, particularly of exportable
surpluses, need not be traced in detail. However, in order to determine the volume
of exports that may be expected from Rumania during the next few years, it is necessary to ascertain whether the post-war decrease was brought about by random factors
easily remedied in time of emergency or by more fundamental structural factors that
do not permit of reversal within a relatively short time.
The distribution of land in Rumania, where the majority of the farm population
was not freed from serfdom until 1864, is important in determining farm practices and
thus crop yields and production. Before the World War, land distribution was characterized by holdings of two extremes in size: the small, uneconomical peasant farms
averaging not quite 10 acres: and the large estates, averaging 3,500 acres. About
40 percent of the crop acreage was composed of holdings of less than 25 acres, where-
Danubian Surpluses
713
as estates of more than 1,250 acres accounted for 38 percent. Of the farm owners.
95.4 percent, or about a million peasants, owned only slightly more land than the
0.2 percent represented by 2,000 estate owners. Medium-sized farms, usually the most
efficient under European farming conditions, were virtually nonexistent except in
Transylvania, which at that time was part of the Austro-Mungarian empire.
Another characteristic of pre-war agriculture was the relatively small number
of landless farm laborers (only 200,000 in 1913) despite the prevalence of large estates. This is explained largely by the history of the inequality of Rumanian land
division. After the emancipation of the serfs, the size of the peasant holdings was
barely sufficient to provide them with a meager subsistence, especially since the soil
of the holdings was usually of poor quality. Consequently, a considerable portion of
many large estates was rented in small lots to peasants and croppers. The estate
owners depended on the peasants not only as farm helpers, but also for the use
their draft animals and, to a lesser degree, their primitive farm implements. Consequently the number of landless workers was relatively small.
of
The large estates (latifundia) of Greater Rumania were for the most part operated efficiently and upon much the same principles as in Germany or France. Managers,
frequently imported from neighboring countries, were usually well trained in advanced
agricultural methods. The seed beds were carefully prepared in season, rational
systems of crop rotation were employed, improved varieties of seed were used, the
poorer soils were fertilized, and modern machinery was extensively employed, although
at the time of the World War harvesting with a sickle was ill common. In regions
of uncertain rainfall up-to-date methods of moisture conservation were used.
The size and topography of the peasants' fields, however, permitted the use
of only the simplest type of machinery and most primitive methods of cultivation
often dating back 2,000 years to the time when the country was settled by farmers emi-
grating from ancient Rome. It is not surprising, therefore, that crop yields on
large estates were considerably higher than on peasant farms.
TABLE 3.-Grain crop yields on large estates and peasant holdings is the
old Kingdom of Rumania, average 1909-1913
YIELD ON LARGE
ESTATES AS PERCENT
SMALL PEASANT
LARGE ESTATES
CROP
AGE OF FIELD OF
HOLDINGS
PRABANT HOLDINGS
:
23.2
14.2
113.5
118.2
18.0
118.8
22.9
125.7
19.0
122.1
:
:
:
:
:
:
:
Corn
28.8
:
:
:
:
Oats
21.4
:
Barley
18.2
17.7
:
Rye
20.1
:
Wheat
Percent
Busheis
Bushels
Compiled from official sources.
5 Michael. Louis G. Agricultural Survey of Europe: The Danube Basin. Part 2: Rumania, Bulgaria and Yugoslavia, Tech. Bul. No. 126. 0. s. Dept. Agr., PP. 18-19.
Foreign Agriculture
714
Toward the end of the World War, when the Central Powers had occupied part of
Rumania, the peasant army made continuation of the war dependent on the promise of a
radical land reform, which was effected by a decree of December 16, 1918. It was the
original intention of the government to hold the expropriated estates under public
control and to operate the land under cooperative management. When it became appar-
ent that this plan could not be realized, the land was subdivided into small plots.
The result of this reform, affecting about 15 million acres of a total agricultural
area of 42 million, was that 35 percent of the acreage formerly operated under relatively efficient methods came into the possession of peasants who were not equipped
to maintain the former level of efficiency.
The backwardness and lack of ambition of the Rumanian peasant may be explained
by a number of factors. The peasants are descendants of serfs, who were exploited by
the Turks until the middle of the nineteenth century and dominated by local landlords
until their liberation. Even after their emancipation, and until the outbreak of the
World War, the peasants were entirely dependent on the large estates. These condi-
tions were not conducive to the development of initiative or efficiency. Moreover,
the percentage of Illiteracy among the peasants is high. It is also significant from
the point of view of efficiency and productiveness that a good deal of the farm work
is done by women and children, and that there are 108 days in the year - chiefly
church and national holidays during which the peasant feels that he is obligated to
do no work. Adding the winter days and other periods of adverse weather conditions,
there remain only about 80 days for actual field work.
Itils improbable that such a situation can be remedied in a few years. Only
large-scale and slowly-working educational measures can be depended on to change the
peasant's reluctance to adopt ways of living and farming methods that differ from
those handed down from generation to generation.
Since the World Mar little effort has been made to raise the social and intellectual standards of the peasants. Existing difficulties might have been overcome
eventually if the original plans for cooperative management had been realized. The
land reform failed to remove the chief obstacle in the way of efficient farming - the
uneconomic sizeiof peasant holdings. The peasant family received an average of only
6 to 7 acres.
The apparent advantages of the subdivision of the large estates could not be
maintained. Since farms in Rumania are divided in equal parts among the heirs, the
small peasant holdings had to be parcelled into still smaller and smaller units as
population increased A further impediment to efficiency lies in the fact that the
holdings of an individual peasant consist of lots scattered in different locations,
Ibid. . 19
.
7
Princesed Stojan. World Without End: the Saga of Southeastern Europe, New York, 1939, P. 235
According to Peter F. Drucker (in *Can Germany Win the Balkans, Harpers Nagazine, Jan 1939
P. 152) such of the initial improvement in the peasants situation has been lest. The small
farmers could not obtain credit and were obliged to seek financial assistance from their for
Ber landlords. to whom they gradually pledged all their property. As a result not more than
their
land.
twentieth
of the farmer-owners installed by the land reform are still in real control of
a
.
Danubian Surpluses
715
which cannot be operated as a single farm, Moreover, throughout most of the postwar period emigration was rigidly restricted, and opportunities for nonagricultural
employment were - and still are - extremely limited.
Under these circumstances it is not surprising that the land reform adversely
affected both the quantity and quality of Rumanian crops and farm exports. A period
of low production extremely small export surpluses and sharply decreased farm income persisted a decade after the inauguration of the reform measures. The transfer
to peasant ownership of 15 million acres previously efficiently operated by the estates would have alone caused a considerable decrease in production and yield. Before the land reform 51 percent of the total wheat acreage 34 percent of the oats,
25 percent of the barley, 12 percent of the rye, and 13 percent of the corn were
grown on the estates
The retrogression of farming methods and the resulting decrease in the produc-
tion of some crops and in all exports have, therefore, been due to factors that
cannot be readily altered of these factors only the most important have been men-
tioned. Many others, institutional as well as natural are likely to prevent rapid
expansion of production and exports even though strong pressure may be exercised to
bring about such expansion An educational program followed over a long period of
years would no doubt bring about a gradual improvement in farming methods; as a result crop yields and livestock production might be increased to the point of regaining the pre-World-Mar level of cereal exports and expanding the exports of livestock
and its products Such an improvement however would require complete revamping of
the farm economy necessitating an extensive educational program, consolidation of
the scattered farm lots, and vast expenditures for fertilizers, farm machinery, and
transportation facilities - a program not possible of completion within a few years.
EFFECTS OF BOAL AND CLIMATE ON GRAIN PRODUCTION
On the whole. physical conditions present no serious obstacle to expansion
of Rumanian agriculture - especially to an increase in grain production - provided
farming methods are adjusted to existing soil and climatic conditions Although the
soils of the hilly sections are somewhat deficient in humus and nutrients, since humidity and rainfall wash away the soluble components those of the plains are unu-
sually fertile, rich in such plant nutrients as potash and nitrogen (though frequently deficient in phosphorus).
The plains, exposed to extremes of rainfall and temperature, are actually
semiarid steppes, whose productive properties depend entirely on sufficient and uniform moisture. Eastern Rumania, Dobrogea, and southern Bessarabia are the dryest
regions of the entire Danube Basin. Here the spring and fall seasons are short and
the summers long and hot. Droughts are frequent; rainfall occurs largely in the form
of a few heavy downpours. As a rule satisfactory crop yields are possible only when
moisture-conserving methods are constantly applied. Managers of the large estates
knew how to overcome this handicap to a considerable extent; the peasants, however
depend on natural rainfall, and as a result crop failures occur whenever unfavorable
weather conditions prevail.
Foreign Agriculture
716
INVESTMENT IN AGRICULTURAL MACHIMERT
The typical Rumanian peasant farm is equipped with only the crudest and most
inefficient farm implements. The average investment per acre in farm tools is only
half of that in Bulgaria, a third of that in former Poland, and one-fifteenth of the
investment in Germany.
TABLE 4.-Relation of investment in agricultural implements to wheat yields
INDEX
INVESTMENT IN
WHEAT TIELD
AGRICULTURAL
COUNTRY
PER ACRE
IMPLEMENTS
INVESTMENT
WHEAT TIELD
PER ACRE
PER ACRE
Index
Index
PER ACRE
:
15.9
Germany
6,070
22.8
17,402
:
Switzerland
24.8
:
1,214
300
1,500
:
Poland
200
4,300
100
154
167
:
14.5
:
809
:
Bulgaria
100
:
:
9.5
:
405
:
:
Rumania
:
:
Bushels
Let
241
262
:
Based on figures compiled by Dr A. Cherdivarencu (see footnote 1)
Mr
Additional farm machinery is necessary if production is to be maintained at
even the present level. The Institute for Agricultural Research at Bucharest reports
that the total value of Rumanian farm equipment is only about 14 billion lei (about
98 million dollars). In many cases the equipment is not only antiquated, but beyond
repair. Many peasants still use wooden plows, and often one plow must be used by
five farms. Replacement of the completely obsolete equipment, with provision for the
most urgent additions, would require an expenditure amounting to more than the total
value of the present machinery.
Otviously. such a situation cannot be remedied in a short time. German authorities, who have a special interest in improving the situation, have pointed out
that there are numerous difficulties. Because of topographic conditions, only specific types of machinery can be used. High duties and other levies, as well as inland and ocean freight rates (the latter usually representing from 30 to 40 percent
of the value of the machinery in the manufacturer's price) constitute a severe hand icap. The credit problem presents another difficulty; the peasant cannot pay cash
for his equipment. and the seller, who retains no title in the property sold and no
right to repossession in case of default, assumes a high risk in such sales. The
National Cooperative Institute may act as an intermediary, but may vouch only for
members of cooperatives.
The Ministry of Agriculture recently recommended the expenditure within the
next 5 years of 1.3 billion lei (about 9 million dollars) for farm machinery, to
.
1940 Sidost-Echo. Bedart an Landmaschinen, (Rumania's fare machinery needs) Jan. 5.
Damubian Surpluses
717
te provided by the National Cooperative Institute, largely through imports from
Germany. Germany, however, will probably not be able to export much fare machinery
for the duration of the war: moreover, in 5 years only a small part of actual requirements would be supplied. 10 The plan also envisaged the abolition, at least in
part, of duties and taxes on imported machinery.
The long-run possibilities for improving farm methods and expanding production will not here be avaluated. As for the immediate future. however, and even for
the next half-decade, it may be safely stated that no appreciable change may be expected.
THE PATTERN OF RUMANIAN AGRICULTURAL PRODUCTION
Grain crops constitute the basis of Rumanian farm economy: partly because of
natural factors but also because of the widespread indifference of the peasants
toward the introduction of new crops and farming systems. Table 5 shows the prevailing pattern of Rumanian agricultural production.
LAND UTILIZATION IN GREATER RUMANIA
In the year 1938 of a total area of about 74 million acres approximately 33
million, or 45.6 percent consisted of arable land; 11 million, or 14.8 percent, of
permanent meadows and pastures; and 1.6 million, or 2.1 percent, of tree and bush
crops. Forests constitute 21.5 percent of the total, and the remaining 16 percent
is unproductive. The importance of grain crops is shown by the fact that they account for 83.8 percent of the arable land. Corn is by far the most important single
crop. grown on 37.2 percent of all arable land, followed by wheat (28.4 percent) and
barley (9.5 percent). The remaining 14.2 percent is divided almost equally among
food crops, fiber plants, oilseeds, and tobacco.
The production pattern of Rumania has shown only minor changes during the
past 10 or 12 years; however, this is not necessarily proof that strong German pressure may not succeed in increasing agricultural production in some fields. It should
not be overlooked, however, that such pressure has been exerted more or less continuously since 1934. Moreover, the depression of the 1930's should have stimulated
definite shifts in acreage, but it resulted only in governmental recommendations for
such shifts. Present indications are that official propaganda or pressure alone will
not be able to induce the peasants to reorganize their crop system within the course
of the next few years.
Since the late 1920's the acreage planted to grain crops has shown little
change (see table 5). During the 5-year period 1935-1939 the level of grain acreage
was 3.5 percent above that of 1928-1932. Since 1936 a downward tendency has prevailed;
however. this tendency is too slight to conclude that it occurred as a result of
10
culture According and Domains). to the plan published drawn up in by Argus, Professor Mar. 21, Jonescu-Sisesti 1940 (Rumanian Minister of Agri-
3000700
02
56459108
Foreign Agriculture
718
the government' recommendation for a reduction in grain acreage in favor of legumes,
f ibers, oilseeds, and fodder crops to meet changes in the export demand. On the con-
trary there is reason to believe that the decrease in total grain acreage is due
largely to random factors.
TABLE 5. Land utilization in Greater Rumania, 1938 1
PERCENTAGE
LAND USE
Total area if Ausania
trable land
Permanent seadow and pasture
Tree and bush crops
Mouds and forests
Improductive
copy
AREA
OF TOTAL
1.000 acres
Percent
100.0
45.6
72,906
33,223
10,806
14.8
1,564
2.1
15,656
21.5
16.0
11,658
Percent arable land
12,348
37.2
Winter about
8,797
26.5
Spring wheat
638
1.9
2,958
8.9
Coff
Spring harley
Winter barley
06
200
111
4.8
3.6
0.3
27,853
83.8
Beans
208
0.6
Pea
121
0.4
0.2
1,609
1,191
Rye
other grains
Total
raps
54
leguses
0.03
10
1.4
476
Onions
54
0.2
Cabbaga
67
0.2
lelon and watermelons
Vegetable gardens
Total
101
0.3
99
0.3
1,191
3.6
crops
0.4
126
12
0 04
04
12
1.5
205
0.6
Puppier
5
156
42
Fodder beets
Total
Tree and bush crops
469
413
114
1,982
-
Wohar
368
0.4
3.6
-
Alfairs
Closer
1,201
-
Total
Fedder
119
-
Sugar
0.02
0.4
0.1
-
Represent
497
Vines
Other (r.hards
Total
912
371
--
279
-
Orchards of plus trees
1,564
-
Minor rops are contained in the subtotals but are not given individually
Based an Figures in the International Yearbook of Agricultural Statistics, 1938-39.
a
It is especially noteworthy that on the whole the acreage changes in the various grains conflict with governmental recommendations The government demanded
reduction in wheat and corn acreage and an increase in barley and oats: but between
1928-1932 and 1935-1939 the wheat acreage increased nearly 20 percent and the corn
Danubian Surpluses
719
acreage 10 percent, while oats and barley decreased 30 and 25 percent, respectively.
Since 1936 the acreage under oats has been reduced 26.7 percent and that under barley
32 percent, while the wheat acreage increased 19 percent. Only the 6-percent decrease in corn acreage was in line with official recommendations
In the food materials of all countries under German influence there is at
present a marked deficiency in protein of both animal and vegetable origin: consequently, leguminous plants have attained added importance because of their high protein content. Thus far, however, Rumanian farmers have made no effort to expand the
acreage of such plants as beans, peas, andilentils - since 1936, in fact, a decrease
of 10 percent has occurred. Also, the acreage planted to textile fibers, the products of which are in great demand domestically and in all German-dominated countries,
has shown no increase since 1934.
TABLE 6. Crop acreages in Greater Rumania, averages 1928-1932, 1933 1937.
and 1935-1939; annual 1933 to 1939
AVERAGES
CROP
1928-
1933
1935
1932
1937
1939
,000
,000
1933
1934
1.000
1,000
1935
1936
1937
1938
1939
.000
1,000
1.000
1.000
1,000
acres acres : acres 1 acres : acres acres :acres : acres acres acres
Cereals:
Corn
11.470 12.563 : 12,611 11,928 12,368 12,772 12,999 12,749 12,348 12,187
7,609
8,496
8,480
8.777
9,435
10,079
1,041
1,083
1,191
1,107
867
991
1,076
958
911
960
4,687
4,123
3,533
:
4,485
4,331
4,079
3,980
3,739
3,158
2,511
1.998
1,792
2,050
2,044
1,970
1,986
1.939
1,609
127,887
28,065
:
27,121
27,263
28,277
128,486
28,287
27,741
255
277
245
259
247
208
42
74
(2)
128
109
121
(2)
40
49
54
124
126
126
72
54
37
225
116
44
40
37
114
119
122
118
52
63
60
47
3
5
472
219
83
163
Tobacco
59
35
Sugar beets
94
87
487
Average 1935-1938.
514
2,708
1,455
27,536
12
472
504
494
497
314
227
195
205
50
119
241
156
42
50
25
25
44
44
35
106
91
01
72
74
119
89
514
489
504
511
535
533
476
1
Potatoes
143
96
2
soybeans
195
1
153
-
Rapeseed
497
402
4
Cotton
77
64
5
Flax and seed
114
2
1
101
2
257
2
237
5
27,114
:
Total
7,700
:
:
Oats
:
Barley
9,053
:
Rye
8,212
:
7.579
Wheat
Data not available
Compiled from International Yearbook of Agricultural Statistics, International Institute of
Agriculture,
1936-37
Relations for for
other
years to 1938-39 and official data in the office of Foreign Agricultural
Germany has been bending every effort to stimulate increased product ion of
oleaginous plants, particularly soybeans. A German-Rumanian company, "Soia," con- of
trolled largely by the German Dye Trust, was founded in 1934 for the purpose
Foreign Agriculture
720
contracting with Rumanian peasants/for the cultivation of soybeans, previously unknown
in southeastern Europe. After much experimentation to determine the most suitable
soils and seed. it was found that Bessarabia offered the best prospects for soybean
production. As a result 80 percent of the total Rumanian soybean acreage was located
in Bessarabia - which has now been ceded to the Soviet Union. During the first few
years the number of peasants with whom contracts (for 2.5 acres each) were concluded
increased rapidly, reaching 74,000 in 1937. In 1938 only the most efficient farmers
were allotted seed and given instructions, and the number of producers was cut in
half. In 1939. however, the upward trend was resumed, and is expected to continue as
long as Germany offers its present high prices for soybeans. The available supply of
farm labor, draft animals. and tractors, however, as well as natural factors and
prices of competitive crops will partly determine the future level of production.
No noticeable expansion has recently taken place in the acreage of other oil-bearing
plants.
CROP TIELDS AND PRODUCTION
The outstanding characteristics of Rumanian agricultural production are the
low level of and extreme variation in crop yields, resulting chiefly from backward
farming methods and inability to provide for adequate moisture conservation. Application of manure is rare, and commercial fertilizers are practically never used in
spite of the general deficiency of phosphorus in the soil. According to Rumanian
officials 11 the soils of even the best districts are in danger of becoming depleted
unless the use of fertilizers is increased.
The primitive rotation system in Rumania results in low yields even for
grains The yield of corn in 1935-1939 was 28.2 percent, that of barley 24.6 percent,
that of oats 20.9 percent below the 1909-1913 level. and even the wheat yield was 6.6
percent below 1909-1913. Adequate yields from crops now in greatest demand (such as
fibers. legumes and oil-bearing plants) can be obtained only if the government makes
available the right qualities of seed and instructs the peasants in more efficient
methods It is obvious that the prevalence of low yields during more than two decades cannot be remedied immediately except during years of unusually favorable
weather even if sufficient fertilizers, modern farm equipment, and high-quality seed
could be supplied
No less disturbing is the extreme variation in yields. During 1930-1939 the
percentage deviation from the average yield was 23.3 percent for barley, 19.4 percent
for wheat. (5.8 percent for rye 14.7 percent for oats, and 9.9 percent for corn.
This instability in yield explains largely, the variability of Rumanian grain production, as well as the wide fluctuation in exports. Table 7 shows the yields of grain
crops during the past two decades.
For a number of reasons corn is the Rumanian peasant's most important grain
crop. First of all, corn is his chief food grain; it is estimated that only 3 million
11
Lapadata
maine,
No 2 Aurelis
1938 PA4technical study on Rumanian cereals.* Correspondance Brononique Row
Danubian Surpluses
721
people of a total of 20 million regularly consume wheat as a bread grain. Moreover,
farm operations in production of corn may be performed largely by hand; and only 0.3
bushel of seed per acre is required as compared with 3.3 bushels for wheat, thus reducing production outlays. Because of the peasant's familiarity with corn and the
suitability of the climate for that crop, fluctuations in production are smaller than
those of other grains except in years of extremely adverse climatic conditions. During 1930-1939 the deviation from the average production was 10 percent, due almost en-
tirely to variations in yield.
TABLE 7.-Fields per acre of Rumanian grain crops, averages 1909-1913,
1928-1932, 1933-1937, 1935-1939, 1930-1939; annual 1933 to 1939
CORN
WHEAT
RYE
BARLEY
OATS
Bushe's
Bushels
Bushels
Bughels
Bushels
:
YEAR
Annual:
:
15.0
15.5
18.3
:
10.1
:
:
27.1
15.4
9.1
:
9.2
:
19.0
:
:
16.6
11.4
13.3
10.4
:
17.0
15.2
17.1
18.6
29.4
15.7
16.4
11.3
:
18.2
18.8
17.1
12.1
:
19.8
16.2
15.3
13.8
:
23.1
23.4
16.7
16.1
18.3
28.2
17.7
10.5
10.0
18.6
26.7
1933 1937
15.7
13.6
15.0
13.8
22.9
1935 1939
16.8
15.6
15.9
13.8
22.3
1930 1939
17.1
14.4
15.2
14.6
23.1
2.8
2.4
3.4
3.4
:
14.7
:
16.3
1939
:
19.5
Average:
:
:
:
9.9
:
Percentage deviation
:
Percent
Percent
19.4
:
1.7
Percent
15.8
:
Average deviation from
1930 1939 mean yield
:
1928 1932
:
1909 1913
:
1938
20.8
:
1937
:
1938
Percent
23.3
:
1934
1935
19.3
:
1933
Percent
14.7
Compiled from official sources
The variability of the annual wheat crop. on the other hand, is more than twice
that of corn. During and immediately after the World War the wheat situation was af-
fected by war influences, and later by the effects of the land reform. Before 1931
various governmental measures were undertaken to improve conditions, but with little
success. In 1931 a wheat valorization program combined with a system of export premiums was initiated in the hope of raising the domestic price level. The system was
modified in 1933 to one of government purchase of wheat when the domestic price fell
below a fixed minimum. The new system maintained domestic prices at about twice the
world market prices. Since 1935 a combination program has been followed of export
premiums, minimum domestic prices, and government purchase.
Barley production is the most unstable of that of all Rumanian crops, the deviation from the average of 1930-1939 amounting to 23.3 percent, of which two-thirds
Foreign Agriculture
722
was due to variations in yield and one-third to variations in acreage. Production
has been declining steadily: the average crop for 1935-1939 was only 46.9 million
bushels, as compared with 57 million for 1933-1937 and 87.3 million during 1928-1932.
Production of oats is also declining, but the annual crop fluctuations are not so
sharp, being more nearly equal to those of wheat.
TABLE 8. Production of Rumanian fare crops, averages 1928-1932, 1933-1937,
1935-1939; annual 1935 to 1939
AVERAGES
CROP
UNIT
1935
1936
1937
1938
1939
frou-
Thou-
frow-
Thou
Thou
Thou-
sands
sands
sands
sands
sands
sands
1928-1932
1933-1937
1935-1939
Thou
Thou
sands
sands
Corn
Bu
202,500
197.970
Wheat
Bu
107,382
111,788 140,816 6,439: 128 .717: 138,158 177, 155 163,611
Rye
Barley
17,126 13,724 17,824 17,768 20,361 16,987
46,862 42,430 74,031 42,127 38.222 37,498
45.792 40.000 40,904 58,362 35.328: 31.903 33.548
14.839
13,503
Su.
57,030
87.307
Bu
Date
3u.
66.262
Beans
Bu.
2.903
2,530
2,712
2.4543
1.580:
1,716
69,702
Potatoes
Ton
69,592
74,295
71.356
70,768
61,441
Sugar beets
Ten
751
634
690:
4693
549
806
24
29:
25:
32
30
10
10:
13
10
1,015
461
1,384
2,306
2,767
191:
179:
211
191
200
36
13
41
78
54
14:
16
11:
14:
Sale
Sunflower seed
Ten
Reposed
Ten :
Soybeans
Ton
Tobacco
Ton
36
:
18
11
-
Cotton
33
7:
I
Ten
Ten
4
Heap
Flax
1
I
Compiled from International Yearbook of Agricultural Statistics and official data in the or.
fice of Foreign Agricultural Relations
Of the remaining crops, only a few are of importance to this study. Production of legumes shows wide annual fluctuations, but without any evident tendency
toward increase. Potatoes and sugar beets are grown for domestic consumption only.
Production of fiber crops, particularly cotton, is entirely inadequate to meet domestic needs; the fivefold increase in production since 1935 still meets only 3 percent of Rumanian requirements.
Except in the case of soybeans, no increase has taken place in the production
of oleaginous plants. Normally 75 percent of the sunflower seed, 70 percent of the
hemp seed, 65 percent of the flaxseed, and about 50 percent of the rapeseed were con-
sumed domestically before the recent territorial changes. At present. total production of oilseeds is insufficient to meet domestic needs.
Fruit production has suffered from backward methods of cultivation, handling,
and processing. The number of plus trees, const ituting more than 60 percent of all
fruit-bearing trees, is placed at 49 million; but the average yield per tree is very
low. amounting to only 17 pounds as compared with 85 pounds in Yugoslavia and in
Danubian Surpluses
723
California. 12 In addition, the fruit is of inferior quality, with the result that
only 25 percent of the crop can be consumed as fresh fruit or as dried fruit or jam.
The remaining 75 percent is used in the manufacture of plum brandy.
In 1937 the 8 million apple trees in Greater Rumania produced a crop of
660,000 short tons. In the same year 115,000 tons of pears, 408,000 tons of walnuts,
and 34,000 tons of quinces were produced. Rumania exports little fruit, because of
the generally low quality and the lack of a standardized product: according to official estimates only I percent of the total production was exported in 1937. There
are long-time possibilities of improving both quality and quantity of the fruit crops
and
of exporting larger surpluses; these, however, cannot be realized within the next
few years.
THE LIVESTOCK ECONOMY
Although the predominance of small farms should be favorable for the development of an intensive livestock Industry, the proportion of animals to population is
very low. Hog numbers per capita in Yugoslavia, former Poland, and former Austria
are twice those in Rumania: and in Germany and Hungary three times as great.
TABLE 9. .-Livestock numbers in Rumania, 1937
:: Hogs
:
2,110
:
12,373
:: Poultry
::
1:
3,170
73,897
:
4,184
PCOT
408
:
:: Goats
Thousands
:
Sheep
2,065
:
Milk cows
::
:
Cattle
Thousands
NUMBERS
:
:
Horses
KIND
NUMBERS
:
KIND
:
Compiled from official sources.
