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PHIA
OCTOBER 1961
BUSINESS
REVIEW
Six Decades of Debt M anagem ent— Part III
The Businessman-Farmer in a Cost-Price Squeeze
BUSINESS REVIEW
is produced in the Department o f Research.
Clay J. Anderson was primarily responsi
ble for the article “ Six Decades o f Debt
Management” — Part III, and D. Russell
Connor, o f the Department o f Bank and Pub
lic Relations, for “ The Businessman-Farmer
in a Cost-Price Squeeze.” The authors will
be glad to receive comments on their articles.
Requests for additional copies should be
addressed to the Department o f Public In
formation, Federal Reserve Bank o f Phila
delphia, Philadelphia 1, Pennsylvania.
S IX DECADES OF DEBT M ANAGEMENT
Pari III
This is the third and final article in a series on debt management during the past six decades. The first
(Business Review, M a y 1961) dealt mainly with techniques employed to offset the disturbing effects of
Treasury operations on the money market and policies pursued in financing W orld W a r I. The second
article (Business Review, July 1961) was concerned primarily with debt reduction in the twenties and
financing an extended period of deficits during the severe depression of the thirties and W orld W a r II.
This final article considers policies and techniques during the fifties— in some respects an unusually
difficult period for debt management— and takes a brief look at the six decades in retrospect.*
There was a short period of debt retirement fol
In the fifties, however, Government securities,
lowing the end of World War I I ; however, hostili
especially the longer maturities, faced strong
ties in Korea and the cold war resulted in a
HOLDINGS OF GOVERNMENT SECURITIES
greatly enlarged defense program. The Federal
BILLIONS OF DOLLARS
Government operated at a cash deficit in six out
of ten years in the decade of the fifties. The net
deficit for the decade exceeded $16 billion and
outstanding federal debt rose $34 billion.
In addition to the upward trend in the debt,
other factors complicated debt management dur
ing the decade. The Federal Reserve-Treasury
accord in the spring of 1951 restored flexible
interest rates after almost two decades of un
usually low market rates. A weak private demand
for credit, a substantial inflow of gold, and a
generally easy monetary policy in the thirties
resulted in low market rates and a strong de
GOVERNMENT SECURITIES AS
ASSETS
PER CENT OF
PER CENT
mand for Government securities, especially short
maturities. To facilitate financing World War II,
prices of Government securities were supported
to maintain about the same rate structure that
prevailed when the United States entered the
war. The support policy was continued, with
minor changes, until the accord in the spring
of 1951.
’ This article and the previous articles are based on statements of
Treasury officials and official publications of the Treasury and do
not necessarily reflect the views of present Treasury officials.
3
business review
competition from alternative investments. There
in order that new issues could be sold without
was a substantial increase in corporate, state and
central bank assistance. Adjusting prices and
municipal securities, and in Government agency
terms of new offerings to the market was quite a
issues and Government insured and guaranteed
departure from the days when the support policy,
mortgages. Lending and investing institutions
in effect, guaranteed the success of any issue.
came out of the war with a much larger propor
Restructuring the debt to reduce frequency of
tion of their resources in Governments than in
refinancings was another method of affording
the pre-war period. An ample supply of highyielding investments encouraged these institu
more freedom for the execution of monetary
policy and of reducing disturbing effects on the
tions to increase substantially the proportion of
money market. In the latter part of 1958, the
their resources held in loans and investments
Treasury initiated a program designed to get the
other than Governments. Thus the fifties, charac
short-term debt on a more orderly and easily
terized by sharp rate fluctuations and strong
manageable basis. A cycle of six-month Treasury
private demands for credit, provided a markedly
bills was established to supplement the cycle of
different environment for debt management than
three-month bills already outstanding. In the
the thirties and forties.
spring of 1959, a program was initiated provid
ing for $1.5 billion to $2 billion of one-year bills
OBJECTIVES A N D POLICIES
maturing quarterly in January, April, July, and
Wartime objectives of a stable market for Gov
October. Regular cycles of three-month, six-
ernment securities, low interest rates, and keep
month, and one-year bills put refunding of a
ing as much of the debt in the hands of non
large volume of short-term debt on a routine
bank investors as possible continued to guide
basis and minimized its impact on the money
debt management operations until the early
market.
