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FEDERAL RESERVE BANK OF RICHMOND

MONTH LY
REVIEW
European Economic Cooperation
Fifth District Ports—North Carolina
The Executive Gap
Soybeans: The “ Cinderella'’ Crop




A businessman engaged in international trade may easily become confused these days by the
varied array of free trade areas, common markets, and trade agreements that vie for his
attention. Since the Second W orld W ar an outburst of togetherness has occurred
that is unparalleled in history. Industrially developed as well as less-developed nations have
taken to economic cooperation in their attempts to achieve greater prosperity. In Central America
a five-nation common market has performed remarkably well since its founding in 1960,
and in East Africa three countries recently initiated a free trade area. But particularly
in W estern Europe international organisations have mushroomed. The General A greem ent on
Tariffs and Trade, the European Economic Community, the European Free Trade Association,
and the Organisation for Economic Cooperation and Development that are headquartered there,
all make their own regulations that affect international trade.
United States foreign policy generally has taken a very positive attitude toward
these attempts at cooperation. This country played an important role in the early postwar
European cooperation movement. It zvas in part because Marshall Plan aid was made
conditional upon coordination of the many national reconstruction programs that
they were successfully organised.
This article tells in broad outline the story of postwar European economic cooperation.

Economic Cooperation In Europe
The Early Postwar Years: 1945-1948 In the
immediate aftermath of W orld W ar II, the need for
international cooperation was widely recognized, but
the odds seemed very much against any successful
attempt. Most European nations faced acute recon­
struction problems. Much of their productive ca­
pacity had been destroyed and capital to rebuild was
painfully lacking. Dollars to pay for capital goods
imports from the U. S., the only potential supplier
at the time, were in short supply. T o protect their
foreign currency reserves, most governments re­
stricted the convertibility of their currencies and
employed import, export and capital movement con­
trols. Moreover, the prevailing bilateral trade pat­
tern which was aimed at an equilibrium with each
individual trading partner rather than an overall
equilibrium, seriously hampered a revival of inter­
national trade.
In such an atmosphere of rigid national trade
and exchange restrictions the American proposal to
establish an International Trade Organization ( I T O )
that would deal with all aspects of international com ­
mercial relations could only meet with cautious op­
timism in Europe. Tw o years of negotiations ulti­

2




mately proved fruitless when in 1948 the nations
involved failed to ratify the proposed charter for
the organization. The most likely explanation for
this is that the IT O tried to achieve too much too soon.
The G A T T T he lengthy IT O discussions did,
however, have some influence. In 1947 several
negotiators, realizing that faster progress could be
made in a limited area, started a series of meetings
that ultimately led to the signing of the General
Agreement on Tariffs and Trade ( G A T T ) . The
agreement provided for substantial reductions in the
members’ tariffs and froze current free entry lists.
The G A T T is based on the principle of absolute non­
discrimination, but its Article 24 explicitly leaves
open the possibility of establishing regional customs
unions or free trade areas. Since the agreement was
signed, both the European Community and the
European Free Trade Association obtained waivers
of the G A T T ’s basic principle under this provision.
In the two decades since its formation, the G A T T
has proved an important forum for discussions on
international trade problems.

A t its annual meet­

ings such subjects as import valuation, dumping, and

O N A L TRADE OF THE EEC,
TA A N D

0
Source:

Since 1945
the use of quotas by less developed countries are
discussed. Recently the U. S.-initiated Kennedy
Round negotiations for an across-the-board major
reduction of trade barriers took place in the frame­
work of the G A T T .
The Benelux On a more regional basis, the year
1948 saw the implementation of a customs union
between Belgium, the Netherlands, and Luxembourg.
As planned in 1944, the partners had gradually
abolished the duties on their mutual trade and had
introduced a common tariff schedule for imported
goods. The higher aim of an economic union in
which cross-border migration and capital movements
would also be free and in which economic policies
would be harmonized appeared harder to achieve.
Due to the different economic problems of Belgium
and the Netherlands in the reconstruction period,
this phase could not be introduced until 1958.
Hailed at its formation as the road toward West

THE U. S.

10

20

30

$ Billion
Department of Commerce, 10th Annual
Report of EEC, and the EFTA Bulletin.

