The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE B A N K OF R IC H M O N D N O VEM BER 1958 Power for Progress M an’s rise from a prim itive state has depended heavily upon his use of energy resources, and an important form of this use in recent years has been electric power. New and more widespread uses for electricity have brought about a doubling of output every ten years since 1920, and the future promises still further rapid growth. Homes and businesses alike look to electric power for heat, cooling, light, and power, and all are continually increasing their consumption as new w ays appear to use more w atts in the search for the easier and better w ay. W ATER VS STEAM E lectricity presently comes from two principal so urces: waterpower and ther mal generation, the latter being m ainly steam plants. W aterpow er, captured by dams to spin large turbines, accounts for one-fifth of total gen erating capacity in the nation and one-fourth in the District. A s in other regions, there are wide variations among D istrict states in this proportion. South Carolina, for exam ple, depends on hydroelectric plants for more than half the state’s total capacity. It is in North Carolina, however, that the D istrict’s largest hydro generating capacity is concentrated in 41 dam sites owned by Carolina Power and L ight Company and Duke Power Company. W ater has steadily declined in importance as a source of power in the D istrict. Ju st a decade ago hydro plants accounted for one-thircl of the D istrict’s total generating capacity. Expansion since then has come largely in steam plants, how ever, as coal-fired boilers promised better operat ing results than did m any of the rem aining hydro Dispatchers control the flo w of pow er from control pan els such as this one at South C a ro lin a Electric and G a s C o m p an y 's U rquhart Station. 2 ,« s : ! The C o n o w in g o Project located on the Su squehanna River in M aryland is the District's larg e st private hydroelectric g e n era tin g plant. sites. T his is likely to be the trend of the future also, as undeveloped suitable power sites become increasingly scarce. BITUMINOUS CO A L CUSTOM ERS Therm al gen erating plants in this D istrict are generally steam plants which use finely crushed bituminous coal as a source of heat. In modern plants this powdered coal is blown into large boilers where it burns almost instantaneously to produce highpressure and high-tem perature steam. Steam is fed into turbines which drive the generators that produce the electric power. Steam plants of electric utilities in Fifth D is trict states burned nearly 18 million tons of coal in 1956, and most of it wras bituminous coal from D istrict mines. In the country as a whole, electric power generation consumed 161 million tons last year, m aking public utilities the most important consumer group for the coal industry. P lans are under w ay for further additions of steam generating capacity in the D istrict and in the nation, pointing to further increases in coal consumption. Steady progress has been made in increasing the efficiency of coal-fired boilers for power plants, w ith the result that 0.93 pounds of coal would produce in 1957 as much electric power as did 1.19 pounds in 1950. This 21% cut in fuel requirem ents is an important consideration for an industry in which fuel cost bulks so great among operating expenses. W hile bituminous coal is the principal fuel used in the D istrict, accounting for about 93% of ther mal output, natural gas is coming to be of increas ing importance. In South Carolina gas-fired boilers account for three-fifths of total therm al generation. Fuel oil plays only a minor role in the face of the price competition of coal, and nuclear energy is still in the future as a commer cial source of heat for electric power. This pattern of fuel use differs from that of the country as a whole due to the extensive coal de posits in the D istrict. N ationally coal is used for seven-tenths of therm al generation with gas pro ducing more than one-fifth and fuel oil the re mainder. LO CA L INDUSTRY Electric power moves from generator to consumer over a network of high voltage lines. These provide interconnections be tween generating stations and between power system s so that power m ay be “wheeled” quickly and smoothly from one area to another to meet tem porary or unexpected needs. In general, power generation and distribution is essentially a local industry in which individual companies operate over an area comparable to a state or less. Power output of most individual generating sta3 These po w erfu l turbines are located at M ono n gahela Pow er C o m p a n y 's steam gen e ra tin g plant in A lb rig h t, W est V irg in ia . tions is used prim arily within the general vicinity of the station. It m ay he supplemented by power from adjacent stations or a portion m ay be used to help other stations serve nearby areas. Some times both occur sim ultaneously, so that the net work of transm ission lines serves to relay power from a surplus area to one where needs tempo rarily outrun production. The coordination of output and use is done by dispatchers located