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Atlanta, Georgia May A ls o • 1965 in t h is is s u e : PROFITS JUMP AT DISTRICT BANKS SIXTH DISTRICT STATISTICS DISTRICT BUSINESS CONDITIONS Sfaferd f f e e m IBm dgf Indebted Cotton Farmers Our Poor Relations: Fact or Fantasy? Our ideas about economic and credit conditions frequently fall short of reality, usually because we are not intimately acquainted with the specifics involved. If you were to ask the average person to give his impressions of the debt status of cotton farmers, he might begin his answer somewhat like this: Well, cotton is grown in the South, so cotton farmers must be southerners. They probably are rather un happily tied to landlord financing and to merchant and dealer credit, which they use to purchase the necessities of life— seed, fertilizer, and food. Usually, if they are tenant farmers, they find themselves in debt at the end of each year. In fact, it seems to me that the landlord’s situation is only slightly less oppressive than that of his tenants. Because he ordinarily stakes everything on a single cash crop that is plagued by wildly fluctuating prices, he also probably sinks into debt quite fre quently. This answer would have been most accurate some thirty years ago. However, cotton farming and the economic status of cotton farmers are quite different today. New facts have been made available recently that enable us to compare commonly accepted views about the debt of cotton farmers with their actual status. This information was obtained from a survey of farm debt in 1960 that was conducted by the Census Bureau in cooperation with the Federal Reserve System, the United States Department of Agriculture, and the Farm Credit Administration.1 In formation from this survey enables us to answer such questions as: How heavily indebted are cotton farmers? Do they borrow as much as other types of farmers? Are most of the indebted cotton farmers in the South? What sources of credit do they use? What are the characteristics of the typical borrower? D e b t N o t U n iv e r s a l Contrary to our average observer’s general impression, not every cotton farmer is continually burdened with debt. When the survey was made in November and December 1960, only about 54 percent of the nation’s 219,000 cotton farm operators were indebted. Although this percentage reflected the traditional lull in farm borrowings that occurs “between crops,” it was, nevertheless, rather low relative to that for other types of farmers who pay on debts in the fall and winter. Thus, proportionately fewer cotton farmers were indebted than were cash grain farmers, live stock operators, and other farmers with field crops, fruits and nuts, and vegetables. Furthermore, their debts were generally smaller: On the average, cotton farmers owed about $7,300, compared with about 1The 1960 Sample Survey of Agriculture provided the first comprehensive survey of total farm debts. The first article on the survey was published in the Federal Reserve Bulletin for December 1962. Definitions of debt and other pertinent information about the survey are contained in that article and in a statistical handbook, Farm Debt, Data from the 1960 Sample Survey of Agriculture, Federal Reserve Board of Governors, 1965. $10,300 for cash grain farmers and others with seasonal credit needs (Chart 1). The smaller average debt owed by cotton farmers, of course, strongly reflects the relatively small scale of their operations. Although farm consolida- Chart II: Cotton Farms with Debt: Average Debt, by Region, 1960 Chart I: Average Total Debt of Indebted Commercial Farm Operators, 1960 farmed by indebted cotton farmers and received more than half of the cash receipts earned by this group. The cash receipts of all cotton farmers accounted for 7 percent of the national total in 1960. tion has led to an increase in cotton acreage over the years, the average cotton farmer in debt operated 265 acres in 1960, while those without debt operated 151 acres on the average. Moreover, when we cast cotton farmers’ aggregate in debtedness against that of other farm operators in 1960, we see that they owed only 5 percent of the $16.8-billion total farm debt outstanding with farm operators in 1960. A small increase in this ratio occurs when we include the $256 million owed by landlords of cotton farms in the total. Cotton farmers owed about the same proportions of real estate and non-real estate debts as most other major types of farmers. In the fall of 1960, about 60 cents out of each dollar of indebtedness was for real estate, while 40 cents was for non-real estate. S o u th V e rsu s W e s t In the past three decades, cotton farming, long the spe cial province of southern growers, has moved West. Greatly enhanced by an expansion in the supply of water made available for irrigation, the West has become an im portant cotton-producing region and a powerful com petitor of the South. By 1960, the West (defined for purposes of the survey to include Oklahoma and Texas, states traditionally classed as southern cotton-producing states) was producing 55 percent of the nation’s cotton crop. Indebted cotton growers were more numerous in the South than in the West in 1960, but their debts were smaller. When the survey was made, there were 52,000 cotton farmers in the West, and 32,000 of them were indebted. Although they accounted for only about onefourth of the nation’s 119,000 indebted cotton farmers, western operators owed 57 percent of the total farm debt of cotton farmers, while southern growers owed 43 percent. The proportions were similar for major real estate indebtedness and non-real estate and related debt. Moreover, the average total debt of a western grower was almost four times larger than the average for a southern grower— about $15,500, compared with about $4,300 (Chart 2). Western growers in debt, of course, had larger farms and earned sizable incomes. In fact, when the survey was made, they operated half of the land Cotton Farm Operators with Debt, by Region, 1960* United West** States South Number of Indebted Farm Operators (000) Percent of Total 87 73 32 27 119 100 16 50 184 16 50 500 32 100 261 154 54 4 ,792 285 100 2,396 66 45 2,057 146 100 1,233 371 43 4,283 498 57 15,450 868 100 7,313 211 43 282 57 492 100 2,436 8,737 4,145 160 43 216 57 376 100 1,847 6,713 3,167 Size of Farms Number of Acres Operated (Millions of Acres) Percent of Total Average Acres Operated Farm Income Net Cash Farm Income of Operators (Millions of Dollars) 130 46 Percent of Total Average Dollar Income per Farm 1,504 Off-Farm Income of Farm Operators and Family (Millions of Dollars) 80 Percent of Total 55 Average Dollar Income per Farm 926 Farm D ebt of Indebted Operators Total Debt of Operators (Millions of Dollars) Percent of Total Average Total Debt per Farm Major Real Estate Debt of Operators (Millions of Dollars) Percent of Total Average Major Real Estate Debt per Farm Non-Real Estate and Related Debt (Millions of Dollars) Percent of Total Average Non-Real Estate and Related Debt per Farm *TotaIs may not add because of rounding. ♦♦For purposes of this study, the West was defined to include Oklahoma and Texas, which usually are considered southern cotton-producing states. G r o w e r s B o r r o w fr o m T r a d itio n a l C r e d it S o u r c e s After noting that cotton farmers were enlarging their farms and otherwise responding to advanced cotton tech nology, a casual observer may have reasoned that they were drawing borrowed funds from new or different out lets. He also probably speculated that farm specialization would logically cause them to seek across-the-board financing from one source. Contrary to this conception, however, the survey reveals that cotton growers in 1960 •2 • were utilizing