Meat consumption in Rumania is very low; in the years 1926-1935 it fluctuated
between 5.5 and 11.2 pounds per person for the peasants and between 20.2 and 26.6
pounds for the urban population. The government has been attempting, however, to
improve livestock breeds and encourage increased consumption. Rumanian exports of
livestock and its products are relatively unimportant, and prospects for greater
surpluses in the near future are not favorable. Increased exports are not possible
without an increase in livestock numbers and the development of better breeds - conditions that depend in turn on the establishment of a better feedstuff basis and the
peasant's adoption of advanced methods of animal husbandry.
Production of dairy products is insignificant. A total of only about 600 million gallons of milk is produced per year; a quantity barely sufficient to meet domestic needs in spite of the low level of domestic consumption. It is believed that
12 Arcadian, Nicolas P. "Agricultural Fax materials used in the Rusanian food industry." Cor-
respondence Economique Rouncine, No. 3. 1939. p. 29.
Foreign Agriculture
724
no real progress can be made in the Rumanian dairy industry until the peasant's
standard of living has been vastly improved. Certainly no exports may be expected
within the next few years.
AGRICULTURAL EXPORT TRADE
Although Rumania is predominantly an agricultural country (80 percent of the
working population is engaged in agriculture), total farm exports represent less than
50 percent of the value of all exports. The bulk of nonagricultural exports consists
of minerals, chiefly petroleum products. Exports of forest products account for
about 10 percent of the total value. Table 10 shows the recent position of agricultural products in the total trade of Rumania.
TABLE 10 Composition of Rumanian exports by value, 1939 with comparisons
PERCENTAGE
PERCENTAGE
ALL
TEAR
EXPORTS
TOTAL
Willion
Million
OF ALL
EXPORTS
16,756
6,416
38.3
1936
21,699
10,827
49.9
1,746
1937
31,568
15,368
48.7
2,934
1938
21,533
9,409
43.7
2,532
1939
26,809
12,250
40.7
2,530
1,519
9,904
34.2
7,310
53.7
9.1
8.730
52.1
8.0
9,027
41.6
9.3
13,164
41.7
11.8
9,496
44.1
:
1935
16.2
11.1
:
1,504
9.4
11.226
41.9
:
PLANT PRODUCTS
GRAINS
(INCLUDING GRAINS)
(INCLUDING FLOUR)
PERCENTAGE
OF AGRI
CULTURAL
OF AGRI.
TOTAL
Milkon
:
1929
14.096
10,530
74.7
1934
4,733
3,432
72.5
1935
6,416
4,788
74.6
1936
10,827
8,520
78.7
6,841
1937
15,368
12,429
80.9
10,177
9,409
7,121
75.7
5,258
7,210
:
let
Percent
let
20.2
:
:
1,018
21.5
51.2
1,382
21.5
:
63.2
1,747
16.1
:
66.2
2.081
13.5
:
3,287
Percent
2,884
55.9
1,859
19.8
:
Percent
CULTURAL
EXPORTS
EXPORTS
Million
let
:
1939
PERCENTAGE
CULTURAL
lei
1938
ANIMAL PRODUCTS
OF AGRI
TOTAL
EXPORTS
Million
LIVESTOCK AND EDIBLE
PERCENTAGE
CULTURAL
TOTAL
Percent
:
4,679
iet
:
34.8
:
4,733
: Percent
:
:
13,613
:
14,096
1934
let
:
at
48.8
Million
EXPORTS
Million
:
led
28,960
OF ALL
TOTAL
Million
1929
EXPORTS
PERCENTAGE
OF ALL
TOTAL
EXPORTS
AGRI
MINERAL PRODUCTS
FOREST PRODUCTS
AGRICULTURAL PRODUCTS
One leu at the official rate of exchange : $0.007035.
Compiled free Correspondance Economique Rousaine, Dec 1939. P 6., and official sources
Danubian Surpluses
725
TABLE 11.-Rumanian exports of agricultural products. 1933-1939
Net exports for calendar year
PRODUCT
UNIT
1933
1934
1935
1936
1937
1938
1939
Thou Thou- : Thou- : fhou : Thou : Thou : Thou:
223:
5:
Bu.
sands
sands
sands
20,598:
9,521
19,932
9,274:
30,366:
22,439:
36,786
32,420:
40,781
7,964:
4,921
8,149:
23,977:
1,615
28:
1,144:
1,174
14,656
1,211
0:
0:
368:
1,190
10,219:
858:
1,079
:
146:
60:
120:
129:
123
:
95:
101:
111:
99:
85
:
3,564:
2,609:
2,499:
1,690:
2,315
11:
26:
18:
11:
4:
2:
3:
2:
2:
23
2:
:
:
Livestock and products:
11
2:
23
12:
8:
6
:
Ton
1:
:
:
:
Nuts
-
Ton
-
Grapes
:
Ton
8:
:
:
:
Prunes
:
:
Ton
:
:
Apples
5
-
Fruits and nuts:
-
4
:
:
Bu.
:
Ton
Ton
:
Oilseeds and legumes:
0:
:
Bu.
Legumes
sands
0
:
Du. : 28,553 15,316:
Oats
Oilseeds
Oilcake
:
24,993:
Barley
Rye
sands
20,869:
Bu.
Wheat
sands
42,206
:
Corn
:
:
:
Bu.
sands
:
Grains:
:
Cattle
Head:
16:
46:
69:
41:
43:
40:
Hogs
Head
105:
71:
43:
204:
190:
197:
Sheep
Head:
2:
95:
79:
19:
19:
46:
Poultry
Head
2,568:
3,504:
3,192
2,830:
2,533:
1,248
Animal products
Ton
15:
16:
17:
25:
23:
21:
Compiled from International Yearbook of Agricultural Statistics and various official sources.
TABLE 12.-Rumanian exports of grains, averages 1928-1932, 1933-1937,
and 1935-1939
Bushels
1933-1937
1935-1939
37,720
27,806
21,082
:
Average:
1928-1932
CORN
WEEAT
BARLEY
Bushels
Bushels
11,363
42,164
RYE
OATS
Bushels
:
PERIOD
Bushels
3,062:
1,457
13,743:
18,130
1,034:
2,355
28,340
11,933
706
2,743
Compiled from official sources
Exports of grains, constituting from half to two-thirds of the total agricultural exports, reflect clearly the characteristic sharp fluctuations in product ion.
Corn exports ranged during the last 5 years from a low of 9.5 million bushels in 1938
to a high of 30.4 million in 1936. On the whole, however, the volume of corn exports
is declining: the 1935-1939 level was 17.5 percent below that of 1928-1932.
The wheat export situation has improved significantly since 1933, largely because of the sharp Increase in acreage and production. Although the Rumanian govern-
Foreign Agriculture
726
ment recommended reduction of the wheat acreage infavor of feed crops and industrial
plants, its policy actually stimulated increased production and exports of wheat.
Government support of the wheat market is still being continued.
Barley exports have greatly diminished as a result of the acreage reduction
since 1933: the volume of exports during 1935-1939 was only 29.3 percent of that during 1928-1932. Reduced acreage and production caused a similar, though sharper, decrease in exports of oats, and in 1938 and 1939 no shipments at all were made.
Despite the activities of the German-controlled Soia Company which purchases
the entire soybean crop for shipment to Germany at high fixed prices. the export
volume of all oilseeds has not expanded during the last few years. An increase in
soybean exports has been accompanied by a reduction in shipments of rapeseed and sun-
flower seed. as well as of oilcake. Exports of legumes fluctuate around a level of
2.5 million bushels annually.
Fruit exports as a whole are insignificant, averaging only 28.000 tons annually during 1935-1939. A maximum of 38,000 tons was exported in 1935 as compared
with a minimum of 20.000 in 1939. The relative unimportance of these exports is ap-
parent when this figure is contrasted with German fruit imports during 1938 of
536,000 tons.
Exports of livestock products fluctuate in accordance with the domestic feed
situation. Live animals represent about 50 percent of the export value of the animal
products group. The maximum quantities available for export in any year since 1933
were 200.00 hogs and 70.000 cattle equal to about 30.000 tons of dressed meat.
The annual exportation of animal products has never exceeded 25.000 tons
GEOGRAPHIC DISTRIBUTION OF RUMANIAN FOREIGN TRADE
With the German domination of Rumania, as well as of practically all the countries of central and northwestern Europe, future Rumanian trade relations will undoubtedly be largely controlled by Germany. Nevertheless an analysis of the geographic distribution of Rumanian agricultural exports during the past few years is
of more than theoretical interest. It reveals the dependence of various European
importers on Rumanian farm products and the extent to which anticipated changes are
likely to alter the direction and volume of such exports.
GERMAN RUMANIAN TRADE RELATIONS
in spite of its territorial expansion after the World Mar Rumania suffered
severely from the trade dislocations following the breakdown of the Austro-Hungarian
monarchy. The export situation became even more critical during the world depres-
sion. As a result the government was forced to institute rigid foreign exchange
control and other regulations to control the nation's foreign trade and international payments. with most trade regulated by clearing agreements Transactions
with free-exchange countries. however, furnished most of the active trade balance
Danubian Surpluses
727
necessary to obtain sufficient foreign exchange for servicing the foreign debt and
for imports of such essential products as cotton, iron ore, and machinery.
Germany began its economic drive into southeastern Europe in 1934, at a time
when the Danubian countries faced serious difficulties in disposing of their agricultural surpluses. Since the Danubian countries export principally farm products
and raw materials (needed by the Reich) and import manufactured products that Germany can normally supply. this complementary trade greatly facilitated transactions
between Germany and the Southeast.
The proximity of the Danubian states to Germany, especially important under
blockade conditions, also favored the flow of trade between the countries. In addition, the controlled trade and exchange conditions of the Danubian countries could
easily be adjusted to German foreign trade methods, since most of the German clearing agreements provided for a complete balance of exports and imports through clearing accounts, which did not require the acquisition of foreign exchange.
Normally these favorable conditions should have enormously increased trade
relations between Germany and the countries of the Danube Basin: however, the expan-
sion was in most cases far less rapid than was anticipated, partly because of Germany's inability to export the desired quantities and qualities of manufactured
goods. This inability may in turn be attributed to the fact that the German rearmament program taxed the nation's economy so severely that the demands of the Danubian
countries for industrial goods could not be supplied.
The trade situation was further complicated by the fact that Germany was in a
position to drive hard bargains and frequently forced upon the southeastern coun-
tries products that they did not need. or allowed clearing balances to pile up in
the German favor, thus virtually borrowing funds from the Danubian states. 13 Delayed deliveries of German goods, often of unsatisfactory quality, together with the
desire of the Danubian countries to avoid a German trade monopoly, served to prevent
a more pronounced expansion of their trade with Germany.
The absorption of Austria and Czechoslovakia tremendously increased the German sphere of influence. As far as Rumanian farm exports were concerned, however,
the effects were slight. A comparison of Germany's share in Rumanian exports during
1928-1932 with its share during the subsequent trade drive in southeastern Europe
shows that Germany and Austria together took 27.5 percent of all Rumanian exports
before and only 28.1 percent during the drive. Including Czechoslovakia, the share
of Greater Germany during these two periods was 34.1 and 36.4 percent, respectively.
In March 1939 a new German-Rumanian trade agreement was concluded, which
originally provided for a complete reorientation of Rumanian economy in accordance
with German import needs. Since the agreement stipulated that a bilaterally balanced
trade should continue to be maintained and that the requirements and interests of
13
Richter. Hans Southeastern Europe's trade increasingly dominated by Germany. Foreign
Agriculture, vol 111. May 1939, PP. 169-174.
Foreign Agriculture
728
Rumania in her trade with other countries were to be considered, no immediate sharp
expansion in trade was anticipated. It is significant, however, that in 1939 Greater
Germany purchased 43.2 percent of the total Rumanian exports, largely as a result of
the agreement. In the same year Greater Germany furnished 56.1 percent of the Rumanian import needs, as compared with 53.6 percent in 1935-1939 and 48.8 percent in
1928-1932.
TRADE RELATIONS WITH COUNTRIES OTHER THAN GERMANY
In spite of the decided tendency to strengthen trade with Germany, the necessity for securing raw materials and manufactured goods that Germany could not supply
forced Rumania to maintain trade with free-currency countries. To such countries as
Belgium, the Netherlands, Denmark, and Poland- now under complete German domination Rumania sold 7.4 percent of her exports in 1935-1937 and bought from them 6.7 percent
of her total imports.
Italy also exerted effort in 1939 to intensify her trade relations with Rumania. The Italian-Rumanian trade agreement effective January 1, 1939, envisaged an
annual volume of trade valued at 5 billion lei (about 37 million dollars). In the 5
preceding years total annual trade had never exceeded billion lei, and in 1938
it amounted to only 2.5 billion.' 14 The largest increase proposed was on Italian imports of wheat and petroleum, which Germany also needs. Actually, Italian-Rumanian
trade in 1939 reached a value of 5.236 billion lei, with Italy taking 12.1 percent
of Rumania's exports as compared with 6.2 percent in 1938 and 9.3 percent in 19351939. Rumanian imports of Italian products rose from 5 percent in 1938 and 5.5 percent in 1935-1939 to 8.9 percent in 1939.
A trade agreement with the United Kingdom also resulted in a sharp increase
in Rumanian exports to that market: in 1939 the United Kingdom took 14.1 percent of
total Rumanian exports as compared with 11.1 percent in 1938. On the other hand,
Rumanian imports from that market decreased. Since it is unlikely that BritishRumanian trade can be maintained during the war, former Rumanian exports to Britain
appear virtually the only potential reserve for increased exports to the agriculturally deficient countries of the Continent. Any attempt by Greater Germany or
Italy to import quantities of Rumanian agricultural surpluses larger than their 1939
takings - plus Britain's former share - would further deprive the other Danubian
countries, as well as Switzerland and the German-dominated territories, of part of
the imports they formerly took from Rumania.
GEOGRAPHIC DISTRIBUTION OF RUMANIAN FARM EXPORTS
As a consequence of the recent political rearrangements, the geographic distribution of Rumanian farm surpluses is expected to show significant changes from
the distribution prevailing before the outbreak of war.
14
U. 8. Department of Agriculture, Special Rept. No. 368 of the Agricultural Attached *Rusania recent trade agreements, Belgrade. Tugeslavia, Jan. 4. 1939.
Danubian Surpluses
729
In order to determine the nature of the changes expected in geographic distribution of Rumanian farm exports it is necessary to examine the direction of farm
exports during the last few years. The actual trend in the near future will depend
largely on the size of current crops, changes in domestic consumption the degree of
disorganization of trade routes, availability of transportation facilities, and the
willingness of Germany and Italy to admit former Rumanian customers now under their
domination to participate in the purchase of Rumanian agricultural surpluses.
Bread grains: Germany began to purchase Rumanian wheat in 1937, when the
German policy of storing bread grains for emergency purposes was initiated. German
purchases in 1939 give a better indication of the potential future minimum demand on
Rumania than would an average covering years during which Germany had access to overseas markets. Thus in 1939 Greater Germany took 25 percent of Rumanian wheat exports,
at a time when German wheat production reached a near-record level.
The share of the United Kingdom in total Rumanian wheat exports in 1939 was
31 percent. The wheat formerly exported to Britain may now serve to offset to some
extent the deficiencies in Germany, as well as in the territories under German domination, which purchased about 20 percent of the Rumanian wheat surplus during 19351939. Italy's share increased sharply in 1939 over the 2 preceding years, but Italy
had been a large importer of Rumanian wheat in 1935 and 1936. Of the small Rumanian
rye surplus, Greater Germany usually has bought either the total supply or the
largest part, except in 1939, when Italy and the countries now dominated by Germany
took two-thirds.
Feed grains: The European feedstuff situation is likely to remain critical
even in years of unusually large Danubian surpluses. As long as the British blockade is in force, Germany and the other European livestock-producing countries that
are deficient in feedstuffs will be deprived of most of their imports of corn and
concentrated feeds, which they had purchased regularly from overseas countries.
Germany proper did not depend greatly on Rumanian coin before the outbreak of the
war except in 1937, when it took 60 percent of the Rumanian surplus. During 19351939 the German share was only 25 percent. The proportion taken by Greater Germany,
however, represented 50 percent of the total. The Netherlands, Belgium, and Denmark
increased their Rumanian purchases to 16 percent in 1938 and 10 percent in 1939:
however, if their livestock industries are to be maintained at even present levels,
a much greater volume of exports to these countries will be necessary.
Great Britain's share in Rumanian corn exports of 30 and 23 percent in 1938
and 1939, respectively, would if diverted to the occupied countries ease the feedstuffs situation there, but both Germany and Italy will undoubtedly demand much
greater quantities from Rumania than before the war. Rumanian exports of corn to
other southeastern European countries, amounting to 17 percent of the total in 19351939, cannot be curtailed without endangering the livestock exportation of those
countries to Germany and Italy.
The geographic distribution of Rumania's exports of barley was similar to
that of corn during 1935-1939. Since 1937, however, Greater Germany's share has
Foreign Agriculture
730
increased sharply. of total Rumanian barley exports in recent years, between twothirds and three-fourths has gone to Germany, Austria, and Czechoslovakia. Greater
Germany took 60 percent of the exports, and the remainder went to Hungary and other
European livestock-producing countries.
Denmark and the Netherlands imported nearly half of the Rumanian surplus of
oilcake. The 16 percent taken by England and France, ow.divertable to other countries, cannot offset the serious deficiency in the Metherlands, Denmark, and Germany. The bulk of the Rumanian oilseed exports was taken by Greater Germany; only
small quantities went to Italy and the conquered territories. Because of the cession of Bessarabia, the Rumanian oilseed crops cannot meet even domestic requirements.
One-fifth of the legumes was formerly shipped to Great Britain and France: Germany
had Increased its share to 62 percent in 1939. The small surplus of fruit went almost exclusively to Greater Germany.
POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41
The preceding discussion has pertained to Greater Rumania, including Bessarabia
and northern Bukovina, now ceded to the Soviet Union: northern Transylvania, now
ceded to Hungary: and southern Dobrogea, now ceded to Bulgaria. The ceded territories represent important farm-surplus-producing areas, and their loss is bound to
affect the future volume of Rumanian farm production and exports. The surpluses of
the territories ceded to Hungary and Bulgaria will still be available to continental
Europe in the future. These territorial changes, therefore, affect merely the agricultural economies of the immediate countries concerned. The cession of Bessarabia
and northern Bukovina to Russia, however, probably represents a definite loss of important surpluses to the European deficit countries.
Bessarabia and northern Bukovina covered an area of about 12 million acres,
or 17 percent of the area of Greater Rumania. The relative loss in arable land is
even greater, amounting to 8 million acres, or 23 percent of the former total arable
area. The loss of these two territories will noticeably reduce the volume of most
farm exports, since they contributed normally nearly 19 percent of the total Rumanian
wheat product on and over 20 percent of the corn. The relative loss in this year's
grain output is much greater, since Bessarabia is the only section that did not suffor from the heavy rains which damaged crops throughout the Danube Basin.
The cession of Bessarabia and northern Bukovina also resulted in the loss of
29 percent of the potato crop and 32 percent of the sugar beets. These losses, how-
ever, will affect only the domestic economy. On the other hand, a reduction of 17
percent in cattle numbers and of 20 percent in numbers of hogs and sheep will prob-
ably correspondingly reduce the exports of animal products. Although little livestock was exported from Bessarabia, some quantities were shipped to deficit regions
within Rumania.
The effect of these territorial losses on the future exports of oleaginous
products is especially serious. The loss of Bessarabia, where in 1938 75 percent of
Danubian Surpluses
731
the total sunflower seeds and 80 percent of all the soybeans were produced will make
it impossible for Rumania to export oilseeds for many years. Even domestic require-
ments, in fact, will probably not be supplied.
The principal result of the cession to Hungary of mountainous northern Transyl.
is that future Rumanian grain production will be reduced by about 9 percent.
This loss reduced the total area of Rumania by 14 percent and the population by about
vania
13 percent.
The cession of southern Dobrogea will affect Rumanian economy less seriously
than the loss of Bessarabia. It will, however, considerably increase Bulgarian surpluses: the Bulgarian wheat crop will be increased by 9 percent: the rye crop by 45
percent; corn and barley, 18 percent; oats, 12 percent; and dry beans, 67 percent.
Southern Dobrogea is very fertile: nearly 70 percent of the total area is in grains.
THE 1940 OUTLOOK
The Rumanian crops of 1940 were affected by two unfavorable factors - one directly connected with the war and the other resulting from the adverse climatic con-
ditions during last winter and spring.
Like most other countries of southeastern Europe, Rumania felt obliged to
mobilize an army of between 1.5 and 2 million men, who as a result were not available
for their peacetime occupations, chiefly farming. Although much farm work is performed by women and children, the mobilization as well as the withdrawal of many
draft animals for military use, is known to have affected production adversely. Rumania did not yield to the German demand that men be returned to their farms to plant
the spring cereals, and the compromise of putting youth to work on farms only partly
overcame the acute labor shortage. The principal result was a sharp reduction in the
area sown to winter cereals. However, a large proportion of the army was released in
July, so that the shortage was somewhat relieved at harvest time.
The resulting situation appears to have been especially harmful to the wheat
crop. According to the latest semiofficial information, the decrease in acreage, combined with the effects of the exceptionally severe winter, late and rainy spring, and
devastation by floods, resulted in a total wheat crop in Greater Rumania of only 89
million bushels, as compared with 164 million in 1939 and 177 million in 1938. This
would mean a reduction of 45.7 percent from 1939 and 49.7 percent from 1938.
The loss of Bessarabia and northern Bukovina further aggravated the wheat sit-
uation for the 1940-41 marketing year. Indications are that the present territory
of Rumania produced only 60 million bushels this year: adding the estimated carryover of 17 million leaves a total supply of about 77 million bushels. Assuming normal consumption, domestic requirements will amount to 93 million bushels, or 26
million more than the estimated crop.
The Rumanian Government has prohibited exportation of wheat in order to safeguard supplies for domestic consumption; moreover, it is contemplating an enforced
732
Foreign Agriculture
reduction of the wheat content of flour. This procedure may somewhat alleviate the
anticipated domestic shortage, but will not provide export surpluses in 1940-41.
Furthermore, the army mobilization resulted in a sharp increase in domestic wheat
consumption: although the Rumanian farmer consumes very little wheat, as a soldier
he receives a much more nearly adequate diet and consumes an even higher bread ration
than the average Rumanian city dweller. For all these reasons, it is certain that
wheat exports will be impossible in 1940-41, despite pressure from the belligerents.
Undoubtedly, German demands for the army of occupation represent an added strain.
This year's rye crop of about 7 million bushels (for present boundaries) will
meet only about 40 percent of domestic requirements. In view of the shortage the
government has prohibited all rye exports.
Exports of barley have been prohibited since November 1939. The 1940 crop is
believed to be about 5 million bushels in excess of domestic requirements. Rumania
has had no surplus of oats during the last few years, and exports have been prohibited
since October 18, 1939.
The corn situation looks somewhat more promising. The government urgently
recommended the planting of corn and barley this spring on a part of the acreage that
could not be sown to wheat last fall. Semiofficial estimates place the 1940 corn
crop for present boundaries at about 160 million bushels and the 1939 carry-over at
15 million: domestic requirements are estimated at about 155 million bushels. The
supply, however, is not sufficient to compensate for the shortage of wheat and rye.
Any corn exports would be at the cost of further reducing the Rumanian standard of
living. which is already low.
Prospects for increased exports of oilseeds are unfavorable. Even before the
cession of Bessarabia and northern Bukovina exports of sunflower, castor, rape, hemp,
and flaxseed were prohibited; the present territory does not produce enough oilseeds
to meet domestic requirements. The soybean situation has completely changed as a
result of the territorial losses. Since most of the soybean and sunflower seed was
produced in Bessarabia, Rumania will face serious difficulties in meeting domestic
requirements. Rumanian soybean plantings in 1940 amounted to only 54,000 acres, as
compared with 256,000 in 1939, and production was no doubt correspondingly reduced.
Little information is available concerning prospects for the exportation of
animal products. Meat consumption has been restricted by the introduction of three
meatless days a week. Mobilization and the intensified rearmament program have, however, increased sharply the number of meat consumers and the per-capita consumption
It is certain that no increase in exports is possible; in fact, a decrease is likely
in view of the damage suffered by livestock as a result of floods. The cession of
Bessarabia and northern Bukovina will also tend to reduce livestock exports.
THE OUTLOOK AFTER 1940-1941
Unquestionably, Rumanian farm production - especially of animal products and
farm products for industrial use - could be greatly expanded in the future if certain
Danubian Surpluses
733
prerequisites were fulfilled. Among these prerequisites are the widespread education
peasants in the science of modern agriculture, adoption of improved methods of
farming and livestock breeding, of greater attention to seed selection, increased use
fertilizers and modern agricultural machinery, and elimination of strip farming in short, a reorganization of the entire Romanian farm economy.
of
of
THE FIVE-TEAR PLAN
During the past 5 or 6 years effort has been made toward accomplishment of
these objectives, stimulated especially by the law of March 1937 for the encouragement of Rumanian agriculture. Moreover, the German-Rumanian trade agreement of 1939
provided for a sweeping reorganization of agriculture under the supervision of German
experts. The Agricultural Five-Year Plan, drawn up by the Rumanian Minister of Agri-
culture in March 1940, is the latest attempt in this direction. In spite of all
these measures, however, little fundamental improvement has yet been accomplished.
The object of the Five-Year Plan is much the same as that of the 1937 law and
of the German proposals in the trade agreement. Recognizing the necessity of a farreaching educational program, the plan provides for the establishment of a network
farm organizations to secure the active cooperation of the farmers. It also recog-
of
nizes that a prerequisite for the improvement of agricultural conditions is the
stabilization and consolidation of farm ownership, and toward that end is proceeding
with the division of land - which has not been completed even after 20 years of
agrarian reform - and the consolidation of strip farms. Many economists believe,
however, that consolidation of strip farms is impossible except under a system that
will entirely disregard individual rights.
Although it is realized that grain crops produce the best results under exlisting conditions and require less care and labor than other crops, the Five-Year
Plan15 provides for a reduction during the next 5 years of 2 million acres, or 25
percent, in the present wheat acreage. Corn acreage is to be reduced by 12 percent.
The present level of production, however, is to be maintained and even increased by
improving yields through better seed selection, the application of fertilizers, and
the control of plant diseases. The acreage retired from grain crops, together with
700,000 acres of reclaimed wastelands, is to be used to expand production of industrial and fodder crops.
Considering the present status of the Rumanian peasant, it is obvious that
the objectives of the Five-Year Plan cannot be realized within the next few years.
Nevertheless, the plan suggests the possibility of interesting modifications in Rumanian farm production over a longer period of time.
Altogether the plan would involve the transfer of 4.2 million acres formerly
planted to corn and wheat - with which the peasant is sufficiently familiar to obtain
at least low yields - to crops that require more care and more intensive preparation,
15
The plan was set up prior to the recent territorial changes. Undoubtedly the territorial
losses will effect corresponding changes in the production plans
732
Foreign Agriculture
reduction of the wheat content of flour. This procedure may somewhat alleviate the
anticipated domestic shortage, but will not provide export surpluses in 1940-41.
Furthermore, the army mobilization resulted in a sharp increase in domestic wheat
consumption: although the Rumanian farmer consumes very little wheat, as a soldier
he receives a much more nearly adequate diet and consumes an even higher bread ration
than the average Rumanian city dweller. For all these reasons, it is certain that
wheat exports will be impossible in 1940-41, despite pressure from the belligerents.
Undoubtedly, German demands for the army of occupation represent an added strain.
This year's rye crop of about 7 million bushels (for present boundaries) will
meet only about 40 percent of domestic requirements. In view of the shortage the
government has prohibited all rye exports.
Exports of barley have been prohibited since November 1939. The 1940 crop is
believed to be about 5 million bushels in excess of domestic requirements. Rumania
has had no surplus of oats during the last few years, and exports have been prohibited
since October 18, 1939.
The corn situation looks somewhat more promising. The government urgently
recommended the planting of corn and barley this spring on a part of the acreage that
could not be sown to wheat last fall. Semiofficial estimates place the 1940 corn
crop for present boundaries at about 160 million bushels and the 1939 carry-over at
15 million: domestic requirements are estimated at about 155 million bushels. The
supply. however, is not sufficient to compensate for the shortage of wheat and rye.
Any corn exports would be at the cost of further reducing the Rumanian standard of
living. which is already low.
Prospects for increased exports of oilseeds are unfavorable. Even before the
cession of Bessarabia and northern Bukovina exports of sunflower. castor, rape, hemp,
and flaxseed were prohibited; the present territory does not produce enough oilseeds
to meet domestic requirements. The soybean situation has completely changed as a
result of the territorial losses. Since most of the soybean and sunflower seed was
produced in Bessarabia, Rumania will face serious difficulties in meeting domestic
requirements. Rumanian soybean plantings in 1940 amounted to only 54,000 acres, as
compared with 256,000 in 1939, and production was no doubt correspondingly reduced.
Little information is available concerning prospects for the exportation of
animal products. Meat consumption has been restricted by the introduction of three
meatless days a week. Mobilization and the intensified rearmament program have, however, increased sharply the number of meat consumers and the per-capita consumption.
It is certain that no increase in exports is possible; in fact, a decrease is likely
in view of the damage suffered by livestock as a result of floods. The cession of
Bessarabia and northern Bukovina will also tend to reduce livestock exports.
THE OUTLOOK AFTER 1940-1941
Unquestionably, Rumanian farm production - especially of animal products and
farm products for industrial use - could be greatly expanded in the future if certain
Danubian Surpluses
733
prerequisites were fulfilled. Among these prerequisites are the widespread education
of peasants in the science of modern agriculture, adoption of improved methods of
farming and livestock breeding, of greater attention to seed selection, increased use
of fertilizers and modern agricultural machinery, and elimination of strip farming in short, a reorganization of the entire Remanian farm economy.
THE FIVE-YEAR PLAN
During the past 5 or 6 years effort has been made toward accomplishment of
these objectives, stimulated especially by the law of March 1937 for the encouragement of Rumanian agriculture. Moreover, the German-Rumanian trade agreement of 1939
provided for a sweeping reorganization of agriculture under the supervision of German
experts. The Agricultural Five-Year Plan, drawn up by the Rumanian Minister of Agri-
culture in March 1940, is the latest attempt in this direction. In spite of all
these measures, however, little fundamental improvement has yet been accomplished.
The object of the Five-Year Plan is much the same as that of the 1937 law and
of the German proposals in the trade agreement. Recognizing the necessity of a farreaching educational program, the plan provides for the establishment of a network of
farm organizations to secure the active cooperation of the farmers. It also recog-
nizes that a prerequisite for the improvement of agricultural conditions is the
stabilization and consolidation of farm ownership, and toward that end is proceeding
with the division of land - which has not been completed even after 20 years of
agrarian reform - and the consolidation of strip farms. Many economists believe,
however, that consolidation of strip farms is impossible except under a system that
will entirely disregard individual rights.
Although it is realized that grain crops produce the best results under exlisting conditions and require less care and labor than other crops, the Five-Year
Plan provides for a reduction during the next 5 years of 2 million acres, or 25
percent, in the present wheat acreage. Corn acreage is to be reduced by 12 percent.
The present level of production, however, is to be maintained and even increased by
improving yields through better seed selection, the application of fertilizers, and
the control of plant diseases. The acreage retired from grain crops, together with
700,000 acres of reclaimed wastelands, is to be used to expand production of industrial and fodder crops.
Considering the present status of the Rumanian peasant, It is obvious that
objectives of the Five-Year Plan cannot be realized within the next few years.
Nevertheless, the plan suggests the possibility of interesting modifications in Rumanian farm production over a longer period of time.
the
Altogether the plan would involve the transfer of 4.2 million acres formerly
planted to corn and wheat-with - which the peasant is sufficiently familiar to obtain
at least low yields - to crops that require more care and more intensive preparation,
15 The plan was set up prior to the recent territorial changes. Undoubtedly the territorial
losses will effect corresponding changes in the production plans
Foreign Agriculture
734
with the cultivation of which the peasant is largely unfamiliar. The educational
preparation necessary cannot be accomplished in a short time under existing condi-
tions. Furthermore, it is recognized that a sharp increase in the use of fertilizers, especially phosphate, is essential: and there is now a shortage of phosphates
in all countries under German domination and in Germany itself. It is also doubtful
whether farm machinery can be made available to nearly the number of units called
for by the plan.
TABLE 13.-Proposed acreage changes in crops other than grains under the
Rumanian Five-Year Plan
AREA TO BE
INCREASE
1935- 1939
SOWN BY 1944
1.000 acres
1.000 acres
OVER 1935-1989
Percent
AVERAGE ACREAGE
CROP
Fiber plants:
Flax
6.3
297
4,600
Hemp
126.3
371
290
11.9
259
2,100
472
741
57
88
371
:
70
:
200
18
6
0
5
Castor beans
:
Poppies
Peanuts
-
Rapeseed
:
Cotton
Oilseeds:
Sunflower seed
900
3
30
Peas
116
494
Beans
225
494
120
44
173
290
163
395
140
347
494
42
Legumes:
Lestils
Soybeans
Alfalfa
:
Forage crops:
330
Clover
450
618
37
Beets
:
111
247
120
:
97
148
50
Sugar beets
:
:
Compiled from official sources.
CONCLUSIONS
Although it is impossible to evaluate possible developments, it appears certain that no more than minor changes in Rumanian agriculture may be expected within
the next few years. This conclusion is based on an appraisal of the difficulties previously mentioned, of the additional complications caused by the war, and of the many
unsuccessful attempts at production expansion in the past. In general it is believed
that the existing pattern of Rumanian production will continue for at least the next
2 or 3 years. There may be some increase in oilseed and legume acreage: however, in
view of the current war-induced shortages in European grain supplies, it can hardly
be expected that the Rumanian peasants or the government itself will be induced to
curtail cereal acreage in favor of industrial crops.
Danubian Surpluses
735
The Five-Year Plan recognizes that in many sections of Rumania the diet of
the peasants is often unvaried and poor, and that any expansion and diversification
of production must be accompanied by an improvement in the peasant's standard of
living. Such an improvement, however, would necessitate increased domestic consumption, which in turn would tend to limit any increase in export surpluses.
During the present war any significant expansion of production is unlikely.
There appears to be little probability of a material increase in exports during 1941
and 1942 from the reduced territories of Rumania. The cession of Bessarabia and
northern Bukovina will reduce the exports of grains by at least 20 percent from the
pre-war average. Many years will probably be required before exportation of oilit
seeds, legumes, and other specialty crops will again be possible. On the whole,
appears unlikely that either the composition or magnitude of Rumanian farm production
will show any important change during the next several years, insofar as meeting the
deficits of other European countries is concerned.
HUNGARY
Although far less important than Rumania as a supplier of agricultural products to the deficit countries of Europe after the World War, Hungary regularly furnished large exports of wheat, some surpluses of live animals and meat products, and
various crop specialties. The pattern of farm production in Hungary is similar to
that of Rumania, but the structure of its farm economy, its production methods, and
the general problems confronting agriculture are sufficiently different to warrant
consideration.
THE AGRICULTURAL STRUCTURE OF HUNGARY
Pre-World-Nar Hungary, with a population of 21 million, was an integral part
of the Austro-Hungarian monarchy. Hungarian agriculture had at its disposal a free
market of more than 50 million consumers. Largely because of natural advantages,
pre-World-War governmental policy was directed toward maintaining the predominantly
agricultural character of the country, except for industries closely connected with
agriculture, such as the milling industry, sugar refining. and other enterprises
processing farm products.
Hungary probably suffered more than any other Danubian country from the
changes brought about by the peace treaties following the World Mar. The Treaty of
Trianon reduced the area of Hungary to less than one-third its former size and the
population to about 8 million people. These dislocations could not be overcome
without many difficulties and great strain on the national economy. Lack of markets
for the agricultural surpluses immediately after the World War, the resulting diffi-
culty in settling the international balance of payments, and the impossibility of
employing the bulk of the working population in agriculture naturally resulted in
increased industrialization during the post-war period.
Statistics on occupational distribution reveal that post-war Hungary has been
rapidly losing its character as a. predominantly agricultural country, and that the
Foreign Agriculture
736
post-war population increase has been absorbed largely by nonagricultural industries.
Territorial acquisitions following the dismemberment of Czechoslovakia d id not basically alter the economic structure, although they increased Hungary's area by about
13 percent and its population by about 12 percent. The annexation of northern
Transylvania in 1940 further increased the Hungarian population by 2.4 million and
the crop acreage by 3.7 million acres, or about 27 percent.
The farm economy of pre-World-War Hungary had a pronounced feudal character.
Nearly a third of the area was held by 4,000 large estates, whereas 2.4 million
peasants owned little more than half the total area. Unlike the situation in Rumania, there were about 800,000 farm workers without land, who constituted the principal labor force of the estates. There were 500,000 peasants whose average holdings
of 2 or 3 acres were insufficient to provide a living, and who for that reason might
also be included in the category of landless rural workers.
OST-WORLD WAR LAND REFORM MEASURES
Land reform after the World War changed the distribution of holdings compara-
tively little. About 36 percent of the total area is still owned by a few large proprietors and only 47 percent by the peasants. 16 The agrarian law of 1920 was not
intended to bring about a radical division of large estates, as in Rumania, but merely
to give small holdings to landless farm workers. The size of these holdings, however,
was fixed at 4.2 acres, far too low to provide even a meager subsistence. It is estimated that between 1920 and 1935 the area in estates was reduced from 8.2 million
acres to 6.8 million. or by 17.2 percent. At the same time. the area in small holdings increased from 10.9 to 11.9 million acres, and the number of landless workers
declined from 754,000 to 563,000. At present however, 43 percent of the farm land
is still held by large estates, averaging 5,613 acres in size, and by farms exceed ing
280 acres. Of these estates 1,300. or only 0. percent of total holdings, comprise
30 percent of all farm land. On the other hand, 85 percent of all farms are less
than 14 acres in size and constitute less than 20 percent of the total farm land.
Fully 40 percent of the farm population is still without any land.
Thus, of a total population of 9 million in the 1930's the landless workers
with their families constituted 1.3 million. or 14 percent. An additional 600,000
workers, or 7 percent. were permanently employed on large farms and estates. while
1.1 million people, or 12 percent. lived on farms of less than 7 acres, where they
existed on an extremely low standard of living. These "3 million beggars" constitute one of the most serious economic and political problems confronting Hungary. 17
The need for further land reform measures has been recognized by the govern-
ment. and attempts have been made to remedy the situation. The Settlement Act,
adopted in 1936, offered a plan for progressive liberation of entailed properties.
16 Fungarian Economic Yearbook, 1939 , 23
17
Ibid., also JASES Oscar. *Feudal agrarianism in Hungary." Foreign Affairs, July 1938 P
714. and U 8 Department of Agriculture Office of Foreign Agricultural Relations, Special
Rept No 366. "Hungarian agricultural policy in 1938,* Belgrade Dec. 12. 1938.
Danubian Surpluses
737
More than a quarter of the land in Hungary is entailed, and belongs to the church, to
municipalities, or to banks: or it represents 'idei Kommisse (properties with family
entail). The law provided for a gradual distribution to the peasants of about 300,000
acres of such entailed land. Furthermore, the Settlement Act was intended to assist
small peasant farmers in expanding their farms to a more efficient size of between 7
and 14 acres. So far little progress has been made under the Act. Early in 1939 a
total of only 40,000 acres had been leased to 13,000 families.
In connection with a far-reaching 5-year plan of rearmament and reconstruction initiated in March 1938, an acceleration of rural settlement, with emphasis on
small leaseholds, was planned. Under the plan 1.1 million acres, or about 17 percent
of the acreage still held in large estates, was to be used for settlement purposes
over a period of years. A new bill introduced in January 1939 would make available
for small leaseholds 2.4 million acres to be taken from large estates, from Jewish
landowners, and from foreigners.
PROBABLE EFFECTS OF LAND REFORM MEASURES
The realization of the proposed Hungarian land reform measures may somewhat
alleviate the present plight of the rural proletariat, but no radical or prompt change
may be expected. In appraising the fundamental position of the Hungarian farm econony, it must be remembered that even a far more radical land reform - that is, the
distribution among farm workers and small peasants of the total acreage now held by
large estates - would still fail to provide these groups with holdings of even submarginal size.
In contrast to Rumania, where the breaking up of the large estates resulted in
relative deterioration of farm practices and a corresponding decline in exportable
surpluses, the Hungarian land reform measures thus far have not appreciably affected
farming methods, the composition of total farm production, or altered the prospect
for potential surpluses.
Farm practices on the larger farms in Hungary are far superior to those of the
peasant holdings in other countries in southeastern Europe, and are more nearly comparable to those in western Europe. Since the Hungarian farm economy is characterized by a large number of farm laborers accustomed to the relatively advanced methods
of the large estates, it is probable that even with a rapid expansion of small leaseholds the general farm practices would still remain far superior to those of Rumania.
Nevertheless, the peasants are in urgent need of agricultural training. The government is said to be considering plans for the improvement of agricultural education.
Should proposed land reform measures be carried out, certain shifts in farm
production could be expected to take place - from crop to livestock production, for
example, and from cereals to industrial crops. It is unlikely, however, that such
reforms would result in an expansion of total farm production; it is more probable
that these shifts would tend to raise the living standards of peasants and farm laborers and to decrease the volume of farm products available for export.
a
Foreign Agriculture
738
PATTERN OF HUNGARIAN FARM PRODUCTION
The character of Hungarian farm production is largely determined by natural
and climatic conditions, and only partly by the system of land distribution. Hungary
is a level country, 60 percent of the total area consisting of arable land. The
great Danubian plain, covering the central and eastern sections, constitutes the
greater part of the country: the northwestern part is formed by the small Danubian
plain. As a result Hungary possesses a larger share of prairie soil than any other
country of southeastern Europe. This in itself explains the predominance of grain
crops, particularly of wheat, in the Hungarian farming system.
LAND UTILIZATION
Table 14 gives a concise picture of the land utilization in Hungary in 1938.
Grain crops occupied 73.4 percent of the total agricultural land. Wheat was the
most important single crop, accounting for 28.4 percent of the arable area, followed
by corn with 19.5 percent. The acreage planted to rye, barley, and oats together
was less than that of wheat alone, and only slightly more than that of corn. Aside
I
from cereals the potato crop was the only one of great importance, accounting for 5.2
percent of the cultivated area. Legumes and vegetables constitute only about
percent each. It should be noted, however, that legumes and other vegetables are
grown chiefly in household gardens and are not recorded in official statistics, which
include only the crop grown on areas registered in the "Land-book." Industrial
crops, of which sugar beets alone made up 0.8 percent, were grown on 2.1 percent of
the arable land.
DEVELOPMENT OF CROP ACREAGES
Table 15 shows the changes in the distribution of crop acreage during the last
decade. It should be noted that the 1939 figures are not strictly comparable with
those for the preceding years, since they include acreages of the newly acquired
territories. According to official estimates, 18 the acquisition of new territories
in 1938 and 1939 increased wheat acreage by 13 percent, of rye by 16 percent. barley
by 23 percent, oats 5.5 percent, potatoes 19 percent, and sugar beets 50 percent.
Northern Transylvania added another 18 percent to Hungarian wheat production, 22 percent to corn, about 9 percent to rye and barley, and 37 percent to oats.
Except for the usual annual fluctuations, and disregarding territorial acquisitions, the total grain acreage has remained remarkably stable. The average grain
acreage during 1935-1939 was about equal to that for 1928-1932. The Hungarian Government has repeatedly recommended a shift from grains to legumes and industrial
plants. Thus far, however, virtually no changes have occurred in the acreages devoted to industrial plants. Certain shifts in legume acreage have taken place, but
without any marked upward trend.
18
International
Institute of Agriculture, Monthly Bulletin of Agricultural Economics and
Sociology,
Feb. 1939.
Danubian Surpluses
739
TABLE 14-Land utilization in Hungary, 1938
LAND USE
ACREAGE
PERCENTAGE OF TOTAL AREA
1,000 acres
Percent
Total area of Hungary
23,000
100.0
Arable land
Permanent meadows and pastures
Tree and bush crops
Woods and forests
13,865
60.3
1,596
6.9
828
3.6
2,728
11.9
74
.3
Uscultivated productive land
Unproductive land
1,512
6.6
Percent of arable land
10,178
73.4
Winter wheat
3,954
28.5
Spring wheat
54
.4
2,907
19.5
909
6.6
Grains
Corn
Spring barley
Winter barley
Rye and maslin
Oats
Food crops
214
1.6
1,564
11.3
554
4.0
971
7.0
Total legumes
Beans, dry
Lentils
Peas, dry
124
.9
10
.1
35
.2
79
.6
Potatoes
719
5.2
Cabbage
15
.1
Melons and watermelons
42
.3
Onions
15
.1
Fiber plants:
Hemp
.2
37
.1
Flax
8
Oleaginous plants:
Hemp
35
Flax
20
Rape
27
Poppy
20
Sunflowers
.2
.1
.2
.1
.1
17
Other plants:
Sugar beets
Tobacco
.8
109
.2
35
Millions
Fruit trees
33.6
Plus
9.6
Apple
6.0
International Yearbook of Agricultural Statistics, 1933-1939.
Foreign Agriculture
740
The total acreage in fibers during 1935-1938 was still the same as that for
1928-1932. Flax covered a smaller acreage, but the reduction was offset by a corresponding increase in hemp acreage. Shifts also occurred in acreage of the various
oleaginous plants, but no real expansion took place. German sources state that the
Hungarian Government realizes now that shifts from grains to industrial plants cannot
be obtained merely by propaganda methods, and that some form of coorcion must be
exercised.
TABLE 15. Hungarian crop acreage, averages 1928-1932, 1933-1937, 1935-1939;
annual 1935 to 1939
AVERAGES
CROP
Grains
1935
1936
1937
1938
1939
1,000
1.000
1,000
1.000
1,000
1,000
acres
acres
acres
acres
acres
acres
3,665
4,000
4,669
1928-1932
1933 1937
1935-1939
1,000
1,000
acres
acres
Wheat
3,968
3,910
3,957
4.135
4,028
Corn
2,728
2,840
2,877
2,843
2,810
2,954
8,901
3,150
1,562
:
1.728
:
1,344
Rye
1,576
1,581
1.551
1,537
1,607
1,499
Barley
1,133
1,150
1.124
1,057
1,161
1,155
1,121
635
545
539
502
529
570
554
101
111
124
124
10
10
10
64
77
Data
636
1935-1938
20
as
Flas
22
12
Lineard
aa
22
32
35
10
10
10
106
101
107
88
95
28
19
10
17
20
27
27
30
22
:
Poppy seeds
32
9
Oilseed,
37
729
as
Hampseed
20
28
32
22
32
35
Reposed
25
24
24
37
17
15
156
115
116
121
116
59
39
36
116
37
37
:
Sugar beets
Tobacco
as
35
719
37
114
20
37
:
:
:
Keep
37
734
36
694
:
719
79
:
:
36
720
:
38
694
Potatoes
56
:
:
69
7
Lentils
60
1
Peas
11
10
:
:
Beans
115
9
109
Leguses
27
30
109
35
Compiled from International Yearbook of Agricultural Statistics and various official sources.
VARIATIONS IN CROP FIELDS
The average level of crop yields in Hungary far surpasses that of Rumania and
the other Danubian countries. This is due partly to soil properties and partly to
more advanced farming methods.
Except for a relatively small unproductive section of the Great Plain and a
sandy region in the northeast, the prairie soll is rich in plant nutrients and is
especially favorable for cereals. The climate, however, is characterized by extremes
of heat and cold, and by drought and torrent (a) rains. Generally, there are annually
two periods of 2 or more weeks of drought. frequently occurring in the growing
Danubian Surpluses
741
A further danger to crop yields arises from winds in March and April
that dry out the newly turned furrows.
season.
19
The methods of moisture conservation, particularly on peasant farms, are frequently insufficient to overcome these handicaps. The situation may eventually be
improved by a reforestation of the Great Plain. Although special provisions have
been made since 1923 to reforest selected regions, only 90,000 acres of a total of
750,000 in need of reforestation had been improved by 1936. More extensive irrigation and reforestation plans have recently been proposed, but no significant change
may be expected for many years.
The Hungarian yields of grain crops, unlike those of Rumania, have not declined as compared with the pre-World-War period. With the exception of rye, the
average yields during 1935-1939 were higher than in 1909-1913 or in 1928-1932, due
largely to the favorable corn yield in 1936-1938 and the heavy wheat, barley, and
oat crops in 1938 and 1939. Wheat shows relatively the least instability in yield.
During 1930-1938, the average deviation from the mean yield was 10 percent. This is
little more than half the amplitude of variation existing in Rumania. Nevertheless,
there was a wide difference between the minimum yield of 17 bushels per acre in 1934
and the maximum of 24.7 in 1938.
Corn yields are extremely variable: the average deviation from the mean yield
during 1930-1938 amounted to 21.1 percent, as compared with the average deviation in
Rumania of 9.9 percent. During 1930-1938 Hungarian corn yields fluctuated from a
minimum of 19.6 bushels per acre to a maximum of 36.8 bushels, a maximum difference
of 88 percent. The variation in yield of barley, oats, and rye is slightly larger
than of wheat.
-
Since changes in the total grain acreage were slight during the last decade
disregarding territorial changes - the fluctuations in production were determined
largely by variation in yields. Among cereals, wheat production is relatively most
constant. Corn production, however, varies widely.
During the last 10 years Hungarian wheat growers have enjoyed various forms
of government aid, directed toward keeping domestic prices above the world market
price. Since 1934 the Hungarian bread-grain policy, aided substantially by the export agreements with Italy and Austria, has in general been one of maintaining minimum prices. Government assistance was particularly successful in seed selection.
It is estimated that in 1935 two-thirds of the total wheat acreage was sown with
four types of improved seed. Greater stability of production in the future will depend largely on the program of reforestation of the Great Plain.
Some progress has been made in obtaining better crops of alfalfa, which is
noted for its resistance to drought and frost, but the expansion has occurred largely
at the expense of vetch. The total production of legumes, like that of fibers and
19
Michael, Louis 0., "Agricultural survey of Europe Hungary," U. s. Department of Agricul
ture, Tech Jul. 160, Jan. 1930; also Wheat Studies of the Food Research Institute, vol. The
Danube Basin as a producer and exporter."
Foreign Agriculture
742
oilseeds, has remained virtually unchanged. Fiber and oilseed production meets only
a small share of domestic needs. As already indicated, official recommendations for
expanding acreages devoted to commercial crops have so far been largely unsuccessful.
TABLE 16.-Production and yield of Hungarian grain crops, averages 1909-1913
1928-1932, 1933-1937, 1935-1939 annual 1934 to 1939
FIELD
PRODUCTION
GRAIN
CORN
RTE
1,000
1,000
1.000
WHEAT
OATS
BARLET
WHEAT
CORN
BARLET
RTE
OATS
1.000
1.000
bushe bushels bushe! bushels bushels Bushels Bushels Bushels Bushels Bushels
Average
71,490
1909-1913
60.810
31,380
32,370
28,460
19.3
27.7
19.5
24.5
21,770
19,225
18.775
19.9
24.4
18.3
25.5
34.3
20.7
29.5
18.0
25.2
35.2
79,108
73,303
28,896
28,889
1933-1937
81.070
84.07
28,625
29.001
1935-1939
85.737
92.832
28,191
28.656
1928-1932
64,824 82,599 24,380 24.983 17.868:
84.224 55.837 28.650 25.557 16.941
1.789:102.085 28.114 30.237 18.049:
1581188.606 24,325 25.579 18,629
1934
1935
1936
1937
98.778:104.799 31.6761 33.252 21,3821
112,767 88.612 35.310 35.847 24.5763
1938
1939
33.5
22.2
31.4
18.6
25.7
35.5
20.4
19.6
18.6
24.3
33.7
21.8
36.3
17.5
26.0
34.1
19.7
36.8
16.2
22.1
32.7
24.7
36.1
20.3
29.7
38.6
24.2
28.1
20.4
26.7
38.6
17.1
29.7
15.4
21.2
32.4
1935 1938, four-year average since 1939 figures include crops in new territories.
Compiled from International Yearbook of Agricultural Statistics.
TABLE 17 Hungarian production of crops other than grains, average 1935-1938;
annual 1933 to 1938
AVERAGE
CROP
1934
1933
1937
1936
1935
1938
1935-1938
1,000 tons .000 tons 1.000 tons .000 tons:1.000 tons .000 tons .000 tons
Beans. dry
5.8
3.8
Lentils
2.5
5.3
4.4
4.6
3.7
9.2
9.5
7.7
8.9
8.8
10.1
9.1
Peas dry
29.8
27.8
23.1
22.9
38.1
41.9
45.9
Total
42.8
43.1
36.1
34.3
41.3
56.6
58.7
Keep
9.8
7.4
7.2
5.7
10.2
11.2
12.2
Flax
1.6
1.6
1.3
1.1
1.9
1.8
1.7
13.9
Total fibers
11.4
9.0
8.5
6.8
12.1
13.0
4.6
2.2
2.3
3.2
5.3
5.4
4.7
Reapseed
Flaxseed
9.8
5.6
9.0
7.1
12.9
7.9
11.5
Repeated
9.5
8.0
9.1
11.5
7.4
6.5
12.6
Poppyseed
4.3
10.7
7.3
3.8
4.4
4.3
4.5
Sunflower seed
6.0
3.2
5.5
4.2
5.7
5.7
8.2
7.4
5.6
8.7
7.1
6.7
5.8
9.8
35.6
51.3
Linseed
Total oilseeds
41.6
35.3
41.9
37.0
Potatoes
2,196
1,906
2,170
1,422
Sugar beets
1.096
1,041
1,016
848
Tobacco
23.4
26.2
20.1
23.6
42.4
2,519
2,637
2.205
1.239
1,227
1.068
25.1
22.5
Compiled free International Yearbook of Agricultural Statistics and various official sources
22.5
Danubian Surpluses
743
THE LIVESTOCK ECONOMY
Livestock and poultry play an important part in Hungarian agriculture, contributing nearly 30 percent to the total farm income in 1934-1935 and over 31 percent
in 1936-1937.2 Rapid expansion in the livestock industry, however, is handicapped
by the uncertainty of feed supplies. Before the World War, the feedstuff basis was
guaranteed by the surpluses of districts later ceded to Rumania and Yugoslavia. The
extreme variability of Hungarian corn yields constitutes an especially serious lim.
iting factor. During the greater part of the post-war period there was also the dif-
ficulty of limited export opportunities for livestock and meat products. Even after
the government succeeded in obtaining rather constant export outlets, however, the
increase in livestock numbers was very slow.
The number of cattle on farms in Hungary, according to the spring census in
1938, was 1,882,000, as compared with 1,678,000 in 1934 and 1,819,000 in 1929. About
80 percent of the cattle in Hungary are now owned by small peasant farmers. Great
efforts have been made to improve the quality of cattle by selecting better breeds
and introducing more adequate feeding methods. The average annual milk yield per COW
has been increased from 355 gallons in 1924 to 435 gallons in 1937. As a result,
the total milk production of 400 million gallons now exceeds domestic needs, thus
allowing for some butter exports. Ten years ago Hungary imported butter.