fifties. The transition from a supported to a free
The Treasury also tried to group maturities of
market for Government securities and a change
short-term issues other than bills as far as pos
in Treasury officials resulted in some significant
sible at quarterly dates in February, May, August,
shifts in the goals of debt management.
and November. The purpose was to reduce the
The objectives of interfering as little as pos
sible with monetary policy and of contributing
to price stability and sustained economic growth
NUMBER OF OFFERINGS OF UNITED STATES
SECURITIES*
NUMBER
were significant influences in shaping debt man
agement policies. Other objectives were to achieve
a more balanced maturity structure of the debt
and to borrow at a reasonable cost.
Freedom for m onetary policy
Considerable stress was placed on minimizing
interference of debt operations with monetary
policy. In a free market this meant that new
Treasury offerings had to be priced competitively
4
1947 4 8
49
'5 0
'51
'52
'53
'5 4
'55
'56
'57
'5 8
* Marketables other than regular weekly Treasury bills.
'59
'60
business review
number of refunding operations which in turn
erations to short maturities may build up excess
would facilitate execution of monetary policy,
liquidity and impair the effectiveness of restric
diminish churning in the money market on major
tive actions in a subsequent period of expansion.
quarterly income tax payment dates, and inter
The Treasury avoided these extremes by rely
fere less with other major market borrowers,
ing heavily on intermediate-term issues in re
such as states, municipalities, and corporations.
cessions and the early stages of recovery. These
Efforts of Treasury officials to reduce the fre
maturities are bought mainly by commercial
quency of trips to the money market were suc
banks, thus resulting in an expansion of the
cessful mainly in that trips would have1 been
money supply with little direct reduction in funds
more frequent otherwise. The volume and fre
available to private borrowers. An additional
quency of Treasury debt operations are partially
advantage is that in a period of expansion and
the result of fiscal policies. Deficits mean more
rising rates, banks are more reluctant to sell
trips to the market to raise cash; they also in
intermediate than short maturities in order to
crease the amount of outstanding debt and the
shift to loans. Thus, use of intermediate maturi
volume of refunding operations. The increase
ties in recession and early recovery tends to re
in the number of Treasury financings— cash and
inforce a restrictive policy in subsequent periods
refundings— in 1959 and 1960 reflected largely
of inflationary pressure as well as contribute to
new borrowing required to meet substantial
the objective of lengthening the debt. Most of
deficits.
the debt lengthening in the fifties was achieved
during periods of recession.
S ta b ilit y a n d g ro w th
Price stability and sustained growth were also
Reasonable cost
important goals of debt management. Accord
Borrowing at a reasonable cost to the taxpayer
ing to some theories, these goals would call for
was another goal of debt management; however,
confining debt operations to short-term issues in
Treasury officials recognized that pursuit of this
periods of recession and to long maturities in
objective could easily conflict with the other two.
periods of expansion when rising business ac
Short-term issues can usually be sold at lower
tivity threatens to outrun productive capacity
cost, but excessive use increases the frequency
and push up prices. Treasury officials have
of Treasury refunding operations, builds up too
pointed out, however, that it is feasible to apply
much liquidity, and complicates both debt man
this type of theory only within limits.
agement and monetary policies. Central bank
Complete reliance on long-term securities in
assistance to maintain artificially low rates or to
periods of expansion and inflationary pressures
guarantee success of new Treasury issues priced
might produce such sharp rises in long-term
too low results in money creation and, except
rates that private demand for investment credit
in periods of business slack, contributes to in
would be too severely restricted. Moreover, a
flation. Borrowing at low cost, although in itself
pressing need for cash may dictate sale of short
a desirable goal, should not be permitted to
maturities despite inflationary pressures. Neither
interfere with or take precedence over economic
is it always feasible in recession to limit new
objectives such as stability and sustained eco
offerings to short maturities. Confining debt op
nomic growth.
5
business review
“RUN TO STAND STILL”
Despite efforts to lengthen it, average maturity
of the marketable debt decreased during the
fifties— from six years and four months at the
AVERAGE MATURITY OF UNITED STATES
MARKETABLES OUTSTANDING
(Call dates)
YEARS
beginning to three years and four months at the
end of the decade. The rate of decrease, how
ever, slowed considerably after 1951. Several
factors complicated the task of lengthening the
debt.
POTENTIAL GROWTH OF SHORT-TERM
UNITED STATES DEBT*
BILLIONS OF DOLLARS
term securities. When money is tight and market
rates are rising, unusually high interest rates
are required to dispose of a significant amount
of long-term bonds in competition with strong
private credit demands. When money is easy
and rates are low, longer maturities can be
readily sold. But absorption of long-term funds
and upward pressures on long-term rates tend to
JUNE
DECEMBER 31
* Debt maturing within one year assuming all maturing issues are
refunded into securities maturing in less than one year.
For one thing, passage of time is constantly
offset policies to promote recovery. The fact that
savings institutions— the principal holders of
long-term
Governments— were
reducing
their
shortening outstanding debt. This is the reason
Government portfolios in order to acquire other
some have said the Treasury must “ run to stand
investments and make loans added to the diffi
still.” Impact of the passage of time on debt
culty of marketing substantial quantities of long
maturity is illustrated by the fact that debt
term Treasury securities except in periods of
maturing in one year or less would rise from $81
easy money and weak private
billion to $191 billion by the end of 1965 if there
credit.
were no increase in outstanding debt and if all
The
demands for
per cent ceiling on Treasury bonds
maturing issues were refunded into new securi
was another barrier to lengthening the debt in
ties maturing within one year. Determined ef
the latter part of the decade. When market rates
forts are required merely to prevent shortening
on long-term issues were above or even near the
of the debt.
ceiling, as during much of 1959 and the first
Another problem, as stated earlier, was that
part of 1960, the Treasury was unable to offer
there seemed to be no good time to sell long-
long maturities either for cash or in refundings.
6
business review
N E W TECHNIQUES
to moving securities from the short to inter
Difficulties encountered by the Treasury in man
mediate maturity range, paves the way for a
aging a large and growing debt in the environ
senior refunding. Holders of intermediate ma
ment of the fifties led to a search for new tech
turities are more likely to accept an offer to
niques. Advance refunding, non-par pricing, and
exchange for long maturities than holders of
more extensive use of auctioning new issues
short-term issues.
were among the more important methods tried in
Refunding in advance has several advantages.
an effort to facilitate debt management opera
It helps to keep holders of long-term Govern
tions.
ments in such issues. Long-term securities, as
Advance refunding
portfolios of short-term investors. Short-term in
Refunding in advance of maturity is a recent
vestors are unlikely to accept a long-term bond
they approach maturity, generally move into the
device used by the Treasury in an effort to
offered in an exchange. Hence an attempt to re
maintain a larger volume of longer maturities
fund a maturing issue into a long-term security
outstanding and to lengthen average maturity
is likely to be successful only as the “ rights” are
of the debt. In 1951 and 1952, the Treasury
sold to investors willing to take a long maturity.
offered to exchange some of the outstanding 2 %
Refunding into a long maturity is more likely to
per cent bonds for a 2 % per cent nonmarketable
be successful, therefore, if the offer is made while
bond, but the purpose was to reduce the large
the issue is still held by long-term investors. An
volume of long-term marketable bonds over
hanging the market and thereby facilitate the
additional advantage of advance refunding is that
it results in less shifting of rights and churning
transition from a supported to a free market—
in the market. Advance refunding also enables
not
Treasury officials to select a time when market
to
lengthen
average
maturity
of
the
conditions are favorable.
debt.
