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1-22-43
UNITED STATES DEPARTMENT OF AGRICULTURE
RELATION BETWEEN AGRICULTURAL PRICES AND INCREASED PRODUCTION
OF FOODSTUFFS
Assuming normal weather conditions, the total output of farm products
in 194-3 can be increased in only two ways:
(1) By getting more production from the land now in cultivation
(2) By bringing in new land
There is a small amount of additional land that can be brought in, but the
bulk of the increase must come from higher yields per acre and more livestock production from the land now in use*
That means greater effort on
existing farms and higher costs incurred for the additional product. These
costs must be compensated for in the form of higher prices or by other means
of increasing farmers1 returns*
In 1942 our total output of agricultural products was 27 percent
above the average for 1935-39. In the last year, production increased only
8 percent from the average of 1910-14 to the years 1918*19. Although there
are very definite limits to increasing the total output of farm products,
the more essential products can be increased both by obtaining a higher
yield per acre or per animal and by shifting from one crop to the other,
such as from oats to soybeans and from short-staple cotton to peanuts»
The increase that can be obtained from shifting production into the more
essential products is by far the most important. For instance, the acreage
of soybeans harvested for beans was increased from 5,881,000 acres in 1941
to 10,762,000 acres in 1942, and the acreage of peanuts picked and threshed
was increased from 1,914,000 acres in 1941 to 3,690,000 acres in 1942.
Acreage shifts of this kind are made by farmers who have been producing
the crop in the old producing areas and by new growers in the old producing
areas, as well as by new growers in new producing areas*
The tremendous
- 2increase in peanut acreage in 1942 involved establishment of many new
producing areas. The increase in dry bean acreage which we are attempting to get for 1943 will require establishment of new producing areas
in the Eastern Plains States where beans will be substituted for wheat.
Prices received for farm products serve as the income inducements
for production increases and for shifts of the type just mentioned.
They
therefore affect increased output in four different ways, as outlined
below*.
1. Adequate Income Incentives for High Output
Prices for the products produced on any one farm or group of farms
must be sufficiently high to cover expenses and to leave a satisfactory
income to the farmer and his family. The prospect of considerably higher
returns for the increased effort that is necessary for a high level of
output is a powerful incentive to induce the farm family to work harder
and to take the additional risks involved in increased production.
Necessity for an income incentive to increased effort is recognized in
the war contracts of other industries and in wage agreements with war workers.
F a m incomes must also be sufficiently high to hold farm families in agriculture in competition with other work opportunities*
Cash income from
farm marketings in 1942 are estimated at about 15*6 billion dollars, or 37
percent higher than in 1941* Thus farm incomes are satisfactory in most
areas and on most sizet*and types of farms * But if farm output is to be
increased in 1943 it will be necessary to obtain maximum production on
all farms that have sufficient land and equipment to make a significant
contribution.
Some adjustments in income incentives will be needed,,
especially in some areas, to get maximum, output*
- 32
«
Larger Output Costs More Per Unit of Product
If production of a product such as milk is increased greatly on
any one farm or a group of farms, the expenses usually rise faster than
the output and therefore the additional product costs more to produce than
the normal volume of production.
For instance, if milk production is to
be increased considerably on a farm where as many cows are now being kept
as there is barm room for and the present labor force can handle and if
little more home-grown feed can be produced, the cost per 100 pounds of
the additional milk will be much higher than for the normal output. If
the cows on hand arc already fed to capacity, more cows would have to be
kept, and perhaps new shelter would have to be provided for them. Purchased feed is usually more expensive than homo-grown foods• An extra
milker might have to be hired or a new milking machine purchased (if one
could be had),*
To get increased output under such circumstances, it is
necessary to provide either higher prices for the entire production or a
return for the additional product that more than covers the increased
expense*
Otherwise the farmer will have no larger income for himself
than if he had not increased production, and he will have carried all the
burden and risk in^lved in increasing output.
3«
Production in Now Areas More Expensive
If increased production of a crop, such as boons, necessitates
growing thorn in a now producing area, or at least on farms iThorc beans
'have not previously been produced, some special problems arc mot and higher
costs are incurred.
