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THE FEDERAL RESERVE BANI{ OF CHICAGO
AGRICULTURAL LETTER
November 2, 1951
The outlook is for more inflation, but how soon and how much still is uncertain.
This conclusion was reached at the annual Agricultural Outlook Conference held in Washington,
D. C . this week. A prime generator of the anticipated inflationary forces will be rising
i?vernment expenditures tor defense and related activities. These have already risen by
25 billion dollars, annual rate, since the outbreak of war in Korea and are estimated to
r1se another 25 billion in the year ahead. The def'ense program will then be taking 18 to
19 per cent o! our national output, compared with 12 per cent now, and 6 per cent in mid1950.
Consumer incomes will increase further in 1952. Wage rates will advance, more
people will be employed, and the work week will lengthen a bit. Even though higher tax
rates are in effect, consumer incomes are likely to increase by 12 to 15 billion dollars
next year. And since consumers are already saving at an exceptionally high rate, they probably will step up spending as much as income rises.
Spending by business for inventory accumulation, however, is expected to be lower
a year from now and investment in new construction and equipment probably will be curtailed
due to materials shortages. These cutbacks will of'f'set a part of' the increased demand by
government and consumers.
Total demand for goods and services in 1952, therefore, may exceed the present
annual rate of 328 billion dollars by 8 to 10 per cent-at present price levels. In the
past year, production expanded within this 8 to 10 per cent range but in the year ahead an
increase of' only 5 to 7 per cent appears probable . Thus, upward price pressures are expected to be stronger than at present but not so strong as in the last half' of 1950. These
pressures, however, may be confined largely to metals, consumer durables, and housing.
This survey of the over-all economy provided the background for a detailed discussion
of the outlook tor fa.rm production, price, and income prospects . Secretary Brannan opened
the Conference by pointing out that farmers are expected to "produce enough to supply the
nation's growing military forces," to provide raw materials for "the growing defense industries," to assure balanced diets for the "nation's civilian population," to maintain "a
safe margin ot strategic reserves," and "to back up the nation's foreign policy by enabling
us to continue to share our food and fiber to the f'ullest pol!ISible extent ...with friendly
countries in need of help." This means high production goals in 1952.
Farm production set a record this year, 5 per cent higher than in 1950, and with
favorable weather, is expected to increase further in 1952.
Foreign demand for U. S . farm products probably will continue strong in the year
ahead, supplementing the indicated strong domestic demand. Exports of most items probably
\'ill compare favorably with the current year's volume. Some decline is indicated, however, for soybeans and other fats and oils.
Farmers' cash receipts are expected to rise next year, reflecting a larger volume
ot marketings at prices averaging near 1951 levels . Net income of !arm operators, however,
Probably will show little change from this year's level of about 15 billion dollars due to
r1e1ng production costs. This level of net f'arm income is about 2 .3 "billion dollars above
the Postwar low ot 1950 but 2 billion less than the 1947 record. It adjusted for the ris~ cost of living, the 1951 net farm income is higher than in 1949 and 1950 but otherwise
he lowest since 1941.
Ernest T . Baughman
Agricultural Economist
5o, 116
Research Department
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis