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FEDERAL RESERVE BAN K OF R IC H M O N D JANUARY 1960 FIFTH DISTRICT 1959 The year 1959 was a prosperous one for most Fifth District businesses. Economic stability and strength held up very well against four months of reduced activity and general uncertainty oc casioned by the steel strike. The business expan sion which originated in 1958 and gained strength in the first half of 1959 lost momentum as the effects of the strike permeated the economy. Manhours (seasonally adjusted) in all sectors of dura ble goods manufacturing turned downward within a month or two following the cessation of steel production. As far as employment in the District was concerned, the effects of the strike were most evident in durable goods manufacturing, mining, transportation and construction. The resumption of steel production, however, put new life into the upward swing. The vigor which was present or anticipated earlier in the year gained impetus in most markets, particularly textiles and furni ture. Some industries closely tied to steel were obviously handicapped by lags in specialized finished products. In the closing months, how ever, production in general was rising in response to the pull of the markets. The thought is frequently expressed and in various ways that the present is the product of the past and nurtures the seeds of the future. Out lines of industrial diversification and growth are revealed in the chronology of economic events. A knowledge of these outlines helps to provide the perspective needed to interpret current develop ments. The following brief consideration of the patterns of business activity in the District and of the trends which are gradually changing these pat terns will give added meaning to the events of 1959. EMPLOYMENT In the Fifth District during 1959 nonagricultural jobs numbered approximately 4,450,000 on an average monthly basis. Major sources of non farm employment in the District are presented in the following table: Industry G ro u p s % Distribution N onfarm Em ploym ent Total n o n a g ric u ltu ra l Total n o n m a n u fa c tu r in g Total m a n u fa c tu r in g N o n d u ra b le s D u ra b le s N o n m a n u fa c tu r in g : Governm ent Trade Servic e a n d m iscella n eo u s T ran sp o rta tio n , co m m un icatio n a n d public utilities Con tract construction Fina n ce, in su r a n c e a n d rea 1 estate M in ing 100.0 69.1 3 0 .9 19.5 11.0 20 .3 19.2 10.7 Selected m a n u fa c tu r in g : Textile mill products Food a n d kin d red products A p p a r e l , etc. C h e m i c a ls P r im a ry metals Fu rniture Stone, c la y a n d gla ss T o bacco m a n u fa c tu r in g F a b ric a te d metals 7.2 5.9 3.8 2.0 8.8 2.8 2.3 2.1 1.6 1.5 1.2 1.0 0.8 DISTRICT TRENDS The employment records of the last decade re veal the pattern of District industrial development both in size and diversification. The individual changes which compose this pattern frequently have profound effects in the localities where the specific developments occur, and make their pro portionate contribution to the general economic growth and strength of the District and the nation. The net effects of these changes are, however, very gradual when observed through the medium of aggregate statistics. In the Fifth District from 1949 to the present time nonagricultural employ ment has been increasing at an average annual rate of about 1 .6 % per year, resulting in an in crease over the ten-year period of approximately 20 %. (Revisions in the nonagricultural series on which these ten-year comparisons are based may alter comparability to some slight degree.) D ur ing these ten years agricultural employment in the District has been declining at an average rate of about 4% per year. Mining employment reached its highest postwar level, 169,000, in 1948. The figure fell to about 99,000 in 1954, increased by some 10,000 between 1954 and 1957, but dropped again to about 88,000 in 1959. Percentage changes in employment for the prin cipal industries and industry groups in the District which were below the rate of growth set by the nonagricultural industries as a group during the decade of the 1950’s are presented in the fol lowing tabulation : % C hang e in Employment 1949-1959 N o n d u r a b le goods Textile mill products C h e m ic a ls Tobacco m a n u fa c tu r in g Stone, c la y a n d gla ss T ran spo rtation , co m m un icatio n public utilities Mining + 13 1 + 14 + 3 + 10 - an d + 4 -43 Major industries and industry groups in which employment grew faster than total District non agricultural employment during the 1950’s are as follows: % C hange in Employment 1949-1959 D u r a b le goods Food a n d k in dred products A p p a r e l , etc. P r im a ry metals Furniture G o v e rn m e n t Service a n d m iscella n eo u s Contract construction Fin a n ce, in s u ra n c e a n d real estate + + + + + + + + + 27 38 55 25 43 30 30 34 55 All of the more important sectors of the District economy except agriculture, mining and textile manufacturing expanded between 1949 and 1959. Trade and fabricated metals increased just about in proportion to total nonfarm employment. The nondurable group of manufactures showed gen erally