Farmers must learn how to grow beans. Their yields
arc likely to bo low for the first year or two even if the area is adapted
for- bean growing, because the farmers have not developed sufficient skill
in handling them#
(This was true of peanuts in 1942#)
The new growers
must have an inducement to shift out of the crops they have been growing
and to make the nev/ investment necessary for equipment, seed, and other
supplies for a crop in which they have not had experience*
This requires
compensation for the additional risk involved in shifting to the new crop*
It is comparable to conversion from automobile manufacture to tanks or
airplanes*
4#
~*
Income from Products Most Needed Must Be
High Enough to Get Required Increase in
Output
Since increased in the essential products must come either from
higher yields per acre and per animal or from shifting away from other
crops, it is necessary to adjust prices or other income incentives of
these products so that land and labor can bo drawn into their production
to whatever extent is necessary to got the desired output«
The price increases or income incentives that are needed to induce
the amount of shifting that is required to meet the needs for essential
products must be measured.against the net returns that can be obtained
from alternative uses of lend and labor•
For instance, with present
prices for cotton, farmers will need to got about §125 a ton for peanuts
in order to shift land and labor from short staple cotton to peanuts.
In
1942 the increase in peanut acreage came large#>ly out of corn and idle land,,
A wide margin between returns for the product of which an increase
is desired and the closely competing products usually brings prompt production response*
For instance, production of soybeans in 1942 was nearly
double that of 1941, and most of the increase resulted from larger plantings*
„ 5 The price in December 1941 was 82 percent above the price in December 1940.
Production in 1942 was increased in response to favorable returns from
soybeans, and because corn allotments restricted corn acreage in 1942«
Thus the alternative crop was oats in most areas, and the income margin
between oats and soybeans was rather \ixdep Soybean prices in December
194*2 were only 8 percent higher than they were a year earlier.*
To insure
a continued high level of production soybean prices Trill be supported at
$l#60 to $1«75 depending on oil content.
Table 1 shows the recent price and production changes for some of
the farm products important in the war .effort. While price increases
alone do not account for the differences in production response it is
fairly evident that increased prices have exerted an important influence,,
For instance, among the crops soybeans head the list of price increases from
December 194-0 to December 194-1 and they also have the largest increase in
production*
Similarly, hog prices have increased most in the livestock
group, and hogs also show the largest increase in production, A discussion
of the price and production changes in some of the other commodities follows*
Dry Beans
With a price of $5.12 per bag as of December 15, 1942, and a preplan ting season price of roughly $4*^0* farms last year planted only 95
percent as many dry edible beans as they did in 194-1 when the December 15
price was $4#93 and the pre«»planting season price was -$3«68#
This indi~
cates that the farm price required to obtain the present goal of 3#3.
million acres — a 4-3 percent increase over 1941 planted acreage — v/ould
be considerably above $4*60 at planting time.
The average price to farmers
- 6 -
at harvest time in 1942 was $4#89. With two-thirds of the bean crop in
1942 grown in the States of Michigan, California and Idaho, where beets,
potatoes and soybeans compete with edible beans, it appears impossible
to jot the increase of beans asked for in old areas. Hew areas will have
to be established and a program organized from the ground up#
Hew areas
in the plains States might produce the beans at present prices after they
are once established, but further incentives seem necessary to induce
shifting into the new enterprise.
Hogs
The recent pig crop report indicates that farmers plan to increase
the number of sows farrowed this spring by 24 percent compared with the
number farrowed a year ago.
This is welcome information.
Such an increase,
if also continued for fall farrovri.ngs, would exceed the 1943 goal for hog
production.
Farmers have increased hog production by such a proportion because
of the very favorable relationship between the costs and returns involved*
During the September-December period just ended, the period when farmers
were making their plans for spring farrow of cows, the average hog-corn
price ratio, based on prices received by farmers, was 18,4 for the United
States.
Farmers 1 response to this ratio is in accord with past reactions
to changes in the relationship between hog prices and feed costs*
So long <xs the hog-corn price ratio stands at about 15, it may be
expected that farmers will tend to maintain the level of hog production
Unanticipated this year, Prospective prices for grain in 1943 make it
- 7 that hogs sell at about maximum prices permitted under price
ceilings, if the Jiog^corn price ratio is to be held near 15 f 0 #
If pro*
duotion of hogs is to be expanded still further in 1944, a ratio more
favorable than 15 may be required during the last four months of 1943*
Inasmuch as farmers are near their capacity for producing hogs without
seriously curtailing production of other things, future pripe policy with
respect to hogs must be governed by the need for other types of production.
