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TIIE FEDERAL RESERVE BANK OF CHICAGO

AGRICULTURAL LETTER
July 7, 1950
The outbreak of military operations in Korea spurred commodity markets to sharp
advances last week, greatly accelerating the gradual price rise experienced in recent
months. The effects will be temporary, however, unless much larger-scale operations
develop. Price strength in most markets reflects primarily the high-level demand associated with expanding industrial production. Stocks of most agricultural commodities
are ample, and crop prospects are good in both the U.S. and Europe.
Dairy product prices continue steady at support levels with every indication that
this situation will continue through March 1951. With Federal taxes and license fees on
colored margarine repealed this product will be stocked by more stores in the 32 states
which permit its sale, and average consumption is expected to increase somewhat, partly
at the expense of the price support program for butter. The increase in margarine consumption since 1942 resulted largely from more families using the product.
With hog prices advancing more than seasonally the recent BAE report on the pig
crop assumes added significance, both to farmers and consumers. The number of pigs raised
from the 1950 spring crop totaled 60.1 million, three per cent more than a year earlier.
Marketing of these pigs will begin in appreciable volume next month, continuing through
the fall and winter. Farmers report keeping five per cent more sows for fall-farrowed
~ this year than in 1949. These pigs will reach market beginning in late winter and
continuing through the spring and early summer of 1951. Total pork production for the
remainder of 1950 and the first half of 1951 probably will be a little larger than in
the corresponding period a year earlier, but the demand for meat appears to be strong
enough to support hog prices at or above the year-ago level, at least through the remainder of the current year. The usual seasonal decline in hog prices from the summer
high to year-end is about 20 per cent.
Price su ort for the 1950 wheat cro is set at $1.99 per bushel, U.S. average,
compared with 1.95 for the 19 9 crop. Acreage allotments have not yet been announced.
Honey prices will be supported at nine cents per pound during the 1950 marketing season.
Fitting machinery to small farms is a problem common to most areas. Working
with 80 acre farms, 60 acres tillable, Purdue University farm economists concluded that
the following arrangement was most economic: a tractor, plow, disc, harrow, wagon, and
grapple fork owned by each farmer; corn planter, cultivator, rotary hoe, one-horse drill,
mower, side-delivery rake, hay loader, and manure spreader jointly owned by two farmers;
corn picker, corn binder, silage cutter, and grain drill jointly owned by three farmers;
and combine hired on a custom basis. University of Wisconsin economists working on this
problem. reached the same general conclusion except that it would be more economical for
dairy farmers to buy a small field forage harvester jointly with two neighbors than to
buy a hay loader, corn binder, and part interest in a stationary silage cutter.
Prices received by farmers in mid-June averaged the same as a month earlier and
Meat animal prices were six per cent higher than
in June 1949, and crops averaged about the same as a year earlier. Poultry products
prices were down 26 per cent and dairy products about three per cent from June 1949 levels.
Prices paid by farmers for goods and services increased one point in June to 255
Per cent of the 1910-14 level and were three points higher than in June 1949.
Only one per cent less than a year ago.


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

No. 48

Ernest T. Baughman
Agricultural Economist
Research Department