Full text of Business Conditions (Federal Reserve Bank of Chicago) : August 1947

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UGUST, 1947

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BUSINESS CONDITIONS




A REVIEW BY THE FEDERAL RESERVE BANK OF CHICAGO

The Feed Crop Situation
Corn Is the Big Question
The climate and soil of much of the Seventh Federal Re­
serve District are exceptionally well adapted for corn pro­
duction. I o the agriculture of this region “corn is king.”
Nearly two-fifths of the harvested acreage of crops in the
Seventh District states was devoted to the production of
corn during the decade. 1935-44. For Indiana, Illinois, and
Iowa, corn accounted for nearly one-half of the harvested
acreage of crops; for Michigan and Wisconsin, about onefifth and one-fourth, respectively, of the crop acreage was
in corn. The corn crop is vital to not only Midwest farmers
but to consumers, industry, and farmers in other regions as
well.
'
LIVESTOCK DEPENDENT ON CORN

Most corn is fed to livestock, over 75 per cent of the crop
normally being fed on the farms where the corn is grown.
Sales to other farmers and to manufacturers vary signifi­
cantly from year-to-year but averaged 20 per cent of total
production from 1936 to 1945. Minor quantities are used in
the farm households and for seed. During recent years, corn
has provided about 70 per cent of the total tonnage of im­
portant feed grains. A small crop this year would necessitate
reduced production of meats and other livestock products
during the following year. Fewer hogs would be produced,
and those would be marketed at lighter weights; more cattle
would go directly from range and pasture to slaughterers
with fewer of them stopping in Corn Belt feed-lots for the
usual increase in weight and improvement in quality before
slaughter; the flow of milk and eggs might be reduced; and
our capacity to supply food to peoples in other countries
would be curtailed. Thus, there is general interest in the
United States corn crop at this critical time.
CLIMATE AFFECTS CORN YIELD

Since corn is a warm weather plant requiring high tem­
peratures both day and night during the growing season,
the region of greatest production in the United States has
a mean summer temperature of 70 to 80 degrees and a
mean night temperature exceeding 58 degrees. Of impor­
tance also is the frost-free period which exceeds 140 davs
in the heart of the Corn Belt.
Many people have assumed that hot weather in August,
after the corn has silked, hastens maturity. However, if corn
is to be hurried along by favorable weather, it appears that
the hurrying must occur' during the early growth period
prior to the appearance of silks and tassels. Shortly after the
emergence of silks and tassels, pollination occurs. The period
from pollination to dented ears appears to be fixed by bio­
logical factors and affected little by the weather.
Iowa studies indicate that it takes corn 51 days following




the appearance of silks to reach the dent stage. Once corn
is dented, it is sufficiently matured so a killing frost will not
seriously damage it. Although ideal corn weather during the
growing period from silks to dented kernels has an impor­
tant effect on yield per acre and the quality of corn produced,
it apparently does not affect the rate of maturity of corn.
This year the cold wet spring delayed planting and
caused slow growth of corn during much of the early
growth period when good weather could have hurried the
crop along. There is grace concern now as to the possi­
bilities for exceptionally good weather to facilitate vigorous
growth of the crop, also, as to the possibilities for the first
killing frost this fall being delayed until the corn has ma­
tured. Corn killed by frost before it has matured means
soft corn”—immature corn of high moisture content—that
may heat and decay when stored and has reduced value for
feeding and industrial uses.
If the corn is not dry enough for safe storage and cannot
be dried adequately by natural or artificial means, it must
be used up rapidly during the cool fall and winter months
following harvest. The supply of livestock cannot be in­
creased significantly on short notice. However, the available
number of hogs and cattle can be fed to heavier weights
before slaughter thereby utilizing more corn immediately
following harvest but at the expense of sustained supplies
of animal products during the ensuing year. Of course,
there is some soft corn every year, but it usually accounts
lor only a small part of the crop. The problem was particu­
larly serious in 1915, 1917, 1924, 1935, and 1945, all years
when temperatures during May and June averaged well
below normal. In several of these years, higher than normal
rainfall during May and June accompanied the below
normal temperatures. These conditions of high rainfall and
sub-normal temperatures were experienced over much of
the Corn Belt during May and June this year.
Historical relationships between corn yields and various
climatic factors indicate that no single factor satisfactorily
explains the variations in corn yield over a period of years.
Warm weather in September and usually in April, May, or
early June frequently has been accompanied by high yields.
In Missouri higher than normal temperatures in July and
August have resulted in low yields. In South Dakota and
Kansas large yields have been associated with higher than
normal relative humidity. For optimum growth and grain
production corn requires a plentiful supply of moisture
throughout the growing season. Maximum moisture is re­
quired during silking and tasseling. Corn plants transpire
the equivalent of two to four acre-inches of water per ton
of dry matter produced. Half or more of the total water used
by corn is required in about a five-week period after the
plants develop their maximum leaf area.
(Continued on Inside Back Cover)