The Treasury has made four advance refund
ings in the past two years; each involved an ex
N o n-par pricing
change of putstanding marketable issues for new
Non-par pricing is another device that has been
marketable securities of longer maturity. In so-
found useful. For many years the Treasury fol
called “ junior” advance refundings, as defined
lowed the policy of offering new securities at
by the Treasury, holders of securities maturing
par. Issuance at par, however, impedes adjust
in one to five years are offered an opportunity to
ing the yield of a new security to the market,
exchange into bonds maturing in five to ten
especially if the Treasury wants to reopen an
years. A “ senior” advance refunding is one in
issue already outstanding. Reopening an out
which holders of intermediate maturities are
standing security is often desirable, helps to keep
given an opportunity to exchange into long ma
down the number of different issues and, by
turities. Both junior and senior types are needed
avoiding issues with only small amounts out
to best achieve the objectives of advance refund
standing, facilitates a broader market for Treas
Government securities
ury securities. Since mid-1958 the Treasury has
maturing within five years are not interested in
made several offerings of coupon securities at
long-term bonds. A junior refunding, in addition
prices above or below par.
ing.
Most holders
of
7
business review
Auctioning longer-term bills
usually limited to a certain percentage of capital
For many years, the three-month Treasury bill
and surplus.
was the only Treasury security auctioned at com
petitive bidding. When the six-month and one-
S IX DECADES IN RETROSPECT
year bills were introduced, these securities were
Debt management during the past six decades
also offered at auction. Proposals have been
lends support to the adage that necessity is the
made in recent years that the auction technique
mother of invention. Policies and techniques of
be extended to intermediate and longer maturi
ties. Although the Treasury has not rejected the
debt management responded, somewhat tardily at
times, to the changing needs of a dynamic and
idea, officials have expressed reservations.
growing economy.
Experiments with auctioning Treasury bonds
In the first decade of the present century,
in the mid-thirties indicated that this technique
Treasury officials were concerned about periodic
tended to narrow the market for Government
financial crises. In the absence of a central bank,
securities. Smaller investors, being unfamiliar
they attempted to use Treasury operations to
with the market and the auction technique, were
prevent or alleviate these disturbances. In periods
reluctant to submit competitive bids. As a result,
of stringency, Treasury powers were used to in
the bulk of the original issue usually went to
crease reserves and the supply of funds in the
large institutional investors. Managers of in
money market. Among the devices used were
stitutional portfolios also expressed dislike for
shifting cash from subtreasuries to deposits in
the auction device because it compelled them to
commercial banks, suspension of reserve require
submit a bid at a specific price. If they bid high
ments against Government deposits, and prepay
enough to be sure to get the new issue, they
ment of interest and principal on Government
might find themselves being criticized by their
bonds. To offset too much ease in the market,
superiors for having paid more than the average
the Treasury accumulated cash if possible and
price of accepted bids. Submitting a low bid in
shifted funds from commercial banks to the sub
order to get the security at less than the average
treasuries. Central bank functions performed by
price involved the risk of not getting any of the
the Treasury became the responsibility of the
issue. These difficulties are not so serious for
Federal Reserve System when it began operation
bills, according to the Treasury, because the
in 1914.
bulk of these securities is held by large institu
World War I brought a tremendous increase
tions whose portfolio managers are familiar with
in the volume of Treasury operations. The fed
the Government securities market.
eral debt soared from a little over $1 billion in
Treasury officials also pointed out that auction
1916 to nearly $27 billion in 1919. The vast
ing longer maturities would make it much more
increase in Treasury receipts and disbursements
difficult to control amounts issued to different
emphasized the need for alleviating the impact
classes of investors. In offerings of long-term
of Treasury operations on bank reserves and the
securities, savings type investors are usually
money market. Treasury certificates, mostly rang
given preferential allotments and small subscrip
ing in maturity from one to three months, were
tions are usually allotted in full. Commercial
issued in anticipation of bulges in receipts at
bank subscriptions,
tax payment dates and war loan drives, much as
8
on the other hand, are
business review
tax anticipation bills are used today. In order
$58 billion at the end of 1941 to $269 billion in
to spread receipts from Liberty Bond drives
mid-1946.