lower than average increments of growth. Textiles and tobacco in particular held this group down while the food and apparel industries made impressive gains. Durable manufactures char acteristically increased employment by more than the nonagricultural 20% between 1949 and 1959, with furniture leading the way among principal District industries in this category. The nonmanu facturing categories were also high on the list, with finance, insurance and real estate posting the biggest relative increase. Reliance on employment statistics for indica tions of economic progress, however, has impor tant limitations. New and highly productive equipment in agriculture, mining and textiles, for instance, has enabled these industries to greatly increase output per man-hour and per employee. DURABLES District durable goods manufacturing rolled up steady gains right through the first half of 1959. The impact of the steel strike then sent man-hours worked in durable goods industries into three successive months of decline, down 3.8%, 7Ac/c, and 8.0% below the June peak in July, August and September, respectively. Activity in durables began to recover in October and gained signifi cantly in November, but through the fourth quar ter remained about 2 % below second quarter levels. At the end of the year durable goods pro duction measured in seasonally adjusted manhours stood between 4% and 5% above 1958. Machinery in particular came back strong, reattaining the year’s earlier high level and bettering the performance of a year earlier by about 15% in the electrical and 30% in the nonelectrical classi fications. Transportation equipment and fabri cated metals, still reflecting the steel strike late in the year, were below both their 1959 high levels, and their closing 1958 figures. Primary metals ended the year 7% below the May high, but about 5% above 1958. The furniture industry had an especially signifi cant year, the best in its history in the opinion of some. Indications for the entire southern furni ture industry are that late in the year production was setting all-time records, bringing total output for the year to a level about 14% above 1956, the industry’s last good year. New orders and un filled orders for furniture were also indicated to be at all-time high levels, as much as one-third and four-fifths higher than the comparable 1958 figures respectively. The lumber industry during 1959 showed moderate strength, holding at levels about equal to or a little above 1958. Toward the end of the year hardwoods strengthened noticeably and 1959 production of southern pine wyas reported to be 11% above the comparable 1958 figure. NONDURABLES During 1959 the District’s nondurable goods in dustries displayed generally healthy characteris 3 tics, and demonstrated their naturally greater sta bility under changing economic conditions as com pared with durables. Productive activity measured in seasonally adjusted man-hours expanded at an average rate of about 1 % per month during the first half of 1959. The June level exceeded the 1958 average monthly figure by more than 7%. Then strike-related contractions in particular industries sent nondurable goods manufacturing into a grad ual decline. The October level was slightly more than 2% below the June high. The November aggregate man-hours figure for this group was very slightly above the October level. Available evidence shows that the year ended at just about that level—2% below the June peak, but more than 2% above the end of 1958. In some respects the year bordered on the phenomenal for the textile industry. A rising demand for most fabrics began to develop about the middle of the year. Print cloths led the way, piling up an order backlog which by the end of the year nearly equaled anticipated production for the first three quarters of 1960. Knit goods and synthetics also exhibited unusually strong demand. Only in the case of industrial fabrics did any de gree of sluggishness characterize a significant por tion of the demand picture. Lagging demand for industrial cloth plus the industry’s generally cir cumspect response to its unaccustomed prosperity apparently accounts for the fact that productive activity measured in seasonally adjusted manhours was at year’s end 4% below the year’s peak in Tuly, and only about 3% above comparable 1958 levels. All categories of nondurable manufactures finished the year with productive activity near record levels or setting new ones. Only the food and tobacco manufacturers were below their re spective year-ago levels. The apparel industry, one of the fastest growing in the District over the past decade, finished 1959 with a level of produc tive activity about 6 % above the previous year. Chemicals finished 5% ahead of 1958. CONSTRUCTION The value of construction contract awards in the Fifth District in 1959 reached an all-time high, exceeding $ 2.8 billion, which was 6 % above the previous high set in 1958. A brief hesitation in the upward trend in construction late in 1958 was followed by a second phase of accelerated activity 4 early in 1959. Following a peak in April, award values moved downward through the month of August. The year ended with volume again on the rise. Construction