Iowa State Finance —I
State Tax Revenues 1920-47
In 1920, Iowa state tax revenues were 17 million dollars; minor substantive revision of existing tax statutes, of sup­
in the fiscal year just ended, they will approximate 119 porting any likely level of state services and aids to local
million dollars. A sevenfold increase in a quarter of a government.
century is not as spectacular as it first appears if recognition
is given to the fact that in this period the income of Iowa
CLASSIFICATION OF STATE TAXES
citizens increased between two and three times, and the
Who pays the taxes for the support of state government
State assumed a major financial responsibility for two new
and costly government functions — highways and social in Iowa? How is this tax burden distributed among income
classes and occupational groups? How does it affect business
security.
From another viewpoint, the expansion in state revenues and agriculture? As important as these questions are from
is even more remarkable since it was accomplished by a the standpoint of public policy and citizen concern, straight­
nearly complete transformation of the state’s tax system— forward and conclusive answers are impossible. To some ex­
the abandonment of the property tax which constituted 46 tent the taxes imposed by the State are not borne by the
per cent of state revenue in 1920 and the addition of sales, taxpayers who pay them initially; they are shifted in varying
payroll, and income taxes which became the major sources proportions to other groups within or outside of the state.
of income in the 1930’s. The present Iowa tax system em­ Moreover, the determination of tax incidence requires a
bodies all of the important taxes used by the states today. detailed knowledge of the consumption and expenditure
It is capable, merely by changes in tax rates and relatively habits of the population. Even in an area with a population
as homogeneous as that of Iowa there will be significant
differences in scales of living and in patterns of expenditure.
TABLE 1
A possible approach to the analysis of tax payments is
CLASSIFICATION OF IOWA STATE TAX REVENUES
1920-47
to consider how state taxes affect arbitrarily selected tax­
FISCAL YEARS ENDING JUNE 30
payers. For example, the food, clothing, amusement, utility
(In millions of dollars)
service, and capital equipment budgets of a family or in­
dividual are subject to the two per cent sales tax. Cigarette
Business
Highway Property5
Payroll
Fiscal
Sales*
Personal2 & Corpo­
TotaH
User5
smokers pay 7 to 15 dollars annually in addition, and typical
Year
ration*
7.8
7.1
consumers of beer and other alcoholic beverages a roughly
—
1920
.6
1.5
17.0
—
7.9
7.7
1921
1.7
.7
18.0
—
similar amount. Motor car owners’ average contribution in
7.8
9.0
.6
■ “
1922
.7
1.8
19.9
8.7
11.4
.6
1923
.9
1.8
23.4
the form of license fees and gasoline tax would approximate
.7
1.8
1924
1.0
24.9
another 40 to 50 dollars. Those income classes affected by
13.2
10.0
.8
—
2.0
1.0
1925
27.0
14.4
.8
2.2
1.1
1926
30.8
the personal income tax would pay an additional tax on net
10.9
15.6
.9
2.1
1927
1.1
30.6
18.4
10.1
1.1
■
receipts in excess of personal exemptions at a rate of some­
2.3
1.2
1928
33.1
9.7
19.7
1.3
2.3
1929
34.1
1.1
thing less than five per cent.
10.6
22.9
1.4
—
2.7
1930
1.2
38.8
11.6
22.6
In the accompanying tables another method of analysis
1.4
2.6
1.0
1931
39.2
9.9
22.3
1.2
2.6
.8
1932
36.8
is
presented. The various elements in the state tax system
7.6
19.3
1.2
'
2.2
31.2
.9
1933
8.7
20.3
1.9
2.0
.9
1934
33.8
are classified into groups which affect business, consumption,
3.1
20.8
14.7
—
2.5
5.5
1935
46.6
and the expendable income of individuals. Thus, Iowa
6.3
22.8
16.7
*
3.1
5.8
54.7
1936
3.6
10.4
24.4
19.7
3.7
5.9
67.7
1937
makes
relatively minor use of general business taxes. The
6.2
9.6
25.5
20.6
3.6
5.4
70.9
1938
8.1
7.9
26.1
21.3
3.4
5.3
1939
72.1
state corporation taxes including the net income tax amount
7.9
7.1
26.7
23.4
to only 2.3 million dollars annually (see Table 3). This is
3.8
5.2
1940
74.1
7.8
5.8
28.5
25.3
3.8
6.4
77.6
1941
9.2
4.3
slightly less (15 per cent) than the total collected from
28.2
30.0
3.8
8.7
84.2
1942
8.2
1.9
24.2
28.9
3.9
8.5
75.6
1943
insurance companies, the only special business which makes
11.4
.1
23.5
31.3
4.3
8.3
78.9
1944
a substantial contribution to state revenues. Business also
12.6
.1
22.8
34.2
4.1
9.2
19457
83.0
9.4
.1
31.3
39.8
4.7
8.8
19467
94.1
pays
a substantial portion of the property tax which in past
10.0
.1
37.1
52.1
5.9
13.4
1947''
118.6
years has been an important state revenue. This is the
’Gross receipts including penalties and interest less actual amounts re­
only tax applicable to unincorporated business.
funded during fiscal year.
2See Table 2.
Iowa has turned more and more to consumption taxes:
®See Table 3.
4See Table 4.
BSee Table 5.
,
,
, ,
°Total amount of the locally collected property tax for general state pur­
poses, for capitol ground extension (from 1920-25), for soldier bonus bond
redemption (from 1923-44), and the equipment tax on transportation
companies.
7Subject to revision.
, , _
,
SOURCES: Iowa State Budget (biennial) ; Report of the Treasurer of
State (biennial) ; Iowa Auditors* Report (biennial)._____________________




THIS MONTH’S COVER
Iowa State Capitol in Des Moines
Page 1

the general sales tax, the tobacco and liquor revenues. In
The state poll tax of two dollars on persons of 21 years
recent years, these taxes have comprised 40 per cent of total of age and over, is almost an anomaly in modem state fiscal
state taxes. As is apparent from Table 4, the sales tax in practice, but was applicable for two years only (1935 and
particular has been sensitive to price and volume changes 1936), and earmarked for old age assistance administration.
in consumer expenditure thus giving the core of the state’s Recent collections are from delinquencies and penalties.
revenue system an automatic flexibility to changes in eco­
The payroll tax also has a direct effect upon the expend­
nomic conditions. Liquor revenues may be expected to ex­ able income of individuals though its incidence is less cer­
hibit much of the same kind of flexibility now that wartime tain and by some thought to fall in varying proportions on
shortages are being eliminated.
business, consumers, and employees. This tax is often ex­
The highway user taxes are both consumption and busi­ cluded in the treatment of state taxes because of the ear­
ness levies but have been so nearly earmarked for a special marking for unemployment compensation and its relation
use that they are segregated in Table 5. In Iowa, as in the to the Federal Social Security Act.
majority of states, the total of these revenues may be re­
garded as fees for the use of state constructed and main­
IOWA REVENUES COMPARED TO OTHER STATES
tained roads.
The levy on personal income is the principal direct tax
The components of the state tax system in Iowa not only
in the Iowa system. It differs from the general sales tax typify the taxes common to every state revenue system but
because of the personal exemptions and the inclusion in also illustrate a wide variety of important alternative levies
the tax base of expenditures for services and the amount of that states have adopted to cope with pressing revenue de­
savings. This tax was introduced in 1934, the exemptions mands. Thus, in common with all states Iowa taxes motor
doubled in 1938, and the net amount due was reduced by fuel, motor vehicles, alcoholic beverages, inheritances, and
50 per cent during the income years 1942 to 1946. Full insurance companies; it derives minor revenues from li­
rates will apply for the income year of 1947. The tax is not censes and privilege taxes on corporations and selected
an important revenue yielder since it has brought in only occupations.
eight per cent of state revenue in recent years. The acts of
Iowa rates of tax for the levies in universal use by the
the Iowa legislature in these years indicate a preference for states are roughly comparable to the average for all of the
sales taxation over personal income taxation.
states. The Iowa tax on motor fuel used on the highways,

STATE OF IOWA TAX
FISCAL
MILLIONS

OF

YEARS

ENDING

REVENUES, 1920-47
JUNE

30,

1920 - 47

DOLLARS

MILLIONS

120 ----------- -------

OF

DOLLARS

120

PAYROLL

SALES

PROPERTY

CORP.

