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Federal Reserve Bank of Philadelphia
Federal Funds During Tight Money
. . . Federal funds behavior during the 1966 credit restraint indicates it may not
be just a fair weather performer.
The 1967 Harvest: Scrutiny of the Bounty
. . . Favorable growing conditions in 1967 produce a harvest of plenty for Third
District farmers.
BUSINESS REVIEW is produced in the Department of Research. Evan B. Alderfer is Editorial Consultant. Donald R.
Hulmes prepared the layout and artwork. The authors will be glad to receive comments on their articles.
Requests for additional copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania 19101.
Banks are alert to a possible return of the tight reserve positions of 1966. They may find a ray of
hope in this report, based on new figures, on . . .
FEDERAL FUNDS
DURING TIGHT MONEY
by Mark H. Willes
More banks are active in the federal funds market
one-third of the country member banks in the
than ever before.1 In addition to the large city
Third District bought or sold federal funds. In
banks which have traditionally been in the market,
1965 slightly less than half did. In the sixteen
many country banks, even the smallest ones, have
months between February 1966 and May 1967
come to use it on a regular basis as a source of
needed reserves and as an investment outlet.
almost two-thirds of the country member banks
in the district bought or sold federal funds at least
Earlier issues of this Review have reported on
the increasing involvement of Third District
once. And once a bank entered the market, it
usually was a frequent participant thereafter.
country banks in this market.2 Since February,
Entry has not been limited to large country
1966 these banks have supplied daily figures cov
banks. Charts 1 and 2 show that while a greater
ering their federal funds transactions. From these
proportion of the larger banks are active in the
market than the smaller ones, still a significant
proportion of the latter participate on both the
data it is clear that country banks in the district
now participate in this market to an unprece
dented degree. Moreover, contrary to some early
buy and the sell side. In fact, most of the new
fears, the evidence indicates that this increased
activity has not made the participating banks
more vulnerable to tightening monetary condi
tions. In spite of the severely restrictive conditions
in 1966, apparently banks in the Third District
CHART 1
MORE BANKS BUYING FEDERAL FUNDS
Country Banks in the Third Federal Reserve District
Per Cent
were able to make short-run reserve adjustments
in the federal funds market.
M arket participation
The federal funds market was once the province
of a relatively few large city banks and Govern
ment securities dealers. Those days are gone.
Many country banks are now active in the market,
and the number is increasing. In 1964 just over
1 Federal funds are deposits at the Federal Reserve or
at correspondent banks which are lent (sold) or borrowed
(purchased) overnight or for a few days. For a more
complete discussion see the references cited in footnote 2.
2 Federal Reserve Bank of Philadelphia, Business
Review, March 1965, April 1966, and August 1966.
0 -5
5 -1 0
1 0 -2 5
2 5 -5 0
5 0 -1 0 0
D ep o s its in M illio n s of D o llars
O ve r 1 0 0
All Banks
3
business review
CHART 2
MORE BANKS SELLING FEDERAL FUNDS
Country Banks in the Third Federal Reserve District
federal funds.
This has important implications for bank oper
ating policies. On the buying side it means that
banks of all sizes have access to the federal funds
market when they are faced with a shortage of
funds. Consequently, the very small as well as the
large banks now have the option of buying federal
funds rather than having to liquidate securities,
let loans run off, or borrow from the Federal Re
serve. These latter alternatives— because of rela
tive costs, customer relations, etc.— are frequently
less agreeable ways to make reserve adjustments.
On the selling side, a bank can now convert
reserve excesses of almost any size into income
earning assets. Small banks as well as large can
manage their reserve positions more closely, re
ducing idle balances and adding to profits.
Accommodating banks
entrants into the market in the district since early
The reduction in the size of transactions that the
1966 have come from the ranks of the smaller
market will accommodate is the result of large
banks. Almost 85 per cent of those banks which
city and country banks seeking to broaden their
purchased federal funds for the first time during
own sources of funds and competing for corre
this period had deposits of less than $25 million
spondent balances. These large accommodating
and over 90 per cent of those which sold federal
banks act as dealers, buying and selling federal
funds for the first time were from these smaller
funds against their own account in order to meet
size categories.
the needs of smaller correspondents. They adjust
Transactions sizes
their own positions in the national market.