According to recent estimates, the number of hogs in Hungary in 1939 was 5.5
million. In addition there were about 300,000 hogs in the regions ceded to Hungary
in November 1939. 22 In line with the changed export demand, there has been a decided
tendency to increase the number of lard-type hogs, the proportion of which in total
hog numbers rose from 5.8 percent in 1924 to 17.5 percent in 1937.
Hungarian sheep numbers increased from a low of 1,087,000 head in 1934 to
1,629,000 in 1938. It is believed that the government policy of fixed domestic wool
prices and of forcing the textile industry to take the entire domestic wool clip con-
tributed largely to this expansion. Poultry represents an important source of income, particularly to the small peasants, furnishing about 6 percent of total farm
income. Dead poultry and eggs also represent important export items.
AGRICULTURAL EXPORT TRADE
Agriculture contributes between 30 and 40 percent to the total 23 national income of Hungary and industrially produced commod ities about 52 percent. Farm prod- A1-
ucts, however, account for between 60 and 70 percent of the total export trade.
though in recent years the relative importance of agriculture in the total national
20 D. Siegescu D., Agricultural exports from Hungary during the 347E. years 1927-1937. Monthly
Bulletin of Agricultural Economics and Sociology, Aug 1938. P
21 Hungarian Economic Yearbook, 1939. P. 82.
22
U. S. Department of Agriculture Office of Foreign Agricultural Relations, 17. Special 1939.
"New Hungarian hog number estimates and feeding statistics," Belgrade May
23 Hungarian Economic Yearbook, 1939. P. 21
Rept
Foreign Agriculture
744
income has decreased, the status of farm products in the export trade shows no downward tendency (see table 18).
The amplitude of the annual fluctuations in agricultural exports depends
largely on the current size of the crops rather than on export demand. The fact
that farm products represent the greater part of all exports has determined Hungarian
foreign trade policy, and has led to many difficulties during the post-World-Mar period, when some of the important former deficit countries embarked upon a policy of
increasing their self-sufficiency in foodstuffs.
TABLE 18. Hungarian exports by classes of products in percent of total
value. 1934 to 1939
PLANT
LIVESTOCK AND
PROCESSED
TOTAL AGRICUL.
ALL OTHER
PRODUCTS
ANIMAL PRODUCTS
FARM PRODUCTS
TURAL EXPORTS
EXPORTS
Percent
Percent
Percent
Percent
Percent
5.5
:
32.3
:
30.5
(1)
:
:
38.4
:
33.0
(1)
62.8
:
28.4
64.4
71.4
34.0
37.2
28.6
34.6
35.6
:
:
30.5
66.0
:
4.5
:
:
30.1
32.5
:
31.4
:
:
:
4.9
:
:
1939
34.6
67.5
65.4
:
:
:
1938
:
1937
25.9
:
1936
5.3
:
:
1935
31.5
30.7
:
:
:
1934
:
TEAR
Processed farm products. such as wine canned meat. etc are included in *Plant products'
and Livestock and animal products* for 1938 and 1939.
Hungarian Economic Yearbook, 1939 (data for 1934-1937) Bulletin Statistique Trimestrict For
grois. 1939 (data for 1938-1939
1
EXPORTS BY COUNTRY OF DESTINATION
Before the World War approximately 75 percent of the Hungarian farm surpluses
found a free market in Austria, which in turn supplied 73 percent of the Hungarian
import needs. During the first decade after the war, Hungarian foreign trade with
the Succession States (Austria, Czechoslovakia, Rumania, and Yugoslavia) declined.
In 1930. however, these countries still took 53.8 percent of the total exports and
supplied 46.5 percent of Hungarian imports. Imports from Germany increased from 12.9
percent of the total in 1921 to 21.3 percent in 1930. During the world depression
the direction of Hungarian trade changed relatively little. The share of Czechoslovakia decreased, but the shares of Austria, Germany, and Italy were well maintained.
As in the case of many other countries, foreign exchange difficulties forced
Hungary to adopt a system of import regulations. In December 1932 the Hungarian
Clearing Bureau for Agricultural Products and Foreign Trade was established for the
purpose of arranging clearing agreements to facilitate exports. Since Hungary needed
a number of raw materials that could not be supplied by the countries participating
in the clearing system, efforts were also made to acquire freely convertible foreign
exchange from Great Britain, Egypt. the United States, and Switzerland.
Danubian Surpluses
745
Since 1934 trade connections with Germany have been greatly strengthened in
spite of a number of difficulties - outstanding among them the fact that Hungarian
manufacturing industries in many instances require the same type of raw materials
needed by German manufacturers. Hungary depended to a large extent on Germany for
these raw materials, in exchange for Hungarian farm products. As a result of the
German rearmament program, however, Hungary found it impossible to obtain from Ger-
many its usual supplies of pig iron, cellulose, and other raw materials. Nevertheless, Germany's share in total Hungarian exports increased from 11.4 percent in 1933
to 22.2 percent in 1934.
Exports to Austria and Germany together declined gradually from 46.6 percent
of the total in 1934 to 41.0 percent in 1937. After the inclusion of Austria in the
Reich, however, and the intensification of the German trade drive into southeastern
Europe, Hungarian exports to the Greater Reich increased to 45.7 percent of the total
in 1938 and to 50. percent in 1939. Czechoslovakia's share. which in 1929 was 16.4
percent as compared with Germany's 11.6 percent. fell abruptly to less than 5 percent
in 1934 and dwindled to -1.6 percent in 1939.
Italy, bound to Hungary and Austria politically as well as economically
through the Rome agreement of 1934, noticeably improved its position in Hungarian
trade. Its share was increased from 7 percent in 1929 to 8.3 percent in 1934 and to
about 13 percent in 1935-1937. Although declining slightly in 1938. Hungarian ex-
ports to Italy increased to 15.5 percent in 1939.
The share of the Danubian countries in Hungarian trade has remained compara-
tively constant, at a little less than 10 percent of the total. Switzerland was
also a steady customer, taking about 4 percent of all exports. The various European
countries now under German domination bought regularly certain crop specialties that
they are bound to need increasingly during the next few years. Until 1938 Great
Britain maintained its share of about 8 percent. In 1939 transportation difficulties
led to a sharp reduction in these exports, and trade with Great Britain has now entirely ceased.
Since two-thirds of the total Hungarian exports in recent years have been directed to Greater Germany (including Czechoslovakia) and Italy, and since the other
Danubian countries and Switzerland have also enjoyed close trade relations. no marked
changes in the geographic distribution of Hungarian exports may be expected, except
for a diversion to the Axis powers of the share formerly taken by Great Britain.
THE COMPOSITION OF FARM EXPORTS
Wheat and live animals are the outstanding Hungarian farm exports accounting
in recent years for about 30 percent of the total exports and about 50 percent of the
agricultural exports. Various measures have been adopted by the Hungarian Government
to stimulate wheat exports. A grain certificate system coupled with outright export
subsidies was in operation from 1930 to 1934. Exports were monopolized by an export Rome
syndicate, which also supervised a minimum-price guarantee introduced after the
Foreign Agriculture
746
agreement of 1934. That agreement provided for wheat export quotas to Austria and
Italy. Trade agreements with Germany, Switzerland, and several other countries also
greatly improved the grain export position.
The magnitude of the annual wheat exports depends entirely on the size of the
current crop. As a result the exports of wheat show sharp variations from year to
year, ranging from 14.8 million bushels in 1935 to 40.6 million in 1939. Nevertheless, wheat exports represent relatively the most constant surpluses in the entire
farm economy.
TABLE 19. Principal Hungarian fars exports (net), averages 1928-1932,
1935-1939. annua 1934 to 1939
AVERAGE
AVERAGE
1936
Million
Million
Million
Million
Million
Million
Million
bushe ls
bushels
bushels
37.0
19.9
1935-1939
bushels
bushels
bushels
16.8
12.2
21.0
13 2
16.0
8.9
2.4
2.6
2.6
2.8
1.7
3.6
2.7
20.8
19.2
14.8
23 6
16.0
17.7
40.6
22.5
1.1
9/8
8.4
75
4.3
1.9
..9
1.7
4.3
2.4
5
11
6
6
6
6
3
4
7
a
4
3
5
a
Peas. dry
2
4
6
6
2.0
6
3
Beans, dry
6
Oats
6
1.0
a
Barley
2
3.6
T
-
4
Rye
3.5
#
Corn
-
Flour
4
11.9
3
bushels
bushels
Total wheat
1939
1935
1928-1932
Willion
Wheat
1938
1937
1934
5
COMMODITY
Thousand Thousand Thousand Thousand Thousand Thousand Thousand Thousand
tons
toms
37
37
44
33
49
40
18
23
18
18
18
14
18
10
15
17
13
11
13
39
23
50
41
35
33
36
32
20
64
43
34
64
45
28
as
29
as
aa
as
21
23
21
15
21
7
4
3
6
11
12
4
.
.
1
11
11
26
1
Eggs
14
15
15
4
a
30
Lard and becom
17
4
Poultry
Butter
9
Meat fresh
11
8
11
9
Fruit, fresh
Tobacco
9
8
Vegetables
8
Clover seed
tons
tons
tons
6
Oilseeds
tons
28
toms
9
tons
Malt
11
11
Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Live cattle
Live hege
94
70
70
77
108
55
75
169
126
183
175
165
229
389
40
38
44
24
20
Live sheep
36
77
227
32
Compiled fres official sources
Exports of other grains are insignificant, except in years of unusually favorable harvests. Rye surpluses, averaging 3.6 million bushels annually during 19281932, were reduced by almost 50 percent during 1935-1939, largely because of the small
exports of 1935 and 1939. In the case of corn, the extreme variations in yield result
Danubian Surpluses
747
in corresponding fluctuations in the level of exports. In years of low yield Hungary
must import considerable quantities of corn. During 1935-1939 net corn imports averaged about I million bushels a year. During 1928-1932 average annual exports amounted
to 400,000 bushels.
On the whole, livestock exports have been well maintained. A decided tendency
toward increased exports of live hogs is evident, but live cattle exports have declined. Exports of animal products, such as meat, lard, butter, dead poultry. and
eggs, show considerable variation. Exports of fresh meat are small and have declined,
whereas those of lard, poultry, and eggs have been rather stable. Butter exports increased slightlyluntil 1937, but have been only nominal in recent years. Fruit and
vegetable exports vary widely in accordance with annual yields, and no definite tendency is apparent.
GEOGRAPHIC DISTRIBUTION OF FARM REPORTS
team
The importance of Germany as a market for Hungarian agricultural surpluses has
increased sharply in recent years. In 1937, before the annexation of Austria Germany
purchased 29.9 percent of total Hungarian farm exports. At that time Austria's share
amounted to 23.1 percent, so that Germany and Austr ia together took 53 percent of the
total.
As an immediate result of the annexation of Austria a new trade agreement between Hungary and Germany was signed on May 7. 1938, providing for higher quotas on
imports of the more important Hungarian farm products. The intensification of Hungarian dependence on Greater Germany increased Germany's share of total Hungarian farm
exports to 62 percent in 1938. Greater Germany and Italy together received almost
three-fourths of all Hungarian agricultural surpluses.
Germany proper became interested in the Hungarian wheat surpluses only after
1938, but Greater Germany and Italy absorbed together nearly three-fourths of total
Hungarian wheat exports during 1935-1939. Italy alone took 60 percent in 1939.
Switzerland was the only other important customer, taking 14.4 percent in 1935-1939.
Greece purchased Hungarian wheat only occasionally, as in 1937 and 1939, when its purchases amounted to about 6 percent of the total. No major shifts in wheat export markets appear likely during the next few years.
The small surplus of r ye was exported almost entirely to Greater Germany and
Italy. Corn exports are very irregular. In the frequent years of low yield, as in
1935, 1936, and 1939, Hungary depends largely on imports from Rumania and Yugoslavia.
In good crop years the Scandinavian countries were important purchasers; in 1937, for
example, their share of Hungaria corn exports amounted to over 50 percent of the
total. In 1939, however, the total net surplus of 50,000 short tons was exported to
Greater Germany. The small exports of barley go to Italy, Belgium, and Switzerland,
which countries also take the surpluses of dry beans. About half the exports of dry
peas are normally purchased by Germany. Great Britain's share of about 30 percent
will now be available to either Germany or Italy.
Foreign Agriculture
748
Hungary is on a net import basis for oleaginous raw materials. Since the
former imports of linseed and copra are now threatened, it is unlikely that even the
insignificant oilseed exports of 1935-1939 can be maintained, the greater part of
which was shipped to Greater Germany and Italy. Most of the Hungarian surpluses
of fresh fruits have been taken regularly by Greater Germany. Switzerland and former
Poland bought 9.8 and 7.3 percent. respectively, from 1935 to 1939.
Before 1938 Italy was the principal foreign market for Hungarian live cattle,
but in 1938 and 1939 was exceeded by Greater Germany. The two countries have been
virtually the only foreign markets since 1935. Much more important is the volume of
live hog exports, for which former Austria and Czechoslovakia were the traditional
markets. Greater Germany, therefore, absorbs the entire surplus. Until 1938 Great
Britain imported between one-third and one-half the total poultry exports, the remainder going to Greater Germany. Italy entered the market in 1939, and during the
next few years it may take the share formerly going to Britain. Most of the exports
of lard. bacon. and eggs go to Greater Germany.
The future geographic distribution of Hungarian farm exports is expected to
resemble that of 1938 and 1939, but with Germany predominating more than ever. since
all of Hungary's former customers except Switzerland and perhaps Italy are now under
German domination or cut off entirely. Only Great Britain's former share of the export trade (5.7 percent in 1937 and 6.9 percent in 1938) will be available to continental European importers in addition to their previous takings.
POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41
So far Hungarian export surpluses have probably been less affected by the war
than have those of Rumania. Shortages of certain products essential to the Hungarian
farm economy. especially of fertilizers and fuel, were evident immediately after the
outbreak of war. Hungary regularly imported phosphates from French Africa and the
United States. Since the use of such fertilizers increases plant resistance against
climatic changes typical of Hungary, continued shortages are likely to affect adversely the quantity and quality of the crops and the export surpluses. Transportation difficulties and shortage of coal may also reduce the level of current farm
production and exports.
THE 1940 41 OUTLOOK
At the time of the winter and spring sowings for the 1940 crop, the farm-labor
shortage in Hungary resulting from partial mobilization appears to have been less
acute than that in Rumania. The labor shortage was intensified at harvest time because of increased mobilization preceding the Hungarian demand for Transylvania,
which was subsequently ceded by Rumania. These and the other factors previously
mentioned, however, were of minor importance compared with the adverse effects of
weather conditions on the size of the 1940-41 crops and, consequently, on the current
export surpluses.
Danubian Surpluses
749
The unusually severe winter and extensive spring floods seriously damaged most
of the Hungarian crops and jeopardized the potential surpluses of livestock products.
In 1940, according to recent reliable estimates, the acreage of all cereals except
corn was about 20 percent below that of 1939. The Hungarian Ministry of Agriculture
stated early in May that serious frost and flood damage to winter seedings and retarded spring sowings necessitated shifts from bread cereals and barley and oats to
corn. 24 Information recently received indicated that much of the wheat crop had
lodged and that some rust had developed.
Reports indicate that the 1940 wheat crop was less than 80 percent of the 1939
crop. The total 1940-41 crop. including that of the new territories, is estimated at
about 75 million bushels. 25 The 1939 Hungarian crop. excluding the crops of the new
territories, amounted to 112.8 million bushels, as compared with the average of 85.4
million during 1935-1938 for Hungary as then constituted.
The 1940 rye crop probably did not exceed 30 million bushels, as compared with
35.3 million in 1939 - a decline of about 15 percent. The 1940 crop. however, in
spite of increased area, will about equal the 1935-1938 average.
In view of the feed shortage prevailing as a result of the poor 1939 corn harvest, the Hungarian Government has ordered a sharp reduction in the milling ratio for
bread grains in order to obtain larger supplies of bran. The milling ratio for wheat
cannot exceed 75 percent, and that for rye 70 percent. The reduction ordered may increase domestic bread-grain needs by about 10 percent. in addition, army requirements have resulted in an increase in domestic consumption of bread grain. In view
of these factors, no substantial exports of bread grains may be expected during the
1940-41 marketing season, even with pressure from outside of Hungary.
The 1940 barley crop was very poor. According to the International Institute
of Agriculture, from 40 to 70 percent of the area of winter barley had to be plowed
under. The total 1940-41 crop is estimated at about 32 million bushels, 27 which
represents a reduction of about 10 percent compared with the 1939 crop but only a
slight reduction compared with the 1935-1938 average. Even the larger crops of the
last decade provided only insignificant export surpluses. During 1935-1939 barley
exports averaged 300, 000 bushels annually; however, the 1940 crop will not meet domestic requirements. Reports indicate that winter oats suffered great damage. There
were no exports of oats in 1938 and 1939, and no surpluses may be expected in 1940-41.
The 1940 corn crop may reach 110 million bushels. as compared with 89 million
in 1939 and the 1935-1938 average of 93 million for Hungary as then constituted.
Low corn yields in 1939 necessitated imports from neighboring Danubian countries.
Exports are hardly possible in 1940-41 in view of the poor clover and alfalfa crops.
24
Internationaler Getreidemarkt, May 18. 1940.
25 International Institute of Agriculture. Monthly Crop Report and Agricultural Statistics,
Sept. 1940
26
Ibid., May 1940.
27 Ibid.. Sept. 1940.
Foreign Agriculture
750
Reports indicate that pastures had to be used prematurely because of a lack of fodder supplies. with a consequent deterioration of pasture conditions.
Exports of oilseeds were prohibited by the government as soon as it became
apparent that the British blockade would cut off the usual imports of copra, whale
oil, and other fats and oils. In order to increase the domestic supply of edible
oils, a decree was issued compelling all corn producers to plant soybeans on the
borders of their corn fields. A 1940 soybean area of 14,200 acres, as compared with
5,750 in 1939, was expected as a result of that measure, but no information is avail.
able as to developments or crop yields. A large part of the winter rapeseed crop was
destroyed by frost and the weight of the snow. and the spring crop was retarded by
cold and wet weather. It is believed unlikely that Hungarian oilseed crops in 1940
will be large enough to offset the loss of former imports.
Prospects for the 1940 fruit crops are far from promising. According to reliable reports. vineyards and fruit trees were greatly damaged by frost. It is estimated that from 80 to 100 percent of the peach trees, 70 percent of the cherry
trees, and 30 to 40 percent of the apricot trees were destroyed.
The livestock industry was faced with serious diff ficulties following the short
corn crop of 1939, and the severe winter and late spring intensified the shortages.
The government attempted to remedy the situation by importing corn from Rumania. Indications are that hog numbers have been reduced during the past few months because
of the feed shortage; 28 moreover large numbers of hogs and other animals were killed
by floods. Despite the introduction of meatless days, the domestic consumption of
meat has increased as a result of greater industrial activity. All these factors
will undoubtedly nfluence the level of potential livestock and meat exports during
1940-41. It is also feared that a new epidemic of hoof-and-mouth disease (which prevailed in 1938 and into 1939) may break out. In any case, it is certain that the
1940-41 surpluses of live animals, as well as of animal products, will fall far short
of the 1939 exports.
THE OUTLOOK FOR THE NEXT FEW YEARS
The most urgent problem facing the Hungarian farm economy is that of improving
-
the status of landless farm workers and peasants. This is possible only by a more
rigid land reform or by transfer of large numbers to nonagricultural industries
measures not to be expected in the near future. In the meantime no significant
shifts in the pattern of farm production may be anticipated.
No attempt has been made to appraise the effects on future farm production and
surpluses of the proposed land reform. reforestation program. and various other contemplated measures. Should these measures be adopted, however, it is quite possible
that the new leaseholds, aided by the cooperatives, would eventually cons iderably
increase the total production of animal products and of fibers and oilseeds. In view
28
Weekly Economic Report for May 4. 1940 from the American Consulate in Budapest, Hungary
Danubian Surpluses
751
of the prevailing political situation, however, it is not likely that the reform
measures will be made effective le the near future. Only minor changes may be anticipated during the next few years. The volume of export surpluses, therefore, will
depend largely on current crop conditions and the effect of the war on the avail-
ability of farm labor, fertilizer supplies, and transportation facilities.
YUGOSLAVIA
Yugoslavia is predominantly an agricultural country. According to the latest official census (in 1921) 78.9 percent of the gainfully occupied population was
engaged in agriculture, 9.9 percent in Industry, 2.6 percent in commerce, 1.7 percent
in transportation, and 2.9 percent in public service and the professions. The occu-
pational distribution has not changed significantly since that time. More recent
unofficial estimates indicate that of the total population of 15.6 million, 81 percent is engaged in farming, 30 and the total number of farm holdings is estimated at
1,986,000. The average farm must provide food and shelter for 5.3 persons.
The efficiency of the Yugoslav farm economy varies sharply from region to re-
gion. In northern Yugoslavia farming methods are generally similar to those of
Hungary, whereas in the remainder of the country they are about as primitive as in
most parts of Rumania. Although Yugoslavia regularly produces surpluses of wheat,
corn, livestock, and livestock products, it is not probable that production can be
expanded rapidly enough in the near future to make any significant contribution
toward offsetting the shortages of farm products in the deficit regions of Europe.
THE AGRICULTURAL PROBLEM IN YUGOSLAVIA
The Yugoslavian farm problem is one of providing sufficient agricultural land
for the large and increasing farm population. About 42 percent of the total area
consists of forests and unproductive land; and all of the country except the north- of
eastern section, which is a part of the Great Danubian Plain, is mountainous.
the total area of 62 million acres, only 11.7 million, or less than one-fifth, are and
suitable for intensive agriculture. In 1938, 24.2 million acres of mountainous 36 milpoor land were utilized for farming purposes. A total agricultural area of furnish
lion acres, of which more than two-thirds is land of inferior quality, must workers.
a livelihood for 10.6 million peasants and about 2 million landless farm
It is estimated that under present farming conditions in Yugoslavia at least
25 acres are needed to provide adequate subsistence for one family. At present. These
however, only 10 percent of the holdings are farms of more than 25 acres.
29 See Von O., Die sozialoskonomishche Struktur der Jugoslavisc 1937 Wirtschafts-Eneyblo
Social and Economic Franges, Structure of Yugoslavian Agriculture), Balkamleender," Berlin, The Economic Siluation of
the baedie Balkana des Balhans, vol. 1. *Die Belgrade, wirtschaftliche 1938; U. s. Lage Department der of State, Consular Report, Agrarian
referes
1919-1940. Belgrade March 14. 1940
30 Ven Franges,
in Tugoslavia,
0. Changes
in the
export of agricultural
1939. products from Tugoslavia.' Monthly
Bulletin
of Agricultural
Economics
and
Sociology,
Jan.
Foreign Agriculture
752
larger holdings account for 45 percent of the total agricultural land. The holdings of the remaining 90 percent of the farm population average about 8 acres, of
which, as a rule, only 5 acres are arable. Despite the land reform measures initiated
in 1920, the uneconomical size of most Yugoslavian farm holdings remains the most
serious obstacle in the way of a permanent improvement in agricultural conditions.
Yugoslavia was formed after the World War out of part of the former AustroHungarian Empire and all of the former Kingdoms of Montenegro and.Serbia. Land dis-
tribution and farming conditions varied greatly in these regions. "Old Serbia" was
a typical peasant country, with no large estates, whereas the former Turkish provinces
of southern Serbia, as well as former Bosnia, Hercegovina, and Dalmatia, had preserved a feudal system in which the status of the peasants bordered on serfdom.
Although the agrarian reform measures initiated in 1920 abolished feudal re-
lations in Yugoslavia, large-scale redistribution of land in southern Yugoslavia
could not be effected, since most of the peasantry there had always operated small
farms, though in a vassal relationship to their overlords. About 2.5 million acres
were distributed among 250,000 families of former serfs as a result of the land reforms. The peasants, however, continued to live on the same small holdings as before. and made no changes in their primitive farming methods.
In the northern part of the country. comprising Slovenia, Crostia-Slavonia,
and Voivodina, the situation was different. There the peasants had been freed in
1848. In contrast with the situation in southern Yugoslavia, only a small percentage
of the total area represented peasant holdings. About 750 large estates, operated
largely by farm workers, as in Hungary, comprise 2.7 million acres of land. In
northern Yugoslavia as a result of the land reform measures 1.9 million acres formerly belonging to these estates have been distributed to 275,000 families of former
farm workers and war veterans.
Altogether the agrarian reform redistributed 5.7 million acres, or 13 percent
of the total productive area, among 765,000 families. The effect on farm practices
and the level of production was slight. since most of the peasants continued to use
primitive farming methods. In the north some retrogression in farm production may
have resulted, but on the whole farming conditions there are still far superior to
those in the southern section of Yugoslavia.
Southern Yugoslavia produces few farm surpluses: most of the small farms there
are hardly able to produce enough for their own needs. The southern part of old
Serbia, south Serbia, central Bosnia and Croatia, Dalmatia. Hercegovina, and Monte-
negro must import supplies from the north. The northern stricts are virtually
the only regions capable of producing crops for export. It is significant that
illiteracy among the peasants increases progressively from less than 10 percent
in the north to over 70 percent in the southern provinces. The few remaining
large estates - maintained largely to produce high-quality seeds and improved breeds
of livestock - use tractors and steam plows. and practice advanced methods of mois-
ture
conservation. In the north. iron plows are in general use even on peasant
farms.
Danubian Surpluses
753
Nearly half the farmers in Yugoslavia are members of cooperative societies.
The peasant cooperatives have been active in providing farm implements. The agri-
cultural depression in 1929 interrupted this activity and led to a general deterior.
ation of farming practices in the southern parts of the Kingdom.
As in Rumania, a serious obstacle to increased efficiency is the peasant's
adherence to traditional customs and practices. In Slavonia, for instance, only 20
percent of the available working days are utilized for farm work. In Serbia there
are 120 official and 80 unofficial holidays, so that only 160 working days remain.
Yugoslavia cannot solve the problem of its surplus agricultural population by
land distribution alone, since there are few large estates left to divide. Moreover,
most peasant holdings are already too small to provide even a meager subsistence.
It is believed that farmers' conditions can be improved only by a slow process of agricultural intensification, which will require many years of education.
THE AGRICULTURAL PATTERN OF YUGOSLAVIA
Only about 20 percent of the total area of Yugoslavia consists of level land
suitable for farming. The best of this land is located in the north and east, where
70 percent of the area is arable. Except in some valleys, soils in other sections
of Yugoslavia are relatively unproductive. In the southwest the Karst, covering
about a fourth of the country, is predominantly barren, lacking surface water and to
ais large
extent surface soil. In this region only from 10 to 20 percent of the land
arable.
Since the southern provinces produce very little for export, only the northern
region will be considered here. The land of northern Yugoslavia consists largely of
fertile prairie soil. The valleys are ordinarily protected from inundation by the
dams on the Danube and Tisa rivers: but severe floods occasionally cause serious
damage, as in 1927, when the Danube flooded 750,000 acres of land seeded to winter
cereals.
Only spring crops like corn, dry beans, and hemp can be grown in northeastern
Yugoslavia, The northern plain is open to the cold winds of the Alps and the Carpathian Mountains, and severe cold weather is frequent. The most serious handicap to
production is the prevalence of cold northerly winds, which blow away the protective
snow blanket and result in widespread damage, which usually cannot be offset by increased spring sowing. The summer temperature is excessively high, with little pre-
cipitation. The distribution of rain is usually favorable, however, since the
greatest rainfall is in May and June. The months of July and August are very dry.
resulting in premature ripening of cereals.