many credit sources. Furthermore, most of them have traditionally served cotton growers. Long-term Credit Cotton growers’ major real estate in debtedness indicates their reliance on creditors of long standing— the Federal land banks since 1916, commercial banks for an even longer time, and, of course, individuals, such as farmers, who sold them farms. Overall, most cotton growers with major real estate debt in 1960 were financed by Federal land banks, commercial banks, and individuals. Almost a third of the operators with major real estate debt that year had borrowed funds from Federal land banks. Individuals selling their farms and obtaining a mortgage were creditors of about one-fourth of the borrowers, while commercial banks were third in numbers of borrowers with major real estate debt. In the South especially, the Farmers Home Administration and in ratio of major real estate debt to the value of land and buildings owned is also the smallest for cotton growers. Variations occurred among the specific credit sources, however. Measured by the lending ratios, individuals and insurance companies were the most liberal creditors for cotton farmers with major real estate debt, while Federal land banks were the least liberal. This pattern prevailed in both the South and West. Short-term Credit With respect to production credit, many cotton farmers have relied for years on merchants and dealers to supply “furnish,” i.e., food, seed, guano or fertilizer, plows, and other personal and production items, when the crop season opens in the spring. Such debts would not be paid until after harvest in the fall. This may seem a bit out of date to many of us. Yet, surprisingly enough, the survey data indicate that merchants and dealers still Cotton Farm Operators with Major Real Estate Debt, by Source of Debt, 1960 Source of M ajor Real Estate D ebt N um ber of Farm Operators (000) Federal Land Banks Farmers Home Administration Insurance Companies Commercial and Savings Banks Other Institutions Individual Sellers by Mortgage Individual Sellers by Land Contract Other Individuals 14 5 5 8 3 11 2 1 Farm Operators with D ebt to Specified Source Non-Real Estate and Total D eb t * Related D ebt A m ount of M ajor Real Estate D ebt Owed to Each Source (Millions of Dollars) (Millions of Dollars) 178 35 262 72 47 205 90 9 36 7 80 18 13 67 21 1 142 29 181 54 34 138 68 7 Proportion of D ebt in South West (Percent) 31 79 52 37 26 26 13 43 69 21 48 63 74 74 87 57 ♦Totals may not add because of rounding. surance companies also had served numerous borrowers. Cotton farmers indebted solely to insurance companies for major real estate debt in 1960 owed the largest aggre gate amount— about $136 million. Federal land bank debtors owed the banks $108 million; debtors to individ uals from whom the farm was purchased under a mortgage owed about $92 million; and those who purchased under land contract owed about $44 million. Cotton farmers in debted to commercial banks owed about $47 million for major real estate debt. These debt aggregates, of course, obscure significant differences in cotton farmers’ average indebtedness to their credit suppliers. Insurance company debtors in 1960 owed the companies about $26,000, on the average, com pared with about $7,500 owed to individuals on mortgages. Again, western growers had larger average debts than southern growers, reflecting, of course, variations in farm sizes, farm valuations, and farm incomes. Judging from their average incomes, however, western growers with major real estate debt in 1960 had the greatest potential for repaying their debts. Creditors have been relatively conservative in their long-term lending to cotton growers, judging from the survey data. The ratio of total debt to income for cotton farmers with major real estate debt is the smallest among the ratios for the major types of farmers. Furthermore, the were providing substantial short-term financing to cotton growers in 1960. Although the size, value, and tech niques of cotton farming operations have changed con siderably during the transition from the mule-power age to the mechanical age, merchants and dealers evidently stand ready to supply cotton farmers with funds to finance the purchase of machinery, fuel, fertilizer, spray materials, and the other production requirements of a modern farm. Merchants and dealers were top-ranking suppliers of funds for non-real estate and related financial purposes in 1960. While almost 60 percent of the nation’s indebted cotton farmers owed funds to merchants and dealers, the South contained about three such debtors to each one in the West. In the aggregate, cotton farmers owed mer chants and dealers about $243 million, a total significantly higher than the $174 million they owed commercial banks and the $89 million they owed the credit co-operatives known as production credit associations. The average amount owed to merchants and dealers, however, was relatively small, compared with the averages for debts owed to other primary sources of short-term credit, be cause many of the farmers indebted to them were southern operators with small farms. Cotton farmers’ debts to merchants and dealers were $2,000, on the average, in the fall of 1960. In comparison, their debts for production requirements to commercial banks and production credit •3 • Cotton Farm Operators with Non-Real Estate and Related Debt, by Source of Debt, 1960 Production Credit Association Farmers Home Administration Insurance Companies Commercial and Savings Banks Other Institutions Merchants and Dealers Other Individuals Miscellaneous N umber of Farm Operators Am ount of Non-Real Estate and R elated D ebt Owed Each Source (000) Source of Non-Real Estate and Related D ebt Farm Operators with D ebt to Specified Source M ajor Real Total D ebt* Estate D ebt (Millions of Dollars) (Millions of Dollars) 11 5 1 24 7 58 22 14 153 35 26 304 97 506 118 166 65 10 8 130 42 263 54 83 89 25 17 174 56 243 64 83 Proportion of D ebt in South West (Percent) 44 27 6 36 25 48 39 32 56 73 94 64 75 52 61 68 *TotaIs may not add because of rounding. associations were about $4,500 and $6,000 per farm, respectively. Cotton farmers indebted to major short-term creditors differed little, if at all, as to age and time on their present farm, but their farms varied considerably with respect to the value of land and buildings. Debtors to merchants and dealers in 1960 were operating farms valued at about $65,000 on the average, a value influenced considerably by large growers in the West. Those who owed individuals were operating farms with relatively small valuations of about $30,000 per farm, while growers indebted to pro duction credit associations and commercial banks had units valued at approximately $91,000 each. These average values indicate that many farmers utilizing mer chant and dealer credit in 1960 had sufficient financial resources to obtain production financing from commer cial banks and production credit associations if they had wished. Possibly, cotton farmers were receiving certain services from merchants and dealers that are not ordi narily provided by other credit sources. Landlord Debt Landlords are still important in the financing of cotton production. In 1960, 171,000 of the 219,000 commercial cotton farmers were using rented land. Altogether, they rented 25 million acres, with an average acreage of 148 acres. However, only 51,000 farmers had an indebted landlord. On 39,000 farms, one or more of the landlords had major real estate debt, and there was at least one landlord with non-real estate and related debt on 29,000 farms. When the survey was made in 1960, the indebted landlords owed about 29 percent of all farm debt outstanding on cotton farms. As in earlier years, relatively few cotton farmers rent