Interviews with several city and country dealer
Many factors have prompted country banks to
enter the federal funds market. Some of them have
banks in the Third District indicate that for an
been discussed in the articles referred to earlier.
dealer in federal funds resulted in substantial and
aggressive bank, past willingness to act as a
One of the most significant developments that has
continuous inflows of funds.3 Since smaller banks
made possible active participation by these coun
tend to have excess reserves and therefore gen-
try banks has been the sharp reduction in the size
of transactions that the market will accommodate.
large banks that have cultivated a federal funds
rally enter the federal funds market as sellers, the
One million dollars used to be the minimum
trading unit. Now transactions as small as $50,000
are common, and occasionally even smaller ones
have been recorded. With the trading unit this
small, a bank of almost any size can buy or sell
4
3 Not all of these were new funds. Some were shifts
out of idle correspondent balances previously held at the
same bank. They may still be considered a source of
funds, however. If the bank had not bought them as
federal funds, there is a good chance they would have
been transferred to a bank that did.
business review
relationship with a number of smaller banks have
generally assured themselves of a large and steady
inflow of funds. This has worked to the advantage
of both the large and small banks. It has helped
the large ones meet the heavy demands for funds
CHART 3
RESERVE PERIOD BUYING PATTERNS
Third District Country Banks by Deposit Size*
N u m b e r of Banks
with which they have frequently been faced. For
the small banks, it has meant an increase in earn
ing assets and income.
With so many country banks now in the market,
the potential for large accommodating banks as a
group to continue to add significantly to their
sources of funds through the purchase of federal
funds from smaller banks is reduced, although it
is still not negligible. Aside from this factor, how
ever, the dealer function will remain important
for individual accommodating banks. Now that
country banks are aware of the money they can
make by selling their excess balances in the federal
funds market, accommodating banks must con
tinue to serve as dealers or risk losing correspon
dent balances to banks that will offer this service.
Interviews with a number of district banks indi
cate that whether or not a larger correspondent
bank is willing to act as a dealer is an important
consideration for them in deciding where to hold
their correspondent balances. Many banks indi
cated that they would shift part or all of their cor
respondent balances to another bank if their pres
ent correspondent stopped accommodating them
as a federal funds dealer. Since the accommo
dating banks are well aware of this, is seems likely
that competition
for
correspondent
balances
among the larger city and country banks will in
sure that the federal funds market continues to be
a readily accessible and convenient place for
smaller country banks to buy and sell funds.
Reserve period patterns
An idea of how convenient it is for country banks
to operate in the federal funds market can be
obtained from Charts 3 and 4. These charts show
" D ep o s it size in m illio n s o f do llars.
5
business review
CHART 4
RESERVE PERIOD SELLING PATTERNS
Third District Country Banks by Deposit Size*
N u m b e r of Banks
the average number of country member banks in
the district that typically bought and sold federal
funds on a given day within a two-week reserve
computation period.4 The patterns on both the
buy and sell side are almost identical. Activity is
generally higher on weekends than on other days
of the week; and it also tends to be a little higher
during the second week.
A transaction on Friday carries over the week
end. It is therefore easier— less paper work, fewer
telephone calls, and so on— to have one trans
action on a weekend than to make three separate
transactions for the same amount during the week.
Yet both are equivalent in terms of the effect on
reserves.
In addition, as the end of the reserve period
nears, banks are more sure of their reserve needs.
Market activity therefore tends to increase as more
and more banks try to complete their reserve
adjustments.
While these two patterns are evident in Charts
3 and 4, perhaps the most striking feature of these
charts is that the second pattern— the rise in activ
ity the second week— is not more pronounced,
particularly for smaller banks.
It has been widely believed that in order for
country banks— especially the smaller ones— to
participate in the federal funds market, they must
“ save up” reserve excesses or deficiencies. Only
after they have accumulated them over the first
part of the reserve period are they in a position
to enter the market. Consequently, it has been
thought that most country banks concentrate their
25 -
L - l.
o*
6
activity in the last few days of the period.