CROP PRODUCTION
As in Rumanja and Hungary, grain crops are most important, accounting for by
far the largest part of the cultivated land. In 1938, 15.2 million acres or 82.2
Foreign Agriculture
754
percent were planted to grains of a total arable area of 18.5 million acres. In
some northern districts the proportion of grains was over 90 percent. Corn is the
most important single crop. accounting for about 37 percent of the arable land, fol.
lowed by wheat. with 29.3 percent.
of other food crops, occupying 1.1 million acres (5.7 percent of the arable
land) in 1938. potatoes alone accounted for 667.00 acres and legumes for 94,000. In
the same year, of 455,000 acres. or 2.5 percent, devoted to industrial crops, over 40
percent was planted to fiber crops, chiefly hemp. Oilseeds occupied 129,000 acres
and sugar beets and tobacco 72,000 and 42,000, respectively.
Since the peasants are traditionally familiar with the cultivation of wheat
and corn the acreage of both crops has tended to increase throughout the post-World.
War period. During the recent depression, when cereal prices dropped rapidly, expansion of wheat and corn acreage appeared to the peasants the only means by which
they could maintain their already low income. Between 1924 and 1934 wheat acreage
increased from 4.423 000 to 5,002,000 acres, or by 13.1 percent. The expansion in
corn acreage was even more pronounced increasing from 4,924,000 acres in 1924 to
6,565,000 in 1934 - an increase of 32.8 percent. Since 1934 no clear-cut tendency
has been apparent Production of both wheat and corn has merely shown rather wide
annual fluctuations caused largely by the peculiar climatic conditions of Yugoslavia.
Barley and oats are grown only to meet the domestic bread- and feed-grain re-
quirements The rye acreage is limited to local needs in districts inhabited by
Germans None of these grains is important in the export trade.
As in Rumania and Hungary, crop yields vary widely from year to year. The in
stability of the wheat yield is 50 percent higher than in Hungary and nearly as high
as that of Rumania The average deviation from the mean yield between 1930 and 1939
amounted to 16 2 percent as compared with 11.5 percent in Hungary. During this pe-
riod the maximum fluctuation ranged from 11.1 bushels per acre in 1932 to 21.2 in
1938 the highest eld being nearly double the lowest.
The variability of the corn yield is equal to that of wheat, the average deviation from the mean being also 16.2 percent between 1930 and 1939. The volume of
production of wheat and corn is largely determined by yields. The wheat crop fluctuated between 53.4 million bushels in 1932 and 111.3 million in 1938. The fluctuation in corn production is even more pronounced: the maximum crop of 210 million
bushels in 1937 was nearly 3 times the minimum crop of 72 million in 1928.
Thus far Yugoslavian agricultural policy has favored cereal crops. Since 1930
the government has regulated wheat prices through the Prizad (The Privileged Export
Company) a joint stock company which purchases all wheat offered by farmers at
prices well above current world market prices and attempts to find export outlets.
Gradually similar subsidies have been introduced for other farm products. Since 1938
provisions have been made to establish the necessary storage facilities for cereals,
fruits, eggs and other commodities. These plans are to be carried out by a new corporation known as "Silos, Inc.," working with the cooperatives.
Danubian Surpluses
755
Although the importance of grains has not decreased there has been a tendency
toward increased production of industrial crops. However, the expansion in fiber
crops, oilseeds, tobacco, and sugar beets has been slight so far, and has not notice.
ably affected the general farm situation.
Among the fibers, hemp is most important. Since 1931, when 93,000 acres were
planted, hemp acreage has increased gradually to 143,000. Between 1928-1932 and
1935-1938, production was doubled, rising from 26,600 to 53,700 short tons. Most of
the increase occurred between 1933 and 1936, and little expansion has taken place
since then. During the same period cotton production also increased, but the total
crop is still insignificant, amount ing in 1939 to 1,200 short tons as compared with
1,300 in 1938 and only 300 in 1933-1937. Present production meets only about 5 percent of the domestic needs. Imports of cotton in 1938 amounted to 21,600 short tons,
and imports of cotton yarns and textiles are also needed.
The acreage in legumes has remained unchanged during the last decade. The
production of dry beans, which are of exceptionally high quality, usually exceeds do.
mestic requirements; however, annual fluctuations in this crop are pronounced.
Oleaginous plants probably offer the best prospects for the future and should
take an important place in a more intensive agriculture. Before 1938 the total production of oilseeds was insufficient to meet domestic needs, which are estimated at
about 50,000 tons. In 1938 production for the first time about equaled these needs.
The government has strongly urged a shift toward oleaginous plants, and since 1933 a
continuous increase in production has been observed The Yugoslav vegetable oil industry is obliged to purchase domestic seeds, prices for which are fixed by the government agency Uljarica. Since 1934 the cultivation of soybeans has been promoted by
this company, though it has proceeded slowly to allow producers to become familiar
with the requirements of soybean culture. About half the crop is used as feed.
Tobacco is produced in the regions of low rainfall. For many years the Yugoslavian Tobacco Monopoly has maintained control over production and marketing During the depression the tobacco acreage was reduced from 54,400 acres in 1932 to
18,200 in 1934. By 1937, when the area planted amounted to 47,700 acres most of
this reduction had been recovered. Neither the 1938 area of 36,800 acres nor the
1939 area of 39,500, however, approached the 1937 level.
Indications are that the government desires to bring about an expansion of
tobacco production. A decree of the Ministry of Finance on June 16, 1939. provided
for a standardization of tobacco production and announced that only varieties approved by the Monopoly could be grown. The necessary seed is produced on exper
mental fields operated by the Monopoly. The National Tobacco Monopoly, created at
the same time, promotes improved cultural practices and attempts to develop export
outlets. Domestic consumption requires approximately 20 million pounds per year
or about 50 percent of the present crop.
31
31 U. s. Department of Agriculture Office of Foreign Agricultural Relations, Special 1939 Rept No.
389. "The oriental tobacco situation, as of October 1. 1939. Belgrade Oct. 20
Foreign Agriculture
756
TABLE
Acreage production, and yield of Yugoslav grain crops,
20.
averages 1928-1932 1933-1937, 1935-1939 annual 1933 to 1939
AVERAGES
GRAIN
1933
1934
1935
1936
1937
1938
1.000
1.000
1.000
1.000
1,000
1.000
1.000
acres
acres
acres
acres
acres
1.000
acres
acres
acres
1028 1932 103E 1937 1935 1939
1.000
1.000
acres
5.235
6,455
acres
5.051
ACREAGE
Wheat
5,760
Corn
Barley
5,137
6.2721
5,002
6.565
5,313
6,563
6,100
5,462
6,683
623
628
628
640
650
1,044
1,051
1,030
1,026
1,045
019:
890:
Bushels
581
625
634
633:
1.033
1,045
1.039
1.059:
1,042:
929:
916:
Bush-
898
9021
024
Date
els
els
Bush-
Bush
els
Bush
Bush
TIELD PER ACRE
5,377
613
Rye
1939
els
els
Bushels
5,262
6,649
5,262
6,801
917
854:
Bush
Bush
els
5.584
6,575
910
Bush
els
els
Wheat
17.1
16.5
17.0
18.8
13.7:
13.8
19.7
16.4:
21.2
18.7
Corn
23.8:
26.4
22.5
30.91
19.5
30.5
22.1
13.4
15.3
12.7:
Barley
20.1
12.5
18.1
12.4
17.9
16.5
18.5
31.6
13.1
17.1
27.5
14.0
17.7:
27.2
13.2
18.1
18.91
18.6
Date
22.93
24.61
24.21
27.5
25.1
20.8:
25.8:
23.8:
24.5
26.3
13.6
Rye
1,000 1,0001,000 11,0001,000 1,000 :1,000:1.000
bushels
bushels bushels bushels
96,516:96,582:68,328:73,100:107,422:86,238:111.330:104.488
1.000
1.000
bushels
86,170
PRODUCTION
137.2171
86,334
175,400
7,913
8,262
Barley
18,317
18.872:
Oats
21,164
22,195
Wheat
Corn
Rye
14.7
173,178:140.861:200.909:119.222:203,946: 210.061:187.229 145,432
9,659 7.688 7,719 8.002: 8,243 8,941 9,587
18,618:21,267:18,828:17.248:19,421:17.596:19,348:19.477
8.891
International Yearbook of Agricultural Statistics and various official sources
TABLE 21 Yugos lav production of crobs other than grains averages
1928 -1932, 1933-1937, 1935-1939 annua 1933 to 1939
AVERAGES
CROP
P8-13811933-1937 1935-1939
Food crops
Beans, dry
1.000
bushels
18.3
29.
Potatoes
1,602
53.7:
30.8:
12.7
10.9:
1,727
45.25
26.6
Heap
=bushels
bushels
33.0:
9.43
bushels
1,724
11.8
Flax
Cotton
1:
3:
8:
1936
1935
1934
1.000
1.000
1,000
1933
1937
1.000
1,000
.000
bushels
bushels
bushels
37.3
2,009
41.4
11,6
1:
2:
000
33.71
29.5
1,479
1,779
41.3
11.1
2:
bushels
39.
1939
.000
.000
bushels-bushels
29
1,874
1,764
57.3
1938
13.2:
55.00
12.25
4
.8:
1.3
3.3
61.
14.2
1.2
Oilseeds
1.41
2.7:
3.3
1.7
2.1:
2.3
2.6
5.01
.2
7
1.85
.2:
.4
.4
1.0
1.71
3.2
2.6
5.7
10.4:
12.3
3.1
11.1
23.1
8.6
5.31
4.4
3.1:
11.23
2.9:
9.0
3.3
9.9
Poppyseed
Soybeans
6.0:
6.0:
2.0
2.5
.9:
3.6:
.8
1.1
.7
1.75
4.2
10.1
Sunflower seed
6.71
Rapeseed
1
Hempseed
Cottonseed
15.2
Total
81
Fruits
Oliv
1
Pluss
Apples
Peaches
Pears
Cherries
Tobacco
14.1
4.43
2.73
7.7
18.8
31.7
19.7
28.85
38.0
39.5
54.3
29.9
456.4
360.81
494.2
123.91
20.31
129.7
84.51
61.91
48.6:
21.8:
24.0
13.5
18.1
30.91
482.6:
135.9:
17.3:
58.91
88.1
37.5
9.73
6.63
18.4
14.3:
53.2
33.8
381.21
687.8:
236.4:
333.7
1.650
153.6
7.9
34.8
125.18
120.4
129.5
120
38.6:
37.6:
30.80
80.5
47.21
31.7
16.51
30.0
18.3
24.9
22.9
24.7
10.1
16.2
40
22.9
I 4-year average
a 5-year average
International Yearbook of Agricultural Statistics and various official sources.
In years of good crops there are large surpluses of plums and apples. Plums
however, show extremely variable yields. During 1933 to 1939, for example, the
smallest plum crop - that of 1937 - was only 236,000 tons, compared with a record
crop in 1939 of 1,650,000. or 7 times the 1937 production. Prunes are used
Yugoslavia chiefly for the distillation of a brandy known as Slivovic. The government has established commissions to control the quality of the prunes to be ex-
in
ported.
Danubian Surpluses
767
The development of an export market for the apple crop has been hindered by
the great number of varieties grown in Yugoslavia. For that reason the authorities
have attempted to limit production to a few varieties in order to provide possible
increased exports of a standardized product.
THE LIVESTOCK ECONOMY
The importance of the livestock industry in Yugoslavia is shown by the fact
that It provided 18.3 percent of the total national income in 1937, whereas all other
branches of agriculture accounted for 24.6 percent. 32 If stable export outlets can
be found, an expansion of livestock production probably would be the most effective
means of overcoming the 111 effects of the pressure of farm population. Rapid expansion is jeopardized, however, by the precarious feedstuffs situation, which prevents
a transfer from pasture feeding to more progressive stall feeding.
Before the land reform, the feudal economy made it impossible to produce feed-
stuffs in about a third of the territory comprising present Yugoslavia. Although the
clover and alfalfa acreage has been expanded, the production of feedstuffs is still
00 limited to warrant a large increase in livestock numbers. The uncertainty of the
corn yield is also a limiting factor. Furthermore, a change from an extensive to an
intensive pastoral economy could only be accomplished over an extended period of time.
Nevertheless, various government measures have resulted in a gradual improve-
ment of cattle and hog breeds. During the last decade a slight upward trend in livestock numbers has been apparent (see table 22). To many small peasant farmers, the
sale of poultry and eggs represents virtually the only source of cash income.
TABLE 22. -Livestock numbers in Yugoslavia, 1925, 1934, 1938, and 1939
2,792
3,451
:
10,137
:
22,800
4,267
1,273
3,503
10,154
4,225
22,500
:
:
8,868
:
21,500
1,264
Thousands
:
3,990
:
:
7,907
:
:
:
16,800
:
3,768
2,802
1,206
:
Poultry
1,106
Thousands
:
Sheep
: Thousands
Thousands
1939
1938
:
:
:
Hogs
:
Cattle
1934
:
:
:
Horses
1925
:
KIND
:
Compiled from official sources.
THE AGRICULTURAL EXPORT TRADE
Although exportable farm surpluses vary widely in accordance with crop yields,
Yugoslavian agricultural exports constitute regularly between 50 and 60 percent of
32
The Royal Institute of International Affairs, South-Eastern Europe, A Political and Economic
Survey, London, 1939, P. 144.
Foreign Agriculture
758
the value of all exports. Total Yugoslav farm exports are divided almost equally
between vegetable and animal products.
Prior to 1930 Yugoslavia's imports exceeded the value of exports. The balance
of payments was settled largely by emigrant remittances and by Germany's reparation
payments. Since both these factors have now disappeared and hardly any capital import is forthcoming, Yugoslavia has had to make special efforts to maintain a high
volume of exports. This is virtually the only method of assuring the country of
sufficient foreign exchange to obtain her needed fibers and manufactured products.
TABLE 23.-Value of Yugoslavian exports by class of product, average 1935-1939,
annual 1935 to 1939
CLASS OF PRODUCT
AVERAGE
1929
1938
1937
1936
1935
1935-1939
Million : Million : Million :- Million 1 Million : Million
:
dinars : dinars : dinars : dinars : dinars : dinars
1
1,595
1,404
777
:
373
383
:
:
455
1,004
1,401
:
783
2,805
571
:
508
1,320
1,323
2,918
:
:
:
:
:
:
:
:
:
606
563
1,368
:
779
2,688
:
:
:
262
401
1,535
1,939
5,048
:
218
401
3,474
5,521
:
:
:
:
545
:
Metals
1,451
:
:
773
1,243
:
1,118
2,694
5,047
:
1,132
6,272
:
:
2,250
4,376
:
4,030
:
Total exports
Total farm exports
Vegetable products
Animal products
Forestry products
Mineral products
489
PERCENTAGE OF TOTAL EXPORTS
: Percent : Percent : Percent : Percent : Percent : Percent
:
6.8
:
:
:
:
10.1
18.2
10.3
49.9
50.1
15.4
:
:
:
:
9.0
:
15.5
54.7
55.6
:
:
2
a
9.0
a
9.7
:
:
:
:
:
:
:
:
9.2
12.4
45.3
a
:
6.0
:
12.5
50.9
49.1
52.9
a
:
2
2
:
2
a
10.0
44.2
:
5.4
55.8
53.9
:
19.2
46.1
2
49.7
53.3
:
:
Metals
50.3
55.4
a
Vegetable products
Animal products
Forestry products
Mineral products
61.6
:
55.8
2
Total farm exports
7.6
9.7
:
One dinar at the current official rate of exchange 2.2420 cents.
As percentage of total fara products
Compiled from official sources.
2
EXPORTS BY COUNTRY OF DESTINATION
Until 1935, when Yugoslavia participated in the League of Nations' economic
sanctions against Italy, the Italian market was the principal outlet for Yugoslavian
exports, taking more than 28 percent of the total. In 1935, however, Italy's share
dropped to 16.7 percent and in 1936 to 3.1 percent: in 1939 it was still only 10.6
percent.
Germany's share in the export trade of Yugoslavia rose gradually until 1937.
Contrary to the situation in Hungary, the annexation of Austria did not result in any
marked increase in the combined purchases of Greater Germany. The German block,
Danubian Surpluses
759
consisting of Germany, Austria, and Czechoslovakia, now buys nearly half the total
exports. Greater Germany and Italy together took 56 percent of the total exports
during 1935-1939.
An increase in exports to Italy may be expected as a result of a trade agreement recently concluded. in September 1939 Yugoslavia owed Italy a clearing debt of
135 million dinars (about 3 million dollars), which was to be met by increased exports of timber, minerals, and farm products.
Exports to Great Britain had already declined to 6.6 percent of the total in
1939. France took less than 3 percent of total exports during 1935-1939. There is
little possibility of a further expansion of Greater Germany's share except by the addition of the volume formerly taken by Great Britain, unless Belgium and the Netherlands, now under German domination, lose their share of 7.9 percent.
TABLE 24. Exports from Yugoslavia by country of destination,
average 1935-1939, annual 1935 to 1939
AVERAGE
1935
1936
1937
1938
1939
Million
Million
Willion
Million
Million
dinars
dinars
dinars
dinars
dinars
1,039
1,361
1,814
Austria
577
640
848
306
Crechoelovakia
540
540
493
1,868
2,219
152
292
212
France
Italy
Switzerland
Rumania, Greece, Hungary:
United States
Million
dinars
1,762
1,820
398
801
554
2,702
2,518
2,563
2,374
662
446
452
401
432
465
485
367
392
63
86
339
75
140
141
672
137
587
324
584
461
97
98
112
84
168
112
365
450
456
397
489
431
256
281
253
Percent
Percent
225
214
291
:)
Greater Germany
Belgium, Netherlands
Great Britain
$
751
:
Germany
1935 1939
:
COUNTRY
PERCENTAGE OF TOTAL EXPORTS
Percent
35.9 3
:
Germany
18.6 :
23.7 :
Austria
14.3
14.6
13.5
6.1
Czechoslovakia
13.4
12.3
7.9
46.3
50.7
43.1
Greater Germany
31.9
36.0
7.9
14.5
11.0
49.9
46.4
47.0
7.9
ร
Percent :
21.7 :
:
Percent
:
Percent :
Belgium, Netherlands
3.8
6.7
10.6
8.8
8.2
Great Britain
5.3
9.9
7.4
9.6
6.6
7.8
France
1.6
2.0
5.4
1.5
2.5
2.8
16.7
3.1
9.4
6.4
10.6
9.1
2.4
2.2
1.8
1.7
3.0
2.2
8.5
5.0
Italy
Switzerland
Rumania, Greece, Hungary:
United States
9.1
10.3
7.3
7.9
8.8
5.6
4.9
4.6
5.1
5.1
Compiled free Statistique du commerce exterieur (annual)
Foreign Agriculture
760
COMPOSITION OF AGRICULTURAL EXPORTS
In accordance with the predominance of corn and wheat in the production pat.
tern of Yugoslavian agriculture, these grains constitute the principal agricultural
export items. Since both crops are characterized by extreme fluctuations in yield,
the surpluses available for export vary sharply from year to year. Even in years of
favorable yields most of the corn and wheat production is needed domestically. It
is estimated that 57 percent of the population consumes cornbread exclusively and
that only 24 percent consumes wheat.
The annual per-capita consumption of corn is 6.2 bushels and that of wheat
3.6. Domest corn needs may be calculated as follows: for human consumption, about
95 million bushels: for feeding hogs and poultry, from 25 to 40; and for seed, about
6 million or a total of 125 to 140 million bushels. The consumption of wheat is es.
timated at 55 million bushels, to which must be added from 15 to 17 million for seed.
Normally from 7 to 10 million bushels of wheat are carried over.
33
It is obvious that large exports are possible only if favorable yields prevail. Because of low yields, corn exports in 1935 and 1939 were below 4 million
bushels whereas the 1937 exports, as a result of favorable yields in 1936 and 1937,
were more than 8 times those of 1935 and 1939. The volume of wheat exports has been
declining the average for 1935-1939 was 30 percent below that of 1928-1932. Moreover, the annual fluctuations are pronounced. Between 1935 and 1939, for example,
wheat exports ranged from a little over I million bushels in 1935 to 12 million in
1937. Exports of other grains are negligible. During 1938 and 1939 there were no
exports of barley. oats, and rye.
Dry beans have long been important in Yugoslav farm exports. In line with the
increased production during the last decade, average exports during 1935-1939 were 55
percent above the 1928-1932 level. The annual variations in exportable surpluses are
not so sharp as those for grains. During the last 5 years, maximum exports of 49,000
tons in 1937 compare with minimum exports of 14,000 tons in 1939.
Hemp is the only industrial crop which has shown a continuously high level of
exports during the last 5 years. The 1935-1939 export level was more than double
that of 1928-1932.
With respect to oilseeds, Yugoslavia has not been in a position to supply her
own needs This is of special significance in view of the fact that oilseeds are
urgently needed in all countries under German domination. Production and marketing
are under the supervision of the government-controlled Uljarica, an organization
which maintains high domestic prices virtually forcing producers to sign contracts
for the ent harvest. Soybeans have been exported in small quantities, principally
to Germany the only country willing to pay the high price demanded. Total exports
of soybeans amounted to 800 tons in 1937 and 4,700 in 1938. of the 1939 crop
of
33
These figures are estimates based on computations by 0. von Franges. The present consump
tion level is probably higher. since the partial mobilization and some shortages in other foods
tend to Increase the consumption of bread grains.
Danubian Surpluses
761
10,100 tons, only 5,500 were taken by the Uljarica, partly for export; the remainder
was used by the peasants as protein feed. In spite of government efforts to make the
peasants expand their oilseed acreages, net imports of oilseeds increased from 11.000
tons in 1937 to 21,000 in 1939.
Yugoslav fruit crops, particularly prunes, apples, and grapes, are regularly
above domestic needs. In years of favorable yield, as in 1939, it is difficult to
find sufficient export outlets. During 1935-1939 exports of fresh fruit ranged
between 29,000 and 77,000 tons annually. Exports of dried prunes fluctuated between
8.000 and 42,000 tons annually during the same period.
The Yugoslav livestock industry exports substantial quantities of live cattle,
live hogs, pork, dead poultry, and eggs. Live cattle exports, however, were cut in
half between 1928-1932 and 1935-1939, whereas live hog exports were well maintained.
Exports of poultry and eggs usually exceed in value those of live cattle and hogs
and are nearly equal to those of fresh pork.
TABLE 25. -Principal Yugoslavian farm exports, averages 1928-1932
1935-1939; annual 1935 to 1939
AVERAGE
COMMODITIES
AVERAGE
1936
1935
1928-1932
1937
1938
1939
1935 1939
Million Nillion : Million : Willion Million : Million Million
bushe Is bushels : bushels : bushels : bushels : bushels : busheis
:
0.2
0.2
:
0.4
13.9
0.1
:
0.6
-
:
0.1
3.7
7.3
:
:
0.1
18.4
0.5
:
Rye
0.4
-
28.5
7.9
:
:
-0.1
Oats
:
Barley
0.1
4.5
:
3.6
0.2
12.1
:
:
15.3
:
8.0
Corn
11.0
:
1.2
:
10.5
:
Wheat, flour
Thousand Thousand :Thousand : Thousand : Thousand Thousand :Thousand
4.0
6.1
3.5
4.9
3.4
3.4
24.0
Flax
2.0
8.0
11.0
:
15.0
15.0
Fruit, fresh
77.0
64.0
:
29.0
:
69.0
Prunes, dry
14.0
30.0
10.0
:
8.0
26.0
12.0
14.0
14.0
18.0
2.0
2.2
2.4
2.1
1.7
23.0
23.0
21.0
19.0
3.0
3.0
:
-
Animal fats
3.0
-3.7
-21.1
-0.2
-14.2
2.6
:
Oilseeds
:
-
:
Cheese, butter:
Meat, fresh
Meat products
:
Eggs
-1.2
23.0
12.2
75.0
62.8
42.0
20.8
17.0
15.0
1.9
2.1
21.0
21.4
3.7
3.2
-11.4
12.6
:
22.0
2
Hemp
:
2.6
26.0
:
4.0
22.0
2
4.0
21.0
:
3.6
10.0
:
Hops
2.9
:
4.1
:
6.7
28.0
14.0
30.0
:
3.1
49.0
tons
1
19.0
:
30.0
tons
tons
:
Tobacco
18.0
tons
:
Beans, dry
tons
tons
:
:
tons
2.1
1.5
:
:Thousands: Thousands Thousands: Thousands Thousands Thousands
:
:
T
Average 1935-1938
Average 1936-1939.
307.0
28.0
260.0
:
301.0
71.4
:
218.0
52.0
:
245.0
38.5
35.0
298.0
:
Live hogs
91.9
:
Live cattle
45.0
277.0
Compiled from official sources.
Foreign Agriculture
762
GEOGRAPHIC DISTRIBUTION OF FARM EXPORTS
The greater part of the Yugoslavian agricultural surplus it sent to the markets
of Central Europe. For some products, such as wheat and corn, the markets have
changed from year to year, but for fruits and livestock products they have remained
substantially the same during the last 5 years.
Austria, Czechoslovakia, and Italy were the principal purchasers of wheat
throughout most of the post-war period. To a large extent, their wheat quotas were
fixed by trade agreements. However, in 1936 and 1937, years of large export surpluses, Great Britain and France took more than 29 and 42 percent, respectively, of
total wheat exports. In 1938 Greater Germany contracted for the entire surplus. In
1939, 86 percent went to Germany and the remainder to Italy. No wheat export surpluses may be expected during the 1940-41 marketing year. Surpluses in the next few
years will be absorbed by Greater Germany and Italy.
The geographic distribution of corn exports has varied greatly from year to
year. In 1935 and 1936 more than 80 percent was exported to the countries comprising Greater Germany. Their share, however, declined sharply in 1938 and 1939, when
Great Britain and the Scandinavian and Low Countries entered the market. The Netherlands and Denmark, like Greater Germany, are now cut off from overseas supplies of
feedstuffs. Consequently, they must depend largely on the corn surpluses of south-
eastern Europe. In view of urgent German needs there is little likelihood that these
countries can obtain even a small part of their requirements.
Greece is normally Yugoslavia's chief market for dry beans, taking from 30 to
40 percent of the total surplus. The United States imported about 10 percent during
1935-1939, or a little less than Greater Germany. Exports have been prohibited
since September 1939.
Most of the tobacco exports have normally been purchased by former Czechoslo-
vakia. France and former Poland occasionally took small quantities. Germany is attempting to encourage production of Virginia tobacco in Yugoslavia, and in the future
may take a portion of the total surpluses.
Greater Germany is by far the most important customer for Yugoslavian fruit.
Only small quantities are exported to Switzerland. Poland purchased some dried prunes
before 1939. No changes in the distribution of fruit exports may be expected.
Greater Germany and Italy took about 50 percent of all exports of live cattle during 1935-1939, and Greece and Great Britain each purchased about 10 percent.
In 1939 nearly 90 percent went to the Axis powers, and Greece took a small share.
During the last few years virtually the entire surplus of live hogs and meat
products and between half and two-thirds of the eggs have been exported to Germany,
Austria, and Czechoslovakia. Switzerland and Italy took 20 and 10 percent, respect-
lively, of the exports of eggs. Great Britain's share of 12 percent will now be
available to Germany or Italy.
Danubian Surpluses
763
POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41
THE 1940-41 OUTLOOK
As in Hungary, the volume of the 1940-41 surpluses of farm products will be
affected largely by the adverse weather conditions of last winter and spring rather
than by the direct influence of the war. Some shortage of farm labor and draft animals has persisted because of the mobilization: however, these factors alone probably
would not have greatly affected the volume of crop surpluses and livestock exports
in 1940-41 If average or better-than-average yields had been realized. Difficulties
in obtaining formerly imported farm products are certain to diminish exports of fibers and oilseeds, since domestic products must now take the place of imports cut
off by the British blockade.