Benelux as well as France, Italy, and Germany.
Yet, the Benelux can continue to perform a useful
function. A s a bloc within the EEC, it can intro­
duce liberalizations which cannot yet be effected in
the Six as a whole. Thus it can continue to stage
“ experiments in economic unity.”
The Marshall Plan and the O EEC

T he G A T T ,

although an important step forward toward trade
revival, did not touch the root of the postwar Euro­
pean economic problem.

W’hat was really needed

was capital to pay for the reconstruction.

The aid

given by the U. S. until that time was too fragmen­
tary to accomplish the desired results.
On June 5, 1947, Secretary of State George Mar­
shall announced that the U. S. was willing to extend
large-scale financial help to European nations, pro­
vided they would coordinate their recovery plans.
Following

intense

negotiations,

sixteen

countries

European unity, the Benelux today seems to have

agreed on a common European Recovery Plan that

lost much of its appeal.

was subsequently approved by Congress in April

This can be attributed

partly to the emergence of the broader European

1948.

E co n o m ic

gress authorized about $ 1 2 billion in funds.

C om m unity w hich incorp orates the




During the next three and a half years Con­

3

In the U. S. an “ Economic Cooperation A d ­
ministration” was set up to administer and supervise
the aid program. In Europe, the Paris-based “ O r­
ganization for European Economic Cooperation”
(O E E C ) was established to allocate Marshall Plan
funds and to promote cooperation among members.
The O E E C moreover aimed at a reduction in trade
barriers and at an unrestricted payments system.
In reviewing its record, three major accomplishments
stand o u t: ( 1 ) the installation of machinery for close
European economic cooperation; (2 ) the elimination
of quotas in member trade through a system of
liberalization rounds; and (3 ) the creation of the
European Payments Union which successfully battled
restrictions on inter-member payments flows.
In 1960 the O E E C was transformed into the
O E C D , the “ Organization for Economic Cooperation
and Development.” The change in name accentuated
the larger functions that the organization had taken
on, and was consistent with the broadening of mem­
bership to include the U . S., Canada, and Japan.
The O E E C -O E C D was and still is an inter-gov­
ernmental organization; that is, it has no supra-na­
tional powers. The Council, formed by representa­
tives of the member countries, makes its decisions by
unanimous vote.
Most day-to-day matters are
handled by the Executive Committee assisted by a
Secretariat and numerous technical committees. Be­
sides a multitude of studies and statistical informa­
tion the O E C D annually publishes surveys of the
economic situation in each of the member countries.
On the basis of a report prepared by the nation con­
cerned, a team from other nations examines her
economy and might make suggestions on a change
in policy. Though the O E C D has no way to enforce
its recommendations, its prestige gives its voice a
certain authority.

countries could get credit from the B IS and creditor
countries had to give credit to the BIS. A s the
years went by less credit was asked and given and
direct payment became more current. In 1958 most
members had reached a situation of full and im­
mediate settlement. A s convertibility was restored
and its aim was attained, the E P U was liquidated.
The B IS today serves as an important forum for
discussions on international monetary problems.
It also plays an important role in the network of
swap arrangements between the world’s leading
central banks.
The ECSC U ntil the form ation of the European
Coal and Steel Community in Paris in 1951, Euro­
pean cooperation had mostly taken the form of non­
committing collaboration. Now, however, six coun­
tries, Germany, France, Italy, the Netherlands,
Belgium, and Luxembourg agreed to integrate their
coal and steel industries and place them under an
independent and supra-national High Authority. T o
establish this common market, the partners vowed to
eliminate all mutual customs duties and quotas, all
discrimination based on nationality, all restrictive
practices and all forms of state assistance for these
products. They also agreed to a common duty to
be levied at the external frontier. Six years later
the same countries signed the Treaty of Rome, there­
by creating the European Economic Community,
often called the Common Market, and the European
Atomic Energy Community (E uratom ). In July
1967, the executive branches of these three organiza­
tions were merged into one 14-member Commission
of the European Community. The Commission re­
sides in Brussels where it employs some 3,000
“ Eurocrats.” The Court of Justice of the European
Community is based in Luxembourg and the Com­
mon European Parliament, formed by members of
the national parliaments, convenes in Strasburg,
France.
During its lifetime the High Authority of the