This is clearly not the case in the Third District.
As the charts indicate, activity by banks of all
sizes is spaced rather evenly throughout the pe
riod. And these patterns are not the result of dif4 The patterns would generally be the same if the
average amount of federal funds bought and sold were
plotted rather than the average number of banks.
business review
ferent banks being in the market at different times.
sources of funds and increase still further their
Taking the reserve period ending May 10, 1967
volume of earning assets. Both activities should
as an example, Table 1 shows that almost 80 per
result in higher profits, although no information
cent of the hanks in the market during those two
is available to show their quantitative importance.
weeks bought or sold federal funds eight days or
Some interesting information on the effect on
more. The great majority of banks of all sizes in
profits of trading in federal funds is available for
the market were in the market more than half of
net sellers, however. The results given in Table 2
the days in the period.
are startling.5 One bank with deposits between $5
million and $10 million received over 50 per cent
of its net current operating income from the sale
Table 1
of federal funds. One with deposits between $25
F R E Q U E N C Y O F P A R T IC IP A T IO N
D e p o s it S ize
(M illio n s o f
D o lla rs )
$ 0 - $5
5 - 10
10 - 25
2 5 - 50
50 - 100
Over 100
Total— all banks
P ro p o rtio n o f B an ks in M arket
4-7 D a ys
1-3 D a ys
8-14 D a ys
4 .2 %
11.9
8.1
3.3
6.2
15.4
8.3
16.7%
6.8
13.5
23.3
6.2
0.0
12.0
79.2%
81.4
78.4
73.3
87.5
84.6
79.6
million and $50 million received almost 75 per
cent. These banks are extreme, but even without
them the picture is impressive. The average pro
portion of net current operating income due to
the sale of federal funds for the district country
member banks in 1966 was over 8 per cent, with
the percentage a little higher for the smaller banks
and a little lower for the larger ones. Since the
marginal cost of trading in federal funds is small,
and for many banks practical alternative invest-
This continuous participation by country banks
of all sizes throughout the reserve period is due to
the willingness of accommodating banks to deal
in trades as small as $50,000. With transactions
of this size permissible, there is little need to save
up reserve excesses or deficits.
5
A large sample (165) of country member banks in
the district was studied to see what proportion of net
current operating income during 1966 was due to their
operations in the federal funds market. The interest cost
of any federal funds purchased was deducted from the
interest income from federal funds sold and the difference
was calculated as a percentage of net current operating
income.
Does it pay?
Even though the federal funds market is suffi
Table 2
ciently well developed that banks of less than $5
N E T IN C O M E FR O M T H E SALE OF
FE D E R A L F U N D S AS A P R O P O R T IO N
OF N E T C U R R E N T O P E R A T IN G IN C O M E
million in deposits can buy or sell on a daily basis
just as banks 100 times their size, some may
wonder if it is worth it— if all of this activity by
D e p o s it S ize
small banks is just a lot of motion or if it repre
(M illio n s o f
D o lla rs )
sents real progress in terms of bank profits.
Presumably, by having access to the market,
net purchasers of federal funds are able to invest
funds that otherwise would have to be kept in a
non-earning form as a liquidity cushion. In addi
tion, they may be able to supplement their usual
$051025-
$5
10
25
50
50 -100
Over 100
Total— all banks
Lo w
Per Cent
H ig h
P e r C en t
A ve ra g e
Per Cent
.2
.1
.2
.1
.1
1.8
.1
27.4
51.4
24.3
74.8
8.6
9.5
7.8
7.7
20.1
17.4
74.8
6.7
5.0
8.1
7
business review
merits for those funds were not available, a large
the smaller banks and that the latter might be
proportion of the amounts represented by these
squeezed out.
figures were clear additions to profits.*’ The bene
This worry seems well founded when it is re
fits of operating in the federal funds market are
called that small hanks must buy federal funds
definitely not restricted to large hanks.
from their large correspondents since the latter
are the ones willing to deal in small units. If large
A fair weather friend?