ing land in 1960 had paid their rent in cash. Typically, the renter had given the landlord a share of his crop sales. This share covered about 85 percent of the total rent, while the other 15 percent was paid in cash. Landlord indebtedness was largely for major real estate purposes, such as buying and improving land and build ings. They obtained financing primarily from insurance companies, Federal land banks, and commercial or savings banks. Non-real estate financing was obtained mainly from commercial and savings banks and from merchants and dealers. Landlords’ indebtedness was relatively well margined in 1960, judging from survey data indicating that their rental receipts exceeded their total indebtedness Commercial Cotton Farm Operators, 1960 South West Number of All Cotton Farm Operators (0 0 0 ) 167 Percent of Total 76 Net Cash Farm Income of All Cotton Farm Operators (Millions of D ollars) 243 Percent of Total 47 Value of Land and Buildings Operated by All Cotton Farm Operators 3,633 (Millions of Dollars) 39 Percent of Total Value of Land and Buildings Owned by All Cotton Farm Operators (Millions of Dollars) 1,711 37 Percent of Total United States 24 219 100 272 53 515 100 5 ,722 61 9,355 100 2,942 63 4,653 100 52 Note: For purposes of this comparison, the West is defined to include Okla homa and Texas, which usually are considered southern states. Cotton Farms with Rented Land, 1960 Selected Characteristics Num ber of Farms (In Thousands) Total No Landlord Debt With Landlord Debt: Any Debt Major Real Estate Debt Non-Real Estate and Related Debt Total Acres Rented (Millions of Acres) Average Acres Rented (Number of Acres) Land and Buildings Rented, Average Value (In Dollars) 171 120 51 39 29 25 148 27,548 Rent: Total (Millions of Dollars) Landlords’ Share of Farm Sales (Millions of Dollars) Cash Rent (Millions of D ollars) Total Rent (Average in D ollars) 417 354 63 2 ,440 Landlord Debt: Total (Millions of Dollars) 256 Major Real Estate Debt (Millions of Dollars) 212 Non-Real Estate and Related Debt (Millions of Dollars) 44 Landlord D ebt: (Per Farm with Such Debt) Total (In Dollars) 5,058 Major Real Estate Debt (In D ollars) 5,445 Non-Real Estate and Related Debt (In Dollars) 1,532 Debt Per Indebted Landlord Per Farm (In Dollars) 4,310 . 4 . by about 60 percent. Broadly viewed, the landlord in debtedness on cotton farms in 1960 suggests that land lord financing for modern farming relates more to obtain ing larger farm units and needed volumes of production supplies than to simply satisfying the minimal needs of their tenants as in earlier years. F a r m a n d F a r m e r C h a r a c t e r i s ti c s a n d D e b t Not too many years ago, most persons thought of the typical cotton farmer as eking out a living from a cotton patch on his small farm. Furthermore, he was thought to command relatively few borrowed financial resources. Facts from the 1960 survey, however, require us to alter that image. Although many indebted cotton farmers still were operating small units and owed small debts, many others had large farms and owed substantial sums. Furthermore, relationships among farm value, income, and debt were exerting a strong influence on cotton farm ers’ debt position in 1960, according to the survey data. The higher the valuation of an indebted cotton farm, the larger the operator’s income and the larger his debt. However, only when farms were valued at more than $200,000 did debts increase significantly (Chart 3). The close association between cotton farmers’ income and debt may also be illustrated by classifying indebted farmers according to gross farm sales. Indebted cotton farmers in the top economic class— $20,000 or more in value of farm products sold— operated farms valued at about $211,000 and had total debts outstanding of about $28,000 per farm. In the lowest economic class— $50 to $4,999 in gross sales annually—farms were valued at about $11,000 each and carried total debts that averaged about $1,400 per farm. Although small cotton farmers owed some debt, farm ers in the upper economic strata who operated farms valued at $40,000 or more owed about 85 percent of the total debt outstanding in 1960. However, only about onethird of the indebted operators were in that group. Those operators also owned most of the wealth that supported Chart III: Cotton Farms with Debt: Average Major Real Estate Debt and Average Non-Real Estate and Related Debt, by Value of Land and Buildings Operated, 1960 these debts since the value of their farm land and build ings accounted for 85 percent of the total valuation. Large Farms and Large Debts in the South Contrary to the general impression that all cotton farms in the South are small and have low values and small debts, many farms in that region are in the upper economic groups and earn incomes and carry debts on a par with their western counterparts. True, there were about 61,000 indebted cotton farms in the South in 1960 in the lowest economic group— those who earned $50 to $4,999 in annual gross sales. Moreover, the number in that economic class was about seven times the number in the West. Yet, also in the South, there were about 6,000 indebted cotton farms in the top economic group. There were about 15,000 farms in that group in the West. Farms in the highest economic class had large valu ations in both South and West. For the South the average valuation per farm was about $179,000, compared with about $225,000 in the West. Debt per farm for this income group was about the same size in both the South and West— approximately $30,000 and $27,000, respectively. Although cotton growers in the lowest economic group Cotton Farm Operators, by Economic Class of Farm, 1960* Number of Farms Without With D ebt D ebt Average Total N et Cash Income Without With D ebt D ebt Average Value Per Acre Operated Without With D ebt D ebt (000) Region and Economic Class of Farm (Dollars) (Dollars) Gross Sales of: $ 20 ,0 00 and over $5,00 0 to $19,999 $50 to $4,999 All Classes Average Total Ratio of D ebt of Real Estate Farms D ebt to Value with of Land and D ebt Buildings Owned (Dollars) (Percent) 3 12 66 81 6 19 61 87 10,231 5,147 1,428 2,272 9,430 3,887 1,243 2,430 163 134 135 142 190 161 110 156 2 9,847 5,650 1,176 4,283 22 16 15 19 7 8 5 20 15 9 8 32 16,193 4,609 2,312 7 ,899 10,948 4,525 1,843 6,849 320 182 76 246 259 231 174 250 27,032 7,268 3,212 15,450 14 17 13 14 West Gross Sales of: $20,000 and over $5,000 to $19,999 $50 to $4,999 All Classes ♦Totals may not add because of rounding. • 5 • in both regions had small debts, the smallest debt average was in the South where most of the small farms were located. Operators’ Tenure Whether individual cotton farmers were indebted and how much they were in debt depended to an important degree upon their ownership status or tenure. While less than half of the tenants and full owners were indebted when the 1960 survey was made, almost three-fourths of the part owners had debts. More over, both indebted tenants and indebted full owners owed proportionately less of the total debt outstanding than did part owners, reflecting differences in numbers of debtors, as well as the average size of debts for the three groups. In aggregate terms, indebted tenant operators on cotton farms were about as numerous as part owners in 1960, and they were more numerous than full owners. Tenant operators with debt numbered about 54,000, compared with 42,000 part owners and 22,000 full owners. The tenants owed much smaller total debts than the full owners or part owners, a relationship that may stem partly from the typical tenant’s inability to keep pace with modern farm technology and expand his income. Tenants with small incomes and small debts were largely in the South, and about half of them were Negroes. While tenant operators of cotton farms with debt generally had earned little and owed little in 1960, some indebted tenants were in the highest economic class with $20,000 or more in annual gross sales and owed relatively large debts. Although the average debts of tenants were generally small, their aggregate debt bulked relatively large in the total owed by all cotton farmers. Tenants owed about $103 million in 1960, almost as much as the full owners but much less than the approximately $500 million owed by part owners. It would be natural for most persons to assume that indebted cotton growers who were full owners earned the largest incomes, owned the most valuable farms, and owed the largest debts in 1960. The survey data reveal, however, that the indebted part-owner group owed rela tively larger debts and possessed a substantially higher debt-repaying capacity. Farmers who were part owners typically had larger annual gross sales than either full owners or tenants, and their farms were more highly valued. Their average debts also were larger, principally because they owed more non-real estate and related debt. They also were younger men who had been on their farms for fewer years than the farmers in the other two groups, which may partly explain their larger average debts. The average indebtedness of part-owner operators was also closely related to the operator’s economic class and generally was about as large as the debt owed by full owners in the same economic group. Part owners in the top economic class had average major real estate debt outstanding of about $17,800; it was about $3,800 for the middle class, and about $1,600 for the lowest class. The averages for non-real estate and related debt out standing were about $11,100, $2,700, and $1,300, respect ively. The average debt for full owners was larger only for the major real estate debt of those in the two upper economic groupings. Although tenant debt averages were approximately the same as those for part owners in the two upper economic groups, they were only half as large in the lowest economic group because tenants had no major real estate debt. The income received by indebted cotton farmers who were part owners justified in some degree their relatively large debts. For part owners with debts, the total value of farm products sold was about $20,000, on the average, compared with $11,000 for indebted full owners and $6,700 for indebted tenants. Off-farm income added about $1,900 to this total for part owners with debt, which was about the same amount that was earned by full owners but well above the $500 average earned by tenants. Part owners’ relatively strong potential for liquidating debts was also indicated by the valuations of their land and buildings. The average valuation of their farms was about $82,000 in 1960, compared with $44,000 for full owners and only about $24,000 for tenants. In the West, the farm valuation for indebted part owners was about $129,000, compared with only about $53,000 in the South (Chart 4). Relatively liberal lending by creditors Chart IV: Cotton Farms: Average Value of Land and Buildings Operated by Indebted Operators, by Tenure and Region, 1960 A verageV eo L dan B alu f an d uildingsO perated (T housands o D f ollars) 40 60 80 IO 120 O | 10 4 to indebted cotton farmers who were part owners was reflected in the ratios of total debt to net cash farm in come and value of land and buildings owned. These ratios were higher than those for full owners and tenants. Survey data on the debts and incomes of indebted cotton farmers who were part owners reflect in some de gree the economic pressures that have prevailed in the cotton-production economy in recent years. An urge to enlarge farm operations and to borrow more to do so has often been felt more strongly by younger men who own some land than by older, more settled farmers or by tenants with limited potential. Younger men have invested borrowed capital heavily to expand their farms and other wise make them more productive. Full owners probably had borrowed less and had smaller debts outstanding in 1960 because they were older, operated smaller farms, and perhaps reacted more conservatively to borrowing for the purpose of expanding their units. Operators’ Farm Income and Debt Indebted growers with the highest average incomes had large farms and were rather heavily indebted. However, only 8 percent of the indebted cotton growers were at the top of the income scale, that is, with $7,500 or more in net cash farm income. Significantly for farm creditors, these opera • 6 • tors owed almost two-fifths of the total debt and received about two-fifths of the gross farm income obtained by in debted cotton growers. Their relatively high potential for debt repayment was indicated by their low ratios of debt to value and debt to income, which were even lower than those of indebted cotton farmers with only modest net incomes. As logic would suggest, much of the debt on cotton farms in 1960 was owed by farmers with relatively large incomes. The indebted cotton growers earning an average of $3,000 or more in net cash income owed about 55 percent of the total debt outstanding. Another fourth was owed by growers who received from $0 to $3,000 in net income, a group that included about seven-tenths of the indebted cotton farmers in 1960. Growers with large farms, however, were not auto matically assured of large incomes. Net losses were in curred in 1960 by about one-tenth of the indebted cotton farmers, primarily part owners and tenants. In these cases, both the farms and the debts were relatively large (Chart 5). The operators with losses in 1960 owed about Chart V: Cotton Farms with Debt: Average Major Real Estate Debt and Average Non-Real Estate Debt, by Net Cash Farm Income of Operator, 1960 N Lss O $999 $ to $3000to $5000to $7600to $ dO0 et o to 1000 5 $2999 $4999 $7499 $ 4 9 an ,0v 1 ,9 9 1 0er N C FrmIno e at ash a c m one-fifth of the total debt outstanding on cotton farms: one-sixth of the major real estate debt and one-fourth of the non-real estate and related debt. Operators’ Off-farm Income and Debt That cotton farmers might make ends meet by earning off-farm in come seems sensible to the average person who reflects on the cotton farmer’s income plight, especially in the South. This option, however, may either have a minimum potential for many growers or be ignored by them. Accord- Cotton Farm Operators and Non-commercial Farm Operators with Off-Farm Income, 1960 Off-Farm Income of Operator and His Family Cotton Farm Operators With Without D ebt D ebt (Percent) No Off-Farm Income $1 to $499 $ 50 0 to $999 $ 1,00 0 to $1,999 $ 2,00 0 to $4,999 $ 5,00 0 and Over All Total Number (0 0 0 ) 35 33 12 4 10 6 100 101 37 22 13 12 9 7 100 119 Non-commercial Farm Operators Without With D ebt D ebt (Percent) 4 1 5 17 24 32 18 100 529 2 8 17 41 31 100 457 ing to the survey data, commercial cotton growers without any off-farm income in 1960 owed about one-third of the debt outstanding on cotton farms. Although many in debted cotton farmers and their families earned some offfarm income that year, the amounts earned by farmers who were low on the economic scale were relatively small and, therefore, were only of modest economic benefit to the operators. On the other hand, indebted cotton growers who received $2,000 or more in off-farm income were principally those with large farms who also had earned large net cash farm incomes. Moreover, operators in this group owed almost two-fifths of the total debt outstand ing on cotton farms. These comparisons suggest that the indebted commercial cotton farmers who obtained the largest off-farm incomes were sufficiently skillful to also operate farm-related or nonfarm enterprises or to make nonfarm investments that