The EPU and the BIS T h e European Paym ents
Union ( E P U ), set up among the O E E C members
in 1950, tackled the restrictions on inter-member
payments flows. The inconvertibility of most cur­
rencies had induced many governments to maintain
a bilateral payments equilibrium and to impose con­
trols to that end. The E P U functioned as a clearing
house. Monthly each member central bank would
send a survey of her net position vis-a-vis each other
member central bank to the Bank for International
Settlements (B I S ), E P U ’s administrator in Basle.

has endeavored to make the necessary adjustments

The B IS would then consolidate these net debts and

whole.

claims into an overall net debt to or claim on the

which not only flows of goods, services, capital, and

ECSC has had to deal with a profoundly changing
European coal and steel market.

In view of this it

and to avoid social and economic disruptions.
The EEC

T h e 1957 T reaty of R om e extended

the principles on which the E C SC had been based
to the economies of the six member countries as a
Its aim was to create an economic union in

Union, expressed in EPU-units, equal to the U. S.

labor would be unhampered, but in which also a com­

dollar.

mon policy on agriculture, transport, competition, and

In this way multilateral

placed bilateral ones.

4




settlements re­

Following certain rules debtor

foreign trade would be in force.

In addition a har­

monization of the social, monetary, economic, and
regional policies was envisaged.
In the decade since its founding, the E EC has
made considerable headway toward these objectives.
By July 1968, two years ahead of schedule, all in­
ternal tariffs and quotas will have disappeared, and
external tariffs on imported goods will be identical.
The significant effect of this on the pattern and
volume of trade can be seen in the chart. The Com­
munity is the largest trader in the world. Between
1958 and 1966 intra-Community trade increased by
about 235% to a total of $22.8 billion. This com ­
pares with a 91% increase in E E C ’s imports from
the rest of the world to about $31 billion in 1966,
and an 85% rise in exports to around $29.4 billion
in 1966.
Restrictions on capital movements and migration

In addition to this the Six set up a $730 million fund
to help finance the economic and social development
of these nations.
The E F T A

T h ou gh

invited to join

the new

Community, many O E E C partners, fearing loss of
national sovereignty, felt that they could not do so.
In the case of Britain, Commonwealth ties and special
agricultural problems also played a role.

The other

O E E C members did, however, step up discussions
among themselves, and in 1959 Britain, Denmark,
Norway, Sweden, Austria, Switzerland, and Portugal
agreed to form the European Free Trade Area.

In

June 1961, about one year after the E F T A had
come into force, Finland was accepted as an as­
sociate member.
E F T A ’s scope is more limited than the Com­

of persons within the Community are being abolished

munity’s.

gradually.

its members’ industrial goods, by abolishing mutual

A t the moment, for instance, capital

Its aim is to create a free trade area for

flows relating to medium- and long-term loans and

tariffs and quotas on the trade in these goods.

transactions in listed securities are entirely free.

December 1966, three years ahead of schedule, this

Proposals to remove obstacles to a free access of

objective had been reached.

issuers of another member country to the various

January of this year.

capital markets are being discussed.

Today also,

In

Finland followed in

E F T A does not, however,

establish a common duty for imports from non-mem-

workers can move freely from one member country

ber countries.

to another without losing their social security rights,

try to profit from the treatment that members give

and efforts are being made to reach complete freedom

each other by bringing their goods into the free trade

in the establishment of businesses.

area via the member country with the lowest external

The Community’s position towards competition is
slowly taking shape.

In principle all cartels and

similar market agreements are forbidden.

Consequently, foreign producers will

tariff.

Thereupon, they can forward them, free of

duties, to the market for which they were intended.

The Com­

T o stop these practices an extensive system of rules

mission can, however, waive this regulation if specific

of origin was set up, and E F T A claims that applica­

conditions are met.

tion of these rules has not met with major difficulties.

A large number of requests for

authorization is under study.

E F T A ’s record, as shown in the chart, is not as

In matters of external trade policy the Six in­
creasingly act as a unity.

At the Kennedy Round

impressive as the Community’s.