The outlook for the 1940-41 wheat crop is far from promising. According to
reliable information, the sowing of the winter wheat crop was restricted by bad
weather in several important producing regions. This factor, together with the mobilization of many farmers, resulted in a reduction of 500,000 acres in the winter
wheat acreage, or of about 9 percent. In addition, spring floods damaged 125,000
acres. Reports indicate that the 1940 crop was from 35 to 40 percent below that of
1939, and about 25 percent below the average for 1935-1939. No wheat exports are
likely during 1940-41, especially since the rye crop is estimated at 20 percent below
that of 1939 and 9 percent below the average for 1935-1938.
The 1940 production of barley, which serves as a bread grain for 10 percent
of the population, is estimated at 24 percent below the 1939 crop and 20 percent below the 1935-1939 average. The oats crop is placed at 25 percent below that of 1939
and 17 percent below the 1935-1939 average. Unless supplies can be obtained from
neighboring countries there will be a marked shortage of oats in Yugoslavia during
1940-41.
With respect to corn, however, the 1940 crop is estimated at 40 million bushels above the 1939 crop and 15 million above the average for 1935-1939. Although
most of the apparent surplus would normally be retained to compensate for the shortage in other grain crops, German pressure may succeed in making about 20 million
bushels available for export.
Since September 1939 exports of dry beans have been prohibited by government
decree. In view of the unfavorable bread-grain outlook, it is unlikely that this
prohibition will be cancel led, even though the crop probably will be close to normal.
Root crops and oleaginous plants apparently suffered relatively little from
the adverse weather conditions; however, Yugoslavia will need its total product on of
oilseeds for domestic purposes. It is improbable that Germany will receive an increased share of the soybean crop.
The severe winter and unfavorable spring seriously reduced the fruit crops.
It is estimated that this year's prune crop probably did not amount to more than 20
Foreign Agriculture
764
percent of the 1939 crop, or 65 percent of the average for 1935-1939. The export
surplus of prunes accordingly will be drastically reduced. The cold and wet spring
also seriously damaged vine crops.
As a consequence of the feed shortage, a reduction in the number of lard-type
hogs seems certain. In order to conserve supplies the government has introduced
three meatless days a week. In view of the feed shortage and the livestock losses
resulting from floods and disease, it is believed that livestock numbers will be reduced during the 1940-41 marketing season. This may not affect the level of the
1940-41 exports of hogs, and it is possible that the shipments may again approach
300,000 hogs.
THE OUTLOOK AFTER 1940-41
As in Rumania and Hungary, the long-time possibilities of a more intensive
farm production and of shifts to industrial crops depend largely on factors connected
with the present land distribution and the status of the peasants. Yugoslavian economists are agreed that the most serious hand icap to a permanent improvement of farming conditions lies in the existence of an excessive agricultural population and the
uneconomic size of the average peasant holding.
The prevalence of uneconomic holdings tends to prevent an increase in produc-
tivity. Moreover, since most of the farms lack sufficient feedstuffs, the most effective means of bringing about an intensification of farming - namely, through an
increase in livestock numbers - can be realized only after the feedstuffs basis has
been greatly increased and the peasants have learned the essentials of progressive
breeding and feeding methods. Lack of capital and the difficulties in maintaining
a subsistence level of consumption on the small holdings seriously retard any rapid
improvement in farming methods. 35 According to an investigation by the Yugoslavian
agricultural cooperatives, only 438 of every 1,000 peasants possess iron plows, 183
have wooden plows, and 379 own none at all. There is urgent need of at least 100,000
additional iron plows.
Under the existing structure of the Yugoslavian farm economy, no essential
shifts in production or increases in productivity may be expected during the next
few years. The tendency toward acreage increases in industrial crops, such as oilseeds, fibers, and tobacco, may be accelerated. In view, however, of the lack of
textiles and oilseeds formerly imported from abroad, an increase in the exportable
surpluses of these crops is unlikely. No expansion in grain acreage may be expected.
The export level will be determined by current yields. The conclusion seems warranted that a significant expansion in farm production must await improvement of the
peasants' status. This in turn will tend to increase domestic consumpt ion and thus
curtail exportable surpluses.
34
American Consulate, Belgrade, July 8. 1940.
35
Mirkovic. Miji, Yugoslavian Agricultural Policy, abstr. in Sรผdost-Economist, March 29,1940
36 Sudast-Echo, Feb. 16. 1940
Danubian Surpluses
765
BULGARIA
Bulgaria is the smallest of the countries constituting the Danube Basin, with
population of 6.3 million inhabitants. The territorial changes following the Balkan
wars and the World War did not greatly alter the total area of the country. Of the
districts ceded by Bulgaria to Rumania and Yugoslavia, comprising an area of 2.3 million acres, 50 percent consisted of plow land. On the other hand, of the 4 million
acres gained from Turkey, less than 10 percent was plow land. These shifts had a
marked effect on the production pattern of Bulgarian agriculture and on the composition of farm surpluses.
a
Over 80 percent of the population is engaged in farming, and farm products con-
stitute 95 percent of all exports. The territorial changes necessarily affected the
post-World-Mar development of the Bulgarian farm economy and the development of the
national economy as well. Before the acquisition of southern Dobrogea from Rumania,
of a total area of 25.5 million acres, only 10.1 million, or 39.6 percent, were arable. The return of this fertile region has noticeably improved the ratio of arable
to total land, since 70 percent of the total area of southern Dobrogea is in grains.
Like most Danubian countries, Bulgaria was predominantly a grain-producing
country before the Norld War. Grain exports during 1935-1939 declined by 58 percent
for wheat, 76 percent for corn, 90 percent for rye, and 81 percent for barley, compared with 1909-1912. It is significant, however, that the country has made progress
in adjusting agricultural production by the adoption of a more intensive agriculture,
with the result that today increased exports of tobacco, fruits, and oilseeds partly
offset the loss of grain exports.
THE AGRICULTURAL STRUCTURE OF BULGARIA
Outstanding problems confronting Bulgarian agriculture are those arising from
the small-sized farms, scattered holdings, and the steadily increasing pressure of
farm population. Even before the World Mar Bulgaria was a peasant country, with few
large estates. In 1908 only 0.1 percent of the total number of farms consisted of
holdings of more than 250 acres, covering 5.5 percent of the total area. About 45.5
percent of all farms had less than 5 acres, occupying only 6.9 percent of the total
area. Most of the farms ranged between 5 and 75 acres, 42.3 percent ranging from 5
to 25 acres and 36.5 percent from 25 to 75.
Since even before the World War virtually all land was in small and mediumsized farms, it is obvious that land reform could make little change in land distri-
bution. Nevertheless, the reform law of 1921 provided for expropriation of all
holdings exceeding 75 acres. In 1924 and again in 1930, however, the expropri
measures were modified, with the result that the total area disposed of did not ex-
ceed 200,000 acres.
Population increase and continuous subdivision of land through inheritance
have tended to reduce the size of the holdings. In 1926, of a total of 750,000 farms
Foreign Agriculture
766
427,000. or 57 percent, were less than 12.5 acres in extent. 37 At that time the average size of all farms was 15 acres. By 1934 it had declined to 12.5 acres. 38
Since opportunities in other occupations are limited, little migration from
the land can take place. The problem of pressure of the surplus farm population is
even more serious in Bulgaria than in the other Danubian countries. It is estimated
that there are 5.8 farm workers for each 25 acres of land, as compared with 4.1 in
Rumania, 4.0 in Yugoslavia, and 2.8 in Hungary. 39 Studies by the Bulgarian Institute of Agricultural Economics show that only about 60 percent of the supply of
available labor can be effectively utilized.
These conditions indicate clearly that intensification of agriculture is the
only solution of the problem of the farm labor surplus. It appears, however, that
-
serious obstacles must be overcome before such intensification can be accomplished
foremost among them the existing system of landholdings, which makes for inefficiency in the use of labor.
Through subdivision, resulting from inheritance and community legislation,
the average Bulgarian farm of 12.5 acres now consists of 15 different strips of
land, often widely separated. Between 7 and 10 percent of the human labor and 10 to
20 percent of the animal labor is wasted in traveling to and from these scattered
fields.
The uneconomic size of farm holdings necessarily retards the adoption of advanced farming methods. Although some progress has been made in replacing wooden
with iron plows, the Central Statistical Office estimates that in 1934 only 391,000
iron plows were in use, whereas the number of wooden plans totaled 457,000. On the
average one iron plow served for the cultivation of 75 acres of land. Harrows were
owned on only 5 percent of the farms. 40
To remedy this situation the government on April 29, 1939, enacted a law to
facilitate the distribution of agricultural implements to farmers.41 Under this law
the Agricultural and Cooperative Bank of Bulgaria was authorized to purchase and dis-
tribute farm implements against non-interest-bearing loans to be repaid in 5 years.
It was provided that about 100,000 units, valued at 500 million leva would
be supplied in 1939-40. In view of the difficulties resulting from the war, it
seems highly improbable that more than a small fraction of this number will be
supplied.
37
Molloff J. St., Die sozialรณkonomische Struktur der bulgarischen Landwirtschaft (The Social
and 38 Economic Structure of Bulgarian Agriculture) Berlin, 1936. P. 118.
Royal
Institute
of P.
International
Affairs. South-Eastern Europe, A Political and Economic
Survey,
London,
1939,
170.
39
40 Ouzounoff. Atanas. Bulgarian Agriculture and Measures for its Improvement, Sofia, 1936.
41
Molloff, T. St. op. cit., pp. 26. 119.
ciology, International Dec. 1939. Institute P. 548. of Agriculture Monthly Bulletin of Agricultural Economics and so42
cents. One 1er at the August 1939 official rate of exchange (latest available quotation) 1.211
Danubian Surpluses
767
To these difficulties must be added the inherent attitude of the Bulgarian
peasant. "The extensive farm practices prevailing cannot be changed as rapidly as
is des irable, since the psychological basis for a transition to intensive farming is
still lacking and the traditional habits of most of the peasants cannot be easily
overcome."
served.
Nevertheless, a tendency toward more intensive agriculture may be ob-
PROGRESS TOWARD INTERSIFICATION OF AGRICULTURE
The authorities have exerted every effort to induce the peasants to expand
production of crops requiring a larger supply of labor than is required for grains.
The closer trade relations with Germany and the German demand for increased quanti-
ties of these products have accelerated this tendency. The shift from grain to industrial crops, however, has not yet progressed far. Moreover, the most effective
means of intensifying the farming system - expansion of livestock production - faces
serious obstacles.
The authorities are also endeavoring to educate the farmers by extension
work, through the agronomes, or county agents. In addition the areas devoted to
some crops are being regulated through government monopolies and by price-fixing
and buying operations, and the government is distributing high-quality seeds and
aiding financially in the construction of dairies and warehouses. These measures,
it is believed, will encourage farmers to extend the production of more intensive
crops.
Probably more progress toward intensification was made in Bulgaria during
the post-World-War period than in any other Danubian country. Table 26 shows the
expansion in specified crops, using the pre-World-War period (1908-1912 = 100) as a
basis for comparison. It may be observed that the relative changes in acreage have
been pronounced, not only when compared with the period prior to the World Mar, but
also when compared with the 5-year period 1930-1934. It will also be noticed, how-
ever, that in spite of the rapid expansion, most of these crops still occupy a relatively small proportion of the total cultivated land (see table 27).
TABLE 26.-Acreage expansion of specified Bulgarian crops, averages, 1908-1912,
1930-1934; and 1938
TOBACCO
Index
Index
1908-1912
100
1930-1934
3,390
1938
8,000
SUGAR BEETS
HEMP
Index
Index
Index
100
100
100
349
:
1,524
:
3,990
Index
100
:
100
141
239
:
:
:
:
:
541
ORCHARDS
:
541
:
:
:
500
COTTON
:
:
SUNFLOWERS
:
YEAR
270
390
:
:
:
:
:
1908-1911
1930-1934 data derived from J. St. Molloff (see footnote 37) 1938 data compiled
from
officialand
sources.
43
Molloff, J. St. op. cit., P. 108.
Foreign Agriculture
768
LAND UTILIZATION
As in all other Danubian countries, grain crops predominate in Bulgarian agri-
culture, although the proportion of grain acreage (67.7 percent of the cultivated
land) is smaller than in any other Danubian country. About half the grain acreage is
devoted to wheat, one-fourth to corn, and one-fourth to rye, barley, and oats. of
the food crops other than grains, which occupy 5 percent of the cultivated land, dry
beans are by far the most important, accounting for half the area devoted to such
crops.
The acreage in industrial crops has increased noticeably, but at present still
accounts for only 8.7 percent of the total cultivated land. Oleaginous plants con.
stitute the greater part of such acreage, followed by fiber crops, tobacco, and
sugar.
It is characteristic of Bulgaria that in spite of the relative scarcity of
land the prevailing primitive crop system allows 11.7 percent of the arable land to
remain fallow each year. In this respect also progress has been made, for the share
of fallow land was over 20 percent before the World-War.
The present distribution of acreage among the various crops in 1938 is shown
in table 27.
TABLE 27. -Distribution of Bulgarian crop acreage, 1938 1
PERCENTAGE
PERCENTAGE
LAND DISTRIBUTION
OF CULTI-
ACREASE
LAND DISTRIBOTION
OF CULTI-
AGREASE
VATED LAND
VATED LAND
:1,000 dores: Percent :
:
1,730
:
3,447
Corn
:Total oilseeds
34.1 :: Sunflower seed
17.1 :: Cottonseed
67.9
Barley
556
5.5
Rye
465
Oats
356
4.6 :: Soybeans
3.5
:: Other
504
5.0
Total food crops
Beans
247
Watermelons
140
:: Rapeseed
Tobacco
2.4
: Sugar beets
1.4 : Rotation meadow
Potatoes
49
.5 :: and other feed
Peppers
15
.2 :: crops
Flax
1.7 : Fallow
140
1.4 Total culti
25
3 :: tivated land
1 : Total acreage
:
7
Hemp
172
:
Cotton
:
Total fibers
Acreages of minor crops are included in the subtotals
International Yearbook of Agricultural Statistics.
734
7.3
467
4.6
:
Wheat
Percent
::
:
6,862
:
Total grains
1.000
acres:
140
1.4
54
5
30
.3
43
.4
89
30
9
.3
645
6.4
1,180
11.7
10,099
25,488
Denubian Surpluses
769
THE PATTERN OF AGRICULTURAL PRODUCTION
ACREASE. FIELD, AND PRODUCTION OF PRINCIPAL CROPS
For about 70 percent of the Bulgarian population wheat and rye are the principal food grains, and the remaining 30 percent uses corn. The acreage and productjon of wheat and corn during the last two decades, however, have not kept pace with
the population increase. As a result the available surpluses have been noticeably
reduced. Few changes have taken place during the last decade in the total area de-
voted to grain crops. A slight increase in the wheat acreage was offset by a de-
crease in the acreage sown to corn, rye, barley, and oats. As a result of the
government program of agricultural intensification, further reductions in grain
acreage may be expected. 44
Better seed selection and a more advanced system of crop rotation may eventually increase average yields. Field experiments of the Sofia Experiment Station
have shown that even a slight improvement in the rotation system, with increased use
of fertilizers, will greatly raise the present yield of most grains. 45 It does not
appear, however, that such improvements can be attained in the near future.
As in all other Danubian countries, climatic conditions in Bulgaria do not
permit constant yields. The average deviation from the mean yield of wheat was 13.2
percent during 1930-1939, and that for corn was 9.4 percent. The record wheat yield
of 1938 led to an average level of wheat production of 64.4 million bushels during
1935-1939, 20 percent above the average for 1933-1937 and 28 percent above that for
1928-1932. The extent of the crop fluctuations is shown by the fact that the 1938
crop of 79 million bushels was twice the size of the 1934 crop of 39.6 million,
whereas the 1938 corn crop of 21 million bushels was little more than half the 1935
crop of 39.7 million.
Tobacco production, insignificant before the World Mar, has become the most
important source of export surpluses, largely because of the acquisition after the
Balkan war of extensive tobacco-growing districts from Turkey. The Ministry of Agriculture has endeavored to improve the quality of the tobacco crop by providing
peasants with good plants, combatting various plant diseases, and establishing
proper facilities for drying and manufacturing. The government virtually regulates
the area that may be planted to tobacco each year. During the depression, this
area was sharply restricted, but since that time much of the acreage reduction has
been recovered as a result of improved export possibilities. The Agricultural and
Cooperative Bank purchases tobacco at fixed prices whenever the market situation
warrants this action.
Before the World War Bulgaria had to import more than 10,000 tons of sugar
annually. During the last decade, however, domestic production of sugar beets has
44
45
Molloff, J. St., op. cit. P. 124.
It should be noted that the data on acreage and production after 1930 are not strictly comparable with those of the period before 1936. since the method of collecting these statistics
has been changed.
Foreign Agriculture
770
been sufficient to meet total domest ic needs. The government controls the sugar best
acreage through agreements with sugar refineries. This control explains in part the
sharp annual fluctuations in production.
TABLE 28 Acreage yie ld and production of Bulgarian grain crops, averages
1928-1932 933-1937, 1935-1939, annual 1933 to 1939
1028-1932
1935-1939
1933
1.000
acres
1933
1934
1935
1936
1937
1938
1939
1.000
1.000
1.000
1.000
1,000
1.000
acres
acres
acres
acres
acres
1.000
acres
1.000
1,000
acres
2.931
actes
3.025
Rye
563
491
471
Barley
603
549
5393
Oats
Corn
321
316
313:
327
318
757
.720
674
1,796
1,692
ACREAGE
Wheat
1
Bush
Bush
els
els
FIELD PER ACRE
3,086
Bush
els
Bush
els
12:7
Rye
16.9
16.9
18.0
13.0
Barley
24.7
Oats
23.2
Corn
17.9
24.8:
25.3:
20.5:
1,000
18:8
26.8
27.4
20.8
50.338
Barley
5378
5401
555.
583
1,000
15 2
16.1
18.4
1,000
2991
1.653
Bush
els
17.6
17:9
25.8
33.8
22:4
.000
369
353
1,685
1,731
Bush
els
Bush
Bushels
2011:
22.9
16.7
18.0
15.9
27.6
28.12
29.4:
31.3
27.4
17.4
12.1
1.000
274
1,527
els
20.4
20.8
3.064
20:1
1,000
1,000
22.8
21.6
27.2
32.2
1,000
bushels bushels bushels bushels bushels bushels bushels bushels bushels
bushe ls
Wheat
447
501
268
els
17.9
Rye
464
1.775
Bush
20.8:
1.000
521
566
17.7:
1.000
489
602
17.1
PRODUCTION
433
494
Wheat
20.8:
acres
3,448
516
eis
27.8:
3.233
2.729
Bush-
26.14
955
3,114
3,097
2
AVERAGES
CROP
9,527
53,647
8.293
14,881
13,603
Oats
7,441
7.984
Corn
31,534
35,278
64,370: 1.454 39.595 47,925 60,351 713
8,483
9.683
6.438
7,767
8,188
9,387
7,397
9.674
14,977:16,147 8.609 12,940 14,809 15,152 16,294 15.332
8.158 8,947 5.133 6,379 9,368 10,094 6,137 8.810
32,203:37,440 31.0918 39,721 34 33 828: 0.955
1935 1938 average
I
Compiled from International Yearbook of Agricultural Statistics and other official sources
TABLE 29 Bulgarian production of prin ipal nongrain crops averages
1932 1933-1937, 1935-1939. annual 1933 to 1939
1928
CROP
AVERAGES
1928 1932 1933 1937/1935-1939
.000
1.000
tons
1,000
tons
tons
1933
1934
1935
1936
1937
1938
1.000
1.000
sons
1.000
1.000
.000
tons
1,000
tons
1,000
tons
tons
tons
toms
1939
Food crops
53.3
58.3
61.
50
121.1
122
Peppers
Fibers
3.8
1
.1
a
7.0
11.1
1
1.0
2.7
Oilseeds
.31
2.73
1.9
2.14
8.0
14.5
1.0
16.8
25.68
7.1
9.3
10.3
Cottonseed
Sesame seed
1.61
3.8
3.1
71.1
96.0
3.7
5.3
4.6
121.9
7.8
.4
-1
6
4.4
9.4
7.2
11.4
7:7
7.7
13.0
11.01
17.21
12.6
19.3
2.0
2.7
5.5
2.2
12.81
7.5
3.4
2.21
2.7
2.85
2.5
24.4
2.1
3.1
23.18
20
20.5
16.6:
24.31
17.7:
49
1.7
3.1
1.5
2:
a
7.
.3
1
1
134.3
169.9
33.8:
491.8
1
Tobacco
Grapes
275.1
27.8
373.0
1
seed
Sugar beets
2.61
3
Sunflower
2.4
57.3
61.3
163.5
87.1
70.2
3.6
3.0
11:3
2.5
1.7
1
Rapeseed
3.45
6.at
1
1.2
35.2
61
135
13.61
1
Hempseed
29.3
0
8.9
Soybeans
Peanuts
4.3
.4
45.7
94.3
67
...
alv
1
Cotton
Total
1.6
1
Heap
Flax
90.6
3
Beans dry
Potatoes
156.7
84.4
90.3
183.0
131.6:
331.51
27.44
21.5
132.7
172.7
181.2
160.21
35.88
89.7:
234.43
144.0:
23.7
30.8
47.3
39.6
19.3
155
42
549.44 482.7 508.7 622.3 334.93 510.6 729.9: 900
1935-1938 average
Compiled from International Yearbook of Agricultural Statistics and other official sources
Among the fiber crops, cotton has shown the greatest expansion in recent years.
Production increased ninefold between 1928-1932 and 1935-1938, but still falls short
T
Danubian Surpluses
771
of domestic needs. In 1938 and 1939, for instance, 14,000 and 12,000 short tons,
respectively, were imported to supplement domest ic production. The production of
most oleaginous plants has increased greatly during the last decade. Sunflower seeds
take first place among the oilseeds. The increased production of oilseeds has made
Bulgaria virtually self-sufficient in vegetable oils. Rapeseed production has been
predominantly
for export.
output has increased as a result of the expansion
in production
of lintCottonseed
cotton.
Rapid progress has also been made recently in the fruit industry. Largely because of the work of the government experiment stations, both quantity and quality of
the fruit crops have improved noticeably. The most striking development was the SUC-
cess in the cultivation of table grapes (at the expense of wine grapes). brought
about in response to the export demand for table varieties.
THE LIVESTOCK ECONOMY
The most serious handicap to the development of an intensive livestock industry
in Bulgar ia lies in the insufficiency of the domestic feed supply. Before the Mor Id
Mar communal pastures furnished a considerable portion of the necessary fodder. As a
result of the land reform, however, the area in communal pastures was reduced from
2.2 million acres in 1908 to less than I million at the present time. It is estimated
that the present number of livestock in Bulgaria requires 2.8 billion carbohydrate
units and 235 million protein units annually, even assuming that feeding takes place
during only 180 days and that the animals utilize pastures during the rest of the
year. Under present conditions, however, only 2.0 billion carbohydrate units and
180 million protein units are produced annually. As a result there is an annual
deficit of 30 percent in feed units and of 25 percent in protein units.
The government has made recommendations with a view to improving the feed-
stuffs ituation. The feedstuffs acreage recommended and the actual acreages are
shown in table 30. It will be noted that no actual increase in the acreage planted
to fodder crops has taken place since 1934, and that in most cases the 1938 acreage
is only a fraction of the acreage anticipated in the government program.
TABLE 30.-Bulgarian feedstuffs acreage in 1934 and 1938, and 1940 acreage
recommended by Bulgarian Government
Alfalfa
ACTUAL ACREASE
1934
1938
1,000 acres
1,000 acres
1,000 acres
437
560
464
71
247
105
PERCENT OF RECOM
1940
MENDED ACREAGE
Esparcet
(1)
247
Green corn
147
494
20
57
124
63
57
148
16
Mangels
Negligible
Percent
83
42
2.4
1
Forage aillet
1938 ACREAGE AS
ACREAGE
4
Vetch
RECOMMENDED
ACREAGE
1
COMMODITY
51
11
Bulgarian Agriculture and Measures for its Improvement, A. Ouzounoff. 1936.
T
46
Chlebarov, G. S., *Die bulgarische Tierzucht und ihre Probleme* (Bulgarian Livestock Econ
any and
XXXV,
1936.its Problems) Zeitschrift der lulgarischen landwirtschoftlichen Gesellschaft, vol
Foreign Agriculture
772
The experiment stations and county agents have succeeded in bringing about
some improvement in quality of poultry and eggs, which are the most Important surplus
products in the livestock industries. A11 categories of livestock, however, show a
continual reduction in numbers, largely because of inadequate feed supplies. Table
31 gives Bulgarian livestock numbers in 1934.
TABLE 31.-Bulgarian livestock numbers, 1934
::Sheep
176
:
:
281
Hoga
: Poultry
::
8,839
902
:
:
:
:
:
1,498
375
:
:Buffaloes
532
Thousands
:
::
:
:
A11 cows
::
:
Thousands
NUMBERS
:
Horses
A11 cattle
Milk cows
KIND
NUMBERS
KIND
12,800
:
Compiled from official sources.
THE AGRICULTURAL EXPORT TRADE
Since Bulgaria has no important mineral or manufacturing industries, its ex.
ports consist almost exclusively of agricultural products. The nonagricultural population of a little over I million can consume only a fraction of the farm surpluses,
To the Bulgarian economy, therefore, exports of farm products are essential for three
reasons: (1) they provide most of the cash income of the peasant: (2) they are virtually the only means of securing foreign exchange for the necessary imports of fi.
bers, textiles, and machinery; and (3) they provide funds for meeting the foreign
debt service.
CHANGING COMPOSITION OF FARM EXPORTS
Territorial changes, as well as the progress attained in promoting the production of more intensive crops, have resulted in marked changes in the composition of
Bulgarian farm exports (see table 32). Most striking are the shifts in the importance of grain and tobacco in the export trade. Before the World Mar, grain crops
contributed nearly two-thirds to the total valuebof exports, whereas in 1938 and 1939
they constituted less than 10 percent of the total. The sharp decline in the impor.
tance of grain in the export trade may be attributed to the post-war loss of grainsurplus-producing regions, increased domestic consumption resulting from population
growth, and the increase in surpluses of other farm products.
The pre-Morld-Mar place of cereals has now been taken by tobacco. Exports of
tobacco were insignificant before the World War, whereas during the past decade this
product has constituted the outstanding export item, representing about 40 percent
of the value of all exports.
Danubian Surpluses
773
Hardly less significant is the increase in the export trade in fruits. Until
the world depression, fruit exports constituted only a fraction of I percent of total
exports. In the 1930's, however, a continually increasing importance is apparent.
In 1939
fruitofexports
times
those
grain. represented nearly 20 percent of total exports, and were 3
Exports of live animals and meat products have always been relatively insignificant as a result of the unsatisfactory domestic feed situation. There has been a
recent tendency toward reducing the exports of live animals in favor of meat products.
Cattle and cheese exports have declined steadily. Eggs still represent the outstanding export product of the livestock economy.
Rose-oil exports, a Bulgarian monopoly, have suffered from the competition of
synthet substitutes in foreign markets. Oilseed exports showed a marked expansion
until
1937; however, during 1938 and 1939 increased domestic utilization reduced the
surpluses.