Economic considerations played a
over a longer period and smooth out their im
more influential role in fashioning debt manage
pact on the money market, subscribers were per
ment policies in World War II than in World
mitted to pay for their bonds in several install
War I. Treasury officials recognized the serious
ments. The system of special depositary banks
inflationary threat inherent in financing a major
was another technique used to alleviate the dis
war, and vigorous efforts were made to sell
turbing effects of Treasury operations. Deposit
securities to nonbank buyers in order to diminish
of Treasury receipts in commercial banks resulted
the inflationary impact of debt operations. Other
only in a shift of ownership of deposits, not a
goals pursued during the war and early post
reduction in reserves or in total deposits. Re
war periods were tailoring securities to meet the
serves were reduced when the Treasury trans
needs of various investor groups, borrowing at
ferred funds from the commercial banks to the
low interest rates, and maintaining a strong and
Reserve Banks; they were restored when Treas
stable market for Government securities.
ury checks drawn on the Reserve Banks in
The Federal Reserve-Treasury accord in the
meeting disbursements were deposited in com
early fifties ushered in an era of variable interest
mercial banks. Transferring funds from com
rates and an unsupported market in Government
mercial banks to the Reserve Banks only as
securities. Business expansion, interrupted only
needed for disbursement minimized the impact
by relatively short and mild recessions, resulted
on bank reserves.
The decade of the twenties afforded relief from
in strong private demands for credit. States and
pressing debt management problems generated
meet the needs of a growing population. The
municipalities borrowed increasing amounts to
by the war. The principal objectives were to re
trend in the federal debt was upward, reflecting
tire as much of the debt as possible, to refund
mainly international tension and a substantial
the remainder into a more manageable pattern
increase in defense spending. Strong private de
of maturities, and to refinance at lower rates in
mand for credit, recurring periods of inflationary
order to reduce the interest burden of the debt.
pressure
and
fluctuating interest
rates were
The thirties ushered in what turned out to be
characteristic of most of the fifties— an un
an extended period of deficit financing. Debt
favorable environment for management of a large
management policies were directed mainly to
and growing federal debt.
ward restoring the money supply which had
Noninterference with monetary policy
and
been reduced by deflation and depression, to
lengthening maturity of the debt were dominant
promoting lower interest rates in order to stimu
influences in formulating debt management poli
late investment and general economic activity,
cies in the fifties. Competitive pricing and re
and to broadening ownership of Government
structuring of maturities provided more leeway
securities. Several techniques adopted have since
for the execution of monetary policy. Efforts to
become
lengthen
standard
practice
in
handling
debt
operations.
average
maturity
of
the debt
en
countered serious obstacles. Passage of time
World War II expenditures dwarfed those of
never ceases to shorten the maturity of outstand
World War I, and the federal debt jumped from
ing debt. A shift in investor attitude toward
9
business review
Governments— reduced demand for permanent
adjustment of yields to market rates. Advance
investment and increased demand for liquidity
refunding shows promise as a method of main
purposes— tended
to narrow the market for
taining a larger amount of longer-term maturities
Difficulties encountered in managing the debt
debt management problems of today are fore
longer maturities.
outstanding. If history is an accurate guide,
led to some new techniques. Non-par pricing per
runners of new and improved techniques of
mits reopening of outstanding issues and better
tomorrow.
10
THE
BUSINESSMAN - FARMER
IN A COST-PRICE SQUEEZE
In addition to the usual things being grown on
trend toward larger farms but fewer farmers as
farms in Pennsylvania, New Jersey, and Dela
more small, marginal operators liquidate their
ware, we see the continuing growth of a new
business.
breed of farmer— the businessman-farmer. For
profit margins have so narrowed in recent years,
An excellent gro w ing season
that the mere ability to grow an abundant crop,
Following an unusually severe winter, which cut
raise high-grade cattle, or produce a quantity of
drastically into peach and blueberry yields and
eggs is no longer a criterion of certain success.
killed off some ornamentals, this year’s growing
Given this basic ability, today’s farmer must
season was the equal of any in the past decade.
also be an expert and sensitive marketer; an
Extensive snow cover and wet soil delayed plant
astute tax accountant; a knowledgeable user of
ing for several weeks but conversely helped
credit; a labor relations diplomat; an adept op
produce some record crops. During most of the
erator of complex machinery; an able salesman;
growing
and something of an expansionist for greater
moved through moderate ranges; moisture was
and
harvest
seasons,
temperatures
operating efficiency.
ample, over-all, excessive only in isolated locales;
While county agricultural agents in the Third
dry spells were infrequent and of short duration.