IUSINE:

HIGHWAY

USER

1944

Page 2



my\

of $1.24 per barrel until recently (The rate is now $2.48.)
compared to an average of all the states of $1.52 per barrel
PERSONAL TAXES 1920-47
and a Federal rate of $8.00 per barrel.1
FISCAL YEARS ENDING JUNE 30
In an enumeration of the features of the Iowa state tax
(In millions of dollars)
system
that are characteristic of all or most of the states, the
Poll
Inheritance
Total
Income1
Fiscal Year
diminishing role of the property tax as a source of state
1920......................................
—
—
.6
.6
‘
.7
.7
revenue merits attention. A fourth of the states, including
1921......................................
—
—
.7
.7
1922......................................
—
—
Iowa, have given up the property tax entirely, another fourth
.9
.9
1923......................................
—
1.0
1.0
1924......................................
—
—
now receive less than five per cent of their revenue from
1.0
1.0
1925......................................
—
this source, and in only a few states does the levy amount
1.1
1.1
1926......................................
—
—
1.1
1.1
1927......................................
—*
—■
to as much as 15 per cent. Unlike other states which have
1.2
1.2
1928......................................
—
—
1.1
1.1
1929......................................
given up the property tax, Iowa uses revenues from other
—
—
1.2
1.2
1930......................................
taxes to reimburse localities for the loss in local property
—
1.0
_,
1.0
1931......................................
—
—
.8
.8
taxes as a result of the homestead exemptions. (The credit
1932......................................
—
.9
.9
1933......................................
—
is
limited to a rate of 2.5 per cent and to an assessed valua­
.1
.8
.9
1934.......................................
—
tion
of $2,500.) In 1947, these payments have aggregated
2.4
5.5
1.3
1935.......................................
1.8
1.5
5.8
1.1
1936......................................
16
million
dollars. In 1945, a similar credit device was ap­
3.2
.9
5.9
1.0
1937.......................................
4.0
.4
5.4
1.1
1938......................................
plied
to
agricultural
lands, and in 1947, to property owned
3.9
.3
5.3
1.5
1939......................................
3.5
by
veterans.
Thus,
certain
classes of property owners have
.2
5.2
1.0
4.0
1940......................................
.2
been freed of all or a substantial portion of their local taxes.
1.6
6.4
4.6
1941......................................
.2
8.7
1.5
7.0
1942......................................
Iowa uses four major sources of state tax revenue that
.2
8.5
6.8
1.5
1943......................................
.2
8.3
6.4
1944......................................
1.7
are not common to all of the states, namely taxes on per­
2.2
6.8
9.2
I9452....................................
.2
sonal net income, corporate net income, tobacco, and retail
.2
8.8
2.2
6.4
1946*....................................
.2
2.8
13.4
10.4
19472....................................
sales. The rates for all four of these taxes are comparatively
modest. Personal net incomes are taxed at comparatively low
including receipts from non-residents.
2Subject to revision.
rates in the top brackets, the graduation being from one to
five per cent; however, the top rate applies to incomes of
for example, is at the rate of 4 cents per gallon compared over $4,000, which is a somewhat steeper progression than
with the nationwide average of 4.2 cents per gallon. Iowa in the average state. Personal exemptions in Iowa are typical,
registration fees for trucks, busses, and private passenger being equivalent in the lowest brackets to incomes of $1,000
vehicles averaged $17.06 per vehicle in 1945 compared to
the United States average of $14.19. The somewhat higher
TABLE 3
than average level of registration fees is due to the use of the
BUSINESS AND CORPORATION TAXES 1920-47
FISCAL YEARS ENDING JUNE 30
license as a substitute for the personal property tax as well
as a highway user tax. For passenger vehicles to which this
(In millions of dollars)
arrangement applies, the in lieu portion of the registration
Special Business
General Business
Total
fee is based on the value; the user element is based on
Fiscal
Incorpo­
Total
All
(All
Year
Total
Insurance
ration
Net
Otheri
Business)
Fees
weight. This treatment of motor vehicles is not unique in
Income
.3
1.0
.2
1.3
.2
1920
1.5
Iowa but may hardly be said to be in general use.
—
.4
.2
1.1
1.5
.2
1.7
1921
—
.5
1.1
.2
1.6
In its business taxes, Iowa’s levy of two per cent on gross
.2
1.8
1922
. —
.2
.5
1.1
1.6
.2
1.8
1923
—
.5
.1
premiums of insurance companies compares favorably with
1.2
1.7
.1
1.8
1924
—
.6
those in other states. Iowa taxes payrolls for unemployment
1.8
1.2
.2
.2
2.0
1925
—
.6
2.0
1.4
.2
.2
2.2
1926
—
compensation insurance as other states. In 1945, the average
.6
2.0
1.4
.1
.1
1927
2.1
—
2.2
1.5
.1
.7
.1
2.3
1928
—
rate for employers was 1.4 per cent compared to a United
.6
.1
2.2
1.6
.1
1929
2.3
—
States average of 1.7 per cent.
.7
2.3
.4
.4
2.7
i.e
1930
—
*.2
.7
2.4
1.7
In the sales tax field Iowa taxed malt beverages at a rate
.2
2.6
1931
—
.8
2.5
1.7
TABLE 2

—

—

'The states use two methods of taxing alcoholic liquors. About two-thirds of
them license private distillers, importers, and distributors and collect from
these agents a flat rate tax per gallon of spirits sold within the state. The
other states make the sale of liquor a state monopoly, either selling directly
to consumers through state operated retail stores or acting as the sole distrib­
uting agent for private retailers. While a variety of practices are in Use, the
tax in the monopoly states is imposed by determining the markup on cost of
merchandise. The markup usually covers the cost of operation and the desired
level of taxation. The net profits of the entire undertaking are a proximate
measure of the tax equivalent. Iowa is one of the monopoly states, and the
equivalent tax in 1945 was $3.04 per gallon compared to an average for all
monopoly states of $3.27 per gallon. Legislation adopted at the 1947 session
of the Iowa General Assembly increasing the markup may affect the rate
equivalent by raising it as much as one-third. The comparison with rates in the
licensing states is far less favorable to Iowa as the average of these rates is
only $1 21 per gallon. Such a comparison is subject to a variety of qualifica­
tions, however, including the effect of operational economies of a state
monopoly, purchasing advantages, business and property tax exemption,
minimum promotional expense, and the fact that the monopoly states in
effect impose an ad valorem levy rather than a specific tax, i.e., their tax is
proportional to quantity and quality rather than quantity alone as is the case
in the licensing states.