Since its founda­

tion in 1959 intra-E FTA trade has gone up by 111%

discussions, for instance, the Commission represented

to $7.4 billion in 1966.

the member countries.

increase during that period was 11.4%, compared

In recent years the Com­

The average annual rate of

mission has negotiated various trade pacts and has

with 5.5% during the period 1953-1959.

signed two association agreements, with Greece in

sociations’ trade with the E E C is, however, more

1961 and with Turkey in 1963.

Both countries will

important than the trade among its own members.

eventually become full members of the Community.

In 1966 E F T A ’s imports from the Six amounted to

The A s ­

During the transition period they can apply for loans

about $ 1 1 billion and exports to that bloc were $ 7 .7

from the Community’s European Investment Bank

billion.

to help finance their development projects.

external E EC tariff has begun to hurt.

Yet, the gradual realization of the common
In 1966 the

A special association arrangement was worked out

rate of increase of E F T A ’s exports to the Six was

in 1958 and renegotiated in 1963 with 18 states in

4.4% compared with an average annual rate of 9.2%

Africa and Madagascar, mostly former French ter­

between 1959 and 1966.

ritories.

The aim, the creation of a free trade area

between the Community and each of the eighteen
countries, will largely be achieved this coming July.



Though E F T A has reached

its immediate aim, many important questions remain
unanswered.
Jan H. IV. Beunderman

5




FIFTH DISTRICT PORTS
ORTH CAROLINA in 1967 ranked

\
\

\

11th among the states in total value of
world trade. The picture was not always
so b r i g h t , h o w e v e r ; s e v e r a l
decades ago, it ranked 15th. Due
to the shoals reaching jar out to sea from the “ outer banks” most
of the coast of North Carolina is inaccessible to large ships, but
with the conclusion of W orld W ar II, steps were taken to increase the
usefulness of the ports south of the outer banks. Wilmington, 28 miles
from the ocean on the Cape Fear River, and Morehead City, 90 miles
further north and three miles from the Atlantic near Camp LcJeune, were
natural sites for coastal ports with their capable manpower, deep harbors, and sufficient transportation facilities
to serve the industrial centers of the state. A third coastal port, Southport, on the estuary of the Cape Fear
.ocr, was isolated by its lack of rail transportation. □ In 1949, the North Carolina General Assembly authorised
the ftablishment of the State Ports Authority. State owned ocean vessel cargo terminals zvere established at Wilming­
ton andMorehead City. The Ports Authority is financed by direct appropriations of the General Assembly which issued
General O'igation Bonds to raise the original $7.5 million for expansion of facilities at the two ports. Private industry also
has made jna>r investments in specialised services for its own use at the two state terminals. With the joint effort between state
and private indiiry, the ports have grown steadily. In 1967, the tzvo ports handled more than one million tons of cargo, 829 ships,
8,000 railroad car'^and 25,000 tractor-trailers. It is estimated that by 1970 the ports will handle over three million tons of cargo.
M ajor exports haned in order of their rank are tobacco, textile mill products, food and kindred products, paper and allied products, and
chemicals and alliedproducts. □ Aside from the two major coastal ports, North Carolina has a number of smaller ports. The river
ports include Fayettdle, Washington, Elisabeth City, N ew Bern, and Greenville. These inland waters are traveled by barges and pleas­
ure craft. Southport, h the coast, holds the promise of one day becoming a small commercial craft harbor. In 1959, a bond issue tvas
passed providing the funS for the North Carolina Ports Authority to construct some type of harbor facility at Southport. In 1965, the South­
port Boat Harbor was debated.