hanks, because of their own needs, refused to sell
Many observers of the federal funds market have
cautioned that for banks seeking to buy funds, it
to their smaller correspondents, the smaller banks
would be shut out of the market.
might be a fair weather friend— funds can be
With these thoughts in mind it is informative
to see what happened to country member banks
obtained easily when credit conditions are easy,
but they might be difficult or impossible to get
in the Third District during 1966, a year of severe
during periods of credit restraint. As credit con
credit restraint.
ditions tighten, it is suggested, surplus banks
Chart 5 shows the average amount of federal
have smaller amounts of excess reserves. The
funds sold by District country member banks of
supply of funds will therefore decline at the same
time that banks with reserve deficits have increas
ing needs for funds.
various sizes for each reserve period from Febru
ary 1966 to May 1967.' Smaller banks (under
$50 million) increased the amount of funds they
Statements like this have led some to fear that
sold fairly consistently throughout the period.
in periods of severe credit restraint, the federal
The largest country banks ($50 million and over)
funds market will dry up, forcing many hanks to
were a little stingy with their reserves during the
dump securities, sharply curtail loans, or seek
early part of the period, particularly around June
accommodation at the discount window. Strains
1966. Even then, however, they supplied a much
on financial markets could be great, with concomi
larger amount of funds to the market than was
tant stresses in the real sectors of the economy.
purchased by district country banks, and they in
Not everyone, of course, goes this far. They
argue that in the foreseeable future, at any given
creased this amount significantly and regularly
time, enough banks will have excess reserves be
question the notion that the market will dry up
cause of short-run deposit fluctuations or because
of the premium they place on maintaining a cush
as small country banks continued to channel funds
from that point on. This would seem to call into
during periods of credit restraint. Large as well
ion of very liquid assets, that there will always be
into the market even when credit was the most
a substantial supply of funds coming on the
market. Their worry is that during periods of
severely restrained.7
8
One reason for this was that throughout the
credit restraint, the large banks, because of their
period, banks which had never been in the market
dominant and strategic positions in the market,
will be in a better position to buy these funds than
GAs noted in the next section, some banks shifted out
of Treasury bills into federal funds in 1966 because of
the rate differential. For these banks, all of the income
attributed to the sale of federal funds does not represent
a net addition to income. Part of it simply represents a
change in its source.
8
7 Charts 5 and 6 show gross federal funds purchases
and sales with no allowance made for the two-way
trading of accommodating banks. When such an allow
ance is made, the patterns are virtually identical to
those shown here.
8 Figures for the 46 reporting banks in the national
federal funds series show this was a country-wide phe
nomenon and was not restricted to the Third District.
business review
CHART 5
AMOUNT FEDERAL FUNDS SOLD
Reserve Period Averages
Third District Country Banks by Deposit Size*
2/3/66-5/24/67
M illio n s o f D o lla rs (D iffe re n t Sc a le s )
before entered as sellers as interest rates climbed
and knowledge of the market spread. This was a
continuation of past trends. If this were the only
reason for the continuous supply of funds, there
would be cause for concern. As the number of
banks still outside the market dwindles, this pool
of untapped funds will shrink. A time could come
when it is insignificant.
A second factor, however, contributed to the
continuous supply of funds over the period of
restrictive monetary conditions. Many country
bankers have come to view federal funds as a
direct substitute for investments in Treasury hills
and other liquid assets. Interviews have confirmed
the fact that if the rate is sufficiently attractive,
they will shift out of bills and similar investments
and into federal funds. Last year the rate was
attractive (see Chart 7) and many hanks acknowl
edged that they did sell federal funds rather than
invest in other short-term securities. This sensi
tivity to interest rate differentials suggests that an
increase in the demand for federal funds, by
raising the rate, might well call forth the needed
supply of funds.
The data also indicate that banks of all sizes
had access to the available funds. Chart 6 shows
the average amount of federal funds purchased for
each reserve period during the same sixteen-month
period covered in Chart 5. Banks with deposits
under $50 million do not show any pronounced
cyclical pattern— no sign of being squeezed out of
the market. Banks of $50 million and above do
show a definite decrease in federal funds pur
chased over the period of credit restraint with no
letup until January 1967. This is not because they
were squeezed out of the market, however.