Milk
The butterfat-feed ratio for the United StatesTOS 26 f 4 in December ~*
7 percent above the average 1922*41 butterfat-feed price ratio of 24,6,
but a ratio of 29 f 0 is considered necessary to encourage farmers to produce
the goal of 122 billion pounds of milk in.1943. The present ratio of 26.4
is too low to reach the goal. Another aspect that needs to be considered
is the level of whole milk pricesf
The average price received by farmers
for milk sold in December was $3#01 per 100 pounds, The December milk-feed
price ratio was 1«44#
This ratio was at a level comparable to that needed
to reach the milk goal in 1943* However, because of recent increases in
feed prices, the ratio likely to prevail during the year will be less than
required to assure achievement of the goal. To obtain butterfat^fced and
milk-foed price ratios in 1943 sufficiently high to reach the milk goal
returns received by farmers for buttcrfat would noed to be 8 cents per
pound higher than prospective prices, and for whole milk about 50 cents
por hundredweight higher*
1A
/ith the prospective quantities of .milk to be sold in 1943 as whole
milk and as buttorfat in creasm, farmers would need to receive in increased
prices about 400 million dollars above what would be received from present
prices of dairy products in order to reach the goal for milk production.
However, if an incentive payment program were inaugurated under which
individual farmers would be given a relatively large payment for additional
milk production instead of a smaller increase in price for total milk, the
increases in total returns needed to reach the goal would be reduced to
about 250 million dollars«
The average price received b;y farmers
in 1942 was 30 cents per dozen.
19.0.
for eggs in the United States
The average 1942 egg-feed price ratio was
It is believed that a ratio of this level is necessary during 1943
to encourage production of the 4,780 million dczen eggs called for by the
1943 goal.
The Deportment's program to encourage production of eggs assures
an average farm price for eggs in the United States during the spring months,
when production is seasonally- large, of not loss than 30 cents per dozen,
and an annual average price of not less than 34 cents*
Prices received
by farmers for eggs in 1943 arc likely to average at least 15 percent
higher than in 1942, and in the spring months of flush production the
increase vdll bu relatively greater than for the year as a whole•
Although
feed prices may average somov/nat higher in 1943 than in 1942, the situation with respect to production of eggs is expected to be sufficiently
favorable to encourage the 1943 goal lovel of production*
TABLE I
Farm price of some products on December 15, 194-2,
Percent increase in price from December 1940 to December 1941 #
Pereont.. ineuwe in production 1942 over 1941, price increase 1942,
and direction of goal for 1943
Product
^
:
:Price rPrice Dec # Production
:Units Dec, : 1941 as : in 1942
:
: 1942 :percent of:as percent
:
:
: 1940 : of 1941
Dollars Percent
Peraont
: Price Dec*
: 1942 as
v percent of
* 1941
Percent
: Desired
: direction
: in 1943
:
Soybeans
Beans, dry edible
Potatoes
Peanuts for oil
Flaxsoed
bu.-
1.59
5.12
bags 1.12
lbs. •0397
bu.. 2.-36
182
176
151
130
126
198
105
105
170 1/
129
108
104
135
99
132
Same
up
up
up
up
Hogs
Butterfat
Milk, wholesale
Eggs
CY/t. 13.27
lbs. ..421
cwt» 3.01
doz. .397
175
124 2/
)
103)
118
129
138
113
116
UP
bUr
1/ All peanuts for nuts
2/ Pigs raised
10?
128
127
up
up
up
wage rates* "by geographic divisions! January 1,. 1943
with comparisons
Geographic
Division
PABM WAGE RATES
PER MOttTH WITH BOARD
Annual *
[
average' ••.
* Oct. 1, : *^an. It • Oct. 1, : Jan. 1,
[ 1910-14 t
1943
1941
:
1942 !
1942
S
: Dollars i Dollars : Dollars : Pall ar.fi ! Dollars,
;
New England ..... ... :
Middle Atlantic ... . ;
East North Central .. J
West North Central . J
South Atlantic ..... ;
East South Central. . !
West South Central•• J
Mountain
.
.... j\
Pacific . ...... .. J
<
i
i
24.18
22.25
23.75
26.32
14-62
14*71
17.35
32-48
S
46.31
39.68
\ 39.67
J 38.25
! 21.75
J: 19.87
!, 25-48
, 47.33
i.
:
:
!
:
!
!
::
!
47.70
40-17
38.71
33.72
22.34
21.69
28-20
45*13
o*3 • D O
l>
!.
!!.
!