in central control stations. W atching indicators of power use and guided by careful analyses of the daily and seasonal patterns of use, they control output at generating stations and direct its distribution through the system. INDUSTRIAL CO N SUM PTIO N LAGS A fairly small number of utility companies account for most of the electric power sold in this D istrict. To be more specific, nine private companies sell around 90% of the total sold by investor-owned companies and government plants in the Fifth District. This has been a declining percentage, for in 1948 these same companies accounted for almost 97% of the total. The amount of electricity sold last year repre sented a gain of 125% over the 1948 total. This growth w as sligh tly less than the national increase of 133% , due to a somewhat less robust gain in sales to industrial consumers. Although such sales doubled in the District, the nation saw an increase of 130%. The lag w as due m ainly to differences between the industry m ix in the District and in the nation. For the most part the leading m anufacturing in dustries of the D istrict are the ones that have experienced low er-than-average increases in use of electric power in relation to labor input. For exam ple, the average electric power consumption per production w orker in the textile industry in creased only 65% from 1947 to 1956 as against a gain of 108% for all m anufacturing establishments. In South C arolina this low rate of increase was offset by better-than-average increases in em ploy ment and in the number of establishments, but this was not generally the case in other states and in the other leading m anufacturing industries of the District. Commercial sales of power in the District have grown at a rate that has outstripped U. S. growth somewhat. Both totals have benefited from the widespread installation of air-conditioning equip 4 ment in stores and office buildings, as well as the phenomenal growth of suburban areas with their huge shopping centers. RESIDENTIAL SALES BOOM One of the m ajor factors in investor interest in the public utilities of this D istrict has been the extrao rdin ary growth in the residential sales of electricity by these com panies. In 1948 these sales comprised 19% of total electric power sales in the Fifth D istrict; by 1957 this proportion had risen to 28% of the total. The District gain in residential sales has far out stripped the national increase, m ainly as a conse quence of better-than-average gains in the Caro linas and V irginia. These have, in turn, reflected population increases in these three states that have exceeded the nation’s rate of growth. Other factors responsible for the substantial rise in residential consumption of electric energy in this District have been rather extensive rural electrification and significant improvement in per capita income in the lower income brackets. Both have led to extensive additions of electrical house hold appliances. tric power tremendously. Of further benefit to the power companies would be the smoothing out of seasonal rises and dips in demand which alter nately tax and idle generating equipment. The m arked growth of residential sales in recent years has been achieved despite a slowing down in the rate of fam ily formation. In a few years, however, a sharp upsw ing is expected in m arriages and new households that w ill carry statistics to record heights. Few businesses are as certain to have their sales reflect the direct impact of this expansion as are the public utilities. PUBLICLY OW NED PLANTS In addition to in vestor-owned u tility companies, 19 m unicipalities, one state, the Federal Government, and some man ufacturing companies generate electric power in the Fifth District. E xcluding the power plants of m anufacturing companies— which p r o d u c e power m ainly for their own use—municipal, state and Federal government installations provide about 16% of total generating capacity in the District. Included in this tally are three public service au th o rities: the South C arolina Public Service A uthority, a state a g e n c y ; the Southeastern Power A dm inistration, an agency of the U. S. D epart ment of the In terio r; and the Tennessee V alley A uthority. The latter has seven dams in North Carolina, three of which have power generating facilities. A factor that could possibly be of m ajor im portance within a few years in boosting residen tial consumption of electricity is heating by electric ity. A relatively new device called the heat pump performs a year-round job of keeping an interior at a comfortable pre-set temperature w inter and summer. It is electrically operated and extracts heat from the outside air, from the ground, or from w ater. A gas is raised to the desired num ber of degrees for interior use by means of a com pressor and is then circulated through pipes in the house. R eversing its action autom atically, the heat pump operates on the principle of a refriger ator to cool the house, much as does a conventional air-conditioner. R elatively high costs currently lim it residential heat pumps to a sm all and well-to-do m arket. If the pump follows the course of other household