Interviews have confirmed that most large
country banks in the district approached the
P erio d E n ding
* D e p o s it size in m illio n s o f do lla rs .
“ credit crunch” of the summer of 1966 with con
siderable misgivings. They saw trouble ahead, and
9
business review
CHART 6
AMOUNT FEDERAL FUNDS BOUGHT
Reserve Period Averages
Third District Country Banks by Deposit Size*
2/3/66-5/24/67
M illio n s o f D o lla rs (D iffe re n t Sc a le s )
Digitized for 10
FRASER
they did not want to be caught short. To them,
borrowed reserves were not a good foundation
upon which to build credit when they were unsure
how long they would be able to borrow the re
serves they needed. In addition, they did not like
to pay the high rate then existing in the federal
funds market. Consequently, some of them liqui
dated investments while others increased the rates
they paid on certificates of deposit. The effect of
both actions was to increase the amount of funds
flowing into their banks and reduce their needs to
purchase federal funds. Those which liquidated
securities (primarily Treasury bills and other
short-term instruments) not only obtained a more
permanent source of funds, but they frequently
did so at a smaller cost than if they had purchased
federal funds. As seen in Chart 7, the federal
funds rate was usually higher than the bill rate.
It therefore cost less to sell bills or let them run
off than it would have to hold them and purchase
federal funds instead. These two factors, therefore,
plus a seasonal decline in the need for funds by a
few banks and increased borrowing from the
Federal Reserve account for the reduction in fed
eral funds purchased by the large country banks.
While large banks did buy a declining amount
of federal funds during the period of restrictive
credit conditions, most of them did purchase
some federal funds, and many smaller ones did
too. Almost without exception, the buying banks
have stated that they were able to obtain the funds
they needed without undue trouble. The large city
and country banks in the district were willing to
accommodate the needs of their smaller correspon
dents because the latter had previously been such
good suppliers of funds to them. And these large
banks in turn were similarly accommodated in the
national market. It is true that the larger banks
often encouraged the smaller ones to look for
alternative sources of funds so that they would
business review
CHART 7
FEDERAL FUNDS RATE MINUS
TREASURY BILL RATE
P e rc e n ta g e P oints
It appears, therefore, that the federal funds
market is a robust one. Rate and other factors
apparently induce market participants to behave
in such a way that even during periods of restric
tive credit conditions funds continue to be avail
able as some banks shift additional funds into
the market while others reduce their demands.
Correspondent relations help banks of all sizes to
have access to these funds.!) It may be that 1966
was not a real test of the market, although it
probably was a good one. But if it were not, that
experience would seen to indicate that when the
test does come, the market has a good chance of
not be caught short should the market dry up.
passing.
But the fact remains that when the chips were
down, the funds were there and banks— small as
well as large— that were willing to pay the price,
were able to get them.
9
The extent to which this statement is true for small
hanks in other districts is not known. There do not seem
to be compelling reasons, however, why the market in
other districts cannot develop as it has here if it has not
done so already.
11
THE 1967 HARVEST:
SCRUTINY OF THE BOUNTY
by Evan B. Alderfer
“ Rainfall this summer was the best in five years,
and the corn crop is the best in ten years,” said
one of the County Farm Agents we visited in mid-
should enable the farmers to reduce or to pay off
their loans.
October. That statement, with some qualifications
Green fields and big yields
here and there, summarizes our fall roundup of
With the resumption of normal rainfall this sea
agribusiness in the 60 counties that are the Phila
son, the crop that outdid all others was corn. By
delphia Federal Reserve District.
the time the total harvest is in, the Pennsylvania
Within the region, mostly in the Delaware and
corn crop is expected to reach 84 million bushels
Susquehanna watersheds are more than 66,000
— well over twice the small 1966 crop and about
farms that usually gross their owners about $850
one-and-a-half times the 1961-1965 average. No
million annually in sales of crops and livestock
other major crop went over the top to that extent.
products. A shortage of rain in any one season is
Reports from most sections of the District were
bad enough, and two in a row is worse. But five!
expressed in more superlatives than we have heard
The cow is the major source of the regional
in years. The bumper crop is reflected in both
farm income.