It operates mainly as a pleasure craft marina.

woodcut courtesy North Carolina state Ports Authority

The

E x e c u t i v e

Ga p

When the economy approaches full employment, it is inevitable that shortages should develop.
Typically, there are shortages of certain raw materials, of the more complex manufactured goods, and
most frequently shortages of labor. Some types of labor shortages can be offset by using more ma­
chinery, or by changing the product being produced, or by altering the type of service being rendered; but
the type of labor shortage most difficult to cope with is the shortage of executives.
There is no precise definition of an executive. One does not qualify as an executive by the attain­
ment of a given age, or by a set of physical characteristics, or by any recognized course of education or
training. There are executives of almost all ages, of both sexes, and of all races and creeds. Their
educational backgrounds run from practically no formal training to the post-doctoral level. But all have
one thing in com m on : they make things happen. They provide the inspiration, the guidance, and the
leadership for all types of productive activity.
Trend in Demand T h e demand for executives closely follows fluctuations in general business ac­
tivity. In the accompanying chart, prepared by Heidrick and Struggles, a national management con­
sulting firm, it can be seen that demand dropped from a relatively high level just before the beginning
of the recession in 1957. It rose again in 1958 as business picked up, then slackened slightly in the 1960
recession. Gains were moderate until the economy felt the stimulus of the 1964 tax cut, and the de­
mand rose sharply to a peak in 1966. The “ credit crunch” of 1966 was accompanied by a downturn,
and there was relatively little increase in demand in 1967.
When we consider that this chart represents the demand for additional executives, it is remarkable
how closely it follows the trend of business in general. It might be assumed, for example, that if the
strong demands of 1955-56 were met, demand for new men would not immediately surge again with the
pickup of business in 1958. But apparently the demand for new executive labor is just as sensitive to
cyclical fluctuations as the demand for other types of labor.
(Continued)

NATIONW IDE TREND IN DEMAND FOR EXECUTIVES
(3 Month Moving Average Adjusted for Seasonal Variation)
1960-1961 = 100

Source:

Executrend, Heidrick and Struggles, Inc.




D E M A N D BY EXECUTIVE C A T EG O R Y
(3 Month Moving Average Adjusted for Seasonal Variation)
1960-1961= 100

Source:

1960-1961=100

Executrend, Heidrick and Struggles, Inc.

Over the past three years, demand for manufacturing executives has fluctuated most, and
the steadiest growth has been in the financial area. In the fourth quarter of 1967, most of
the demand for executives was in engineering. Out of 13,754 openings catalogued, 38%
were in general engineering, 20% in defense engineering, 18% in finance, 10% in market­
ing, 8% in manufacturing, 4% in personnel, and 2% in general administration.



Part of the reason for this may he that an everhroadening range of work is being done by people
who may be considered executives. W ith the in­
creasing complexity of business technology, it has
become necessary to hire larger numbers of staff
executives, who exercise little authority but do a
great deal of work themselves, as compared with line
executives, who constitute primarily a line of au­
thority and communication from top management to
employees. The physicists, chemists, economists, ac­
countants, lawyers, and other professionals employed
by business firms are executives in the sense that
they influence corporate policy, and in some cases,
are essential to the operation of the fir m ; but they
may have few people working for them and often
perform more actual labor than their subordinates.
A firm may expand greatly with no increase in its
structure of line executives; but if it depends heavily
on staff professionals, any substantial increase in
output requires more “ executives.” This not only ties
the demand for executives more closely to the busi­
ness cycle, but it also lengthens the average training
time, for the route to the top increasingly tends to
be through the professional ranks. As staff men
move into top management, they give up their staff
work and must be replaced with other staff men who
require lengthy education and training.
Given the problems of producing executives, any
surge in demand will inevitably result in shortages:
but there are also other significant long-run influences
on the supply. For example, the demands of gov­
ernment, the military establishment, and educational
institutions have limited the supply of able personnel
available to corporations. Also the relatively low
birth rate of the 1930’s resulted in a shortage of
persons in the most appropriate age range for exe­
cutives in the 1960’s.
These factors might seem to encourage the pro­
motion of young men to the executive level at an
earlier age, but if that has been done, it apparently
has been more than offset by retaining others beyond
their normal retirement age. This is particularly
evident because the average age of executives has
risen in recent decades. A study by W ilbur G.
Llewellen, under the sponsorship of the National
Bureau of Economic Research, reveals that the
average age of company officials is now higher than
in 1940. Chief executive officers of 50 firms sur­
veyed averaged 60 years of age in 1963, compared
with 56 years in 1940. and ages of other top exe­
cutives showed comparable increases. One reason
for the increase in average age is that more slowly
rising compensation together with higher taxes have
made it more difficult financially for executives to