Federal Reserve District report abundant crops
Even September’s Hurricane Esther fortunately
this year, they also cite soft prices in several
veered out to sea and did not damage late crops.
areas of the farm economy. They continue to
stress the need for more efficiency on the farm,
C om ——a p arado x
relay the farmers’ growing concern over rising
County agricultural agents express surprise at
expenses, particularly taxes, and mention com
the large number of farmers who participated in
petition from other areas where labor costs some
the 1961 Feed Grain Program. In our area where
times are lower. They also note a continuing
most corn is used for silage and grain, farmers
11
business review
withdrew from production approximately one-
vania Dutch in Lancaster County, is yielding
sixth of their 1960 acreage and thereby quali
higher than estimated and could top last year’s
fied for subsidy payments. Despite this signifi
bumper crop. Once again the leaves are large and
cant reduction, 1961’s estimated corn production
laden with moisture, therefore much care will be
in Pennsylvania, New Jersey, and Delaware will
needed in curing to avoid damage in the drying
come close to 1960’s unusually large crop. The
sheds. As always, there is some apprehension
reasons for this seeming paradox appear to be:
over prices but the farmers collectively seem
1. Nearly ideal growing weather helped com
pensate for the reduction in acreage.
financially able to resist price pressures.
2. Much of the land held out of production
Vegetable yields high, prices up
Vegetables generally yielded well and were of good
was below average quality.
3. Land kept in corn production was more
intensely
fertilized
and
cultivated— in
some instances with advance funds pro
vided by the Feed Grain Program.
4. Some farmers not in the program planted
quality. An exception was the abundant tomato
crop which in some areas lacked quality because
of excessive moisture. Moreover, tomatoes
ripened almost at one time, making them difficult
to pick without some losses. Yields of early peas
new corn acreage this year with the mis
and limas were light but later plantings more
taken idea that such land would qualify
than made
under the 1962 Feed Grain Program.
up the difference.
Green beans,
squash, sweet corn, peppers, and cabbages were
plentiful; asparagus and celery about equaled
Other field crops equal 19 6 0 ’s
Field
crops
other
than
corn
were
1960’s yields.
equally
Vegetables for processing brought fractionally
abundant. Hay yields approached record propor
higher contract prices than a year ago. Fresh
tions, and barns are filled; but excessive moisture
market prices, too, generally averaged higher,
in some cuttings posed curing problems, conse
save for tomatoes in late summer. Irrigation and
quently the quality is not as exceptional as the
spray control needs were modest because of
yield. Oats, wheat, rye, and barley should ap
favorable weather conditions, so production costs
proach 1960’s high yields, as insect and disease
were held down.
damage was negligible. Soybean production will
exceed last year’s, although the intrusion of the
Fruit prospects are m ixed
Mexican bean beetle reduced original expecta
Winterkill raised havoc with peach production
tions. More soybean acreage was planted than
this year, reducing the yields from one-tenth to
heretofore, particularly in Delaware where this
one-half, depending on location. Over-all, county
crop is assuming ever greater importance. White
agents estimate the crop to be one-third less than
potatoes of good yield and quality will be in
1960’s. The harsh winter destroyed a number of
lower volume than last year because of reduced
trees, while late frosts also nipped many buds
plantings.
and blossoms of those remaining. Quality of the
fruit also suffered in some cases. Peach prices
Another big tobacco crop
were relatively high but not sufficiently so to
Tobacco, the major cash crop of the Pennsyl
offset crop losses.
