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DC BRANCH 260 F3/3 1 0 Federal Reserve • anit of Chicago - July 31, 1970 FED CATTLE PRICES are likely to trend lower during the remainder of 1970 reflecting continued expansion in feeding. Cattle on feed in the nation's 22 major feeding states numbered nearly 10.6 million head at midyear-2 percent more than a year ago. Most of the increase was in the Western states, especially Texas. The number of cattle in Texas feedlots increased 13 percent over a year ago. f;11F- EPLO AGR 111C? • uulln4 tter 7 1970 Number 1076 CURREHT SERIAL RECORDS Higher costs for both feeder animals and feeds have By contrast, the total number of cattle on feed in the squeezed profit margins. Feeder cattle prices in recent weeks five Seventh District states declined 1 percent from a year ago. averaged at or above the midyear high of 1969. Because of the This mainly_reflected a 3 percent drop in cattle on feed in -decline in fed cattle prices, feeder animals at $35 to $40 per Iowa, the nation's leading cattle feeding state. Indiana also hundredweight are costing Midwestern producers more,relative showed a decline with the number on feed down 5 percent to fed cattle prices a year ago. from a year ago. Illinois showed a 2 percent increase. Michigan and Wisconsin had increases of 14 and 4 percent, respectively. Break-even Prices for Fed Cattle Beef supplies have been running ahead of year-earlier levels since April. Federally inspected beef production from January through mid-July was about 5 percent greater than a year earlier. Marketings of fed cattle during the second quarter were 7 percent greater than a year ago. Reflecting these larger supplies, prices averaged around $3 per hundredweight below the midyear peaks of 1969. In recent weeks, however, prices have strengthened but are still well below those of a year ago. • Price of feeders (dollars per cwt.) 50 lb. yearling steers 32 33 34 35 36 Cost of gain* (dollars per cwt.) 24 _20, 28 .212, Selling prices-1150 lb. steers (dollars per cwt.) 28.52 29.09 29.65 30.22 30.78 29.39 29.96 30.52 31.09 31.65 30.26 30.83 31.39 31.96 32.52 31.13 32.00 31.70 32.57 32.26 33.13 32.83 33.70 33.39 34.26 Marketings during the current quarter are expected to be 3 percent greater than a year ago but less than the previous quarter. A further increase in marketings over the year before 450 lb. steer calves Selling prices-1050 lb. steers is likely in the fourth quarter. In addition, producers have (dollars per cwt.) been marketing animals at heavier weights. Choice steers at 37 29.57 30.71 31.86 33.00 34.14 seven major markets during the first half of 1970 averaged 29 38 30.00 31.14 32.29 33.43 34.57 pounds per head heavier than in 1969. A continuation of this 39 30.43 31.57 32.71_ 33.86 35.00 trend,- coupled with larger numbers marketed in the second-- 40 30.86 32.00 33.14 34.29 35.43 half of the year, could substantially increase beef supplies. 41 31.29 32.43 33.57 34.71 35.86 Competing pork and poultry supplies are also expected to increase during the second half. Poultry production has been ex*Includes charges for labor and overhead. panding throughout most of 1970, but pork was in shorter Corn prices have averaged about 3 cents per bushel above supply during the first half of 1970 than in 1969. year-ago levels. Protein supplements have averaged over $3 per ton above a year ago, reflecting high soybean meal prices. ProIncreased consumer demand is apt to only partially offspective supply and demand conditions suggest feed costs will set the rise in meat supplies in the second half of 1970. Alcontinue high through the remainder of the year. though consumer disposable income will continue to increase during the remainder of the year, the rate of increase is un• Profit margins are likely to continue slim through the certain. The expiration of the income surtax as of July 1 will remainder of the year, even for the most efficient producers. bolster consumer incomes. A continuation of the decline in Average costs of gain and current feeder animal prices suggest employment, on the other hand, would moderate future increases. Total employment (seasonally adjusted) fell in May, a selling price of over $30 per hundredweight would be necessary to recover all costs including labor and overhead. Fuand June. Consumers have been saving an increasing protures contracts for choice steers at Chicago are currently selling portion of their incomes, possibly reflecting a general feeling for around $29 per hundredweight. of pessimism about the future. In June, the savings rate-at about 7.6 percent of disposable income -was the highest since 1967. A protracted auto workers' strike could also adversely Dennis B. Sharpe affect consumer spending for meat. Agricultural Economist • FARM BUSINESS CONDITIONS • , 1970 ITEMS PRICES Received by farmers, U.S.(1957-59=100) Paid by farmers, U.S.(1957-59=100) Parity price ratio (1910-14=100) Wholesale, all commodities (1957-59=100) Paid by consumers (1957-59=100) Wheat, No. 2 red winter, Chicago (dol. per bu.) Corn, No.2 yellow, Chicago (dol. per bu.) Oats, No. 2 white, Chicago (dol. per bu.) Grain Sorghum, No.2 yellow, Kansas City (dol. per cwt.) . Soybeans, No. 1 yellow, Chicago (dol. per bu.) Hogs, barrows and gilts, Omaha (dol. per cwt.) Beef steers, choice grade, Chicago (dol. per cwt.) ....... Milk, wholesale, U.S.(dol. per cwt.) Butterfat, U.S.(dol. per lb.) Broilers, live, U.S.(dol. per lb.) Eggs, U. S.(dol. per doz.) Milk cows, U. S.(dol. per head) June ' 1969 May June 116 133 72 117.0 135.2 1.41 1.37 .71 2.03 2081 23.65 30.56 5.31 .71 .13 .31 331 117 132 73 116.8 134.6 1.48 1.32 .70 1.96 2.70 23.43 30.53 5.39 .71 .14 .30 333 116 128 75 113.2 127.6 1.28 1.31 .64 2.02 2.69 24.97 34.22 5.09 .69 .15 :31 303 -- -- -- Farm labor, U.S.(dol. per week without board) Factory labor, U.S.(dol. earned per week) 134.40P 132.93P PRODUCTION Industrial, physical volume (1957-59=100) Farm marketings, physical volume (1957-59=100) 168.6 108 169.1 101 173.7 103 798.8P 50.1 799.8 50.4 746.2 48.5 4.2 75.2 3.7 74.6 4.4 74.6 FINANCIAL (district member banks) Demand deposits: Agricultural banks (1957-59=100) Nonagricultural banks(1957-59=100) 138.7 128.0 135.3 129.8 136.5 129.7 Time deposits: Agricultural banks (1957-59=100) Nonagricultural banks(1957-59=100) 361.2 318.3 359.1 315.4 332.0 318.0 INCOME PAYMENTS Total personal income, U.S.(annual rate, bil. dol ) Cash farm income, U.S.1 (annual rate, bil. dol.) , EMPLOYMENT Agricultural (millions) Nonagricultural (millions) 1 Based on estimated monthly income. 130.06 , PPreliminary Compiled from official sources by the Research Department, Federal Reserve Bank of Chicago. •