!•
I
:
»
59.40
50-15
49.99
66.01
26.21
25.89
34.97
67.99
Q H Q^
'•• 61.43
!. 51.53
ii 50.60
': 49.81
i : 28.68'
: 28.09
: 38.29
i 65.51
1.
PER MONTH WITHOUT BOARD «
New England
. :«
Middle Atlantic ,.
.j!
East North Central •• ,:
West Nerth Central •. •
:«
South Atlantic '•.• • • •!
.
East South Central •• ,i
West South Central . i
Mountain •
.... I
Pacific .•
.... I
•
t
37.70
33.41
32.80
36.86
j20.97
20.80
24-93
46.42
48.16
; 72-i2
:
:
!
:
:
:
:
I
:
75.37
59.53
53.16
46.93
32.90
30.10
38.50
62-46
87.89
!.
;
;
:
!.
!
f
t
57.75.
53.75.
50.23
30-84
27.83,
35.24
64-01
85.19"
•
:
:
:
«•
i
i
i
:
2.45
2-42
2-29
2.30
1.17
1.02
1.36
2.38
2.97
•
:
2-57
2.31
:
:
2?16
1.94
:
J
:
:
:
1.19
1.05
1.43
2-16
2.86
I
{
5
:
:
:
3.39
3-09
2.89
2-90
1-54
1-33
:
3.43
:
:
;
:
:
:
1.72 .:
3.02
2-.73
2.53
1..56
1.-36
1-78
:
!
2.96
3.73
J
:
-2.79
3.64
t 99.70
: 73.78
5 67.17
: 72.00
!• 36.92
;. g5.30
:. 47.3-i
! 89.62
: 123.52
: 93.63
: 75.26
: 68.34
: 67.37
: 42.36
: 39.0-2
: 52-39
: 89.30.
: 125.70
PER DAY WITH BOARD'
New England
•.
Middle Atlantic
East North Central ..
West North Central ••
South Atlantic- .....
East South Central ••
West South Central •
Mountain* •
•
Pacific . .-.. . ..
PER DAY WITHOUT BOARD
New "England
.. •• ...
Middle Atlantic .. ..
East* North Central .
West North Central ••
South Atlantic ......
East' South Central ..
West'South Central •
Mountain
..
Pacific
•
:.
:
1.27
1-24
1-31
i
:
*
:
:
.
:
1-46
.81
.81
.98
1.50
1.49
:
l
S
:
,:
1.71
1-63
1-68
1.88
i
i
s
:
1-05
1-25
2-05
2-06
1-05
- 5-
;
:
:
J...
J
'
:
:
t
3.18
,3.10
:
2-90
3.06
? : 2.80
2.96
3.59 •:i 2.83i
1.53
.1.42
1 • 39
1.37 .:
J ; 2-03
1.86
3-20
3-61 :
• : 4.45
4.43
:
4.06
! 4.19
:
3.88
S 3.75
:
3-67 j ; 3.53'
:
4.33 ; 3.65
:
1-82 .j 2.01: 1.79
{-. 1.75
l 2.43.
:
3-30
3.13
; 4.34. :
S
5.65
:
5.60
Farm wage rates, by,. States, January -1, 1-943. and January ,1,, 1943
«
P e r day,
Per day,
{»; Wit!I board
...j•
with beani
t board
: 12.43 : _1£4£ J 1943 S 1942 : JL2.4S i. 1942_ .
J.943
J
Del.
Pol.
Dol. ' fiolDor.
.Pol.
Pol.
\
State
Maine
H. H.
Vtv
Mass.
B. I .
^JJonn*
IT. Y .
H. J .
JP&.
Ohio
Ind.111.
Mich.
Per month,
60-25
68.00 :
58.75
69.75
56.25
66.00
64.25
78.25
65.00
82.50
bl* • o 81.00 _
56.50 .62.25
j, 45.75
58.75 70.00
j_^5i2S _ ^4^2 5 _ 5.3^00 _
j. 34.75
44.50 .49.50
; 36.-50 47.25 49.25
53.00
\. 41.25 54.00
56.75\! 39.2fe 52-25
j, 45.75
jI 4 1 . 0 0
J• 4 4 . 2 5
j, 45.50
j 52-50
J' 53.75;
J• 43.00
39.50
•VI8.
Minn.
.j! 32-50
lows,
Mo. '
I.'Eak.
!t 29.50
! 39.50'
! 28.00
!•.30*50
He*br •
t 34.25
^ansi
DelKd.
Ta.
J• 34.25
{. 34.25
j'. 28.00
V. V a .
H. C
3. 0 .
Ga.
'la*
~ky.
T^rin.
Ala.
JU.SS.
Ark.
Okla.
Mont•
Idaho
Vy6.
Colo.
H. M e x .
Ariz.
%
Jtah
5 34.25
J.
i,
;!
!:
27.50
23.00
16.25
16.50
{; a .75
' s! 25.75
\I 21 .'75
J:
J:
j
18.75
18.75
22-75
i 19-00
J 28.25
1
31.50
!. 46.80
\ 49-50
s 48; 40
\ 39.75
j 38.00
: 48.75
i 58.50
J?ev.
Wash.
j, 50.00
: 52.00
_J>&ULf.
51-00
! 66.25
j 37.08
TI.
5,
:
Per month, :
; without "board :
52.00
48.50
57.00
41.00
45.50
51.75
53.25
51.25
46.50
42.75
34.50
34.50
30-25
21.75
21.50
32.00
34.50
27.00
'25.75
:
24.00
.56.0048.00:
51.5040.75:
44.25.
45.75:
46.0048.2548.0048.75:
39.5040.25
32.50
23.50
23.50
37.50
35.50
30-25
"26.00
26.50
-29.50 31.75
27.25
•25.00
40.25
40-00
42.00
-42.00
"71.25' 68.00
66.50
74.25
65.50
68.00
59-75
56-50
50. ©0 52.50
73.50
63.50
84.25
74.50
67.00 .71.50
85.50
73.75
86.75
72.50
95.00
93.75
47.77
50.91
80.75
87.00
2-55
2.50
2-35
2.50
2-80
2.65
2.40
.2-50
_66..5_0L
J3J.5
•86.75:.
88.50
79.50
98.50
101.00
100.00
61.00 ^2.15
62.75 ^2.00
68.75 .2.30
73.25 "2-30
73-00 i2.05
69,00
2-00
72.50 '2.20.
1.50
54.00
1.75
67.00
1.80
73.50
71,50
2.10
70.25
1.9.5.
66.50
2.05
62-50
1.85
48.25
1.45
49.75
1.35
42.50
1.25.
.80
30.50
.85
30-50
53.00 • 1.20 .
1.20
48.00
37,75
1.05
.95
36.00
33.25
• 95
41.75
1-10
35.00
1.00
54 :.00 1.55
57.50 - 1.55
95.00
2-40
100.00
2.45.
90.50
2-25
83.25
2-05
71.00
1-85.
104;00
1.95.
105.00 2.55.
91-00 . 2-15
118.00
2.80
2-65
115.00
128.00
2.90
62.-13 1.77
- 6 -
3.20
3-40
3.15
3.25
.3.30
3.25
3.35
3.20
3.45
4.15
"• ... 4 . 3 0
3.85
.4.. 30
4 .;40
4^5
3v55
3.10
5»70
3.05
3.10
•Si 1 5
4.'00
3.90
3_V 40
.3.185
2.-10- _. S«8_0_
.2.75
" 2.70
2-55
.2.75
2.80
2.85
2.95
.3.00
.2.65 _. 2.65
2.70
"3.15
2.80
1.90
2.10
2.55
2.60
3.15'
2.50
2-65
3-40
3-i.5 _ 2.60
3-10.
2.65
1.85
1.80
1.65
1.05
1.15
2.657
2.40
.1.90
1..80
•1-60
1.05
1.10
. 1-65 .
1.70
1.65
1.55
1.35
1.35
1-30
1.20
1.25
1-25
1.50
1.40
1-35
1-25
2.30
2.00
1.90
2.20
3.25
3.60
3.75
3.15
3.30
2-80
2.65
3-30
2.30
2.50
2-55
2.70
3.10
3.. 45
2-95
3.65
4.45 ' 3.60
3.30
4.20
3.70
4.45
2.39
2.12
''
" 3V45
3.40
3.55
3.80
3.50
3.70
3.95
2-60
3.60
3.95
4.25
3.95
4.00
3-35
2-40
2-30
2.05
1 . 3 5 •—
1.45
2.30
2.10
1.75
1.65
1..65
1.95
1.70
2-75
2- 60
4.40
4.55
4-25
4.10
3.00
3.90
4.15
£.60
5.60
5.10
5.70__
2-83
@FedFRASER