12
business review
Apples are a completely different story. Na
Prices, consequently, have been depressed, par
tionally, the apple crop is estimated to be 15 per
ticularly for milk sold to processing plants. On
cent above last year’s; locally, the increase may
the plus side are the abundance of silage for dry
be much greater. The fruit is heavy, has good
feeding this winter and next spring, a seasonal
color, is meaty and solid. Because of excellent
rise in the price of milk, and the possibility of
quality, fresh market prices for local apples are
increased consumption of fluid milk, pending
expected to be satisfactory. But because of big
approval of gallon-jug sales in Pennsylvania.
crops in competing areas, processors anticipate
paying less than last year. Already, prices paid
A cost-price squeeze in beef cattle
for earlier maturing Virginia apples are de
Three major determinants largely decide the
pressed.
status of beef cattle operations: fat cattle prices,
New Jersey’s blueberry crop suffered similarly
cost of replacement stock, and supply of feed on
to the peach crop as the winter cold cut yields
the farm. Sales of finished cattle this year have
almost in half. Resultant prices were good al
brought irregularly lower prices. Conversely,
though quality was off. On the other hand, fa
feeder cattle prices are high at present. These
vorable growing conditions have helped increase
two factors together have discouraged head-for-
New Jersey’s cranberry crop one-fifth over last
head replacement as buyers hold off hoping for
year’s and the quality of the berry is higher.
a price drop in feeder stock. The third factor,
Prices are expected to equal or better the 1960
however— ample feed— may eventually encour
level, partly because of a smaller crop expected
in Massachusetts, our nearest competing area.
age some stock replacement. Because of the slim
price differential between fat and not-so-fat ani
mals, finished cattle will continue to move to
D airy trend continuing
market at lower weights.
There has been no abatement this year in the
tendency toward fewer dairymen, larger herds,
A difficult ye ar for poultrymen
and increased use of machinery. More stringent
Last year’s improved picture for Third District
health and storage requirements call for larger
poultrymen, unfortunately, has not carried over
capital outlays which the small operator can
into 1961. This has been especially true of those
scarcely afford. Accordingly, he either gets out
who raise broilers. On the average, broiler prices
completely or specializes in raising calves and
this year are as much as one-third under those of
heifers. Increased emphasis is being placed by
1960, and in many instances returns are less than
county agents and improvement associations on
costs. Only the most efficient operators will be
better quality cows and more efficient milking
able to avoid sharp financial setbacks. This dis
operations. Thus, the yield per cow is rising al
couraging experience has limited chick place
though this year, for the first time in many years,
ment, which may in turn have a salutary effect
the total number of milk cows in the Third Fed
on the market in future.
eral Reserve District has declined.
Carryover silage from
last year, excellent
Egg prices have fluctuated rather widely this
year and on balance will probably be less than
pasturage, superior cows, and increased efficiency
a year ago. In the interest of greater stability,
all have contributed to a milk surplus this year.
producers have been forced to react quickly to
13
business review
prices by a downward adjustment in chick place
Farmers are using more credit
ments. But, since quality of the flocks has im
Driving toward increased efficiency, farmers in
proved (more eggs per laying hen) and feed has
1961 spent more money for field equipment, barn
been plentiful, egg production locally may exceed
building and remodeling, dairy bulk tanks and
last year’s. A prospective oversupply in our area
milking equipment, improved herds and flocks,
coupled with increasing competition from the
fertilizer, and pest and blight control devices. In
South and Midwest gives little promise of a sig
short, they took any reasonable measure that o f
nificant price improvement.
fered promise of increased production and lower
operating expenses. To do this, they used other
Production costs still rising
people’s money— they borrowed. Their increas
Higher taxes this year caused more complaints
ing sophistication in using borrowed funds is a
from local farmers than ever before. A major
tendency described as welcome to county agents,
factor underlying these increases is reassessment
who long have championed judicious use of
of property values, particularly in Pennsylvania.
credit in financing farming operations.
Numerous townships are said to be adding taxes
on wages to their schedules, and school taxes al
Farm income— higher gross, lower net
most everywhere are still going up. New Jersey
Over the first seven months of 1961, cash re
farmers claim that since their state has no in
ceipts from the sale of crops, livestock, and live
come or sales levies, additional real-estate taxa
stock products ran close to the levels prevailing
tion places a disproportionate burden on farm
in each of the two preceding years. Although
land owners.
changes in income from these sources showed
While farm wages did not spurt upward this
considerable month-to-month variations as com
year, fringe benefits did. These were in the form
pared with a year earlier, they were largely off
of improved housing and health facilities called
setting. In periods when crop sales were down,
for by more stringent legislation in some areas.
receipts from
Thus the total labor bill was up, particularly
larger and vice versa. In the opinion of most
where
county agents reporting to us, gross income of
farmers
were
dependent
on
migrant
the livestock components were
workers. Looking to the future, farmers fear the
Third District farmers may be a little higher
increased minimum wage in industry will even
than in 1960 but net income may be somewhat
tually push farm wage costs still higher.
less, largely because of rising production costs.