Dairy products head the list,
accounting for one-third. Next comes the chicken.
bulging corn bins and overflowing silos. Corn is
a double-barrel bonanza.
Poultry and poultry products account for one-
The total hay crop also went over the top,
fourth of the income. Other livestock and live
though the bounty was more modest than that of
stock products (beef cattle, swine, sheep, etc.)
corn. In a number of areas, however, the quality
account for one-eighth of the farm income. The
of the hay suffered because it “ got rained on”
three groups together, all animals and animal
during July and August cuttings. In some sections
products, yield about 70 per cent of the regional
rain interfered with the first cutting; in others,
farm income. Crops account for the rest.
the second cutting. Timeliness of rainfall is just
To feed all the income-producing animals takes
as important as adequacy. Nevertheless, despite
a lot of corn, and small grain, and hay, and silage
drying troubles, farmers generally had an excel
— more, in fact, than the region grows. It is a
lent hay and pasture season.
feed-deficit area, and most of the short-fall is
The potato harvest, with minor exceptions, also
imported from nearby states in the Cornbelt and
promises to be very good. In Pennsylvania, this
the South. When drought strikes Third District
year’s crop is expected to surpass last year’s by
farmers they must buy more than the customary
almost 50 per cent, and the 1961-1965 average by
import of feed, and many are forced to borrow—
25 per cent. New Jersey yields are also expected
and that adds interest charges to all the other
to be better than average, but New Jersey farmers
expenses. This year’s bountiful harvest, however,
apparently had more excess moisture difficulties
12
business review
than the Pennsylvania growers.
The Pennsylvania tobacco crop, almost all of
the fact that rainy weather during blossom-time
which is grown in Lancaster County, was har
was a bit light, the fruit sized up nicely as harvest
vested on schedule and barned for drying. The
time approached. The harvest in Pennsylvania is
total yield, according to latest estimates, will sur
estimated to exceed last year’s, though less than
pass last year’s by a small percentage. Quality is
the preceding five-year average by about 20 per
good, having suffered a minimum of damage from
cent. The berry crops in New Jersey were reduced
insects, disease, and hail. How much cash the
by wet weather, but a good cranberry crop is
crop will yield the growers turns upon their hig
expected.
gling with the cigar-manufacturing buyers later
in the year or next year.
hindered bees in their pollination. Though the set
Over half the country’s mushrooms are grown
in Pennsylvania and over half the Common
wealth’s crop comes from the Kennett Square
Vegetables
region, where the edible fungus yielded $17 million
Weather conditions were generally favorable for
to its growers during the past fiscal year ended
vegetable growers throughout the District, per
June 30, 1967. The industry’s major problem con
haps more so in Pennsylvania than New Jersey.
tinues to be mushroom imports from Taiwan.
Estimated production of sweet corn, tomatoes,
and snap beans in Pennsylvania is much higher
Dairy farm ing
and well above the average of recent years.
“ Dairy farmers in this District had an excellent
Production estimates by the New Jersey Crop
Reporting Service of 23 different market vege
year, the fluid milk surplus is down and milk
prices are higher.” From another county the re
tables show7 only slight increases in toto over
port is “ doing very well.” From still another,
1966. Among the best performers were sweet corn,
tomatoes, and peppers. Frequent rain and cool
“ milk prices are up, but so are costs.” These com
ments suggest that dairy farmers throughout the
early-season
District enjoyed varying degrees of improvement
crops, but these shortages were more than com
pensated by abundant yields garnered later in the
summer.
over former years. In Pennsylvania, the cow popu
Fruits
abundant. Moreover, the culling of herds in
This was a good year for apples, and bad for
recent years is paying off.
temperatures
reduced
output
of
lation has been declining; herds are fewer and
larger; milk production per cow is increasing;
and, thanks to favorable weather this year, feed is
peaches and cherries. The peach crop was a near
disaster. In February an unseasonably warm spell
Cattle feeding
developed buds in Adams County orchards. Later,
The agribusiness of fattening beef cattle for mar
a cold snap froze out a large part of the peaches
ket has not been so attractive as dairying for the
and all of the cherries. The Pennsylvania peach
greater part of this year because of low prices.
crop was about 65 per cent below 1961-1965 aver
age, and peach orchards in lower Delaware pro
duced similarly disappointing yields.
