Full text of Agricultural News Letter : Vol. 1, Number 10-12

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AGRIC
THE
Vol. l

FEDERAL

LT

RAL
NEWS LETTER

RESERVE

BANK

Dallas, Texas, November 15, 1946

GENERAL AGRICULTURAL
OUTLOOK FOR 1947*
The 1947 Outlook reports prepared by the
United States Department of Agriculture and
the tenor of discussion at the Agricultural
Outlook Conference in Washington in October indicate another generally prosperous
year for agriculture in 1947. It is not expected, however, that farmers will receive as
high incomes as during the past two years or
that they will enjoy as favorable a financial
position as in 1946.
The Agriculture Department's production
goals for 1947 contemplate a total volume of
farm produce approximately equal to that of
1946. The call for continuation of large production in 1947 is based partly on the belief
that relatively high domestic consumption
will continue, and partly on the expectation
that many war-ravaged countries will not
regain prewar levels of production in 1947
and will continue to import a relatively large
volume of agricultural goods. Another reason
for high production goals next year is the need
to replenish domestic and world food stocks,
considerably reduced during the war years.
Though achiev men t of these goals will mean
a further drain on the fertility of American
farms, already seriously reduced by the demands of war, agricultural leaders believe that
uch a course of action is justified in view of
the demand and price situation expected to
exist during the coming year.
•or the rcaf:ions above indicated the demand
for farm products in 1947 is likely to continue strong, although for the year as a whole,
"'Thi issue of till' A grim/111r.il
e1n Lella h devoted to a
umm.try of che farm ouclook fur 1947 .is de\ •cd hy chc United
'cace
partmcnc of Agricult u re a nd l>y p.1rcicipancs in the
gr1culcural Ouclooi;: C nfcrc-n ' h l<l i.1 ·r,,~hi 1 1011 in J..cobe1
of rhi year.

OF

DALLAS
Number 9

total demand may fall somewhat below that
of 1946. An anticipated high level of domestic industrial activity and relatively full
employment during most of 1947 are counted upon to contribute substantially to higher
consumer incomes and purchasing power. The
decline in industrial activity, which is expected to occur during the latter part of
1947 if by that time the backlog of demand
for many consumer goods has been met, may
slow the rate of consumption of agricultural
products, but will not likely reduce it to prewar levels. If the progress of industry is not
retarded by major work stoppages, the index
of industrial production in 1947 may average more than 10 per cent above that of 1946
and 85 per cent above the 1935-39 level. It
is also forecast that a small increase in total
civilian employment will occur in 1947. Given
such relatively high levels of industrial production and employment, the agricultural
economists feel that a substantial increase in
national income can be expected.
The increase in consumer incomes accompanying the increase in national income may
not, however, be so strongly reflected in domestic demand for farm products as might
be anticip:ited under normal conditions. The
larger volume of consumer's durable goods
expected on the market at higher prices in
1947 will probably absorb a considerable
share of the increased purchasing power.
Therefore, consumer expenditures for food
and other farm products might not be increased, but might even drop somewhat in
the latter part of the year, particularly if
industrial production and incomes should decline during that time.
The demand for agricultural products will
likely be further restricted by a decline in
agricultural exports. These are expected to

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AGRICULTURAL NEWS LETTER

foll considerably in 1947, though continuing
at well above prewar levels. A drop is forecast in the volume of most food exports, the
principal exceptions being fresh and canned
fruit, which may increase. Cotton exports are
also expected to decline. The volume of exports of all form products from the United
States will be determined brgely by the supplies of agricultural products abroad, the
quantity of dollar exchange available for the
purchase of exports from this country, and
the extent to which the needs of war-devastated countries for non-agricultural products
compete with food and fiber requirements for
such available exchange.
Due to possibly lowered dem~nd, prices received by farmers may average slightly less in
1947 than the estimated average index of 22 5
in 1946. Prices are expected to continue at
near their October. 1946 levels at least during
the first quarter, but in the latter part of next
year may fall well below those levels if production goals are reached and the decline in
demand materializes. However, the Government's commitment to support prices of most
farm crops will maintain at relatively high
levels the prices of commodities covered by
the support program even if produced in
price-depressing volume.
Prices which farmers must pay for what
they buy are expected to continue upward at
least through the first part of 1947 and to
average as much as seven or eight pt'!r cent
above prices paid in 1946. Continued high
levels of employment, general business activity, and cash farm income will exert an
upward pressure on farm wage rates as industri:?l employers and farmers compete for
workers. Farm wages, therefore, will probably
be higher than in 1946. However, the effect
of the higher wage rates on production costs
will be offset, at least partially, by a somewhat larger and more efficient agricultural
labor force as members of many form families return from military service. Prices of
farm machinery, equipment, building materials, and other farm supplies arc also expected to prolong their advance at least through
the first part of 1947. Persistent material

shortages, however, wiil adversely influenc
the volume of production of farm machiner:
and equipment. The supply of building ma·
tcrials will probably continue short, and price
m·ay go higher. Total supplies of the maj r
plant nutrients, nitrogen, phosphorus, and
potash, are estimated to be about nine per
cent larger for the year ending June 30, 1947.
than for the previous year. Prices of fertil·
izer, as we11 as the quantities used, are expect·
ed to continue upward, resulting in a sub·
stantial increase in total fertilizer costs. Farm·
ers' seed costs are. expected to advance slight·
ly in 1947, and supplies of some varieties of
seed will be short. Supplies of insecticides and
fungicides, with the exception of nicotin
compounds and rotenonc, will probably b
adequate at prices near present levels.
Feed prices are also expected to increase in
1947. In spite of the favorable production of
feed in 1946, supplies for feeding may not b'
overly abundant during the coming year du
to the small carry-over at the beginning of
the season and to the expected large demand
for grains for industrial use and for export.
Total expenditures for feed will be held down
to some extent, however, by the reduced num·
bcrs of livestock. Even so, some increase ma)'
occur in overall feeding costs since the expected higher feed prices may more than offset the effcct of the reduction in herds and
flocks.
Farm land values and rentals during th
coming year are expected to average higher
than for any year of record except for 1920·
If form production, prices, and incomes hoJd
at anywhere near present levels during th
next year, land values and rentals are like!
to continue to rise in spite of uncertaintic::s ·
to long-run commodity prices and farm in·
comes. Interest rates on farm loans are e. ·
pected to remain at about present levels, bur
anticipated increases in the volume of agri·
cultural loans for the purchase of farm iand.
machinery, equipment, and supplies will prob·
ably result in some mcrease in total interest
charges.
Assuming at least average yields per acr
and only a relatively small decline in the av·

AGRICULTURAL NEWS LETTER

rage f prices received by farmers, the United
tat
Department of Agriculture expects
ash receipts from farm marketings in 1947
to total omcwhat less than the August estimate of 2 3 billion for 1946. Government
payments to farmers are likely to show a
harp dedine, as no payments arc anticipated
for dairy products, beef cattle, and sheep.
hus with a light decline in receipts from
marketings and a sharp reduction in Governrn nt payments, total cash farm incom.e in
1947 is expected to fall about five per cent
below this year. Farmers' profits may be further reduced by increases in prices of equipmcn t , nd supplies and in other production expcn es, with the result that realized net inc me of farm operators may be from 10 to
15 per cent below 1946, totaling only 12.5
or 13 billion dollars, as compared with an
·stimatcd 14.7 billion dollars this year.

OUTLOOK FOR MAJOR FARM
COMMODITIES
Wheat
\X'hcat al:reagc in 1947, according to the
United States Department of Agriculture's
forecast will be approximately 72 million
a res, about the same as in 1946. With average yield this acreage would produce about
930 million bushels to supply domestic needs
f perhap 73 0 miliion bushels and provide
200 million bushels for export or addition to
carry-o\ ·r. The Department points out that
wheat price n t yc:-tr will be affected greatly b' the quantities of wheat exported. If,
however, cu ·r nrly high exports taper off,
hereby excrtirn~ a down :\ranl price pressure,
the price of h at will be supported under
pre en legisbtion at 90 per cent of parity.
Cotton

In r ascd supplies of labor :tnd of machinery • n<l

. pare pans are expected to improve
the c tton tcxtil industry's position with reference to de mcstic cotton consumption during the 1946-47 marketing season, according
to reports of the United States Department
f Agriculture published in the 1947 Out-

3

look Issue of The Cotton Situation. The consumption rate of cotton has continued high
<;incc the end of the war, and no immediate
change is anticipated. However, certain forces
may tend to weaken the demand for cotton
goods during the latter part of 1947. The increased supply of durable goods expected on
the market at that time may reduce the
amount of consumer expenditures for food
and clothing. Rayon textiles are becoming
more plentiful and are expected to compete
more effectively with cotton goods in the
months ahead. It is estimated, in view of these
considerations, that domestic mill consumption of cotton may proceed at an annual rate
of 9 % million bales during the first part of
the 1946-47 marketing season, but will be
slower during the latter half, and for the entire season consumption may total only about
9 Yz million bales. It appears that this rate of
domestic consumption will supply any current backlog requirements for cotton goods,
so that for the season 1947-48 the demand
for cotton is expected to decline still further,
probably falling to around 8 Yz million bales.
The United States cotton export arrangerncnts with Japan and Germany, UNRRA
purchases, Export-Import Bank loans, export
payments, and the loan to Britain will favorably influence the export of American cotton
duri1 g the 1946-47 season. However, the
large stocks of foreign cotton and the high
price of Amcrjcan cotton relative to that of
foreign growths are unfavorable factors in
the export outlook. While it is too early to
forecast accurately United States exports for
the current season, it is expected that they
will total about three miJlion bales. The volume of exports during the 1947-48 season
will depend largely upon the dollar exchange
and credit available to importing countries
and the competition of other goods for this
exchange and credit, but even under the most
favorable conditions, it is not believed that
cotton exports can total more than 3 Yz mill ion bales for that season.
Total stocks of cotton available for consumption in the United States and for export
in 1946-47 arc expected to total about 16.7

AGRICULTURAL NEWS LETTER

4

million bales (assuming imports of about
200,000 bales). Total disappearance during

this season, including the estimated 9 Yz million bales consumed domestically and three
million bales for export, would reduce these
stocks to about four million bales on August
1, 1947.
The greater availability of labor, machinery, fertilizers, and other supplies, and the
favorable price of cotton which has prevailed
thus far in spite of wide fluctuations are expected to result in a substantial jncreasc in
cotton acreage in 1947. Proposed goals, based
on the above estimates of domestic and foreign demand, place the acreage next year at
22 Yz million acres. On the assumption of
average yields, this acreage would result in a
total production of some 12 million bales, or
just about the estimated total consumption
and export for the 1947-48 season. However,
if the acreage planted exceeds the proposed
goals, and if favorable weather conditions
prevail during the 1947 cotton growing season, total production may be considerably
above 12 "million bales. In that event, a further decline in cotton prices will likely occur
during the coming year, despite the relatively
favorable statistical position of cotton in regard to disappearance of stocks and carryover.

Wool
Prices of wool to United States mills may
be somewhat higher in 1947 than in 1946.
Selling prices for domestic wool held by the
Commodity Credit Corporation may also be
increased because of the continuing ri_e in the
index upon which wool parity is based. The
present CCC program will continue until
April 1947, and, under existing legislation,
the Corporation cannot sell its wool at less
than parity.
Because of reduced sheep numbers, it is expected that shorn wool production in 1947
will continue the decline which has been in
progress since 1942. Nevertheless, prospects
are that total apparel wool supplies in the
United States in 1947 will remain unusually
large compared with consumption, because
of ample imports and large carry-over stocks.

Unitl'd States mill consumption of appard
wool vill probably decline moderately fro111
rhe record annual rate which has been main·
tained since 1941, but will still be almost half
;igain as large as the 1935-39 average. De·
mand for woolen goods will continue strong
during most of 1947 because of high con·
sumer incomes and need for replenis11ment of
commercial in ven tori cs.
\Vith the possibility that world consump·
tion of wool will exceed production in th
1946-47 season, world stocks probably will
be reduced for the first time since shortlr
before the war.

------

Meats
With high consumer incomes in prospect
the United States Department of Agriculture
expects domestic demand for meat to con·
tinuc strong through early 1947. Some declin
may occur in late 1947 and early 1948, how·
ever, because of a possible drop in total con·
sumer incomes by that time. Also, there ma}
be some shift in consumer spending from foo
to other items, such as automobiles, refrigera·
tors, and furniture, as they become more
abundant. Domestic supplies of meat p
capita in 1947 may be as large as in 1946
partly because of the numbers of cattle no '
on the ranges and the current favorable feed
and price conditions, and partly becau
United States meat exports will probably de·
dine as continental Europe's demand for in1·
ported meat diminishes.
The slaughter of cattle in 1947 is expectc
to equal or p rhaps exceed the estimated 30
to 32 million head of 1946. Slaughter will
be heavy during th-! winter and spring, fall·
ing off if prices begin to decline. Sheep and
Jamb slaughter will decline in 1947 fron1
this year's le ·els. Fewer lambs .vill be avail·
able for grain-feeding this winter than last
and the lamb crop next year will probably b
mallcr because of the continuing reductio.o
in ewe numbers. Pork production next year
may be smaller than in 1946, as there Was ·
reduction of 15 to 20 per cent in this fall'
crop of pigs. Tl is may be offset slightly dur·
ing the latter part of 1947 by an increase in
the spring pig crop.