2.6
2.2
2.0

.1
.1
.1

—
—
—

.1
.1
.1

2.1
1.9

1.5
1.3

.6

1935
1936
1937
1938
1939

2.5
3.1
3.7
3.6

.4
.6
.8
1.0
1.0

.3

.1

2.1

1.4

.5
.7
.9
.8

.1
.1

2.5
2.9

.1
.2

2.6

2.4

1.6
1.8
1.6
1.7

.7
.9
1.1
1.0
.7

1940
1941
1942
1943
1944

8.8
3.8
3.8
3.9
4.3

1.0
1.1
1.2
1.3

.9
1.0
1.1
1.2
1.3

.1
.1
.1
.1
.2

2.8
2.7
2.6
2.6
2.8

1.7
1.8
1.8
1.8
2.0

1.1
.9
.8
.8

1945*
1946“
1947*

4.1
4.7
5.9

1.2
1.3
2.1

.2

2.7

3.2
3.6

2.0
2.3
2.7

.7

.2
.2

1932
1933
1934

3.4

1.6
1.4

1.5
2.3

.6

.8

.9
.9

includes licenses and fees required of specified businesses (e.g., banking,
insurance, and real estate brokers), chain store taxes (in 1935 and thereafter), miscellaneous inspection fees, and occupational licenses.
zSubject to revision.

Page 3

for single persons and $1,500 for married persons and $500
for dependents.
The Iowa corporation income tax rate of two per cent is
one of the lowest in the United States. Only Maryland has
a lower rate (1.5 per cent), and 24 of the 31 states levying
corporate income taxes have higher rates including 10 with
rates of five per cent or more. The Iowa tax is a propor­
tional one as are those in most of the states although there
are six jurisdictions in which the rates are progressive up to
as much as $25,000.
The Iowa retail sales tax of two per cent applies to sales
of tangible personal property, utility services, and admis­
sions. Wholesalers and service industries are exempt. A tax
on retail sales of tangible personal property is found in a
little more than half the states, and in most of these the
rate is two per cent. Three states use a three per cent rate
and two a rate of one per cent. Utility services are excluded
from the tax base in several states, and admissions are a part
of the base in less than ten states. Thus, while the rate of
tax in Iowa is typical, the definition of the tax base is some­
what broader than usual. Iowa also levies a use tax, a prac­
tice deemed necessary to forestall avoidance operations on
certain transactions in nearly all of the sales tax states.
The Iowa rate on cigarettes is 2 cents per package com­
pared with an average rate for all states using this tax of
3.8 cents and a Federal rate of 7 cents. Iowa imposes two
taxes that are not important revenue yielders and are limited

TABLE 5
HIGHWAY USER REVENUES 1920-47
FISCAL YEARS ENDING JUNE 30
(In millions of dollars)
Fiscal Year

Total

1920.....................
1921.....................
1922.....................
1923.....................
1924.....................

7.1
7.7
7.8
8.7
8.8

1925.....................
1926.....................
1927.....................
1928......................
1929.....................

10.0
14.4
15.6
18.4
19.7

1930.....................
1931......................
1932......................
1933......................
1934......................

22.9
22.6
22.3
19.3
20.3

1935......................
1936......................
1937......................
1938......................
1939.....................

Motor Vehi­
cle License
& Operators1

Common &
Contract
Carriers2

7.1
7.7
—
—
—
4.6
8.1

10.2

.1
.1
.1
.1

10.8
10.2
9.0

12.7
11.6
11.9
10.0
9.6

.2
.2
.2
.3
.3

20.8
22.8
24.4
25.5
26.1

9.3
10.6
11.1
11.9
11.8

.3
.4
.5
.5
.5

1940......................
1941......................
1942.....................
1943......................
1944......................

26.7
28.5
28.2
24.2
23.5

12.0
13.3
12.9
11.9
12.1

.4
.3
.3
.4
.4

1945s....................
1946s....................
1947s....................

22.8
31.3
37.1

11.4
12.0
14.1

.3
.3
.4

22.6

'Total amount of locally collected motor vehicle licenses evcent Kft
veearVofh‘d1.re^ine?
Measurer; shownTStajor^stimaS*
^ collection. Includes fees paid by truck drivers (1930 nnd
“(1985 aCndaUtheUrS«ndt°Pe'?t0rS 0932 and thereafter) , automobile dUvera
hide department

TABLE 4

Motor
Fuel

’’

“«“•“»»«>«• fees collected by the motor ve-

lndnttee^tetrh)e.Wei8htteXeB a926-40) and the compensation tax (1941

SALES TAX REVENUES 1920-47
FISCAL YEARS ENDING JUNE 30

“Subject to revision.

(In millions of dollars)
Fiscal
Year

Total

1920
1921
1922
1923
1924

__

----

1925
1926
1927
1928
1929

.8
.8

1930
1931
1932
1933
1934

.6
.6

.7

.9
1.1

1.3
1.4
1.4
1.2
1.2

1.9
14.7
16.7
19.7

General
Sales &
Use

Cigarette

Beer

__

—

—

—

—

—
—
—
—

—
—

.7

—

.8
.8

—
—
—

.9
1.1

—

1.3

_
—
—
—

1.4
1.4

*

1935
1936
1937
1938
1939

21.3

1940
1941
1942
1943
1944

23.4
25.3
30.0
28.9
31.3

22.6

1945s
1946s
1947s

34.2
39.8
62.1

25.6
29.8
41.1

20.6

.6
.6

11.3
13.4
15.0
15.6
15.7

—
—

.7

1.3
1.5

1.0
1.1

All
Other2

—
—
—

__
__
__
__

—

—

__
—
—
—

__
.__
__

—

—

_
—,
—
—

*

1.0
.6
1.6

__
__.

—
.1
.1
.2
.2

1.6

1.3

1.7

1.2
1.2

1.9
2.3

1.2

3.0
3.4
4.6
4.2
3.9

.7

4.1
4.1
4.4

.8
.8

2.2
2.1

1

__
__

1.2
1.1
1.2

1.8

16.7
18.4
21.5
20.5

__.

Liquor
Store
Earnings1

i.i
i.i

2.4
2.4
2.7

1.4

2.2

1.4

3.5
4.2

1.6
1.6

1.2

.3
.3
.3
.4
.6

.9

1Net earnings reported from the operation of state liquor stores less reim­
bursement to General Fund of .1 million in 1935 and .4 million in 1936;
transfers for General Fund purposes from these earnings as follows: 1 5
million in 1937, 2.1 in 1938, 2.6 in 1939, 3.0 in 1940, 3.5 in 1941 and in each
year thereafter.
“Includes individual liquor permit fees, oleomargarine taxes beginning in
1939, butterfat taxes beginning in 1942, and commercial feed taxes begin­
ning in 1946.
“Subject to revision.
♦Less than $50,000.

Page 4



in use, namely a tax on oleomargarine and chain stores.
Among the minor levies that other states use and that are
not found in the Iowa system are a gift tax to supplement
the inheritance tax, a general tax on wholesalers, on pari­
mutuels, a special tax on soft drinks, and a severance tax
on natural resources. Some of these levies could not be
profitable in a state with Iowa’s economic characteristics, and
those which might be suitable are not generally important
revenue producers.
Historically Iowa has not been in the vanguard of states
adopting new tax forms and diversifying its revenue system.
Though one of the first states to impose motor vehicle li­
censes (1904) and to enact a tobacco tax (1921), Iowa
generally has awaited the result of testing and experimenta­
tion by other states before adopting new taxes. It was the
thirty-second state to adopt a motor fuel tax (1925), the
sixteenth a sales tax (1934), and the twenty-eighth an in­
come tax (1934). The liquor taxes were adopted in the first
year after the repeal of the prohibition amendment, a de­
velopment common to over half the states.
In summary, the Iowa tax system is extremely diversified
with typical to moderate rates and devised to tap the maxi­
mum number of tax sources without the stimulation to
avoidance and evasion inherent in a less diversified system
with higher rates. The Iowa system has many components
common to tax systems of neighboring states and no doubt
has developed with deference to the tax laws of nearby areas.

Banks Increase Share of Urban Mortgage Financing
Lender Caution Reported Growing
With their urban residential mortgage portfolios currently
more than 70 per cent above mid-1945 levels, commercial
banks in the Seventh Federal Reserve District as well as
in the nation have more than regained the ground lost to
other types of lending institutions during the war. This
growth in bank mortgage lending has been achieved in a
period characterized by the fastest rising over-all dollar vol­
ume of urban residential mortgages outstanding in the
country’s history, over six billion dollars on one to four
family units alone since V-J Day. Central reserve and re­
serve city member banks have shown greater postwar activity
in residential mortgage lending than country banks. Varia­
tions also exist within each group; Detroit banks, for ex­
ample, are experiencing considerably greater rises than
Chicago banks.
Competitive pressures of lenders with large supplies of
loanable funds thus far have more than offset the strong
demand for home loans with the result that mortgage finan­
cing terms are now commonly easier than at V-J Day. In
general, interest rates and down payment requirements have
moved downward, appraisal values upward, and maturities
have lengthened.
Considerable further expansion in mortgage financing is
anticipated during the next year, but there is some evidence
that banks, along with most other lending institutions, are
beginning to exercise increasing caution in advancing funds
on urban real estate. There is rising doubt over the longerrun prospects for maintaining present levels of home prices
and income payments upon which current mortgages are
based. Mortgage terms have tightened somewhat in recent
CHART

URBAN

I END OF

t

RESIDENTIAL MORTGAGE DEBT
REACHES ALL-TIME HIGH
CALENDER YEAR, IN BILLIONS

ALL
RESIDENTIAL

MULTI FAMILY

I

SOURCE *

U. S

DEPARTMENT




TO

4

FAMILY

OF COMMERCE

OF DOLLARS)

months, but no sharp reversal in the trends cited earlier has
occurred or seems likely in the next several months.
URBAN MORTGAGE GROWTH

Carried along by the postwar real estate boom, the over-all
volume of outstanding urban residential mortgage debt is now
estimated to be in excess of 33 billion dollars, at least 10 per
cent above the previous 1930 peak and more than 30 per
cent above the V-J Day level. About 26 billion dollars, or
75 per cent of this total, represents mortgages on one to four
family dwellings. Multifamily units account for the remain­
der (see Chart 1). Mortgages on all types of residential
buildings are expected to continue to rise during the re­
mainder of 1947, although at a lesser rate than in 1946,
because of the slowing down in new building starts. In­
creases in one to four family-unit debt are estimated from
three to four billion dollars for 1947 compared with almost
five billion dollars in 1946. This anticipated volume is still
considerably in excess of the two billion dollar annual in­
crements during the much discussed “building boom” of
the 1920’s.
In the first four months of the current year, one to four
family-unit debt rose 1.5 billion dollars above its 1946 close
of 24.6 billion dollars. Available data on recordings reveal
that mortgage activity in the Seventh Federal Reserve Dis­
trict since V-J Day has closely paralleled that in the nation.
When measured against consumers’ disposable income
(i.e., after taxes), the volume of urban residential mortgage
debt appears surprisingly low even after many months of
postwar boom. Urban real estate mortgages now approximate
21 per cent of disposable income and except for the war
years are at their lowest relative level since 1920. With dis­
posable income now roughly at 155 billion dollars, the vol­
ume of home debt could advance 75 per cent before equaling
the average for the prewar decade. Should disposable income
decline, however, from present abnormally high levels, this
proportion will rise correspondingly.
The causes for the boom in real estate mortgages are the
causes for the boom in urban real estate, one stage removed.
They include the wartime increase in population and in the
number of families, the increased rate of urbanization of the
population, and the high income levels which enabled many
people to satisfy their desires for more housing space both
owned and rented. The establishment and maintenance of
rent controls contributed to a shortage of rental housing at
the prewar rent levels adhered to generally until July 1947,
forcing many families, particularly migrants and returning
veterans, into the market for owned housing. A “free”
market in owned housing has continued throughout the war
and postwar periods, in which prices have risen sharply due
to increased buyers’ incomes, rising construction costs, and
Page 5

the artificial scarcity of rental units. The rise in the per­
centage of owner-occupied housing from 41 in 1939 to 51
in 1945 and considerably higher at the present time, coupled
with increased turnover of ownership, has also led to in­
creased demand for urban residential mortgages.
The major purpose of postwar residential mortgage finan­
cing to date has been the purchase of existing homes rather
than the construction of new ones. Mortgage loans of sav­
ings and loan associations made in 1946, for example, were
over four-fifths and less than one-fifth, respectively, in these
two categories. Loans for repairs, refinancing, and miscel­
laneous other purposes were comparatively unimportant. A
survey made by the United States Savings and Loan League,
covering only loans made under the Servicemen’s Readjust­
ment Act (G.I. Bill of Rights) by savings and loan associa­
tions throughout 1946, showed only 14.6 per cent of vet­
erans’ loans to have been for new construction in the nation
as a whole. This percentage, however, approached 50 in the
West and Southwest. The proportion of total mortgage
recordings accounted for by new construction is now tend­
ing to rise in all sections of the nation as more housing is
completed and offered for sale.
Government underwriting commitments have aided in
supporting the large postwar mortgage volume, although
many of the insured or guaranteed loans undoubtedly would
have been made without Government hacking. Of the 26
billion dollars of mortgage debt estimated as outstanding
on one to four family units at the end of April 1947, about
8 billion dollars, or 30 per cent, were insured or guaranteed
by the Federal Government, approximately 4.5 billion dol­
lars, 17 per cent, were insured by the Federal Housing
Administration (FFIA), and 3.5 billion dollars, 13 per cent,
were guaranteed by the Veterans’ Administration (VA)
under the G.I. Bill of Rights.
The influx of veterans on the housing market since V-J
Day has expanded the relative share of VA-guaranteed
mortgages in new recordings and contracted that of FHAinsured mortgages, so that these percentages differ appreci­
ably from the respective shares of these two agencies in the
total mortgage debt. The FHA portion of current urban
recordings is under five per cent compared with almost onefifth before the war.
Sharply increased real estate prices and more lenient ap­
praisal values and down payment requirements have ex­
panded the postwar dollar volume of mortgages at a faster
rate than their number. The average size of new and re­
financed mortgages of $20,000 and under recorded on
non-farm homes has risen from $2,722 in 1939 to $3,440
in 1945 and $4,206 in 1946. The rise has been 55 per cent
for the entire war and postwar period and 22 per cent in
the last year.
BANKS IMPROVE COMPETITIVE POSITION

The rapid postwar rise in bank real estate lending follows
a period of wartime decline in which the general public
took advantage of increased incomes to reduce mortgage and
other indebtedness. The recent upsurge in bank-held home
debt, however, appears to be more than the expected conse­
Page 6




quence of the real estate boom. Between June 1945 and
March 1947, commercial banks increased their share of
non-farm mortgage recordings in the Seventh Federal Re­
serve District states from 23 to 28 per cent. In the nation,
this increase was even greater, from 19 to 27 per cent. Dur­
ing the same period the share of savings and loan associa­
tions in the Seventh District states declined from 43 to 37
per cent. A more detailed picture of trends of these and
other lenders is shown in Chart 2. Since banks in the pre­
war period accounted for approximately one quarter of all
non-farm mortgage recordings, the postwar trend among
mortgage lenders is in part a restoration of prewar patterns.
Outstanding urban residential mortgage loans of Seventh
District member banks on December 31, 1946, were 62 per
cent above their June 1945 level. Although considerable,
this rise was less than in all real estate loans, 65 per cent,
or in commercial and industrial loans, 85 per cent. Within
the urban residential mortgage category, Seventh District
member banks in the larger cities showed increases of 70
per cent compared with 55 per cent in the small cities and
towns. Housing shortages, it is well known, have been par­
ticularly acute in heavily populated areas.
Not only has a substantial volume of bank funds been
used in building and buying urban homes since the war,
but the resultant mortgages have proved attractive invest­
ments for banks. Urban residential mortgage loans are
among the highest earning bank assets, despite relatively
high costs of acquisition and servicing. Some recent studies
indicate that FHA-insured first mortgage loans can be ex­
pected to earn about 4.5 per cent gross and 3.7 per cent net
for the typical commercial bank, whereas the conventional
uninsured mortgage averages 4.3 per cent gross and 3.3 per
cent net. Other estimates, making greater allowance for
possible delinquency and foreclosure costs and bad debt
losses, suggest that a spread of from 1.25 to 1.50 per cent
may be more appropriate over the long run. However con­
servatively estimated, the net figure is high when compared
with net earnings on other types of bank loans and invest­
ments. Mortgage lending is accordingly growing in attrac­
tiveness, particularly among smaller banks, many of which
are under considerable pressure to increase business volume
in order to absorb rapidly rising overhead charges. This
attractiveness is one of the factors operating to prevent a
rise in mortgage interest rates.
Competition among the various financial institutions for
highly desirable mortgages continues to be keen. However,
there is some specialization among lenders in the urban
residential mortgage market. Commercial banks, for ex­
ample, operate under relatively stringent legal limitations as
to the proportion of their assets which may be invested in
mortgages. Also subject to regulation is the percentage of
the appraised value of the property which may be loaned
on mortgage security and the loan maturity.1 These require­
ments have been generally waived for FHA-insured mort­
1For national banks the maximum loan-value ratio and maturity are 60 per
cent and 10 years, respectively. Illinois state banks and Wisconsin commer­
cial banks and trust companies are not subject to restrictions. Other re­
strictions for state banks in District states are: loan-value ratio, 70 per
cent in Wisconsin savings banks and 60 per cent elsewhere; maturity, 16^4
years in Indiana, 16 in Wisconsin savings banks, and 10 elsewhere.

gages under the National Housing Act and for loans under
the so-called G.I. Bill of Rights. As a result, it is not sur­
prising to find many banks tending to specialize in FHAinsured mortgages.
Banks characteristically make mortgage loans to persons
with whom they have a customer-deposit relationship. Con­
sequently, hank mortgage portfolios tend to include the
home debt of above average income recipients to a greater
extent than is true for most mortgage lending competitors.
POSTWAR MORTGAGE MARKET

In spite of strong demand, the postwar urban residential
mortgage market to date has been characterized generally
by falling interest rates and easing lending terms. Wartime
expansion in liquid assets and other investible funds during
the war period coupled with the repayment of outstanding
prewar mortgage indebtedness have been leading factors in
producing an abundance of money available for lending.
Government guarantees under the G.I. Bill and under the
Defense Housing provisions of the National Housing Act,
combined with the authorization of agencies like the FHA
which enables lenders to pool their risks on an insurance
basis, have operated to increase the willingness of lenders
to part with liquidity at moderate interest rates. It is recog­
nized, nevertheless, that the influence on interest rates of
such guarantees has declined in recent years primarily
because the mortgage default rate has reached virtually rock
bottom. Non-farm real estate foreclosures numbered only

12,000 in 1946, the low point of the existing series which
runs back to 1936. This figure represents declines of 88 and
99 per cent, respectively, below 1939 and the depression
year of 1933.
The downward trend in long-run interest rates during the
1930’s continued through the war period, when net mort­
gage debt was being reduced by repayments, and even
through the greater part of 1946, after the demand for new
financing rose to its current record level. In most sections
of the country, however, interest rates are now believed to
have reached a postwar minimum. In recent months, a con­
tinuing downward pressure is noticeable only in the East.
The National Association of Real Estate Boards reported in
March that mortgage interest rates are steady in 85 of a
sample of 100 American cities analyzed, falling in 10 cities
and rising in five.
PRESSURE FOR EASIER TERMS

Financing is the only major element in housing costs
which has fallen in price over the past 15 years. The trend
in mortgage interest rates is in sharp contrast with the move­
ment of building materials prices, land costs, and labor
costs over the same period. Not only are interest rates lower,
but the maturity of mortgages is generally longer, and bor­
rowers have been able to obtain higher loan-value ratios.
There is considerable pressure designed to ease terms still
further in order to enable more people to buy homes, es­
pecially new ones, at current high building costs and sale

CHART

COMPETITION
(PERCENTAGE
FOR

UNITED

SHARPENS

DISTRIBUTION

STATES

AND

OF

SEVENTH

IN

2

URBAN

RECORDINGS
FEDERAL

UNDER
RESERVE

MORTGAGE
$ 20,000
DISTRICT

MARKET

BY TYPE
STATES,

OF

LENDER

1941,

1944-47)

PER CENT----------------------------------------- 19*1

'm

m

1945

m

PER CENT

m |p
if§___f§

SEVENTH
DISTRICT
STATES

IND.

IOWA

MICH.

WIS.

PER OENT------------------------------ 1946

SEVENTH
DISTRICT
STATES

1947

ILL.

IND.

IOWA

MICH.

(ISI QUARTER)

SEVENTH
DISTRICT
STATES

WIS.

ILL.

INO.

IOWA

MICH.

WIS.

PER CENT

H m
LEGEND
BANKS AND TRUST COMPANIES
SAVINGS AND LOAN ASSOCIATIONS
INSURANCE
INDIVIDUALS

I

MUTUAL SAVINGS

I

V/MMi
SEVENTH
DISTRICT
STATES
SOURCE:

MICH.

WIS.

SEVENTH
DISTRICT
STATES

ILL.

IN&

IOWA

MICH.

COMPANIES

fci&jjjji

BANKS

ALL OTHER

WIS.

FEDERAL HOME LOAN BANK ADMINISTRATION




Page 7

prices. Real estate interests, particularly speculative builders
who have encountered buyers’ resistance, are outspoken in
this connection, and their position is seconded by some
veterans’ groups.
These individuals and groups commonly wish terms eased
in one or more of four ways:
1. Greater relaxation of appraisal standards to reflect
present costs and selling prices rather than past “normals.”
This proposal may imply belief that housing costs and prices
will not fall materially below their mid-1947 levels, or un­
concern on the seller’s part as to the future course of values.
2. Raising of the maximum loan-value ratios to reduce
the initial borrower’s equity required. In this connection,
reversal in the first few months of 1947 of a six-year rising
trend in average size of recorded mortgages is reported. Such
a development reflects in part a tendency of lenders to re­
quire larger cash payments as initial borrower’s equity and
in part the gradual decline in the prices of many old houses.
3. Lengthening the maximum term of guaranteed and
insured mortgages to bring the borrower’s monthly pay­
ments more in line with his monthly income.
4. Further shaving of interest charges, which appears to
be relatively unimportant to many persons because of the
small influence of interest rate changes on the amount of
the monthly payment on a long-term mortgage.
The Taft-Ellender-Wagner Bill brings together at the
Federal level the principal proposals for liberalization of
mortgage credit for home financing. These provisions are:
Permission to the Federal Housing Administration to insure loans for
as much as 95 per cent of the value of residential property, the loans
to run for 30 years at four per cent interest. Insured mortgage of this
type would be available only on houses built under FHA inspection
and would not exceed $5,000.
Permission to Federal savings and loan associations to make loans on
homes regardless of location—under present law, each association is
limited to a 50-mile radius from its home office—and to participate in
the financing of large-scale rental housing without regard to the present
limitation of these loans to 15 per cent of the association’s assets.

Nothing in present law, of course, prevents a local gov­
ernment or a private firm from easing mortgage credit terms
on its own initiative, if it so desires. Suggestions to this effect
have been made in many places, including several in the
Seventh District. A proposal, for example, has been made
that the credit of Milwaukee County, which is able to float
securities at 1.5 per cent, be utilized to provide low-cost
veteran housing on 40-year mortgages at the same low rates.
In Indianapolis, a private firm is reported considering a 60year term to finance a large scale rental housing project.
Plans such as these are designed to bring housing within
the reach of increasing numbers of persons, particularly in
the lower income groups, and possibly, to prevent a slump
in residential building activity. At the present time, how­
ever, eased financing terms have the effect of adding support
to already high building costs and prices.
PRESSURES FOR GREATER SEVERITY

Counter-pressure for more rigorous financing, i.e., con­
servative appraisals, lower loan-value ratios, shorter maturi­
ties, and possibly higher interest rates, appears to be rising.
This is centered among established mortgage lending insti­
Page 8



tutions.
Bankers and others who view with alarm the current pat­
tern of long terms and high loan-value ratios point out that
the present rates are easier than those of the first mortgages
of the 1920’s which led to so much trouble during the suc­
ceeding decade. Loans now made for 80 per cent of ap­
praised value would have been made for 50-66% per cent
25 years ago. Furthermore, the volume of high-rate, short­
term second mortgage financing is down sharply so that the
first mortgagee must now assume the higher marginal risks
assigned in the 1920’s to the second mortgagee, with results
which will be remembered by many holders of second
mortgages and second mortgage bonds.
Following the past history of the 18-20 year “building
cycle,” these bankers expect the construction volume, cost,
and price of residential and commercial construction to turn
sharply down in the early 1950’s following satisfaction of
the present volume of deferred demand. Many expect the
downturn of the building cycle to correspond with a general
business depression, as it did in 1929, with consequent dis­
astrous effects on new building, vacancies, real estate values,
and foreclosures. In depressed periods, the recent prosperity
trends toward more rapid urbanization and toward a de­
creasing number of persons per room will probably be re­
versed, as well as the partially involuntary shift from home
tenancy to home ownership.
The more pessimistic observers of the present mortgage
market are inclined to discount the effectiveness of the vari­
ous Government guarantees and mortgage-insurance schemes
which were so conspicuously absent in the 1930’s. Their
contention runs as follows: although guarantees decrease
each lender’s direct risks, they may, in the event of wide­
spread losses, increase the risk or hazards of private finance
generally. Should the Government be called upon to make
good its guarantees and protect the financial system from
losses while borrowers, many of them veterans, were losing
their equities in mortgaged property, the political reper­
cussions might be serious.
These sentiments have led to resistance to pressures for
further easing of mortgage-credit terms, to tightening terms
on individual real estate loans, to some leveling of new
mortgage recordings, to Congressional discontinuance of the
RFC’s secondary market for G. I. mortgage loans, and in
a few cases to actual withdrawal of primary lending institu­
tions from the mortgage market. However, they are not ex­
pected to lead to legislation reversing the trends of the past
15 years or to a reduction in the total mortgage portfolios of
the banks.
Since almost all mortgages currently being recorded pro­
vide for amortization of the principal, it is evident that banks
and other lending institutions face their greatest risk on
existing mortgages during the next few years. For after, say,
five years, the borrower should have sufficient equity in the
house to make every effort to continue meeting payment
schedules, and the lender should have reduced his equity
in the dwelling at a rate at least as fast as any foreseeable
decline in housing values. The outlook for the remainder of
1947 is for consumer income, construction costs, and housing
prices to remain at or near their current levels.

THE FEED CROP SITUATION
(Continued from Inside Front Cover)

A detailed study of weather and corn yields from 1901-25
concluded “that the rainfall is the dominant feature of the
weather influence on corn yields, but that other influences
modify it.”1 The accompanying chart shows the relationship
between yield per acre of corn and annual rainfall. During
periods of normal or sub-normal precipitation yield of com
follows variations in rainfall quite closely. Fully as impor­
tant as the total annual rainfall is the amount of rain during
the growing season. Heavy precipitation may benefit or
harm the corn crop depending upon such other factors as
seasonal distribution of precipitation and temperatures. Since
1938, the effects of hybrid seed on com yield are apparent.
Also, there are indications that yield has been influenced
less by precipitation since hybrid corn has been adopted
generally.
Variations in date of the first killing frost in the fall
appear to be random in character. Frosts have occurred
earlier than normal in some years of soft corn crops. The
soft crop of 1924, however, was not due to early fall frosts
but to other factors. The season in 1924, similar to 1947,
was very late, three weeks behind average at times.
Based on July 1 conditions, it appeared that the 1947
corn crop might total 2.6 billion bushels, compared with
the 3.3 billion bushel crop last year and the 3 billion bushel
crops which have been general since 1942. The indicated
production, however, would be about equal to the 1936-45
average. The indicated yield per acre of 31.0 bushels is 6.1
bushels below last year but 1.6 bushels above average. The
yield per harvested acre for Iowa was indicated at one-third
below 1946 and a fifth below average. Yield prospects in
Indiana are below average hut in Illinois and Wisconsin are
near average. Yields in most of the South Atlantic and
South Central states are estimated considerably above aver­
age with prospects for the best crop in years. The estimated
United States acreage for harvest of 84.3 millions is down
about five per cent from 1946 and 6.4 per cent below the
10 year average. Ohio, Indiana, and Michigan fell shortest
W. A. Mattice, “Weather and Corn Yields,” U.S. Monthly Weather Review,
March, 1931, p. 111.

ANNUAL PRECIPITATION AND YIELD OF CORN
AVERAGE OF ILLINOIS, INDIANA, AND




IOWA, 1921-46

of intended acreage while Illinois planted more than was
intended last March.
SMALL OATS CROP IN PROSPECT

The 1947 oats crop (the most important feed grain ex­
cepting corn) was estimated as 1.2 billion bushels on the
basis of July 1 conditions. This is 17 per cent less than 1946
production but seven per cent more than the 1936-45 aver­
age. Indicated production of one billion bushels in the North
Central region, which includes the Seventh District states
and is the principal oats producing area, is about 250 million
bushels below the 1946 harvest.
A barley crop of 285 million bushels is in prospect, eight
per cent larger than the 1946 crop and one per cent below
average. The indicated yield per acre of 25.7 bushels is only
slightly higher than last year but nearly three bushels above
average. The acreage for harvest as grain is estimated at 11.1
millions, nearly 6 per cent larger than last year but 11 per
cent below the 1936-45 average.
The tonnage of corn and oats on farms July 1 was about
11 per cent above the 1936-45 average and 28 per cent
higher than a year ago with corn accounting for the entire
increase. Stocks on farms were estimated at 688 million
bushels of corn and 259 million bushels of oats.
The 1947 production of corn, oats, and barley, if July 1
estimates should materialize, would amount to about 99.7
million tons, compared with 122.4 million tons last year
and the 99.0 million tons average for 1936-45. In addition
to these grains, sorghum, wheat, and rye make some con­
tribution to the feed grain supply. It appears that the 1947
wheat crop will be the largest ever produced. Rye prospects
indicate production this year appreciably above 1946 but
well below average. The acreage planted to sorghums is
about 18 per cent below 1946 and over one-fourth below the
1936-45 average. Pastures are in good condition and hay
production promises to exceed last year’s harvest by three
per cent.
The number of grain consuming livestock on farms prob­
ably will continue to decline through the coming year.
Thus, some decline in total supply of feed grains would
still leave a relatively large supply per animal unit. How­
ever, the relation between numbers of grain consuming
animals and supplies of feed grains already has reached the
point where livestock-feed price ratios are less favorable
than during recent years and in some cases below the 1926-45
average. Below average livestock-feed price ratios cause
farmers to economize on the use of grains in feeding live­
stock and result in curtailed production of livestock products.
Most reduction in livestock production, if a seriously short
corn crop materializes, probably would occur in those
kinds of livestock which require rations consisting largely
of grain—hogs and poultry. Cattle and sheep are equipped
with digestive tracts which will handle large quantities of
hay and grass, and consequently would be reduced sharply
in numbers only if poor pasture and hay crops occur. Sup­
plies of livestock products during 1948 are now dependent
to a significant degree upon good corn weather during
August and a late killing frost this fall.




SEVENTH FEDERAL

ILL • INO

RESERVE DISTRICT