10



retire. Another explanation may be that the lag in
executive supply has made it more difficult to hire
replacements.
The gap between supply and demand has brought
significant changes in attitudes toward executive
recruitment and development. A t all levels, but
especially at the college recruiting stage, firms are
increasingly recognizing the management potential of
women or members of minority groups, sources of
executive talent which until recently were largely
neglected.
The trend toward large numbers of staff executives
has been beneficial to many of those who have had
difficulty breaking into the executive ranks. A
woman or a non-white, for example, is likely to be
in demand as a physicist or a member of the legal
staff in a firm that would hesitate to employ either as
a production superintendent.
The growing executive gap has led to the pro­
liferation of a type of institution which was very rare
a few decades ago— the executive placement firm.
These firms, sometimes called "head-hunters” or
“ personnel pirates” by their critics, came into exist­
ence in a variety of ways. Some represent an ex­
tension of management consulting; others grew out
of employment agencies which had previously dealt
with non-executive personnel. Agencies specializing
in executive placement are generally of two types.
First, there are those who offer career counselling
which has as its goal either promotion in the client's
company or an improved position through a change
in employment. These agencies usually charge the
client a fee. Second, there are executive search
agencies who offer little counselling, but whose main
objective is to match executives who are seeking
improvement with employers who need executives.
The employer usually pays fees charged by this type
of agency.
Although placement agencies have sometimes been
criticized for “ raiding” an employer, it is widely
recognized that they perform a useful service. Many
companies which are well established but are rela­
tively

stable or

are growing

slowly

executives than they can use effectively.

train

more

If they hire

sizable numbers of competent young people, some of
them must ultimately be frustrated by lack of room
at the top, and it is probably better for them to move
into a rapidly growing firm where they are badly
needed than to spend years attempting to repress
their ambitions.

The placement agency bridges the

gap between those firms who train too many potential
executives and those who train too few.
Harmon II. Haymes

SOYBEANS:
The

"Cinderella"

Soybeans, a comparative newcomer, might well be
called the United States’ “ Cinderella” crop. From
relative obscurity prior to W orld W ar II when they
were grown primarily as a forage and green-manure
crop, soybeans have become the nation’s second most
important income earner among all cash crops, out­
ranked only by corn. Today soybeans are grown
chiefly for the production of beans. The 1966 crop
returned a handsome $2.5 billion in cash income to
the nation’s farmers compared with a mere $42.2
million in 1940.
The crop has also become one of this country’s
leading farm exports. From less than half a mil­
lion bushels in 1940, shipments abroad in 1966
totaled 261.6 million bushels.
Soybeans and soy­
bean products, in fact, have been the top dollar
earner among United States agricultural exports for
the past several years. Before W orld W ar II, the
United States was a net importer of oilseeds. But
the dramatic expansion in soybean acreage and pro­
duction that began during the war and has continued
since has propelled this nation into a position of
world leadership in oilseed production and trade.
The United States in 1966, in fact, produced onefourth of the world’s output of oilseeds, oils, and
fats and supplied 30% of world exports of these
products. Its position in soybeans is even more
dominant. Now the world’s chief producer and ex­
porter of soybeans, the United States accounts for
about three-fourths of the world’s production and
around 90% of all soybeans moving in world trade.
Production Expands T h e nation’s 1967 crop of
soybeans totaled 972.7 million bushels and was pro­
duced on 39.7 million acres. Production, which has
risen 75% since 1960, is now nearly 1 2 ^ times the
output in 1940, while acreage harvested is 8 ^ times