TABLE 32. Composition of Bulgarian farm exports, 1939 with comparisons
Expressed as percentages of value of total exports
1.7
:
:
2.1
0.3
:
7.8
:
8.4
:
1.8
:
1.8
:
1.2
:
:
:
:
:
:
:
:
:
:
:
1.3
3.6
4.6
:
1.3
0.2
:
:
:
:
:
4.5
3.6
1.2
:
0.7
8.6
:
1.1
11.9
0.5
0.3
:
:
5.4
2.3
3.9
:
:
3.4
6.4
:
:
2.2
0.5
0.8
19.2
:
:
:
:
:
:
1.8
0.3
1.7
2.1
:
4.1
1.2
1.0
0.9
17.5
41.0
:
:
:
:
:
:
:
:
:
:
:
:
:
:
5.4
:
4.1
:
5.3
16.0
:
1.7
Rose-oil
1.2
:
Hides
1.9
7.5
5.0
0.4
:
1.2
7.4
2.0
9.4
4.9
42.4
:
;
11.5
Eggs
:
2.4
0.4
1.2
:
Cheese
-
0.4
3.4
2.4
:
0.5
4.5
7.4
9.5
:
Poultry
Total live animals
Meat, poultry, fat
0.7
2.4
18.7
32.1
:
:
:
:
1.9
0.2
:
1.2
Hogs
1.9
14.0
32.3
:
2.4
2.0
4.3
1939
:
:
:
:
0.9
2.6
13.8
:
0.2
2.1
41.3
:
Cattle
3.3
45.3
:
Oilseeds
8.9
1.0
1938
:
Beans, dry
Fruit
64.3
1937
:
Tobacco
:
:
:
:
Grains and flour
1936
:
000
1933
:
1929
1911
:
COMMODITY
1.3
1.0
Weltwirtschaftliches
Archiv,
stantlichen
Masnahmen
sur Forderung der Ausfuhr der Agrarprodukte Bulgariens, by
Milks*Die
Deyanowa,
March
1940, P. 430.
VOLUME OF FARM EXPORTS
Although farm exports form the basis of the Bulgarian economy, the absolute
volume of most surpluses is small, particularly in comparison with the needs of the
European deficit countries (see table 33).
Among the grains, only wheat and corn furnish continuous though varying sur-
pluses. In relation to the surpluses of the other Danubian countries, however,
Bulgarian corn exports are of minor significance. The level of corn exports during
774
Foreign Agriculture
1935-1939 was 57 percent below that of the average for 1928-1932. Corn exports show
wide fluctuations. For example, in 1936 exports amounted to 4 million bushels,
whereas in 1939 only 60,000 bushels were exported.
Wheat exports during 1935-1939 exceeded those of 1928-1932 by nearly 30 per.
cent. Even the average 1935-1939 exports, however. were only one-sixth those of
Rumania. The record 1937 exports of 7.2 million bushels would have met only onesixth of the German wheat imports of that year. one-fifth of the Belgian, or onethird of the Dutch imports.
Between 1933 and 1937, exports of dry beans were large, and could have met
about 75 percent of German requirements. During 1938 and 1939, however, the upward
tendency in exports was reversed, part ly because of crop fluctuations and partly as
a result of government precautionary measures to safeguard domestic food supplies.
For the same reasons the increased production of oilseeds has been used
largely to make Bulgaria independent of foreign sources. The sunflower-seed crop
still provides most of the total oilseed exports. The peak was reached in 1937, when
exports amounted to 47,700 short tons. In 1938 only 10,900 tons were exported. Increased exports of soybeans. however, may be expected in years of normal yields,
since in 1940 the soybean area was increased to 100,000 acres, as compared with
44.000 in 1939. To the Bulgarian farm economy, oilseeds represent an important source
of income. Even the high 1938 exports could have met only 3 percent of the total
German imports of oilseeds. Likewise, the record oilcake exports of 1937 - 54,500
tons - amounted to no more than 2 percent of the German oilcake imports of that year.
The prosperity of 120,000 peasant holdings, representing one-sixth of the
total number of Bulgarian farm holdings, depends on the exports of tobacco. The government regulates production according to market conditions and exercises control
over the quality of the crop. Since export potent ialities improved during the last
few years, the number of tobacco growers increased Exports during 1935-1939 were
23 percent above those for 1928-1932.
Grapes are now the most important fruit entering the Bulgarian export trade.
The government has succeeded in inducing peasants to reduce their production of wine
grapes and to expand the production of table grapes in response to the increased
foreign demand for this fruit. As a result, exports of grapes rose rapidly from
3,500 tons in 1928-1932 to 45. 100 in 1935-1939.
Exports of live animals and animal products have declined, largely because of
the inadequacy of domestic feedstuffs. Live cattle exports have decreased sharply,
but during the last few years live hogs have been exported in increasing numbers.
Even these exports, however, amount to only about 10 percent of the exports of either
Hungary or Yugoslavia. Exports of meat products, chiefly dressed poultry, have in-
creased: however, the volume is still insignificant.
In general it appears that although Bulgarian farm surpluses, except for tobacco, are too small to go far toward meeting the urgent needs of the European
Danubian Surpluses
776
deficit countries, considerable progress has resulted from the various government
measures in the field of production and export regulation. The application of govto
ernment measures was begun in 1930, when a "Grain Administration" was established
lend support to peasants impoverished by the precipitous decline in the price of
1936.
grain.
A "Grain Monopoly* followed, and became an autonomous government agency in
The Grain Monopoly also exercises control over the exports of corn, sunflower,
rape- and cottonseed products, hemp, and flax. The Agricultural and Cooperative Bank
exercises similar control for tobacco and rose-oil. In addition a law has been in
effect since 1935 regulating the quality of export products. These measures are
closely integrated with a rigid control of foreign exchange and imports.
TABLE 33. -Bulgarian exports of agricultural products, averages 1928-1932,
1935-1939; annual 1933 to 1939
AVERAGES
COMMODITY
1928-1932
1935-1939
1,000
1,000
bushels
1936
1937
1938
1939
1,000
1.000
1.000
1,000
1.000
1,000
1.000
51
794
4,677
7,227
4,020
101
12
78
465
245
528
92
726
1,043
21
213
4,956
205
23
14
47
4,889
2,110
1,000
1,000
1.000
1.000
1,000
1,000
1,000
tons
tons
tons
tons
tons
tons
tons
26.21
:
Bran
3,952
4,094
6,434
13,886
12,307
59
1,000
1,000
1
376
1,293
:
1,400
:
1,082
:
Rye
Barley
1.359
3,799
4,730
190
Corn
1935
bushels bushe is bushe is bushel is bushels bushe is bushe Is: bushels
3,656
Oats
1934
:
Wheat
1933
tons
tons
26.1
23.8
11.1
38.5
58.61
8.5
4.7
Beans, dry
16.2
15.6:
36.5
18.3
21.5
27.3
24.5:
Rapeseed
14.6
6.0
6
2.5
17.0
1.0:
2.9
2.6
.4
4.8
1.61
20.0
37.4
11.9
0
Sunflower seed
Oilcake
8.1
5.7
11.21
2.0
1.8
7.21
52.93
51.23
47.73
10.0
24.0
42.7
34.7
o
.1
2.21
13.2:
0
7.31
1.18
6.7
0
Soybeans
Cottonseed
14.1
42.7
27.9:
32.0
31.43
54.5
50.3
24.6:
30.2
25.23
23.3:
27.23
22.4:
24.8
37.6
39.0
Grapes
3.5
45.1
11.8:
21.6
38.13
26.0:
40.3
64.1
57.0
Prunes
2.1
8.83
.8:
4.63
10.8
6.1
4.0
12.1
10.9
0%
7.2
.3
.1
5.5
5.2
.3
8.3
16.8
8.3
8.5
4.0
16.3
Apples
Meat products
6.9
2.0
3.1
5.1
8.7
18.5
17.1
17.3
16.0
14.18
19.3
19.3:
16.7
1.3:
2.1
2.01
1.5:
1.8
frow
Thou
Thou
Thou
fhow
fhow
fhou-
Thou
.7
Thou
sands 1 sands sands sands : sands : sands . sands sands :6.7
sands 3.2
12.2
8.5
1.9
21.9
Hogs
Poultry
1.3:
898
687
5.0
12.1
12.1
8.1
12.6
1.8
1.1
12.8:
29.43
4
1,090
1,040
1,172
293
799
23.3
43.1
:
Cattle
1.6:
:
1.3:
1
Cheese
:
Eggs
2.1:
:
Tobacco
883
287
-
T
2
1935-1938 average
Including dressed poultry
International Yearbook of Agricultural Statistics; Statistique du commerce exterieur (annual)
Foreign Agriculture
776
TOTAL BULGARIAN EXPORTS BY COUNTRY OF DESTINATION
Largely as a result of the changes in composition of farm exports, the direction of Bulgarian foreign trade has experienced marked shifts. Before the World Mar
Bulgaria was indebted to Western Europe, particularly to Great Britain, France, and
Belgium. Consequently it exported most of its grain surpluses to those countries
for debt service and for textile and machinery imports.
TABLE 34 Total exports by country of destination, 1939 with comparisons
[Expressed as percentages of value of total exports
AVERAGE
12.4
29.9:
36.0
42.7:
48.0:
47.6:
43.1:)
5.7:
12.6:
9.7:
5.3:
4.6:
3.0:
4.0.)
55.4
4.8:
3.5:
3.6
6.9:
3.3:
5.6:
4.6:
3.3:
4.7
49.2:
51.68
59.5:
53.9
52.7
63.5:
71.1:
60.1
2.1
10.5.
9.1
9.2:
8.8
36
4.2:
7.6:
6.1:
61
11.6:
13.8:
4.8:
3.1:
7.5
2.1:
1.6
1.5:
0.9:
1.6
13.1:
1.6
1.7.
2.1:
4.4:
6.0
5.1
3.3.
2.1:
1.8:
30.4
6.1
13.3
8.9:
4.4:
9.2:
6.3:
4.4:
8.5:
1.7
1.6-
2.1:
3.7
4.7:
1.7:
1.1:
0.73
1.0:
2.6:
3.8:
2.8:
5.4
5.7:
3.8.
4.0
3.4
3.4
2.8
:
:
:
:
:
:
:
0.6
:
:
:
Poland
United States
67.8
47.3:
Netherlands, Belgium,
Denmark, Norway
58.9
1935 1939
:
:
France
1939
18.1
:
Italy
Great Britain
:
Austria
Czechoslovakia
Greater Germany
1938
1937
:
Germany
1936
1935
1934
1933
1929
1911
COUNTRY
:
Weltwirtschaftliches Archit, March 1940 Statistique du Commerce exterieur, Sofia (annual)
The predominance of tobacco surpluses, which replaced former grain exports.
eventually led to an increase in the share of the Bulgarian exports taken by Central Europe, from 20 percent before the World Mar to 60 percent in 1925, and to
more than 70 percent in 1929. On the other hand, the Western European countries,
which had purchased 50 percent of total Bulgarian exports before the World War,
reduced their purchases to 14.6 percent of the total in 1925 and to 12.7 percent
in 1929.
Germany was the principal market throughout the post-war period, whereas before the Morld Mar it took much less than Belgium and also less than Great Britain
and Turkey. By 1933 Germany's share had increased to 36 percent of total Bulgarian
exports. The annexation of Austria resulted in even more pronounced Bulgarian
dependence on the German market. The combined purchases of Germany and Austria
rose
to 58.9 percent of Bulgaria's total exports in 1938 and to 67.8 percent in
1939.
The German trade drive into Southeastern Europe is partly responsible for the
increased Bulgarian interest in industrial crops. In foreign trade policy, however,
Bulgaria endeavored at the same time to expand exports to the free-currency countries.
Actually exports to free-currency countries (Great Britain, the United States, the
Scandinavian countries, Egypt. and Palestine) increased from 4.8 percent in 1927-1929
Danubian Surpluses
777
to 10.9 percent in 1933-1935, and to 25.4 percent in 1937. 47 In 1938 and 1939,
however, the share of these countries fell to 13.1 and 10.3 percent. largely because
of the decline in exports to Great Britain. At the same time Bulgarian exports to
countries (other than Germany) with clearing agreements fell from 59.2 percent in
1930-1932 to 41.3 percent in 1933-1935, and to 14.3 percent in 1939.
Germany now virtually dominates the foreign trade of Bulgaria. Greater Germany takes 71 percent of the total exports. Italy, which ranks second, takes less
than one-tenth as much as Germany. Great Britain's share of the exports was reduced to 3.1 percent in 1939. It is doubtful whether Britain's former purchases can
be diverted to the Axis powers, because the Soviet Union, following the conclusion
of a trade treaty in January 1940, has become a new outlet for such Bulgarian farm
products as tobacco, hogs, rose-oil, and hides, in exchange for Russian oil, metals,
machinery, and cotton.
GEOGRAPHIC DISTRIBUTION OF FARM EXPORTS
Since farm products comprise over 90 percent of the total Bulgarian exports,
and since Germany and former Austria took more than two-thirds of the total in 1939,
it is evident that only about one-third of the Bulgarian farm surplus has been
available to other countries.
The greater part of Bulgaria's grain surpluses had to be sold to the freeexchange countries during 1935-1939, largely in order to obtain orgently needed foreign exchange for imports that could not be furnished by Germany. Great Britain was
the principal market for wheat and corn, although about 10 percent of the exports of
each went to Scandinavia and the Low Countries. Italy took about one-fifth of the
wheat surplus. Germany did not enter the Bulgarian wheat market until 1937.
The greater part of any grain surpluses available during the present war prob-
ably will be absorbed by Germany, since exports to Great Britain will not be pos-
sible. Except for dry beans, sunflower seed, oilcake, and live cattle, by far the
largest share of the exports has been sent to Germany, which contracted for the entire surplus of soybeans. In addition Germany has been importing about nine-tenths
of the total Bulgarian exports of fruits, two-thirds of the tobacco, egg, and meat
products exports, and about half the exports of hogs and poultry.
and
Scandinavia and the Low Countries took about one-third of the sunflower seed
nearly two-thirds of the oilcake exports. Italy was an important market for
poultry and dry beans. Switzerland took about 15 percent of the exports of eggs.
It is difficult to appraise the future role of Russia. The Russo-Bulgarian trade
agreement provides for the delivery of various Bulgarian farm products in exchange
for Russian mineral oil, machinery, and fibers. It is believed, however, that Germany's share will at least be maintained.
47
Pomenow K., "Exports of agricultural products from Bulgaria,* Monthly Bulletin of Agri- 436
cultural Economics and Sociology, Feb. 1940. P. 64: also Deyanown, Milks op. cit., P.
Foreign Agriculture
778
POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41
Shortly after the outbreak of the present war the Bulgarian Government took
steps to safeguard domestic stocks of foodstuffs and raw materials On August 29.
1939, the exportation of cotton, flax, hemp, feedstuffs and hides was prohibited.
A few days later exports of live animals, meat products (except bacon). cheese, but.
ter and other animal fats potatoes and sugar were prohibited. Subsequently, however. the exportation of hogs and lard was again permitted
THE 1940 41 OUTLOOK
According to recent information it is believed that the 1940 acreage of the
principal crops (tobacco, grains. oilseeds and fruits) will be slightly above that
of 1939. however, a delayed spring and heavy rains retarded growth by about a month
and caused some damage to winter and early spring plantings
Late spring plantings, particularly of tobacco. apparently were not greatly
affected by adverse weather conditions The tobacco crop is expected to exceed that
of 1939 The 1940 wheat crop is estimated at about 70 million bushels, or about the
same as that for 1939. It is not believed that any wheat export surplus will be
available during the 1940-41 marketing season The annual exports of wheat averaged
6.4 million bushels during 1935-1939. Prospects for corn and minor grain crops have
been reported as promising in both quality and quantity Corn exports, however. will
hardly exceed 5 million busheis in 1940-41. The average for 1935-1939 was 2 million
bushels
The 1940 crop of sunflower seed and other oilseeds is estimated at about the
same as the 1939 production. The extent of available export surpluses, however, will
depend largely on government policy. The general quality of the 1940 fruit crops was
poor, and fruit exports will be reduced from the 1939 level. The plum crop was small.
and the grape crop was well below that of 1939.
THE OUTLOOK AFTER 1940 41
In all probability the Bulgarian Government will continue its efforts to promote the expansion of industrial crops. Increasing export surpluses of oilseeds and
probably a further rise in fruit exports may be expected in years of normal yield.
There is little likelihood, however, of an increase in exports of live animals and
animal products during the next few years, since the volume of domestic feedstuffs
supplies cannot readily be expanded.
According to the latest information, a 4-year agricultural plan is under consideration. Its main features are a large-scale irrigation program, an increase in
supplies of farm implements. and a more extensive use of commercial fertilizers.
However, large-scale delivery of farm equipment and commercial fertilizers does not
appear possible for the duration of the war.
ยง
also see
Purm memo
of 1/21/71
128
contracts ret's
ACTION REQUIRED
CONFIDENTIAL
to me young 1/24
January 22, 1941
To:
The Secretary
From:
Mr. Young
Re: Approval of British Contracts
Attached herewith is the first group of contracts on which
the British would like approval so that the orders may be
placed. You will note that Sir Frederick Phillips has attached
a letter of approval and that he has also signed the actual
statement. All of these contracts are for machine tools.
I have advised the British informally that there is no
objection.
P.4.
CR.1002
129
TELEPHONE REPUBLIC 7860
WILLARD HOTEL WASHINGTON, D. C.
BRITISH PURCHASING COMMISSION
January 22, 1941.
The Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D.C.
Dear Mr. Secretary,
I write to inform you that I
have approved and noted for the British
Treasury all the machine tool contracts
contained in "Application for Placement of
Orders in the United States by the British
Government". This statement is dated January
21, 1941. It shows the total value of the
orders at $5,853, 611.03, and the initial
payment thereon at $1,545,836.54.
I have also signed the original
of the statement at the end thereof, on page
4.
Yours very truly,
HPhillips
130
TELEPHONE REPUBLIC 7860
WILLARD HOTEL WASHINGTON. D. C.
BRITISH PURCHASING COMMISSION
January 22, 1941.
Mr. Philip Young,
Assistant to the Treasurer,
Treasury Department,
Washington, D. C.
Dear Mr. Young,
We enclose herewith three copies
of application for placement of orders in
the United States. This statement is dated
January 21, 1941, covers machine tools only
and shows,
Total Value of Orders $5,853,611.03
$1,545,836.54
Initial Payment
We also enclose a letter of
Sir Frederick Phillips stating that these contracts have been noted and approved on behalf
of the U. K. Treasury.
Yours very truly,
E.T. Ballartyne
131
January 22, 1941
Mr. Young
Secretary Morgenthau
fee ans of 1/23/41
Please let me know how many Curtiss P-40s there
are in New York awaiting shipment now, and while you
are asking the English for that information, you might
as well find out how many other planes there are awaiting
shipment in New York. I would like to have this information from now on regularly once a week.
132
STRICTLY CONFIDENTIAL
Summary of Orders Placed by the British Government
Through the British Purchasing Commission after
December 19, 1940 1
Preliminary Report for Period up to January 16, 1941
(In millions of dollars)
393 contracts for less than $50,000
Total: 492 contracts 2
ffice of the Secretary of the Treasury,
Division of Research & Statistics.
:
99 contracts for $50,000 and over
Value of orders
Capital
:
: Product
Total
113.1
6.4
119.5
2.5
.2
2.7
6.6
122.2
115.6
January 22, 1941.
Excludes two orders for ships placed on December 20 with Todd-Bath
Shipbuilding Corporation (amounting to $48.8 millions and $47.2
millions, respectively) and one order for airplanes placed on
December 26 with Curtiss-Wright Corporation (amounting to $13.6
millions). Also excludes orders placed during the week December
16-21 through the British Iron and Steel Corporation aggregating
81,462 thousands.
Excludes an indeterminate number of contracts of the British Iron
and Steel Corporation, the dollar values of which have been included in the above statement.
133
Orders Placed by the British Government
Through the British Purchasing Commission after
STRICTLY CONFIDENTIAL
December 19, 1940 1/
Preliminary Report for Period up to January 16, 1941
Date of:
Product
Value of order
Total
Capital
Jig borers, including
10
Gray Motor Co
Four cylinder Diesel engines
88
306,954
306,954
Kearney & Tracker Corp.,
Milwaukee, Wisc.
#2H milling machines, extra
equipment and wiring
15
72,825
72,825
Pratt & Whitney Div. of
Two-spindle reaming
10
60,687
60,687
70,490
70,490
Pratt & Whitney Div. of
Niles-Bement-Pond Co.,
additional equipment
$
20
Quantity
111,840
$
Dec.
Description
Contractor
order :
111,840
West Hartford, Conn.
20
Dec.
20
Dec.
20
Detroit, Mich.
Miles-Bement-Pond Corp.,
New York, N. Y.
Dec. The Thompson Grinder Co.,
20
Springfield, Ohio
Dec. E. V. Bliss Co.
20
Brooklyn, N. Y.
completely equipped
machines
Surface grinding machines
7
Dec.
Capital assistance to
$ 387,450
Remington Arue Co. for
387,450
production of .50 caliber
ammunition
Dec. Automatic Machinery Mfg.
Corp., Bridgeport, Conn.
Hydraulic dual milling
Dec. Pratt & Whitney Div. of
Jig borers, including
Niles-Benent-Pond Co.,
Yest Hartford, Conn.
Dec. Pan American Airways Co.
20
Dec.
20
Dec.
20
Dec.
20
New York, N. Y.
Consolidated Aircraft Corp.,
San Diego, Calif.
Fairchild Aviation Corp.
Jamaica, L. I., N. Y.
Lookheed Aircraft Corp.,
Burbank, Calif.
123,750
112,545
112,545
335,224
335,224
67,503
67,503
63,761
63,761
667
167,417
167,417
3,039
60,576
60,576
18
128,686
128,686
25
440,825
440,825
137,100
137,100
1,543,015
1,543,015
1,407,000
87,473
87,473
150
140,058
140,058
equipment
equipment
Spares for Beoing Model 314
flying boats
Bonb hoist and assembly for
flying boats
Single cable bomb hoiet for
flying boats
Spare parts for Cine camera
3
20
123,750
25
machines, complete with
7
20
56
guns
Amaunition boxes and fittings
for .50 cal. gun and 20 am.
cannon
21
Dec.
21
E. I. duPont de Nenours
& Co., Arlington, N. J.
Pratt & Whitney Div. of
Niles-Bement-Fond Co.,
West Hartford, Conn.
Dec.
21
General Machinery Corp.,
Niles Tool Works Div.,
Hamilton, Ohio.
Dec.
21
Cox & Stevens Aircraft Corp.,
Mineola, N. Y.
Dec. Sperry Gyroscope Co., Inc.,
Brooklyn, N. Y.
Dec. Carter Carburetor Corp.,
St. Louis, No.
Methyl Methacrylate reain
sheets
Jig borers, including
additional equipment
Time saver lathes, rests
and equipment
Reconditioned Douglas DC-2
3
Dec.
transports equipped withengines, propellers, etc.
Bombsights and equipment
167
21
Purchase of RYG fuzes
Assembly and packing of RYG
fuzes
Obsolescence expense charge
Dec. R. K. LeBlonde Machine Tool
23
Co., Cincinnati, Ohio
Dec. Ferracute Machine Co.,
23
Dec.
23
Dec.
23
Bridgeton, N. J.
Porter McLeod Machine Tool
Co., Inc., Hatfield, Mass.
Simmons Machine Tool Corp.,
New York, N. Y.
Dec. Lima Locomotive Works, Inc.,
24
Lima, Ohio
10" x 24" bench lathes
and extra equipment
7,000
Capital assistance to
Western Cartridge Co.
291,000
291,000
Porter McLeod ge cold metal
25
75,552
75,552
Micro-speed drive lathes
38
95,430
95,430
10
67,852
67,852
saving machines
Drag ahovel units, dragline mechanisms, and
dragline buckets
Chain crowd achoval attach-
4
23
ments and elamshell grabe
with all accessories
1
#X-428 Buda engine complete
(Continued on next page)
Office of the Secretary of the Treasury, Division of Research and Statistics
1/
Excludes two orders for ships placed on December 20 with Todd-Bath Shipbuilding Corporation (amounting to
$48.8 millions and $47.2 millions. respectively and one order for airplanes placed on December 26 with
Ourtiss-Wright Corporation (amounting to $13.6 millions). Also excludes orders placed during the week
December 16-21 through the British Iron and Steel Corporation aggregating 61,462 thousands.
January 22, 1941.
134
Orders Placed by the British Government
Through the British Purchasing Commission after
STRICTLY CONFIDENTIAL
December 19, 1940 1/
Preliminary Report for Period up to January 16, 1941
(Continued 2)
Dec.
26
Cincinnati Milling Mch. &
Cincinnati Grinders, Inc.,
Cincinnati, Ohio
Dec. International Machine Tool
Co., Indianapolis Ind.
26
Dec. U. S. Steel Export Co.,
New York, N. Y.
27
Dec.
Ensign Bickford Co.,
Simsbury, Conn.
27
Dec. Production Machine Co.
Greenfield, Mass.
27
Dec.
Kearney & Trecker Corp.
Milwaukee, Wisc.
2#
Dec.
2*
Kearney & Trecker Corp.
Milwaukee, Visc.
Dec. Campbell-Wyant and
Cannon Foundry Co.
Munkegon, Mich.
2#
Dec. Surgesa Co., Inc.
Seaver Falls, Fenna.
2#
Description
Contractor
Quantity
Vertical high speed dial
type milling machines
Product
22
$
order
Value of order
Total
Capital
151,371
$
Date of
151,371
and equipment
Turret lathes and extra
299,700
299,700
1,740,000 gale.
522,000
522,000
15 mil.
525,000
525,000
290,325
290,325
40
149,600
149,600
14
**,120
**,120
60
equipment
Nitration toluol
Primacord instantaneous
detonating fuses
ft.
Hand screw machines with
150
electrical and other additional equipment
#2HL awivel head high speed
vertical type milling machines
#TH vertical type high speed
Milwaukee milling machines
Miscellaneous items and
1,231,800 $
capital assistance for drawings
14,690
1,250,490
179,209
554,209
and patterns
Capital assistance for equip- 1,500,000
375,000
ment to manufacture 20 mm.
high explosive shells for
Hispano gune
Dec.
Kernath Mfg. Co
Detroit, Mich.
2#
Kermath 225 h.p. "Sea Wolf"
140
23*,000
23#,000
40.000 gr.tons 1,200,000
1,717 gr.tons
34,340
1,200,000
79,132 gr.tons
3,956,600
3,956,600
9,019 gr.tons
1,574,325
95.500
1,574,325
95.5*0
200
513,000
513,000
40
500,000
500,000
engines
Iron and steel ordered by
Dec.
the British Iron & Steel
23-20
Corp.
Dec. Varner & Swasey Co.
Cleveland, Ohio.
30
Dec. Morey Machinery Co. Inc.,
New York, N.Y.
30
Scrap steel & iron
Commercial carbon steel
Alloy and special
purpose steel
44-A universal hollow heragon turret lathes
#12-M high speed two-spindle
vertical profile and milling
9
Pig iron
34,340
machines
Dec. Chisholm-Ryder Co., Inc.
Niagara Falls, N.Y.
30
4* bar Lambert type hori-
zontal boring, drilling,
and milling machines, with
standard equipment
Dec. Brown & Share Mfg. Co.,
Providence, R. I.
#00G automatic screw machines
32
95,592
95,592
Morey Machinery Co., Inc.,
Reconditioned machine tools
23
61,350
61,350
The National Acne Co.,
2-1/4* Model *L* Gridley single
341,250
341,250
31
Dec.
New York, N. Y.
31
Dec.
31
Cleveland, Ohio.
Freight charge to New York extra
spindle automatic machines and
50
equipment
Extra charge for wiring and
mounting electrical equipment
and boxing
Dec.