activity is not just another source of employment, but is a mark of a dy namic economy, utilizing savings and credit facili ties to expand capacity and employment in all growing industries. The growth in construction activity, therefore, is good evidence that the Fifth District is moving forward. Nonresidential building contract awards ac counted for a major portion of the increase in construction activity between 1958 and 1959, but residential construction also rose impressively. The third category, public works and utilities, de clined, but gains in the first two were more than enough to offset this. Nonresidential contract award values in 1959 were 23% greater than in 1958. Residential was up 11%. Public works and utilities dropped 22%. As the year 1959 drew to a close, nonresidential construction activity as measured by the value of contract awards was continuing to gain strength, residential construc tion was slipping slightly, and public works and utilities were beginning to look more promising. MINING The average daily rate of bituminous coal out put in the Fifth District for the first six months of 1959 was about one-fifth below the level set in 1957, District coal’s best year since 1948. The hopes for moderate gains over 1958 which wrere justified on the basis of this beginning were des tined for disappointment as later events unfolded. A warning was sounded as early as February when W est Germany advocated a custom’s duty of nearly $5 per ton on coal imports. The ac cumulative surpluses of European coal and fuel oil, and surpluses of fuel oil in the eastern United States had serious effects. Overseas shipments through District ports in 1959 were about onethird belowr the previous year. In recent years coal exports have accounted for about one-fourth of District production. The 116-day strike in the steel mills, however, was the prime domestic reason for coal’s failure to better its 1958 performance. Before the strike added its confusing influences to the picture the only domestic coal users who increased their con sumption as compared to 1958 were electric utilities and steel and coke producers. TRADE Fifth District trade got off to a strong start in 1959 with rising sales during the entire first half of the year, a leveling off at midyear and a moder ate decline in the fall. The year ended with the sales curve again on the rise. District department store sales adjusted for nor mal seasonal variations reached their peak in July and August. Seasonally adjusted sales in each month except March and September exceeded the 1958 average monthly figure. This made 1959 the best department store sales year on record. Furniture stores in the Fifth District had a very good year in 1959, with sales just about equal to the level established in 1956, the best furniture sales year on record. The year began with Janu ary sales (adjusted for normal seasonal variations) nearly 5% above the 1958 average monthly rate. Sales equaled or exceeded the average monthly level for 1956 through the month of August, but finished out the year slightly lower. Information available on the independent stores of the Fifth District suggests that their sales in creased by about 9% in 1959 over 1958. Sub stantially better than average gains apparently occurred in sales of automotive establishments, drug and proprietary stores, and combination furniture and household appliance stores. Build ing material and hardware stores showed lesser gains than the above but still better than average. Food stores and miscellaneous retail stores showed sales declines in 1959 compared with 1958. The decline in food store sales, however, was due largely to the drop in food prices. AGRICULTURE Productive activity on Fifth District farms in creased during 1959, with more crop acreage planted and more livestock raised than in 1958. A midsummer drought and rain during the harvest reduced yields and quality of major fall crops. On balance, District production of wheat, oats, barley, cotton, and sweet potatoes increased, while production of hay, tobacco, peanuts, and Irish potatoes was lower than in 1958. W ith soybeans, Irish potatoes and hay as the main exceptions, crops sold for lower prices than in 1958. Reductions in the prices of cotton, pea nuts, and corn could be traced to lower levels of government price supports. The lower prices about balanced out the increases in production, so that total cash receipts from sale of crops was about the same as in 1958. Farmers raised more livestock in 1959, but a substantial drop in prices reduced livestock in come by about 7% below the 1958 level. By December, hog prices were 33% under a year earlier. Cattle, broiler, and egg prices wrere also lower. Milk prices held steady and were the only major exception to the price reductions. Cash receipts in 1959 from District crops and livestock combined wyere about 3% lower than in 1958. North Carolina receipts from tobacco, hogs, and broilers were down sharply. Government Soil Bank payments in the District were reduced to about one-third of their 1958 total. Farm pro duction expenses increased by about 3% The re sult of these events was a drop in the net income of Fifth District farmers of about 15%, or $170 million. FINANCE The rapid expansion in economic activity last year greatly intensified pressures on District mem ber banks. During the first half of the year loans soared upward at near-record rates. Such heavy loan demands coupled with Federal Reserve efforts to prevent inflation made funds hard to obtain, and banks scrambled for money by liquidating mar ketable Government securities on a declining mar ket. As pressures intensified, borrowings at the discount window of the Federal Reserve rose to the highest level in years. Pressures on banks eased somewhat as the effects of the steel strike spread through the economy. Loan demand slackened in most areas, and banks reduced their borrowings from the Fed eral Reserve to about normal seasonal levels. They continued to liquidate investments but less rapidly than during the first half of the year. As economic activity began to recover follow ing the steel injunction, loans rebounded season ally, too. W hen the year ended, loans had risen percentagewise by more than during any year since 1955, and investments had been cut back even faster than in 1955. Borrowings at the discount window were running somewhat above the usual seasonal rate. 5 REVIEW looks at . . . SAVANNAH RIVER PLANT Stretched out alo n g the b a n k s of the S a v a n n a h River lies one of the nation's largest atomic en e r g y plants. This is the 2 0 0 ,0 0 0 a cre S a v a n n a h River Plant of the Atomic E n erg y C om m issio n , one of the seven m a jo r A E C facilities for the production of special n uclea r m a te ria l. Among all A E C facilities, the $1.3 billion plant is second only to O a k Ridge in d o lla r investm ent in plant a n d eq u ip m en t. Construction of the m a jo r part of the S a v a n n a h River Plant took fo ur y e a r s a n d a p e a k construction force of 3 8 ,0 0 0 w o r k e r s , m a k in g it one of the larg est construction projects ever u n d e rta k e n . The plant w a s built by E. I. du Pont de N em o u rs a n d C o m p a n y , w hich n ow o p erates it for the A E C . W ithin the plant a re five production reactors, a h e a v y w a t e r plant, a n d a n e w test reactor n ow u nd e r construction. As part of the n atio nal d efen se system the plant's m a in pu rpose is to m a n u fa c tu r e plutonium for use in n u clea r w e a p o n s , but it also perform s a n u m b er of p ea cetim e functions. These include the production of h e a v y w a t e r to be used in n uclear reactors, the irra d ia tio n of cobalt to be used in the treatm ent of c a n ce r, a n d the study of the p r eserva tio n of food by irra d ia tio n . The plant is important, h o w e v e r , not only to the nation's security a n d w e ll- b e in g , but as a n e m p lo y er of 7 , 5 0 0 persons with an a n n u a l pa yro ll of $58 million, it is a lso of vital eco nomic s ig n ifica n c e to the s u rro u n d in g comm unities. Aiken Orangebur U. S. G O V ' T PR O P ER T Y SAVANNAH RIVER PLANT ATOMIC EN ER G Y CO M M ISSION a thumbnail sketch . . . The Industrial Production Index On tonight’s program the newscaster quoted the value of last month’s industrial production index just announced by its compiler, the Federal Re serve Board. This evening’s paper gave an emi nent economist’s business forecast for 1960 which included an estimate of the industrial production index for the end of this year. W hat do these figures mean to you—a business man in today’s complex economic setting? Why is this particular economic indicator watched so closely ? Can the over-all index or its components help you in your shop? To answer these ques tions, you should know primarily what this sta tistical tool is designed to measure, how it is com piled, and its limitations as wrell as its usefulness. A MEASURE OF ECONOMIC GROWTH As its title implies, the industrial production index measures changes in physical output in the industrial sector of the economy—manufacturing, gas and electric utilities, and mining. Excluded are agriculture, construction, wholesale and retail trade, foreign trade, finance, transportation, and the service trades. Strictly speaking, therefore, this index does not measure general business activity. The industries covered by the index, however, produce a little over one-third of the value of the total pro duction of goods and services in the United States. The industrial production index is an important tool in economic analysis not only because it rep resents a substantial proportion of the total output of the country but because the area of the economy that it covers is the part most sensitive to changes in over-all demand. Minerals, products of the manufacturers, and utility output are used by all other sectors of the economy. Thus this index is used as one barometer of over-all business activity. It is popular also because of its ready availabil ity—published monthly with a lag of about 15 days. In contrast, the measure of the value of all goods and services produced in the economy—-the Gross National Product—is estimated quarterly. SPECIFIC COVERAGE To compute the monthly industrial production index, 207 statistical series are used. Some of these basic series represent quantity of production; some are