fixtures and appliances, however, the cost w ill de cline m arkedly as output grows. A heat pump expands household consumption of electricity as much as eight times, and it is obvious that its w ide spread use would increase residential sales of elec ATO M IC POWER PLANTS Because utility com panies must be ready to supply the communities of tomorrow with vitally necessary light and power, they m ust plan for their future generating and distributing facilities years in advance of actual need. One of the important considerations in present plans is the use of nuclear fuels in the generation of electricity. It w as not until four years ago that private u tility companies were perm itted by Congress to own and operate nuclear power plants. Progress has been rapid since then. U tility companies already have on line three atomic reactors, and by 1964 ten more nuclear power plants w ill have been constructed and w ill be generating electricity for civilian consumption. One of these w ill be located at P arr Shoals, S. C., and w ill be tru ly a Fifth D istrict joint venture since it w ill represent the combined endeavors of four D istrict utility com panies : Carolina Power & Light, Duke Power, South C arolina Electric and Gas, and V irgin ia Electric and Power. 5 FROM * COTTON LOTH THERE W A S A TIM E w hen the story of cotton w as THE C A R D IN G M A C H IN set to the hum m ing of field h ands an d of steve v olv in g cylin de r w hich dores sh ip p in g direction, p artly untanc pool. it o ff to N ew O rle a n s and Liver cle an ing process. The fil But like the lan d that produced it, the story has ch an g ed an d is set now to the hum m ing of o ff the cylinder into a m achinery. m olds it into a "slive r." Here is the story of cotton, from the time it is seeded, p artly cleaned, an d packed into several slivers into a strt bales at the gin (below ) until it rolls o ff the loom. out tw isting to ab o u t the THE B A LES are opened at the sp inn in g m ill w here v arious types of cotton are blended to produce uni form y arn . This is done in a "b le n d in g fe ed er," w hich also b reaks the packed lint into sm aller pieces. A picker m achine continues the cle an in g process and form s the cotton into thick an d 45 in. w ide. " la p s " —rolls about Laps, resem bling 18 in. oversize rolls of ab so rb en t cotton, are then re ad y fo r card in g. FOR W E A V IN G , w arp y a rn s—the strands that run the lasses the la p onto a rells the fib ers all in one length o f the cloth—are rew ound onto la rg e " w a rp . them, an d er b eam s," several hundred th reads at a time. fin ishes the As harnesses raise an d low er the w arp y arn s on the sheet of cotton is d raw n in el-sh a p e d device w hich loom, a shuttle ca rry in g the w eft—the fillin g thread •rawing (b elow ) com bines —is driven q u ickly b ack and forth betw een the upper i w hich is pulled out w ith- an d low er lay ers of yarn . nme size as a sin gle sliver. from the loom, it is inspected by sh arp -eyed checkers. THE C O N D E N S E D SLIV ER S are taken to the " slu b b er," the first of a series of m achines that give the cotton strand a m ild tw ist w hile d ra w in g it into sm aller an d sm aller diam eters until it becom es the proper size fo r sp inn in g. fed to the sp inn in g further draw n This "ro v in g fram e (below ) out, tw isted into y arn stran d " is w here it is of required size, and w ound on b o b b in s—all in one operation. A fter the cloth is taken H aving turkey for T hanksgiving dinner? Then chances are it was grown and processed in the Fifth D istrict, for turkeys have become a big busi ness in m any sections of this five-state area. L ast year when national production of turkeys passed the 80-m illion m ark, one out of every seven birds was raised by District producers. And V ir gin ia has been the country’s third largest turkey producing state for several years. More turkeys, in fact, are raised in Rockingham County, V ir ginia, and more turkey hens are kept for breeding by Rockingham County farm ers than in any other county in the nation. The story of the turkey reaches back to earliest A merican history, for there were wild turkeys in this and m any other sections of the country when the first settlers arrived. T oday’s fancy well-bred birds, in fact, are descended from those w ild native turkeys whose meat w as relished by the Indians and early settlers alike. TURKEY INDUSTRY GROW S For m any years, turkeys were a side line on most farms. A farm er would keep a few hens and a gobbler and raise a sm all number of young turkeys for extra money. T oday grow ing turkeys has long since ceased to be a side line on the general farm and has become a highly specialized enterprise, returning a fairly tidy sum to D istrict producers-—as high as $49 million in 1952 but, with lower prices, around $40 million for each of the last several years. As 8 m anagerial know-how has increased, individual (locks have grown bigger. T urkeys by the thou sands are now the rule rather than the exception on farms in the m ajor producing areas. Some pro ducers specialize in m arket turkeys, others in breeding flocks. Most buy