31
United Aircraft Corp.,
East Hartford, Conn.
Dec. Tennessee Coal, Iron &
31
Railroad Co.,
Hamilton standard hydromatic
propellers
444
Nitration toluol
40,000 gale.
Cartridges
760,000
1,110,523
1,110,523
252,000
252,000
#7.56
87,568
c/o U. S. Steel Corp.
New York, N. Y.
Jan. Renington Arms Co.,
Bridgeport, Conn.
2
(Continued on next page)
Office of the Secretary of the Treasury, Division of Research and Statistics.
1/
Excludes two orders for shipe placed on December 20 with Todd-Bath Shipbuilding Corporation (amounting to
848.8 millions and $47.2 millions, respectively) and one order for airplanes placed on December 26 with
Curties-Wright Corporation (amounting to $13.6 millions). Also excludes orders placed during the week
December 16-21 through the British Iron and Steel Corporation aggregating $1,46 thousands,
January 22, 1941.
135
Orders Placed by the British Government
Through the British Purchasing Commission after
STRICTLY CONFIDENTIAL
December 19, 1940 1/
Preliminary Report for Period up to January 16, 1941
(Continued 3)
Contractor
Jan.
2
Jan.
2
Jan.
Brown & Sharpe Mfg. Co.,
Providence, R. I.
Brown & Sharpe Mfg. Co.,
Providence, R. I.
United Aircraft Corp.,
East Hartford, Conn.
Description
Quantity
#20 autonatic screw machines
Product
28
$
order :
#000 automatic sorew machines
40
and equipment
P. & W. double wasp engines
1,438
R-2800, model S1A4-0
3
P. & W. twin wasp engines
Value of order
Capital
162,702
125,261
45,921,206
Total
$
Date of
162,702
125,261
45,921,206
510
R-1830, models 8304-G and
8103-G
3
Jan.
3
Jan.
3
Jan.
New Orleans, La.
Fay & Scott
Dexter, Maine
Gisholt Machine Co.,
Madison, Wisconsin
18" milling machines with
coolant pump, piping, and
844
500
#2 deep hole drilling and
reaming machines
#38 plain milling machines
42 vertical milling machines
3
3
Providence, R. I.
10
#00G acrew machines
6
#00 hydraulic feed rigid milla
40 rigid milla
#1 rigid milla
#2 electromille
3
3
3
4
Jan.
The Ohio Machine Tool Co.,
Kenton, Ohio
4
Jan.
Landis Tool Co.,
Waynesboro, Penna.
4
Jan.
Cone Automatic Machine Co.,
Windsor, Vermont
4
Jan.
Brown & Sharpe Mfg. Co.,
Providence, R. I.
4
Jan.
The Foote-Burt Co.,
Cleveland, Ohio
4
Jan.
Scripps Motor Co.,
Detroit, Mich.
a
Dec.
137,037
132,347
111,930
111,930
70,611
70,611
125,000
125,000
150
712,498
712,498
1-1/2* six spindle cononatic bar
15
143,344
#2-0 high speed screw machines
25
114,375
12
Hydraulic grinding machines
and equipment
Ohio production milling machines
20
Various
hydraulic grinding
machines
machines, etc.
with electrical equipment
1* and 1-1/2* single mindle
40
automatic screw machines
V-8 engines
100
Sets of 12 volt electric equipment 100
223,125
53,005
143,344
114,375
223,125
53,005
Iron and steel ordered by
the British Iron & Steel
29-
Jan.
Corp.
4
Scrap steel & iron
Commercial carbon steel
Alloy and special
purpose steel
Drop forgings
Jan. Brown & Sharpe Mfg. Co.,
6
52,938
15
6
Waynesboro, Penna.
1,342,350
12
3
Landis Tool Co.
137,037
132,347
12
Equipment for above
Jan.
3,755,236
6
Rockford, Ill.
52,938
2,622,000
12
#OG screw machines
#1 wire feed sorew machines
42 wire feed sorew machines
Additional equipment
Bundstrand Machine Tool Co.,
1,342,350
50
#20 sorew machines
Jan.
3,755,236
60,000
M
Brown & Sharne Mfg. Co.
649,60
60,000
arbors
#2 surface grinding machines
Jan.
649,600
2,622,000
attachment and collet chucks
Cincinnati Milling Machine
& Cincinnati Grinders, Inc.,
Cincinnati, Ohio
Providence, R. I.
30
Turret lathes with bar feed
Milling machines
Brown & Sharpe Mfg. Co.,
112
Bullet canneluring machines
Cincinnati Milling Machine
& Cincinnati Grinders, Inc.,
Cincinnati, Ohio
Jan. R. K. Le Blonde Machine Tool
Co., Cincinnati, Ohio
Jan.
36 ft. "Euroka" rescue boats
6
3
Jan.
Higgins Industries, Inc.
4
Jan.
Providence, R. I.
3,773 r.tons
75,460
75,460
4,329,450
647,550
86,589 gr.tons
8,634 gr.tons
329,450
11,869 gr. tone
4,154,150
4,154,150
147,918
147,918
Various grinding and screw
machines
647,550
(Continued on next page)
Office of the Secretary of the Treasury, Division of Research and Statistics.
1/
$48.8 Excludes two orders for ships placed on December 20 with Todd-Bath Shipbuilding Corporation (amounting to
millions and $47.2 millions respectively) and one order for airplanes placed on December 26 with
Curtiss-Wright Corporation (amounting to $13.6 millions). Also excludes orders placed during the week
December 16-21 through the British Iron and Steel Corporation aggregating $1,462 thousands.
January 22, 1941.
136
Orders Placed by the British Government
Through the British Purchasing Commission after
December 19, 1940 1/
STRICTLY CONFIDENTIAL
Preliminary Report for Period up to January 16, 1941
(Continued 4)
7
Jan.
7
Jan.
7
Jan.
180,000 gale.
Wheeling Steel Co.
New York, N. Y.
Nitration tolmol
200,000 gals.
Wyman Gordon Co., Inc.,
Worcester, Mass.
Crankshaft forgings for
Hood Rubber Co.,
Watertown, Mass.
Submarine battery containers
with equipment; and Capital assistance
Cincinnati Milling Machine
and Cincinnati Grinders,
Inc., Cincinnati, Ohio
Cincinnati Hydro-Tel vertical die-sinkers and
Loewy Engineering Co., Ltd.,
2000 ton horizontal extrusion press plant
Louis E. Emerman & Co.,
Used machine tools &
Products Co., New York, N.Y.
New York, N. Y.
7
Jan.
Chicago, Ill.
7
Jan.
8
8
Jan.
Brown & Sharpe Mfg. Co.,
Screw-machines and
Warner & Swasey Co.,
Cleveland, Ohio.
8
Jan.
Pratt & Whitney Div. of
Niles-Bement-Pond Co.,
of order
11
Capital
Total
54,000
54,000
60,000
60,000
158,000
158,000
240,950 $
11,500
252,450
233,651
233,651
265,000
265,000
120,655
120,655
54,000
54,000
72
272,027
272,027
1,500
2,167,125
2,167,125
55,440
55,440
170,720
170,720
1,672,782
1,672,782
320,950
320,950
258,542
258,542
17
equipment
Nitration toluol
Providence, R. I.
2,000
Product
equipment
Great Lakes Steel Corp.,
Detroit, Mich.
Jan.
Merlin enginee
180,000 gale.
equipment
Turret lathes and
equipment
#1B two spindle rifling
5
6
Jan.
Jones & Laughlin Steel
Nitration toluol
1
6
Jan.
Quantity
$
Jan.
Description
#
Contractor
order :
:
Date of:
machines
8
Hartford, Conn.
Delta Air Corp.,
Monroe, La.
Douglas DC-2 transports
equipped with engines,
4
Jan.
propellers, navigation and
8
radio equipment
Jan.
Gisholt Machine Co.,
Turret lathes with collets
358
Kent-Owens Machine Co.,
1-8 hydraulic milling
175
Madison, Wise.
9
Jan.
Toledo, Ohio.
9
Jan.
10
Caterpillar Tractor Co. Inc.
Peoria, Ill.
and feed chucks, etc.
machines and equipment
Caterpillar Diesel tractors
with equipment and spare
parts
Waterbury-Farrell Foundry
& Machine Co.,
10
Waterbury, Conn.
Jan. Western Cartridge Co.
East Alton, nil.
10
Jan.
10
United Aircraft Corp.
East Hartford, Conn.
Jan. National Fireworks, Inc.,
West Hanover, Mass.
11
Capital assistance for
Remington Arms Co. for
the production of amouni-
5
Jan.
production of ammunition,etc.
Hamilton standard hydromatic
propellers
222,270
600
1,797,600
Additional capital assistance
for machine tools for 75 mm.
1,797,600
441,100
441,100
358,317
358,317
shells
Iron and steel ordered by the
British Iron & Steel Corp.
Commercial carbon steel
51,536 gr.tons 2,319,912
Alloy and special
75,014 gr.tons 13,990,850
purpose steel
to facilitate production of
20 mm. inert projectiles
Drop forgings
Fort Wayne, Ind.
277,444
machines and equipment for
Jan.
4-11
13
55,174
Capital assistance for
Additional capital assistance
Jan. Wayne Pump Co.
67,500
tion
Jan. U. B. L. Battery Corp.
Long Island City, N. T.
11
67,500
Capital assistance for
machinery and equipment
975 gr. tons
1,000,000
2,319,912
13,990,850
341,075
860,490
341,075
72,719
933,209
to produce 2 pounder high
explosive shells
Nose plugs, die east
Base plugs, die east
Steel base plugs
Fuze hole plugs
250,000
250,000
3,000
3,000
(Continued on next page)
Office of the Secretary of the Treasury, Division of Research and Statistics.
y
Excludes
$46.8
two orders for ships placed on December 20 with Todd-Bath Shipbuilding Corporation (amounting to
millions and $47.2 millions. respectively) and one order for airplanes placed on December 26 with
Curtiss-Wright Corporation (amounting to $13.6 millions). Also excludes orders placed during the week
December 16-21 through the British Iron and Steel Corporation aggregating $1,462 thousands.
January 22, 1941.
137
Orders Placed by the British Government
Through the British Purchasing Commission after
December 19, 1940 1/
STRICTLY CONFIDENTIAL
Preliminary Report for Period up to January 16, 1941
(Continued 5)
13
Cleveland, Ohio
Jan.
670
mooring chains
Mooring shackles
Additional capital assistance
for production of armour
plate for M3 tanks
Tennessee Powder Co.,
Additional capital assistance
to aid production of TNT and
Memphis, Tenn.
15
Cast steel square link
Republic Steel Corp.
Cleveland, Ohio
15
Quantity
806
Product
Value of order
Capital
Total
$ 600,000
$
Jan. National Malleable and
Steel Castings Co.,
Jan.
Description
Contractor
order :
:
Date of
600,000
$ 3,750,000
3,750,000
160,100
160,100
188,400
188,400
56,000
56,000
DNT
Jan.
15
Tennessee Powder Co.,
Memphis, Tenn.
Jan. Curtise-Wright Corp.
New York, N. Y.
15
Jan. Hack Mfg. Corp.
Long Island City, N. Y.
15
Jan. Putnes Tool Co.
Detroit, Kich.
15
Jen.
Jan.
special tools for construction
of enginee
Spare parts for 330 Mack trucks
Annular thread milling hube
Center drills
5,000
2,000
363,208
363,208
68,392
68,392
1,720,000
1,720,000
Union Switch & Signal Co.,
20 nn. Oerlikon H. E. shells 1,250,000
309,375
309,375
Various machine tools
122,800
122,800
Jan. Waterbury-FarrellFoundry
& Machine Co.
16
Capital assistance to purchase
2 pounder(naval) H. V. anti- 1,000,000
aircraft complete rounds
Swissvale, Pa.
15
to aid production of rifle
and cannon nitrocellulose
National Fireworks, Inc.,
West Hanover, Mass.
15
Additional capital assistance
48
Waterbury, Conn.
Jan. New Jersey Powder Co.,
Kenvil, N. J.
16
Jnn.
16
Cleveland Autonatic
Machine Co.
Cleveland, Ohio
Jan. Norton Co.,
16
Worcester, Mass.
Jan. Cleveland Automatic
16
Machine Co.
Cleveland, Ohio
Jan.
16
Jan.
John B. Stevens, Inc.
New York, N. Y.
Kelsey-Hayee Wheel Co.
Detroit, Mich
Additional capital assistance
for powder plant
Model "A" spindle automatic
and out-off attachments
400,000
Grinding machines & equipment
Model "A" spindle automatic
and out-off attachments
Borew machines and extra
10
59,952
59,952
13
77,775
77.775
15
89,928
89,928
109,380
109,380
79,233
79,233
60
equipment
Additional oxygen cylinders
9,604
Total, all orders of $50,000 and over: 99 contracts 2/
Combined total of orders for less than $50,000: 393 contracts
Grand total: 492 contracts 2/
400,000
113,071,782
6,437,159
119,508,941
2,538,651
158,629
2,697,280
115,610,433
6,595,788
Office of the Secretary of the Treasury Division of Research and Statistics.
1/ Excludes two orders for ships placed on December 20 with Todd-Bath Shipbuilding Corporation (amounting to
Corporation
$13.6
Ourties-Wright $48.8
millions and(amounting
$47.2 millions. respectively)
and one order for airplanes placed on December 26
the with
week
to
December 16-21 through the British Iron and Steel millions). Corporation Also aggregating excludes orders $1 462 placed thousands during
Excludes an indeterminate number of contracts of the British Iron and Steel Corporation, the dollar
values of which have been included in the above statement.
122,206,221
January 22, 1941.
137-A
Conference Held in the Secretary's
Office on January 22nd. at 9:15 A. M.
(1941)
Those present were Secretary Morgenthau, Secretary of War
Stimson, Secretary of Navy Knox, Secretary of Commerce Jones,
Mr. William S. Knudsen, Mr. John J. McCloy, and Mr. Philip Young.
Secretary Morgenthau opened the conference by stating that
the British wanted to place immediately in the United States about
one and one-half billion dollars worth of orders, and that it appeared
that the British could be helped only to a very limited extent by the
Army taking over standard United States contracts. Secretary Jones
asked why it took so long, and McCloy replied that it took considerable time to call in the manufacturers, readjust the contracts, and
make the necessary changes in price.
Secretary Morgenthau said that McCloy and the Army people had
been moving heaven and earth to get something accomplished along that
line but that it took days to do it and that a short cut must be
found. Secretary Knox said that the starting point must necessarily
be the total amount of money which was currently available for such
a job and added that certainly Jesse Jones didn't have a billion and
one-half dollars on hand. Secretary Jones said he didn't have it, and
that if he did he couldn't use it for that purpose.
He stated that the British had told him that the total was a
billion one hundred million dollars. Secretary Morgenthau said that
Purvis was sending over a list which should be there in a few minutes.
(The list arrived shortly thereafter). Secretary Stimson inquired as
to how much of the billion and a half total was represented by United
States type goods. Young said that about 376 million dollars were
British type and 884 million dollars was United States type.
Secretary Jones said that what would have to be done would be
to take the most urgent items from the list and study those. Secretary
Morgenthau said that a short cut must be found. Secretary Knox added
that he thought it would be necessary to go to Congress. Mr. Knudsen
also said that he thought an emergency appropriation would be neces-
sary. It was Secretary Jones' reaction that if Congress were asked for
the money it could probably be secured without much trouble.
Secretary Stimson said that he had no argument with the 380 million
dollars worth of British type stuff, but he did feel that we should go
easy in buying it. McCloy said he thought it was fictitious to talk
about a distinction between British and United States types on the
grounds that we would probably adopt some of the British type stuff
anyway.
137-B
-2Knudsen said that he thought we ought to start with what we
already know about, and in response McCloy said that, after all, the
critical items on the British list were of standard type. Secretary
Stimson stated that he thought two crises were coming along. one
inside of four weeks, and another some time after next winter.
Secretary Jones asked Mr. Knudsen if he were buying for the
British. Knudsen replied that he had been told at the White House
that the Army and Navy were going to do it. He added that he didn't
see how the United States could buy anything except United States
type stuff until after the Lend-Lease Bill was passed: until that
time the British would have to buy British type stuff with their own
money.
Secretary Morgenthau asked if they would buy British type stuff
after the bill was passed. To this question both Secretary Knox and
Secretary Stimson replied yes provided that the President thought it
was in defense of the United States. Secretary Stimson pointed out
his testimony before the House Committee in which he stated that there
should be only one purchasing channel and that the British purchasing
agencies out in the field should be cut out.
Secretary Jones said let's put up something to shoot at AS it
would save time and suggested that the discussion start out with respect
to plants. Mr. Knudsen asked AS to how much was involved in setting up
new plants and the materials for the new plants. Secretary Jones replied
that there was A substantial amount needed for the facilities and to set
up the machinery. He suggested that the War Department and Knudsen send
a letter to the President telling Jones to go ahead and place the orders.
Secretary Stimson asked Jones how far he was prepared to go, and
Secretary Jones replied that he would do all that needed to be done until Congress passed the Lend-Lease Bill. He added that he saw no reason
why orders could not be placed for the product as well as the facilities.
Further, it was Secretary Jones' reaction that the bill would be hurt if
an appropriation for the British was requested before its passage.
Secretary Morgenthau asked Secretary Jones to repeat his position
in order that it be made perfectly clear. Again Secretary Jones said
if you people will request the President to request Jesse Jones to do
it then it can be done, and at the same time the authorization should
cover enough orders to make it worthwhile. Mr. Knudsen pointed out that
all the orders could be placed and that actually only one-third of the
amount of money would be necessary. In other words, only that portion
of it which would have to be used for an initial down payment.
137-C
-3Secretary Jones said that he could commit enough money for
that provided, of course, that the Secretary of Var asked the
President to direct Jones to do it. Secretary Morgenthau sug-
gested taking York Safe and Lock AS an example, which appeared on
the detailed list of British contracts in the memorandum referred
to above. Secretary Morgenthau asked Jones as to whether he could
place the whole order for $18,000 worth of bombs and ammunition with
that company and actually give out the down payment. Secretary Jones
said yes that he would order the goods if he had a request from the
War Department and the Navy Department and the President.
Secretary Stimson said that he wanted to talk it over with his
own people to be sure that the stuff on the British list was stuff
that the United States Army needs and could use also. Secretary
Jones pointed out that after all you didn't need to place an order
for 883 million dollars of United States type goods just to start the
plants.
Secretary Morgenthau again referred to the York Safe and Lock
order and asked Mr. Knudsen if in his experience it helped to include
options with the original order, evidently having in mind the thought
that perhaps a small order could be placed with an option for extension. Mr. Knudsen said that was all right, and Secretary Jones added
that you can be sure the plan is practical if he said it. Secretary
Stimson pointed out that, after all, the President was the only one
who had the authority to ask Jones to do it.
Secretary Knox inquired concerning the 376 million dollars worth
of British type goods as to whether a legitimate loan could not be
made. Secretary Jones replied that his people had done a lot of work
on it. For example, the British would have to place an order on
duPont, who, in turn, would want a 20 million dollar down payment,
and then the RFC would lend the money to duPont against British collateral.
Secretary Knox pointed out that the British had already put up
a lot of money in down payments. Secretary Morgenthau stated that
they couldn't use the same collateral twice and inquired as to the
possibility of Jones giving the British around $100,000,000 for
Australian wool, which the British could then use to offset the 375
million dollars of British type goods that they wanted to buy. Jones
said that he could buy the wool if it were certified as a strategic
and critical material. He said, however, that he thought it would
be a dangerous thing to do as it might have an adverse reaction on the
Hill. He said that he couldn't lend to the British or for the account
of the British,
137-D
-4 Secretary Morgenthau inquired if there was any objection to
New York banks making such a loan. Secretary Jones replied that
he thought that would be fine. Secretary Morgenthau said that he
would inquire into that, but that, if he couldn't work it out, he
would like to talk with someone in Jones' shop who knew about the
wool business. Secretary Jones said for him to talk to Clayton or
to Jones. It was Jones' reaction that the banks would shy away from
it. Secretary Morgenthau pointed out, however, that the title would
still remain in private hands.
800
Mr. Knudsen suggested thatA million dollars worth of United
States type goods be placed through Jones, 50 per cent down and
50 per cent more in sixty days. Secretary Morgenthau said that it
would have to start with the Army and the Navy. Secretary Stimson
said that he was afraid it would hurt the bill if the contemplated
plan leaked out through the various contractors involved. Secretary
Morgenthau said that he felt the President should not do anything
without discussing it with the leaders on the Hill. Further, that
considerable thought should be given to maintaining British morale.
Secretary Stimson stated that he thought of it all night and
every night, and that he was worried about what he could say in the
future when he had to testify again if this contemplated plan were
put through in the meantime. Secretary Morgenthau said that it was
in the laps of the other gentlemen present and that he felt Secretary
Jones' attitude had cleared the atmosphere.
Secretary Jones said that he could trade out the deal with the
various contractors 80 that each contractor had just enough to go
ahead on. Secretary Stimson inquired as to what amount was necessary
for a firm contract, and Mr. Knudsen replied about 30 per cent.
Mr. Knudsen also inquired from Jones as to who was to give the order
to the contractor. Secretary Jones replied that he didn't know yet
as the machinery would have to be worked out. Presumably, the Army
and Navy would negotiate the orders and then the RFC could place
them.
Secretary Morgenthau asked if McCloy should continue his negotia-
tions with the British, taking over as many contracts for United States
type goods as possible. Secretary Stimson said that he thought McCloy
should so continue as far as he could. Secretary Jones said that he
could only buy an outstanding plant from the British, not every little
piece of property.
Secretary Morgenthau said he was still troubled about what the
British would do for money. McCloy stated that there was 300 million
137-E
-5dollars of aircraft manufacturing capacity included in the one
billion dollars of proposed British contracts. He suggested that
Secretary Jones go ahead and finance that as there was certainly
no doubt about the United States needing it too. Mr. Morgenthau
asked Secretary Jones if he could do it, and Jones replied that he
didn't know if he could go so far as 300 million dollars. Secretary
Stimson added that he didn't know whether or not he could certify
to that extent.
McCloy repeated that the United States had to get that much
capacity anyway. Secretary Knox stated that he thought Harry Hopkins
should go up on the Hill and ask for the money. He added that the
Navy got some money overnight for its share of the 12,000 plane
scheme. Secretary Jones said that he thought the immediate program
should be kept as small as possible in order that Congress should not
be worried about it. It was his feeling that Congress would complain
and criticize if the figures were too large. Secretary Stimson said
that he guessed he was more conservative as he was worried about what
the President would say if a real emergency for the United States came
un overnight.
Secretary Morgenthau congratulated Secretary Jones and Secretary
Stimson on the attitude which they had taken as it looked as though
this might be the solution for carrying the British during the interim
period pending the passage of the Lend-Lease Bill. He thanked the
gentlemen for coming, and the meeting was adjourned with the understand-
ing that Secretary Jones would talk it over with some of his people and
also look into the wool situation a little more, while at the same time
Secretary Stimson would go over the British list of proposed contracts
to see how far the Army could certify AS to what was necessary for both
the United States and the British.
Dy.
138
January 22, 1941
Mr. White
Secretary Morgenthau
Please let me have your latest chart on shipping
losses; also if you have a chart now showing
tonnage delivered to England.
139
January 22, 1941
Mr. Haas
Secretary Morgenthau
Please let me know the next time you see me
what the situation is at the Port of New York with
respect to movement of goods out of the Port. The
last time I saw the chart, merchandise was accumulating in New York.
140
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE January 22, 1941
Secretary Mergenthau
TO
FROM
Mr. Haas DA
Subject: Export freight situation.
In response to your request of this morning, I am
attaching herewith three charts showing the export freight
situation at the Port of New York.
The volume of export freight accumulated at New York
reached a peak in the first week of January, and then declined sharply. A slight increase was shown last week. (See
Chart 1.)
The drop in accumulated export freight during the second
week of January was due to a sharp increase in the amount ex-
ported during that week, coincident with a falling off in receipts. The exports fell off somewhat last week, however,
(see Chart 2), while receipts of export freight at New York
(Chart 3) showed an increase. It is likely that export freight
receipts at New York and at other North Atlantic ports during
the first two weeks of January were affected to some extent
by reduced carloadings during the holiday period.
Attachments
141
LIGHTERAGE FREIGHT IN STORAGE
AND ON HAND FOR UNLOADING IN NEW YORK HARBOR .
1939
111
CARLOADS
T
TT
1941
940
JAN.
DCC.
NOV.
FCB.
APR.
MAR.
MAY
JUNE
JAN.
DEC.
NOV.
OCT.
SEPT
19.
1 MAR. LIT APR. CARLOADS
THOUSANDS
THOUSANDS
12
12
11
11
10
10
9
8
8
7
7
6
6
5
4
,
3
13
APR.
27
25
11
MAY
22
8
JUNE
1
30
6
16
MAR.
940
JULY
3
2
3
JAN.
17
FEB.
AUG.
SEPT.
12
26
OCT.
23
9
6
9
1939
DEC.
20
28
NOV.
7
NOV.
23
14
21
DCC.
4
25
31
18
JAN.
1
11
17
15
1
28
20
15
MAR.
FEB.
29
12
26
APR.
1941
*LARGELY EXPORT FREIGHT, BUT ABOUT 10% REPRESENTS FREIGHT FOR LOCAL
AND COASTAL SHIPMENT. FIGURES EXCLUDE GRAIN.
C 303 A
Office of the Secretary of the Treasury
Disease of Research and Statistics
142
CARLOADS OF FREIGHT EXPORTED FROM NEW YORK
940
1939
FEB.
JAN.
DEC.
NOV.
MAR.
APR.
MAY
JUNE
1 94 1
JULY
The
AUG.
NOV.
OCT.
SEPT.
TT
TT
JAN.
DEC.
TTT
APR.
MAR.
FEB.
CARLOADS
THOUSANDS
TT
CARLOADS
THOUSANDS
6.0
6.0
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
JUNE
2
3
1
MAR.
MAY
8
FEB.
APR.
22
20
6
JAN.
25
11
940
JULY
17
31
14
28
12
26
23
21
3
6
9
DEC.
27
9
939
20
13
7
NOV.
23
30
AUG.
SEPT.
OCT.
NOV.
DEC.
4
25
16
18
JAN.
1
26 11
17
15
FEB.
1
2.0
15
MAR.
29
26
12
APR.
194
. AS ESTIMATED FROM DATA OF GENERAL MANAGERS' ASSOCIATION OF NEW YORK.
C 306 A
Office of the Secretary of the Treasury
research IN Matistics
143
RECEIPTS
OF FREIGHT FOR EXPORT AT NEW YORK
AND
AT 9 OTHER NORTH ATLANTIC PORTS
1939
CARLOADS
940
FEB.
JAN.
peg.,
MAR.
APR.
TIT
T
I'll
NOV.
194 1
MAY
III
my
JUNE
AUG.
OCT.
IT
SEPT.
NOV.
IT
DEC.
THE
II
JAN.
it
m
APR.
MAR.
FCO.
-
T
THOUSANDS
CARLOADS
THOUSAND
6.5
6.5
6.0
0.0
5.5
5.5
New YORK
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
9 OTHER PORTS
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
.5
.5
0
0
9
Division of Research and Statistics
3
Office of the Secretary of the Treasury
JAN.
17
FEB.
2
1939
20
16
MAR.
30
13
APR.
27
25
11
MAY
22
8
DEC.
6
6
NOV.
23
20
JULY
JUNE
1940
3
25
11
17
AUG.
31
14
SEPT.
28
12 26 9 23 7 21 4 18 1 15
OCT.
NOV.
DEC.
JAN.
1
26
FCO.
15
MAR.
29
26
12
APR.
1941
c 304 A