in terms of ship ments, materials consumed, or in man-hours. Where necessary, adjustments are made in order that the figures represent physical volume of out put in all cases and are free of price influences. These 207 individual series are classified in two separate w ays: by industry groups as designated in the U. S. Budget Bureau’s 1957 Standard In dustrial Classification Manual, and by market groups, showing either type of product use or class of purchaser. The individual series are combined into industry or market subgroups, which, in turn, are grouped into major industry or major market subdivisions. This build-up from the small indus M arket Groups Consum er Goods INDUSTRIAI trial sectors in the economy to major summary groupings is diagrammed below. In addition to these breakdowns, other smaller subdivisions and other combinations are also published as separate indexes in the Federal Reserve Bulletin. To combine the various individual series or groups, a method known as “weighting” is used; each component series is assigned a weight or a value representing its relative importance to the total during some period of time. The weights used in the industrial production indexes repre sent the value added to the product by the process of manufacturing. These relationships for 1957 are used in the current indexes and are shown in the chart. The 1957 weight period, one factor of the recent revision of the index, was used for indexes back to January 1953. The current weights and those used in indexes prior to 1953— based on 1947 relationships—are published beside the index value for most groupings. TWO BASE PERIODS To make comparisons over time, index numbers are computed in relation to some reference or base period which is given the value of 100. The industrial production indexes are compared with two base periods: the monthly average for the three-year period, 1947-49, as 100 and the 1957 monthly average as 100. The 1957 average, adopted recently, is the only base for the detailed indexes now published. The total and major groupings, however, also are being carried on the 1947-49=100 base to facilitate comparison with other economic indexes published on this base. PAST AND FUTURE INDEXES Since its introduc A reas and percentages tion in 1920, the index has undergone many im provements in coverage and technique. Results of the last major reworking were just released last month. Complete descriptions of the esti mating procedures, data sources, and the statistical results have been published by the Board of Gov ernors of the Federal Reserve System. The main features of the 1959 revision included : a broadening of coverage by adding utility output; a change in definitions of some industry group ings ; the addition of the supplementary classifica tion by market groupings; an updating of the weight and the base periods; improvements in esti mating procedures for some series; revision of seasonal adjustment factors; and adjustment of many of the series to the levels shown by the 1954 censuses and other recent benchmarks. The result of the revision was an upward shift in level. Only one-third of the difference between the revised and the old indexes was caused by the addition of utility output. The remainder of the difference was due to improvements in measuring industries previously included. This points out the difficulty of fitting monthly series into an over all measurement of growth and the need for check ing monthly series against more comprehensive data. Indexes for recent years, therefore, will be re viewed as other benchmark data become available. Every effort is exerted to make these monthly indexes representative of the physical output of the industrial sector of the economy. Used with related series on prices, inventories and sales, in dustrial production indexes aid in interpreting gen eral economic and specific industry developments. Industry Groups Prim ary Metals and Fabricated Metal Products, 13% M achinery, 15% Transportation Equipm ent, 11% Other Durable M anufactures, 10% Chem icals, Petroleum, and Rubber Products, 11% Food, B everages, an d Tobacco Products, 11% Paper and Printing, 8% Textiles, A p parel, Leather and Products, 7% Crude O il and N atural G a s, 6% Metal, Stone, and Earth M inerals, 2° Coal, 1% Electric, 4% G as, 1% indicate relative im portance of components to total More "Little" Pigs Go To Market Have you enjoyed pork chops for dinner re cently? Perhaps you ate bacon or sausage for breakfast this morning. Or maybe you were treated to a delightfully flavored baked ham or pork roast dinner during the Christmas holidays. Whatever the form of pork, chances are—if you are a Fifth District resident—it was produced and processed in the District, for hogs have become an important enterprise in many sections of this live-state area. District farmers’ cash income from the sale of hogs totaled $122 million in 1958 and accounted for $6 of every $100 of total cash farm income. Back in the early thirties when hog numbers, mar ketings, and prices were substantially lower, cash receipts from hogs amounted to only $11 million and contributed just $3 to each $100 of total farm income. Roughly two-thirds of all farmers in the