their baby poults from hatcheries rather than hatching them on the farm. Growth of the turkey business in the District has bordered on the spectacular. In 1929, when annual records were first begun, production totaled 1.380,000 birds and provided about $5 million in cash income to the farm ers. T urkey numbers in creased grad ually during the thirties and then climbed more rapidly in the forties. Production by 1949 was two and one-fourth times what it had been ten years earlier, and total cash farm income from turkeys amounted to nearly $25 m il lion. D ram atic expansion has occurred since, and in 1957 a record 12,120,000 turkeys were raised. Output in the D istrict had tripled in eight years, while that in the nation had doubled. W HY THE GROW TH M any factors have contrib uted to the mushrooming of the turkey industrv in the D istrict. Of great importance is the im provement in the efficiency of production and in the m arket quality of turkeys by better breeding and disease control. Through better breeding, for exam ple, has come the small “fam ily-size” turkey developed by the United States A gricultural Research Center at Beltsville, M aryland. W ith an eye for the sm allfam ily trade, many producers began raising these sm all birds, and today the light-breed crop com prises slightly more than half of all turkeys raised in the District. Broad-breasted varieties which have consumer appeal for m any have also been developed and are grown in large numbers. The tremendous progress that has been made in m arketing has also been a big factor in the e x pansion. In years past most families ate turkey only at T hanksgiving and Christm as, and farm ers in the turkey business raised only one crop a year, timed so the birds would be ready for the holiday trade. They sold their turkeys at small local m ar kets or shipped them to large northern m arkets. Today modern processing plants throughout the D istrict provide turkey farm ers with yearround m arkets. These plants turn out ready-tocook turkeys on an assem bly-line basis. The birds are then either packed in ice or packaged in plastic bags and put through a quick-freezing process which, with the aid of refrigerated trucks, perm its them to be sold tem ptingly fresh in m any distant m arkets. Gone are the days when most families bought their turkey live and had to do their own killing and dressing. Providing M r. and M rs. A verage Consumer with both small and large-size birds, conveniently packaged and ready for the oven, has helped bring about year-round consumption of turkeys. The average person thus eats considerably more turkey each year than he used to. T h irty years ago, for instance, the average consumer ate slightly less than one and one-half pounds of turkey a year. Today he is eating nearly six pounds annually. Growing turkeys under contract has been another factor in the expansion. These contract arrangem ents usually provide financing for the grower, reducing his financial needs and risks. They typically specify that the contracting firm w ill furnish the baby poults, feed, medicine, and general supervision and that the grow er w ill pro vide housing, equipment, other supplies, and labor. It is also usually agreed that the contractor w ill pick up the turkeys when they are ready for m ar ket and that he w ill pay the grow er a specified price plus a bonus based on production efficiency. W HAT OF THE FUTURE? Should the nation’s pop ulation increase from the current 175 million to the 204 million anticipated for 1970, this growth will provide the base for a steadily expanding turkey m arket. Added to this fact is the proba bility that turkey w ill continue to be served more and more often throughout the year. Both small and large ready-to-cook turkeys are now available the year round at prices competitive with other meats. H ousewives are becoming accustomed to this convenience and are increasing their purchases of turkey meat. The sm all turkey, esp e cially suited to the needs of sm all fa m i lies, fills an im portant place in the turkey trade. (Below ) A ttractively p a ck a g e d r e a d y - t o - c o o k b i r d s h a v e a great deal of consum er a p p e a l and are a v a ila b le the y ear round. The Fifth District R ising employment continued to hold attention in the D istrict in September and October. The number at work increased in September, as did the number of hours they worked, and a decline in unemployment figures indicates that jobs increased further in October. Construction contract aw ards wyere high again in September, and it is obvious that much construction activity is assured for the months ahead. Department store sales turned up again in October after a decline in September. EM PLOYM ENT Septem ber’s further increase in nonfarm employment in D istrict states raised the total by some 50,000 persons to a level 2 c/o below September 1957. About half the increase was in government workers, reflecting the return of pub lic school teachers to the rolls of the employed, but significant gains also occurred for m anufactur ing and trade workers. The service industries broke their seven-month record of increases to show a slight