Ever since last winter, feeders have been looking
Apples fared much better than peaches, despite
well be an expansion of cattle feeding because
for better markets but the expected price increases
did not come until late this summer. There may
13
business review
prices have begun to move in the right direction
larger in size. Everything is becoming more mech
for feeders; feed is plentiful, and farmers can
anized, and profits are reckoned in fractions of
easily jump in and out of cattle fattening in this
a cent. Among the growers of the area are part-
area where dairying and general farming are so
time farmers— men who in addition to holding a
prevalent.
full-time job also operate a 20,000-bird broiler
house. Wives can easily take care of the automated
Poultry farm ing
houses while husbands are on the job.
In no branch of farming have the replies to our
inquiries been so uniformly out of character with
Continuing trends
the main theme of this report as in poultry farm
The scarcity and high cost of labor is a perennial
ing. Respondents from all sections of the District
bespoke the plight of the poultry people— falling
lament of farmers. The problem is especially acute
prices of poultry products.
It is not that demand for eggs and poultry is
where farmers must compete in a labor market
that offers a variety of attractive urban employ
falling. On the contrary, per capita consumption
of poultry meat is rising blithely but so is pro
ment opportunities.
The scarcity and costliness of labor put con
duction. The production cycle is short, so rising
tinued pressure on the farmer to mechanize. Sur
demand is easily and quickly accommodated; but
prising numbers of the District’s dairy farms, for
periodic over-production puts the skids under
example, are already equipped with barn milkers,
prices. Last December, broiler prices in Delmarva
pipelines, and storage tanks. Potato harvesting
sank momentarily below 10 cents, ruinously below
machines are no longer a novelty, and apple
the 15-cent level of a year earlier.
harvesting machines are now making their appear-
In no part of the District is broiler production
in a highly industrialized region such as ours
rance in Adams County orchards.
so predominant as in Sussex County, Delaware,
The purchase of farm machinery requires funds,
in the Delmarva peninsula. There, the farmers
resulting in a constantly increasing demand for
agricultural credit for which farmers shop around.
had a good season for growing corn and soybeans
— essentials in the diet of broilers. There, chickens
Whether they get the funds from local banks,
have long ago ceased being rasorial— habitually
Production Credit, or other sources depends upon
scratching around barnyards in search of food.
the terms offered but the volume grows.
There, broilers are fed the lowest-cost combina
Mechanization, in turn, puts pressure on the
tion diet determined by computerized linear pro
farmer for the acquisition of more land in order
gramming. They grow from ehickhood to broiler-
to get fuller use of equipment and lower unit costs
hood in carefully insulated, well-ventilated, highly
of production. As a consequence, farms tend to
automated apartments. Big hatcheries supply the
become larger in size and fewer in number. This
chicks, big feed manufacturers prepare the feed,
is, of course, a national as well as a local trend.
and big processing plants receive truckloads of
Another trend is the constant loss of farm land
live broilers in crates and deliver dressed products
for non-agricultural purposes such as residential,
ready for the pan on the kitchen stove.
Hatcheries, feed manufacturers, and processing
commercial, and industrial construction; high
plants are steadily becoming fewer in number and
Such loss of farm land seems to be a never-ending
14
ways, schools, hospitals, and other public uses.
business review
drain on a natural resource.
“■Normal,” however, differs from one place to an
Part-time fanning is on the increase. Sand
wiching an eight-hour job between dawn and twi
delphia County is 42 inches; for farms in Tioga
light farming is getting to be more and more com
County, 34 inches. For each area there is also a
mon. Why?
normal monthly pattern throughout the year.