Dis trict have been raising hogs since 1940. The num ber of farmers producing them for sale, however, increased 25% in the 15-year period between 1940 and 1954. And by 1954 one-third of all farmers who were raising hogs were producing at least some of them for market. By comparison, only one-fifth of all District hog producers raised porkers for sale in 1940. The District’s meat packing and processing in dustry is also important to the economy and assures a home market for our home-grown pork and beef. As late as 1954, the most recent year for which detailed data are available, there were 255 meat packing and prepared meat plants in this five-state area. These firms employed close to 13,000 men and women and had an annual pay roll of more than $41 million. HOG ENTERPRISE GROWS Hogs were a side line on most farms for many years. Farmers kept one or two hogs and raised a few pigs primarily 10 for home use. Sometimes they’d sell a few country-style cured hams and shoulders for extra money. Production of hogs today is generally on a much bigger scale. As managerial know-how has in creased, individual herds have grown bigger. Hogs and pigs by the fifties and hundreds are now the rule on many farms. Some farmers specialize in keeping brood sows and raising feeder pigs—pigs which they sell at weights of 40 to 100 pounds, sometimes 120 pounds. Others specialize in fat tening feeder pigs to top market weight of 180 to 240 pounds. Growth of the hog business in the District has trended upward since the early thirties, and in 1959 the pig crop was four-fifths larger than the average crop in those earlier years. Greatest ex pansion—more than a twofold increase—has oc curred in North Carolina, now the nation’s eleventh largest hog producing state. And for 15 years the District’s farmers have been growing 1 of every 20 hogs grown in the nation. Through the years, the production of hogs has reflected farmers’ response to the relationship be tween the price of hogs and the price of corn. This relationship—called the hog-corn price ratio —states the number of bushels of corn that can be bought with the price of 100 pounds of live hogs. To individual farmers it is a rough gauge of whether it is more profitable to sell corn as grain or to use it for feeding hogs. W hen the ratio has been above average, farmers have usually increased the number of sows farrowing during the next farrowing season. Following periods when the ratio was below average, they’ve generally de creased the number of sows to farrow. The District’s farmers have practiced a twocrop system of farrowing over the years. Fa vored with much less severe winter weather than many other sections of the country, they’ve been able to raise fall crops of pigs that were almost as large as the spring crops. Yearly farrowings have not increased as much as the growth of the annual pig crops would imply, however. By paying more attention to the care and management of their hogs, farmers have not only gradually increased the number of pigs saved per litter but they’ve also greatly reduced the death losses over and above those the first few' days after farrowing. More and more, the successful hog producer has found that it pays to give those little pigs a chance to make hogs of themselves. MARKETINGS INCREASE As farmers began to find that hogs were an excellent source of income, they not only started raising more pigs each year but they also began to send more “little” pigs to market. Marketings turned upward after the Great Depression, rose sharply during W orld W ar II, and have increased another 60% since. Today the average number of hogs marketed each year is five times larger than the average annual num ber sold during the early thirties. The District’s farmers now sell more than two and one-fourth times as many hogs as they butcher on the farm for home use or for sale as meat. This is in sharp contrast to the depression years when farmers butchered nearly four times as many hogs as they sold. Slaughter by farmers con tinued large, and except for the war years, 1943 and 1944, marketings of hogs have exceeded farm slaughter only since 1948. Butchering hogs on the farm trended gradually upward through the early forties, in fact. A definite downward trend has occurred since, and farm slaughter has drop ped more than 40%. PIGS IN PARLORS Yes, many pigs in this area, particularly in eastern Virginia and the Carolinas, have been raised in parlors—“pig parlors,” that is— in the past few years. These parlor-reared pigs really lead a life of luxury. Housed in shedtype, concrete-floored buildings, all they do is eat, drink, sleep, and put on weight. The parlors are equipped with automatic waterers, self-feeders, and spray-mist shower baths which keep the pigs cool and comfortable on hot days. Being comfortable, they’re inclined to eat more often. And what sanitation! The concrete floors are easily kept clean by frequent flushing with a hose. There’s no muddy pigpen nor hog wallow for these pigs. Why the trend toward the confined raising of pigs on concrete ? Basically, it’s a matter of being able to get more pigs to market in a shorter period of time. Its numerous labor-saving features also appeal to many farmers. Some