decline that was possibly somewhat less than m ight have been expected at this season. Insured unemployment declined again in Sep tember and in the early weeks of October. Reports indicated that some part of this decline w as due to an expiration of insurance benefits, while the rem ainder reflected higher employment levels. M anufacturing employment rose 5% from its M ay low to September, and a longer work week helped to raise total man-hours by more than twice that percentage. Successive gains in this total for the nondurable industries had by September brought it close to its year-ago level. T extiles and apparel account for more than one-half the manhours in nondurables, and much of the improve ment has been due to better operations in these industries. The important food and tobacco proc essing industries ran well ahead of September 1957. Durable industries showed a sm aller but sub stantial increase that w as less related to seasonal forces than w ere the nondurables gains. Some lines, such as electrical m achinery and lumber pro duction, exceeded their year-ago man-hour levels, and most moved to close the gap between current man-hours worked and those of the corresponding month last year. CO N STRU CTIO N September added the fifth month to the tru ly im pressive recent record of con struction contract aw ards. W hile this latest month 10 ly total w as down 4% from A ugust, it w as onethird above September 1957, and it brings the five-month total above that of any five consecutive months in the past. Public works and public u tility aw ards were down only slightly from the record level of $89 million reached in A ugust, and residential building contracts rose to $115 million for their second best month of the year. RETAIL TRADE September department store sales in the D istrict dropped back from the record level reached in A ugust to a total comparable with that of the spring months and September 1957. E arly reports for October indicate an upturn, however, that will place that month perhaps 3% ahead of M an-hours in m an u factu rin g have risen stea dily fo r five months, reflecting g a in s of co n sid erab ly more than season al m agnitude. 1956 1957 1958 ATLANTIC CMST UK »»» ii li (1 n || | H I I h i i i i i i h J,,.. IIHHRSimiifmiigHm, nnntiHRRiB ii ii n n ii «« H iiiiiiBJ” ! Between the C o ast Line's plan ned h ead q u arte rs in Jackso n ville an d the Se a b o a rd 's new b u ild in g in Richm ond lie most of the tw o ra ilro a d system s now bein g studied for a possible m erger. September and 6% ahead of October of last year. TO MERGE OR NOT? Ju st as the Seaboard A ir Line R ailroad w as settling down last month in its handsome new office building in Richmond and the A tlantic Coast Line R ailroad was about to break ground for a modern 15-story headquarters building in Jacksonville, the presidents of the two roads joined in the announcement of a study of the possible advantages of a m erger of their lines. T heir joint statement said that “prelim inary con sideration of a m erger . . . indicates that tangible economies and greater efficiencies may be achieved, with resulting benefits to the public.” Should the m erger ultim ately pass through the study stage to action by directors and stockholders of the two railroads, the resulting carrier would rank high in size among the m ajor railroads of the country. The Coast Line operates approxi m ately 5,300 route miles and the Seaboard some 4,150. W h ile one purpose of a m erger would be to cut out duplicate tracks, even a reduced total would still place the combined system within the ten largest roads. The two railroads have for more than a halfcentury competed for freight and passengers to the Southeast. Each having a northern term inus at Richmond, their main lines cross and recross as they provide service to an area stretching to the southern part of Florida and west as far as Birm ingham . In m any cities they compete directly in offering transportation to important centers. Once this competition was desired and encouraged as a means of exerting pressure on each road for improved service at a lower cost, but more recently Federal Government concern has shifted to the burden on the industry of operating the duplicate facilities required for interrailroad competition, since motor vehicles and planes provide strong competition for the railroad industry. This competition has reduced railroads’ share of the transportation business. B y 1956 the ra il roads’ share of intercity freight traffic had drop ped to less than one-half the total, compared with three-fourths in 1929, and their share of passenger miles was down to 35% from 71% in 1929. In short, the railroads no longer hold a monopoly in the transportation field, and their declining rela tive importance has been reflected in recent years in declining employment and uncomfortably steady total revenues in the face of increasing costs. The 1957 recession was quickly reflected in cutbacks of railroad operations and revenues, and the clos ing months of last year saw aggregate net w orking capital of the railroads shrinking well below what had previously been considered a minimum safe level. One