Crop

the prewar level. Heaviest concentration of acreage
is in the Corn Belt, but other important acreages are
in the Mississippi Delta, Lake States, and the
Atlantic Coast States. The Fifth District states,
among this latter group, harvested 2.7 million acres
of soybeans in 1967 and produced a crop of 64.2
million bushels, nearly 7% of the national total.
District expansion of soybean acreage and production
during the war years was not as rapid as that in the
nation as a whole. Since 1950, however, both
acreage and production have increased at a faster
rate in the District than in the nation. As a result,
District soybean acreage in 1967 was 10 times larger
than in 1940 and production was 19 times greater.
W ith these increases, soybeans have emerged as a
major source of crop income in the District as well
as in the nation. The 1966 crop, in fact, brought
District farmers a record $133.4 million in cash in­
come, second only to that from tobacco. Soybeans
were harvested for beans on 18% of all farms in
the District and in the nation in 1964 compared with
around 4 % in the prewar period, according to the
Census of Agriculture.
Demand Grows
D espite the trem endous ex­
pansion in soybean production and the high level of
farm prices for soybeans, demand has kept pace with
output. Since 1941, the average price received by
farmers has been above the support price in all but
four seasons. The crop continues to be produced
without acreage allotment controls. Yet there has
never been a serious surplus of soybeans. At 91
million bushels at the beginning of the 1967 market­
ing year, the carry-over is currently the highest
on record.
The United States is still its own best customer
for soybeans and soybean products despite the tre­

11

mendous growth in foreign demand.
Domestic
crushings currently use 60% of the annual crop of
beans, while domestic consumption accounts for 80%
of the yearly output of both soybean oil and meal.
Here at home crushings of beans for oil and meal
have continued to move upward, advancing to a new
record level of 551.3 million bushels in 1966. This
was 2 y2 times 1953 crushings and more than 8 1 2
/
times the 1940 figure. A s crushings have increased,
so also has the production of soybean oil and meal.
Substantial increases in domestic use have ac­
companied the larger output, however. Utilization of
both products has doubled since the early Fifties.
The biggest growth in demand for soybeans and
soybean products has been in the export market. The
real growth in this market has come since the early
Fifties. United States shipments abroad as beans,
which totaled a record 261.6 million bushels in 1966,
accounted for about 30% of production contrasted
with 15% of the crop in 1953 when exports were
only 40.1 million bushels. Exports of soybean oil
have increased even more rapidly— from 77 million
pounds, only 3% of production, in 1953 to 1,062 mil­
lion pounds, or about 20% of total output, in 1966.
Soybean meal exports have soared even more during
this same period, rising from 73,000 tons, or 1 % of
total output, to 2.7 million tons, or 20% of produc­
tion. The main foreign customers are Japan, the
Netherlands, W est Germany, Canada, and more
recently Spain. Japan, where soybeans are used
widely for food, is the largest single foreign outlet.
Technology Creates Many Uses M odern tech­
nology, which has created such a wide variety of
uses for soybean oil and meal, has been a veritable
fairy godmother to the soybean. As older uses have
expanded and new uses have been developed, the de­
mand for soybeans has grown. Today many food and
industrial products are made from both the oil and

12




the meal. Ninety per cent of the soybean oil used
in the United States goes into the manufacture of
food products, mainly shortening, margarine, and
cooking and salad oils. Soybean oil, in fact, com ­
prises around three-fourths of all vegetable oils used
in the production of each of these products. Paints
and varnishes, resins and plastics, other drying oil
products, linoleum and oil cloth, soap, and fatty acids
are among the many industrial products made from
soybean oil. Most soybean meal (estimates of United
States use run as high as 9 5 % ) is used in the
preparation of high-protein feeds for livestock and
poultry. Soy flour and grits used in such things as
breakfast cereals, bakery goods, macaroni, noodles,
pancake mixes, and candies are but some of the food
uses of the meal. Industrial uses include such items
as fertilizer, cold water paints, adhesives, paper
sizings, various coatings, emulsifiers, and sprays.
Competition Increasing
W h a t o f the future?
Looking to the time when the supply of soybeans
may catch up with demand, the nation’s farmers may
do well to watch several related factors, just as
Cinderella had to watch the clock. For example,
competition from other oilseeds, fats, and oils is
growing in world markets. Competition from syn­
thetic urea as a source of protein for livestock feed
is increasing. W ith these developments, United
States soybean oil and meal may well need to be­
come more price competitive. These prospects point
to the need for a breakthrough in yields per acre so
that costs of production can be reduced. Nationally,
the average yield has been on a plateau of about 25
bushels per acre for the past decade. Fifth District
yields average somewhat lower. Crop scientists say
that the know-how for achieving higher yields has
already been developed. W ide-scale application of
this know-how is all that is needed.
Sada L. Clarke


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102