Perhaps the need for additional
other. Normal annual rainfall for farms in Phila
income. Rural dollars have the same shrinkage as
Each area also has its normal temperature pattern
urban dollars.
— the number of frost-free days in the year, which
The foregoing trends are not peculiar to the
varies from less than 100 days in some parts of
current season; they have been in evidence for
Pennsylvania to over 200 days in others. It’s the
some time. But they are all part of the 1967 agri
departure from normal that exerts great influence
cultural scene, freshened by a normal rainfall.
on farm income from one year to another.
15
FOR TH E R EC O R D
IN D EX
• • •
BILLIO N S $
United States
Per cent change
Per cent change
Sept. 1967
from
mo.
ago
year
ago
9
mos.
1967
from
year
ago
Sept. 1967
from
mo.
ago
year
ago
9
mos.
1967
from
year
ago
Production ..........................
Electric power consumed — i
0
Man-hours, total* ..........
0
Employment, total ............
+ l
CONSTRUCTION** .............. + 4
COAL PRODUCTION ............ - 7
+
—
+
+
+
—
0
1
2
3
5
9
+
—
+
+
+
-
2
2
1
2
6
2
2
-
2
+
Per cent
change
Sept. 1967
from
Metropolitan
Statistical
Areas*
Payrolls
mo.
ago
year
ago
+ 3
0
0
5
+
BANKING
+
+
+
+
+
8
9
6
2
16
6f
+
+
+
+
+
—
2
1
1
1
1
4
+10
+ 6
+ 16
+ 13
+ 19
+ 11
+
+
+
+
+
+
7
6
10
5
15
12
0
-
Altoona .............. +
1
-
0
Trenton
............
-
2
Lancaster .........
ot
‘ Production workers only
“ Value of contracts
“ ‘ Adjusted for seasonal variation
+ 3|
+ 3*
0
0
— 1
+ 3
+
t l 5 SMSA’s
{Philadelphia
0
3
-
year
ago
+
+ 4
9
2
Philadelphia.....
Reading ............ +
0
5
mo.
ago
year
ago
mo.
ago
year
ago
-
— 4
-1 7
+ 7
+10
+
2
— 2
-
+
7
0
1
3
0
-
2
+ 5
+
7
+
1
+ 6
2
+ 9
+ 2
+
2
+
2
+
-1 2
+
2
+ 6
0
+ 8
+
5
+
2
1
+
0
+
2
0
+ 9
6
5
+
6
-
5
1
0
— 2
-
2
-
2
— 3
-
2
0
-
1
0
+
1
— 2
+
3
-1 2
1
-
+
0
2
Lehigh Valley .. -
Scranton ............
PRICES
Wholesale............................
Consumer ............................
Per cent
change
Sept. 1967
from
+
Johnstown .......
+ 12
+ 10
+ 14
+ 8
+21
+ 2t
mo.
ago
Atlantic City ....
+ 14
0
Per cent
change
Sept. 1967
from
1
Wilmington .....
— 8
- 2
Total
Deposits***
Per cent
change
Sept. 1967
from
Harrisburg .......
+ 2
+ 2
0
0
+ 1
- 2f
Check
Payments**
Employment
LOCAL
CHANGES
MANUFACTURING
(All member banks)
Deposits ..............................
Loans ..................................
Investments........................
U.S. Govt, securities ....
Other ..................................
Check payments*** ..........
Banking
Manufacturing
Third Federal
Reserve District
SUMMARY
M E M B E R BA NKS. 3R D . F.R.B .
1
— 1
+
0
+
+
+ 9
3
+
+ 16
8
6
3
+ 14
0
+ 10
— 1
+
2
+ 6
+ 3
+ 13
0
+ 11
Wilkes-Barre .... — 2
-
3
-
1
+ 2
— 2
+
6
0
+ 11
York .................. +
+ 3
+
1
+ 9
+
+
8
1
+ 8
1
1
+
‘ Not restricted to corporate limits of cities but covers areas of one
or more counties.
“ All commercial banks. Adjusted for seasonal variation.
‘ “ Member banks only. Last Wednesday of the month.
@FedFRASER