result w as a series of hearings last w inter by a subcommittee of the Senate Committee on Interstate and Foreign Commerce. Its report issued in the spring urged the railroads as a means of self-help to interest themselves in such m atters as m ergers, joint use of facilities, reduction of duplications in services, and abandonment or con solidation of nonpaying branch and secondary 11 lines, as well as adoption of more efficient traffic practices and more modern rate structures. A ct ing upon a recommendation of the subcommittee, the Senate authorized a further study of the tran s portation industry to include renewed considera tion of F ederal policy on consolidations and m ergers in the transportation industry. The Seaboard and the Coast Line have fared somewhat better than the industry as a whole in the postwar years. Combined operating revenues in 1957 approxim ated their recent peak in 1952—the Seaboard showed a slight increase—and their net from operations has also held up better than indus try totals. Y et steady increases in the share of oper ating revenues going to expenses and constant competitive pressure from trucks, busses, and a ir lines lend special attraction to the possible effi ciencies of consolidated operations. M erger discussions w ill bring forth many ques tions more difficult than the relatively simple one of which new headquarters building w ill be the head quarters. For instance, the Coast Line owns one-third of the Louisville and N ashville R ailroad —with larger operating revenues and more track than either the Coast Line or the Seaboard—and shares a lease on the 300-mile Clinchfield R ail road w ith the L. and N. No mention was made of either of these roads in the joint announcement, but obviously they wrould enter into any m erger study. So also would choices of the tracks, sta tions, freight yards, and repair shops that would continue to link together the Southeast. More m ergers are considered than consum mated, and officials of both roads have been care ful to avoid public statements anticipating the re sults of the study. It m ay wrell be, however, that the decision to merge or to stay separate w ill be less important to V irgin ia and the Carolinas than the increased efficiencies and added financial strength likely to come as a result of the study of duplications in service and facilities. TEXTILES P erversely the biggest recent develop ment in textiles has been the widespread announce ment of m ill shutdowns at T hanksgiving and Christm as. M ills which represent a substantial proportion of cotton w eaving capacity plan to close on W ednesday, November 26, for the rem ainder of that wreek and again on Tuesday, December 23, until the following Monday. Some synthetics m ills are reported to plan sim ilar holidays in pro duction. This program reflects the basic problem which still confronts the m akers of the print cloths that 12 go into m any types of cotton clothing and that account for more than one-third of cotton woven goods production. M ill inventories of unfinished cloth have continued to run somewhat high and to exert downward pressure on prices. Production cutbacks are intended to reduce these stocks and thus to improve the producers’ position in booking orders for future delivery. Prices were raised last month on some industrial fabrics, and there w as some question as to whether the new prices would continue. Demand for these fabrics—used for automobile interiors, furniture upholstery, and the like—was good in October and provided the basis for the increase. M ill operations have shown some improvement in recent months. Reports of work weeks increas ing from their reduced levels have been confirmed by higher cotton consumption and by increases each month in man-hours worked in the m ajor branches of the industry. K nitting m ills continue to enjoy an improved business, centered as earlier in ladies’ seamless hosiery. Production of men’s and children’s hose is reported as being at the y e a r’s best level due to a strong retail demand. BITUMINOUS C O A L Output of D istrict mines rose further in September to bring average daily production one-fourth above the recession lows of A pril and M ay. The first twro weeks of October saw a continuation of operations at this improved rate. Foreign shipments through D istrict ports have shown decided weakness this fall. European coal stocks are reported to have increased further re cently, and cutbacks in shipments from this coun try are expected. Loadings for domestic shipment by w ater continue to run even below the levels reached earlier this year, as competitive fuels are offered to T idew ater industrial users at reduced prices. P H O TO C RED ITS C o v e r—C a ro lin a Pow er an d Light Co. olina Co. Electric & G a s C o. 2. South C a r 3. Su sq u eh an na 4. M onongehela Pow er C o. Electric 6. & 7. The A m er ican Cotton M anufacturers Institute, Inc. - N atio n a l Cotton Coun cil of A m erica of A gricu ltu re 8. V irg in ia Departm ent 9. V irg in ia D epartm ent of A g ricu l ture - S a fe w a y Stores, Inc. 11. A tlan tic C o a st Line R ailro ad Co. - Se a b o a rd A ir Line R ailro ad Co.
@FedFRASER