of the growth in the number of pig par lors is tied in with hog-feeding contracts. Under these contracts, the farmer builds the pig parlor and supplies the labor and the automatic feeding and watering equipment. The contracting firm, frequently a feed dealer, furnishes the feeder pigs, feed, veterinary expenses, management and m ar keting know-how. Usually, terms of the con tracts specify either a profit-sharing arrangement or guarantee the farmer a fixed payment per pound of market weight or per pound of gain. MEATIER HOGS Mr. and Mrs. Average Con sumer have shown a growing preference for lean cuts of pork for many years. They’ve also eaten less pork per person since W orld W ar II, and since shortly after the war they’ve spent a smaller Farm ers find it profitable to raise hogs in "pig p arlo rs" be cause the hogs gain faster and require a minimum of labor. The District's m eat packing and processing plants a re im por tant to the economy and provide m arkets for home-grown hogs. Many factors have con tributed to the growth of the hog business within the District. A major stimulus has been the cut in tobacco, cotton, and peanut allotments. Unable to plant as many acres in “money crops” as they once did, many farmers turned to the production of feed grains. As they planted larger acreages and learned to obtain higher yields per acre, they often found it more profitable to market their home-grown feed as live hogs rather than as grain. Over the years, more farmers have become aware of the need for better balanced farming. Hogs, they’ve found, can be raised on relatively small acreages. Many farms are too small to develop efficient herds of dairy or beef cattle. Com pared to most other livestock, raising hogs requires a relatively low capital investment. And it takes much less time to realize profits from a hog enter prise. Not to be overlooked as a factor in the expansion are the ready markets provided by the many auction markets and packer-owned country buying stations. CURRENT SITUATION AND OUTLOOK District farmers raised 13% more pigs in 1959 than a year earlier. The spring crop of porkers—providing today’s pork dinner—was 20 % larger than in the spring of 1958; last fall’s production—this spring’s pork roast—was 6 % above the year before. The nation’s total 1959 pig crop was 8 % larger than 1958’s. In both the District and the nation the 1959 crop was the biggest since the record 1943 crop. More pigs usually mean more hogs for slaugh ter. True to form, hog slaughter rose sharply in 1959, and it is expected to continue somewhat above a year ago through the first half of 1960. Prices of hogs fell substantially as marketings in creased and in the fall of 1959 averaged about 30% below a year earlier. Hog prices will probably continue near present levels during the winter and spring, say specialists of the U. S. Department of Agriculture. They believe that prices in the fall and winter of 1960-61 will strengthen, however, since the nation’s 1960 spring pig crop is currently expected to be 1 1 % smaller than last spring’s. WHY THE EXPANSION Spring Crop Hog production has trended upw ard since the early thirties and is now four-fifths larg er than in those earlier years. proportion of each dollar of income for pork and more for beef. These indications, say authorities, point to an urgent need for a meatier type of hog. Consumers, they believe, would probably eat more pork if they were assured of a tastier, leaner type of meat. To help meet the consumer's growing demand for better pork chops, a growing number of the District’s hog farmers have begun to produce more long, lean, meat-type hogs within the past few years. And they’re selling them for better prices, too. Virginia farmers, for example, found that only about two-fifths of the hogs graded by the state’s Department of Agriculture rated U. S. No. 1 during the last eight months of 1957. (Hogs with this grade yield heavier cured hams, have a thinner backfat thickness, and also much less fat trim and cure loss 011 hams than do lower grades of hogs.) In the first seven months of 1958, more than three-fifths of the marketed hogs received this grade. This improvement in grade early in 1958 brought Virginia hog producers an additional $27,000. They also received added in come by selling considerably more U. S. No. 2 hogs and fewer No. 3’s. To encourage production of meat-type hogs, at least one of the District’s major meat packing plants has started a “merit-buying” plan to pay farmers higher prices for quality hogs. The newr system takes into account the percentage of the four chief lean cuts—the loins, hams, picnic shoulders, and Boston butts—that can be obtained from hogs. H ere’s how it w orks: An average hog is considered to yield 33% in the four main cuts. For each 1% increase in lean-cut yield over this base figure, the farmer is paid 25 cents more per hundred pounds. Similarly, for every 1% yield below the base percentage, he receives 25 cents less per hundredweight. 12 PH O TO CREDITS C over—Am erican Trucking A ssociations, Inc. C aro lin a State College 10. North 11. Southern States C ooper ative - North C aro lin a State College.
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