14
F O R TH E R E C O R D . . .
BILLIONS
MEMBER BANKS 3RD F.R.D.
S
B A N K IN G
11 '
■CHECK PAYMENTS
/
no cintsi
\ A/
| |/
A /
'
.«
1
u
9"
^
V
i 1
* DEPOST
s
'
%
LOANS |
INVESTM : n ts
_
3t
2 YEARS
AGO
Third Federal
Reserve District
United States
Per cent change
Per cent change
YE AR
AC30
Factory*
AUC
196 i
Department Storef
Check
Payments
Employ
ment
Payrolls
Sales
Stocks
Per cent
change
Aug. 1961
from
Per cent
change
Aug. 1961
from
Per cent
change
Aug. 1961
from
Per cent
change
Aug. 1961
from
Per cent
change
Aug. 1961
from
mo.
ago
mo.
ago
mo.
ago
mo.
ago
mo.
ago
SU M M A RY
8
Aug. 1961
from
mo.
ago
year
ago
1961
from
year
ago
mo.
ago
LO C A L
C H AN GES
8
Aug. 1961
from
year
ago
1961
from
year
ago
M A N U F A C T U R IN G
+
Electric power consumed.......
Man-hours, total*................
Employment, total..................
W a g e income*.....................
C O N S T R U C T IO N **
C O A L PRODUCTION
T RADE***
Department store sales...........
Department store stocks..........
B A N K IN G
(All member banks)
Deposits..............................
loans..................................
Investments..........................
U.S. Govt, securities.............
Other...............................
Check payments....................
+
+
+
+
9
1
1
2
+
-
+ 2
+27
+
+
2
1
0
+ 1
- 1
— 1
0
+ 4t
6
4
3
1
+50
+
+
5
3
1
+ 6
+ 6
+ 9
+ 12
+ 4
+ i it
-
1
7
5
5
+ 11
-1 1
-
+
+
+
+
+
+
1
6
7
6
7
2
9f
5
+
4
-
2
-
i
-
4
0
+29
+
+
8
2
+
-
3
8
+
+
+
1
2
+
4
0
+
1
‘ Production workers only.
“ Value of contracts.
•“ Adjusted for seasonal variation.
+
1
0
0
1
1
3
+ 6
+ 3
+15
+ 16
+14
+ 6
+ 6
+ 4
+ 12
+ 13
+ 10
+ 8
0
0
0
0
1
1 — 3 +
it
+
it
+ 1
+
t20 Cities
{Philadelphia
-
year
ago
year
ago
2
-
7
+
year
ago
-
2 +
Philadelphia. . . .
+ 1
-
2
+
-
+
9 +
3 +
3 +
7 +
1 +
1 +
2 +
2
-
1 +
1 +
7
1 +
2 +
2 +
4
-
4
-
1 +
2
-
1 + 7
Trenton..........
+
2
-
5 +
2
-
3
Wilkes-Barre. ..
+
2
-
5 +
1 -
5
1 -1 0
-
2
0
+
1
1
2
3
1
2 +
0
-
5 +
-
+
+
7
0
Scranton.........
York..............
3 +
+
1 — 5
0
Wilmington . . . .
ot +
2
0
Lancaster.........
Reading..........
PRICES
Consumer............................
year
ago
3
+
year
ago
+10
0
-
4 +12
+18
+
8
-
3
-
7 +
-
-
5 +
3
+
8 +
7
-
6 +
3 +
1 -
2 +
9
-2 2
-
1
0
+
9
-
2 +
4
-
4
-1 4
-
1
-
4
3
+11
-
+15
1 +
6 +
7
3
1 +36
+15
*N o t restricted to corporate limits of cities but covers areas of one or
more counties.
{Adjusted for seasonal variation.
@FedFRASER