produced additional income. Debt Ratios When the survey was made, most cotton farmers with major real estate debt had low debt-to-value ratios: About half had ratios below 20 percent and fourfifths had ratios below 50 percent. The operators in the two lowest ratio groups were older, on the average, and, as might be expected, had been on their farms longer, had repaid most of their major real estate debt, and had larger net worths than operators in the group with the higher ratios. Creditors were relatively liberal lenders to farmers who operated large units but owned only a small portion of the land they operated. In 1960, the debt-value ratios were higher for such men than for those who owned most of the large units they operated. Similarly, farmers with large cotton farms and large gross farm incomes carried more debt per dollar of farm receipts than did farmers operating on a small scale. In P e r s p e c t i v e Do the survey data support our average observer’s notions about cotton farmers’ debts? To a certain extent they do. In 1960, many tenants did have debts outstand ing during November and December, a period when cash crop debts normally reach a seasonal low. At the same time, most indebted tenants received only small incomes and had small debts. Furthermore, merchant and dealer credit was being extensively used in the cottonproduction economy by both tenants and owners. Surpris ingly enough, farm owners apparently were outpacing tenants in the use of such credit. Although the basic pur poses of this credit probably were virtually the same as those for “furnish” in earlier times, the large amounts owed to merchants and dealers in 1960 and the number of farm borrowers may not have been fully anticipated prior to the survey. Landlords also had a significant role in providing capital to the cotton-production economy and proved to be more important debtors than the average person might have expected. Intuitively, we might have assumed that the farmers with the largest incomes and the largest and most highly valued farms owed the largest debts and the largest pro portion of the total debt (Chart 6). A significant im pression gained from the survey data is that most of the debt of cotton farmers was owed by farmers in the top income classification. Furthermore, these large operators •7 • Chart VI: Cotton Farms: Total Debt and Number of Operators with Debt, by Value of Land and Buildings Operated, 1960 Ud $ 5 0 to $25,000to $ n er 1 ,0 0 40,000to $ 0,000to $ 0 ,0 0to $ 0 6 1 0 0 2 0,000 $ 5 0 $24 9 $39,999 $ 1 ,0 0 ,9 9 59,999 $ 99,999 $ 9 ,9 9 a dOe 1 9 9 n vr Vlu o Ln an Bild g Oerated a e f a d d u in s p who produce most of the cotton had obtained large-scale financing and were using it effectively; in the aggregate, they were earning considerably more income with the aid of their borrowed capital. On the other hand, some preconceptions may have to be modified. Although the South contained more in debted cotton growers, some of them with large debts, the western cotton region took the lead with larger farms, larger average debt, and larger total debt in 1960. While farm credit institutions belonging to farmers had received their support, competing lenders had success fully retained much of the cotton farmer’s credit business. Contrary to general belief, however, commercial banks were not financing a major portion of cotton growers. Evidently, nonbank financial sources, drawing funds from places often far from the cotton regions, are the paramount credit sources of the cotton economy. That cotton farmers had obtained their financing from a variety of sources may be significant in the cotton econ omy’s overall credit structure. With several sources avail able, growers not only may be able to tap distant pools of funds, but desirable competition may be fostered among local creditors serving cotton growers. A rthur H. K antner Profits Jump at District Banks The past year was an unusually profitable one for Dis trict member banks. Net income after taxes jumped 16 percent to $133 million, after gaining only about 5 percent in 1962 and 1963. Bank returns on both capital and total assets were slightly higher than in 1963. How ever, the average of individual bank ratios of profits to total assets declined fractionally. What accounts for the rise in net income in 1964? In a word— revenue. Banks boosted total revenue so sharply that it more than offset the continued rapid ad vance in costs. The sources of last year’s increases in revenue and costs may be easily determined by viewing a table of income and expenses, such as Table I. Addi tional information is provided by the average operating ratios of individual member banks, shown in Table II. A s s e t a n d P o r tfo lio S h ifts R a is e R e v e n u e How did banks increase their total revenue last year? They accomplished this feat mainly by shifting their asset structure and by changing the composition of their port folios. The largest single source of the increase in revenue was interest and discount on loans. A sharp upsurge in the demand for funds allowed banks to place a greater proportion of their resources in loans. Increasing sub stantially as a percentage of total assets, loans rose sharply to account for 54.1 percent of total deposits. At the same time, bank investment in securities and in non earning cash assets declined, relative to total assets, al though the dollar amount increased somewhat. The average rate of return on loans is generally about twice that on securities; thus, last year’s increase in revenue from loans can be explained mainly by the shift in asset structure, although a small rise in the average return on loans was a contributing factor. Interest and dividends on securities provided a smaller portion of the rise in revenue. The increase in this measure resulted largely from changes in portfolio com position. Banks expanded their holdings of U. S. Govern ment securities slightly last year, although such issues declined relative to total assets. At the same time, bank holdings of other issues advanced substantially. The ex panded portfolios were weighted more heavily than earlier Table I Income and Expenses, Sixth District Member Banks1 (In T h o u sa n d s of D o llars) 1964 1963 Operating revenue: Interest and dividends on securities 150,493 Interest and other charges on loans 3 95 ,7 16 Service charges on deposit accounts 43,543 Trust department revenue 21,01 7 All other operating revenue 18,987 6 29 ,7 56 Total Operating expenses: Salaries Officer and employee benefits Interest on time and savings deposits Net occupancy expense of bank premises All other operating expenses Total Net current operating earnings Recoveries, transfers from reserves, and profits Losses, charge-offs, and transfers from reserves Net income before related taxes Taxes on net income Net income Cash dividends declared Number of Banks D ollar Change 165,323 457,088 4 8,23 7 2 4,183 2 1,84 0 716,671 + 14,830 + 61,372 + 4,694 + 3,166 + 2,853 + 86,915 163,101 19,748 179,301 + 16,200 22,83 2 + 3 ,084 135,569 160,236 + 24,667 27,751 107,546 4 53 ,7 15 3-1,087 + 3,336 125,085 + 17,539 518,541 + 64,826 176,041 198,130 + 22,089 15,961 37,635 154,367 5 6,98 2 97,385 39,575 17,280 + 43,698 171,712 5 9,038 112,674 4 3,09 9 467 • 8 • + 6,063 + 17,345 + 2,056 + 15,289 + 3,524 502 + 1Based on a tabulation of annual income and dividend statements. 1,319 35 with higher-yielding, longer-term issues. These changes, along with the rising trend of interest rates on some issues, led to higher average yields on bank-owned securities and thus contributed to the increase in total revenue. There was a further shift in portfolio composition that affected income. As profits rose and banks moved into higher income tax brackets, they bought more tax-exempt state and municipal issues; consequently, in terest from these securities contributed more heavily than earlier to the advance in profits. Income from service charges, trust department opera tions, and rentals also contributed to the increase in total revenue. The cost of this higher revenue was a de cline in bank liquidity in 1964. This decline was not as great as might be first suspected, however. Both the growth in time and savings deposits, which are generally more stable than demand deposits, and the growing monthly cash flows from amortization of expanded totals Table II Average Operating Ratios of Individual Member* Banks in the Sixth Federal Reserve District 1960 SUMMARY RATIOS: Percent of total capital accounts: Net current earnings Net income before taxes Net income Cash dividends declared Percent of total assets: Total operating revenue Net current earnings Net income SOURCE AND DISPOSITION OF INCOME: Percent of total operating revenue: Interest on U. S. Government securities Interest and dividends on other securities Interest and discount on loans Service charges on deposit accounts Trust department revenue1 All other operating revenue Total operating revenue Salaries and wages Pension, hospitalization, and other benefits Interest on time and savings deposits 2 Net occupancy expense of bank premises All other operating expenses Total operating expenses Net current earnings Net losses (or recoveries and profits + ) 3 Net increase (or decrease + ) in valuation reserves Taxes on net income Net income RATES OF RETURN ON SECURITIES AND LOANS: Return on securities: Interest on U. S. Government securities Interest and dividends on other securities Net losses (or recoveries and profits + ) on total securities3 Return on loans: Revenue from loans Net losses (or recoveries + ) 3 DISTRIBUTION OF ASSETS: Percent of total assets: U. S. Government securities Other securities Loans Cash assets Real estate assets All other assets Total assets OTHER RATIOS: Total capital accounts to: Total assets Total assets less U. S. Government securities and cash assets Total deposits Time deposits4 to total deposits Interest on time deposits4 to time deposits Number of banks 1961 1962 1963 1964 16.9 14.8 10.6 3.1 14.3 12.6 8.2 2.9 14.5 12.6 8.6 3.0 14.4 12.1 8.5 3.0 14.9 12.0 8.6 2.9 4.55 1.36 .86 21.7 6.9 59.2 7.3 2.6 4.9 100.0 28.3 n.a. 18.0 n.a. 41.6 69.9 30.1 .9 2.5 7.5 19.2 4 .52 1.21 .70 20.5 7.0 60.5 8.0 2.9 4.0 100.0 29.2 2.6 19.2 5.1 36.2 73.1 26.9 1.0 1.8 8.5 15.6 4.70 1.21 .72 20.7 7.1 60.3 8.0 2.8 3.9 100.0 27.9 2.6 22.5 4.5 39.0 74.0 26.0 .6 2.5 7.2 15.7 4.85 1.19 .71 20.5 7.2 60.5 7.7 3.0 4.1 100.0 27.0 2.7 24.1 4.4 41.1 75.2 24.8 1.5 2.1 6.3 14.9 5.06 1.26 .73 19.8 7.1 61.4 7.8 2.9 3.9 100.0 26.5 2.7 23.9 4.7 41.0 74.9 25.1 2.7 1.9 5.7 14.8 3.39 3.09 + .21 3.22 3.03 + .21 3.33 3.23 + .17 3.44 3.29 + .10 3.72 3.37 + .03 6.91 .22 6.83 .27 7.07 .20 7.10 .21 7.18 .28 28.0 10.3 39.2 20.5 1.7 .3 100.0 27.9 10.6 40.3 19.0 1.9 .3 100.0 28.0 10.6 40.2 19.0 1.9 .3 100.0 27.5 10.9 41.6 17.8 1.9 .3 100.0 25.7 11.1 43.8 16.9 2.2 .3 100.0 8.4 16.8 9.3 33.0 2.63 9.0 17.5 10.1 35.0 2.68 8.6 16.8 9.6 36.3 3.12 8.8 16.7 9.8 37.9 3.29 9.1 16.4 10.3 38.8 3.37 402 418 416 426 454 ♦These figures are averages of individual bank ratios taken from member bank reports of condition for December 20, 1963, April 18, 1964, and June 30, 1964. Ratios for banks that joined the System after December 20, 1963, and for a few other new member banks were not included in the averages. 1 Banks with none were excluded in computing this average. Ratio included in “All other operating revenue.” 2 Banks with none were excluded in computing this average. Ratio included in “All other operating expenses.” •*Includes recoveries or losses applied to either earnings or valuation reserves. ' 4 Banks with none were excluded in computing this average. . 9 . of mortgage and consumer loans and of business term loans stemmed the downturn. Debits to Demand Deposit Accounts In su re d C o m m e rcia l B a n k s in th e S ix th D istrict (In Thousands of Dollars) R is e in C o s ts A c c o m p a n i e s K e e n C o m p e t i t i o n Why did expenses move upward in 1964? In recent years, higher interest costs on time and savings deposits have been the primary component of rising expenses. Banks have competed aggressively for time and savings funds, both among themselves and with other financial institutions, through special twists, such as the develop ment of a market for CD’s, and by simply raising interest rates. In 1964, interest cost was again the largest single contributor to rising expenses. Competition for funds continued to be keen, as the negotiable savings bond or certificate, an older instrument revitalized by higher interest rates, attracted large amounts of time deposits at some banks. Despite the dollar increase in interest expense in 1964, this expense declined for the first time since 1960 as a percentage of total revenue, according to the average operating ratios. Undoubtedly, the decline reflects the large increase in revenue in 1964. However, it also mirrors a slowing of the rate of advance of interest costs since the very large upsurge in 1962. Higher salary and wage costs also contributed heavily to the increase in expenses. This probably reflects an increase in rates of pay, as well as increased employ ment at District banks. Salaries and wages declined as a proportion of total revenue, however. In addition to these factors, increased expenditures for advertising, employee benefits, maintenance of bank buildings and offices, property tax, and general business needs, such as office supplies, utilities, postage, and travel, accounted for smaller proportions of the increase in expenses last year than in 1963. Net income is affected not only by operating revenue and expenses but also by nonoperating factors, such as transfers to reserve funds, recoveries and charge-offs on loans and securities, and taxes on income. In 1964, banks paid more taxes than in other recent years, despite a reduction in Federal tax rates. This reflects the higher level of net income before taxes last year. Taken alto gether, the rise in net nonoperating costs plus income taxes was less in 1964 than in the preceding year. T h e O u tlo o k Revenue from loans will probably increase further in 1965 if present trends continue. Thus far this year, loans have expanded rapidly in response to heavy demand. At the same time, security portfolios have continued to shift toward higher-yielding taxable issues and tax-ex empts. Increased revenue from loans and securities will have to offset increased expenses once more if net income is to register a gain. Already, interest costs on time and savings deposits have advanced further this year, reflecting both higher interest rates and expanded deposit levels. Banks are presently facing much the same situation they confronted last year. Loan demand is strong and revenue can be increased by shifting more funds into loans while minimizing nonearning assets. To do this, however, banks must compete for time and savings de posits at fairly high rates. R obert R. Wyand II Mar. 1965 Percent Change Year-to-date 3 Months Mar. 1965 from 1965 Feb. Mar. ^om 1965 1964 1964 Feb. 1965 Mar. 1964 1,084,861 52,214 146,653 377,479 234,023 73,920 1,0%,127 53,286 152,025 388,888 240,008 69,063 + 13 + 12 + 17 +8 +23 +3 +12 +10 + 13 +5 + 19 + 10 +9 +9 +9 +8 +8 +6 472,683 1,308,607 1,714,178 413,196 164,955 973,184 396,362 75,895 3,231,930 143,036 169,021 201,199 190,587 386,658 86,395 96,576 1,775,632 449,198 411,389 336,923 1,040,825 490,630 1,305,143 1,775,069 439,218 166,119 1,013,184 368,168 68,079 3,250,164 161,701 167,954 179,982 208,186 359,973 80,239 99,744 1,803,353 414,731 464,658 351,192 1,057,252 + 21 + 19 + 16 + 10 + 21 + 19 +4 +12 + 17 + 22 +12 +4 + 28 +22 +13 + 11 + 19 + 12 + 24 + 17 +2 + 16 + 19 + 12 +4 +20 +14 +12 +24 + 16 +8 + 13 +16 + 17 + 31 + 21 +7 +18 + 22 + 10 +12 +1 +5 + 11 +7 + 14 +6 +10 +19 +13 +4 + 11 + 15 +6 + 22 + 12 +1 + 12 + 10 +9 +6 +1 53,937 49,464 32,456 33,424 52,736 186,273 77,595 48,096 44,247 31,183 31,938 47,281 166,371 67,916 49,143 43,524 30,376 27,524 51,151 169,582 71,615 + 12 + 12 +4 +5 + 12 +12 +14 + 10 +14 +7 + 21 +3 +10 +8 +7 +9 +3 + 20 +2 + 10 + 1 70,900 72,076 32,403 116,293 54,976 17,684 283,063 95,475 98,379 649,837 58,862 60,445 40,998 83,047 11,924 60,019 27,872 19,632 23,209 63,699 46,235 9,067 99,886 4,564 29,118 31,966 8,866 18,483 60,934 66,471 30,184 101,250 47,289 14,228 243,938 88,462 94,116 537,521 57,599 51,757 34,346 79,976 10,618 56,475 24,171 17,640 17,493 56,370 40,250 9,993 96,994 4,563 26,894 28,811 7,396 15,420 61,609 63,951 25,799 106,878 45,446 17,606 261,727 88,453 90,013 545,464 55,577 50,792 35,755 69,326 9,515 56,868 24,689 19,867 22,206 59,707 40,090 8,121 92,947 4,328 24,939 30,591 7,528 18,456 +16 +8 +7 + 15 + 16 +24 + 16 +8 +5 + 21 +2 + 17 + 19 +4 + 12 +6 + 15 + 11 + 33 + 13 + 15 —9 +3 +0 +8 + 11 + 20 + 20 + 15 + 13 + 26 +9 + 21 + 10 +8 +8 +9 + 19 +6 + 19 + 15 + 20 + 25 +6 + 13 —1 +5 +7 +15 +12 +7 +5 + 17 +4 + 18 +0 . . 79,285 44,067 30,509 57,890 29,172 72,987 40,240 27,497 55,074 28,146 72,500 38,217 31,033 54,552 28,369 + 10 + 11 +5 +4 +9 +15 —2 +6 +3 +5 + 11 + 19 +7 +7 —0 +6 +1 +8 + 11 +4 + 13 +7 +22 +16 +5 + 11 +3 —2 +3 +14 +8 +8 +14 +10 +3 +7 +2 +5 +7 —5 +3 +0 . . . 42,072 33,130 19,763 38,863 29,914 19,207 38,623 27,852 16,855 Bristol . . . . Johnson City . . Kingsport . . . 61,409 64,359 147,934 50,053 52,924 100,761 55,065 57,013 121,913 +8 + 11 +3 + 23 + 22 + 47 +9 + 19 +17 + 12 + 13 + 21 + 11 + 13 +14 +6 +8 + 12 SIXTH DISTRICT, Total 25,307,217 22,133,587 22,427,373 + 14 +13 +9 2,845,259 7,226,318 5,342,187 2,969.509 987,232 2,763,082 2,924,958 7,359,314 5,259,570 2,949,199 943,174 2,991,158 + 12 + 15 + 14 +17 +9 +14 +9 +13 +16 +18 +15 +5 +6 +7 +13 + 12 +7 +3 STANDARD METROPOLITAN STATISTICAL AREASt* Birmingham . . . 1,225,180 Gadsden . . . . 58,441 Huntsville . . . 171,882 Mobile . . . . 408,018 Montgomery . . 286,691 Tuscaloosa . . . 76,026 Ft. LauderdaleHollywood . . 570,444 Jacksonville . . 1,552,328 Miami . . . . 1,986,540 Orlando . . . . 455,234 Pensacola . . . 199,552 Tampa-St. Petersburg 1,154,711 W. Palm Beach 410,824 Albany . . . . 84,675 Atlanta . . . . 3,781,746 Augusta . . . . 173,987 Columbus . . . 189,608 Macon . . . . 208,704 Savannah . . . . 244,130 Baton Rouge . . 470,567 Lafayette . . . 97,476 Lake Charles . . 106,896 New Orleans . . 2,119,762 Jackson . . . . 504,807 Chattanooga . . . 509,279 Knoxville . . . . 394,815 Nashville . . . . 1,064,121 OTHER CENTERS Anniston . . . . Dothan . . . . Selma . . . . Bartow . . . . Bradenton . . Brevard County Daytona Beach . Ft. MyersN. Ft. Myers Gainesville . . Monroe County . Lakeland . . . . . . . . St. Augustine . . St. Petersburg . . Sarasota . . . . Tallahassee . . . Tampa . . . . Winter Haven . . Athens . . . . Brunswick . . . Dalton . . . . Elberton . . . . Gainesville . . . Griffin . . . . LaGrange . . . Newnan . . . . R o m e .................... Valdosta . . . . Abbeville . . . . Alexandria . . . Bunkie . . . . Hammond . . . New Iberia . . . Plaquemine . . . Thibodaux . . . Biloxi-Gulfport . Hattiesburg . . Laurel . . . . Meridian . . . . Natchez . . . . PascagoulaMoss Point . Vicksburg . . Yazoo City . . Alabamaf . . Floridat . . . . Georgiaf . . . . Louisianaf** . Mississippi^** . Tennesseef** . . . . . 3,190,632 8,297,809 6,107,249 3,475,916 1,080,938 3,154,673 *Year-ago data have revised for all states and for all SMSA's except Birmingham, Tuscaloosa, Miami, Albany, Lafayette, and Lake Charles. ‘ ♦Includes only banks in the Sixth District portion of the state. fPartially estimated. • 10 • Sixth D istrict Statistics Seasonally Adjusted (All data are indexes, 1957-59 = Latest Month (1965) One Month Ago Two Months Ago One Year Ago SIXTH DISTRICT INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Manufacturing P a y ro lls * ** ......................... Farm Cash R e c e ip t s ................................... Crops ....................................................... Livestock .................................................. Department Store S a l e s * / * * .................... Instalment Credit at Banks, *(Mil. $) New Loans .................................................. Repayments............................................. Latest Month (1965) One Month Ago Two Months Ago One Year Ago GEORGIA Feb. 46,261 45,956r 46,019r Mar. 156 155 155 Feb. 137 140 113 Feb. 162 163 116 Feb. 119 121 119 Apr. 138p 142 142 Mar. Mar. 192 178 PRODUCTION AND EMPLOYMENT Nonfarm Employment*** ......................... Mar. Manufacturing***................................... Mar. A p p a r e l* * * ........................................ Mar. Chemicals*** ................................... Mar. Fabricated M e ta ls * ** ......................... Mar. Food*** ............................................. Mar. Lbr., Wood Prod., Furn. & Fix.*** Mar. P a p e r * * * ............................................. Mar. Primary M e ta ls* ** .............................. Mar. T e x t ile s * * * ........................................ Mar. Transportation Equipment*** . . . Mar. Nonmanufacturing***.............................. Mar. Construction***................................... Mar. Farm Employment........................................ Mar. Insured Unemployment, (Percent of Cov. Emp.) Mar. Avg. Weekly Hrs. in Mfg., (Hrs.)*** . . . Mar. Construction Contracts*.............................. Mar. R e sid e n tia l............................................. Mar. All O t h e r .................................................. Mar. Industrial Use of Electric Power . . . . Feb. Cotton Consum ption**.............................. Mar. Petrol. Prod, in Coastal La. and Miss.** Mar. 121 121 146 115 125 108 100 109 113 97 140 121 120 73 2.5 41.5 139 148 131 127 115 173 Apr. Apr. Apr. Apr. Mar. FINANCE AND BANKING Member Bank Loans* All B a n k s.................................................. Leading C i t i e s ........................................ Member Bank Deposits* All B a n k s.................................................. Leading C i t i e s ........................................ Bank D e b it s * / * * ........................................ 100, unless indicated otherwise.) 215r 183 42,790 144 131 148 119 132 195 173 181 166 121 120 145 115 129 108 98 109 112 98 140 121 118 78 2.6 41.5 137 139 136 128 113 172 120 120 145 114 128 108 98 109 112 97 137 120 118 81 2.7 41.6 190 153 221 126 113 174r 116 115 138 112 121 104 97 106 106 96 125 116 108 81 3.3 41.3 162 176 150 124 105 168 199 181 197 180 193 177 172 160 154 143 159 156 143 156 152 141 161 140 131 147 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Feb. Manufacturing P a y ro lls***......................... Mar. Farm Cash R e c e ip t s ................................... Feb. Department Store S a l e s * * ......................... Mar. 8,586 160 124 145 8,633r 157 133 138 8,543r 158 99 146 8,049 147 116 135 PRODUCTION AND EMPLOYMENT Nonfarm Employment*** ......................... Mar. Manufacturing***...................................Mar. Nonmanufacturing***.............................. Mar. Construction***................................... Mar. Farm Employment........................................ Mar. Insured Unemployment, (Percentof Cov. Emp.) Mar. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Mar. 121 119 122 126 63 1.9 41.2 120 118 121 127 64 2.0 40.9 120 117 121 127 79 2.1 41.6 117 114 119 117 70 2.6 41.0 205 166 171 206 168 169 200 162 172 176 145 154 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Feb. Manufacturing P a y ro lls***......................... Mar. Farm Cash R e c e ip t s ................................... Feb. Department Store S a l e s * / * * .................... Mar. 6,954 138 122 122 6,900r 139 139 132 6,770r 138 108 131 6,255 130 121 121 PRODUCTION AND EMPLOYMENT Nonfarm Employment*** . . . . . . Mar. M anufacturing***...................................Mar. Nonmanufacturing***.............................. Mar. Construction***................................... Mar. Farm Employment........................................ Mar. Insured Unemployment, (Percent of Cov. Emp.) Mar. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Mar. 114 109 115 130 72 3.1 42.3 113 109 114 126 75 3.2 42.7r 111 109 112 124 78 3.0 42.4 106 103 107 95 78 3.9 42.7 179 136 145 179 137 134 178 134 143 157 125 123 FINANCE AND BANKING Member Bank L o a n s ................................... Apr. Member Bank D e p o s it s .............................. Apr. Bank D e b it s * * ............................................. Mar. LOUISIANA FINANCE AND BANKING Member Bank L o a n s* ................................... Apr. Member Bank Deposits*.............................. Apr. Bank D e b it s * / * * ........................................ Mar. MISSISSIPPI ALABAMA INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Manufacturing P a y ro lls * ** ......................... Farm Cash R e c e ip t s ................................... Department Store S a l e s * * ......................... Feb. Mar. Feb. Mar. 6,213 146 129 115 6,127r 144 141 115 6,177r 142 106 124 5,737 129 123 113 PRODUCTION AND EMPLOYMENT Nonfarm Employment*** ......................... Manufacturing***................................... Nonmanufacturing***.............................. Construction***................................... Farm Employment........................................ Insured Unemployment, (Percentof Cov. Emp.) Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Mar. Mar. Mar. Mar. Mar. Mar. Mar. 114 114 115 113 73 2.6 41.7 114 113 114 112 76 2.7 41.8 113 112 114 113 84 2.9 41.7 111 107 113 112 82 3.5 40.9 FINANCE AND BANKING Member Bank L o a n s ................................... Member Bank D e p o s it s .............................. Bank D e b it s * * ............................................. Apr. Apr. Mar. 193 154 151 192 155 151 187 154 157 170 141 145 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Feb. Mar. Feb. Mar. 3,579 162 185 94 3,532r 160 171 101 3,416r 160 100 102 3,327 149 172 98 Mar. Mar. Mar. Mar. Mar. Mar. Mar. 124 130 122 126 66 3.2 40.6 123 129 121 124 72 3.2 41.lr 123 127 121 128 69 3.2 41.4 119 121 118 110 77 4.3 40.7 Apr. Apr. Mar. 213 165 163 214 167 163 213 167 163 195 152 148 Feb. Mar. Feb. Mar. 7,415 150 113 123 7,455r 150 117 123 7,262r 150 126 129 6,908 139 114 116 Mar. Mar. Mar. Mar. Mar. Insured Unemployment, (Percentof Cov. Emp.) Mar. Mar. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . 121 125 119 138 77 3.3 41.0 121 125 119 140 87 3.3 41.2 121 125 119 140 84 3.4 41.3r 116 119 114 133 90 4.2 40.8 199 157 165 197 157 162 192 155 165 173 141 164 PRODUCTION AND EMPLOYMENT Manufacturing* Insured Unemployment, (Percentof Cov. Emp.: Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . FINANCE AND BANKING Bank Debits*/* FLORIDA TENNESSEE INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) . . Feb. Manufacturing P a y ro lls* ** ......................... Mar. Farm Cash R e c e ip t s ................................... Feb. Department Store S a l e s * * ......................... Mar. 13,514 188 143 176 INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) PRODUCTION AND EMPLOYMENT Nonfarm Employment*** ......................... Mar. Manufacturing***...................................Mar. Nonmanufacturing***..............................Mar. Construction***................................... Mar. Farm Employment........................................ Mar. Insured Unemployment, (Percent of Cov. Emp.) Mar. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Mar. 129 131 129 109 95 1.9 42.5 129 131 129 106 104 129 131 128 106 108 125 127 124 42.3r 41.8 42.2 204 155 159 200 156 156 197 152 162 174 141 147 FINANCE AND BANKING Member Bank L o a n s ................................... Apr. Member Bank D e p o s it s .............................. Apr. Bank D e b it s * * ............................................. Mar. 13,309r 189 138 175 13,851r 12,514 187 177 134 134 181 174 PRODUCTION AND EMPLOYMENT 2.0 2.1 101 94 2.6 Manufacturing* FINANCE AND BANKING Bank Debits*/* *For Sixth District area only. Other totals for entire six states. **Daily average basis. ***Figures manufacturing have been revised in accordance with the 1964 state employment agency benchmarks. for manufacturing payrolls, r Revised. p Preliminary. Apr. Apr. Mar. employment, and average weekly hours in Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U. S. Dept, of Labor and coooerating state agencies; cotton consumption, U. S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U. S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. * 11 • D IS T R IC T B U S IN E S S C O N D IT IO N S W e ,, into its fifth year of expansion, the region’s economy, according to current data, is in glowing health. Nonfarm employment has risen further, and payrolls in manufacturing industries have increased substantially. In farming areas, crop planting and related tasks have gained momentum and quickened the economic pulse. Consumers have slackened the pace of their spending but have not reduced it sharply below the high reached in early 1965. Total bank credit has continued to expand. The decline in volume of large construction contracts from that of early 1964 has not been recouped. Nonresidential building continues strong; however, a slight improvement in residential building was offset by a decline in non building projects. _A n n u a l Rate A ve ra ge W e ek ly Hours* W inM . orked fg The current expansion, now in its fifty-first month, has fostered steady growth in the number of nonfarm jobs at District firms. In the first three months of this year, employment grew by about 80,000 jobs, or at an annual rate of almost 6 percent. Although all District states shared in the advance, Louisiana scored the largest proportional gain. Construction employment in March rose substantially in both Florida and Louisiana. As a result of additional nonfarm jobs in March, insured unemployment decreased, and payrolls showed a healthy gain. The average workweek in manufacturing, however, remained the same as in February. v* Diverse weather conditions have greatly stimulated the pace of agricul tural activity. Plantings of rice, cotton, and corn now are nearly half completed, while the transplanting of the Georgia and Florida tobacco crops is virtually finished. Welcome rains in Florida relieved drought conditions in the western and northern areas. While prices paid by farmers in April were up only slightly from a month earlier, the prices they received recovered from the March dip, primarily because prices for some livestock and poultry products, potatoes, and vegetables strengthened. \S Consumers maintained their spending at a high level in March but failed to match the blistering pace of January. Evidence now available con firms a letdown in consumer spending in February. Department store sales, debits to demand deposits, furniture store sales, automobile sales, and total retail sales all declined in that month despite a small increase in personal income. As might be expected, therefore, personal savings rose, paced by a strong rise in life insurance sales. Although available data indicate that some resurgence in consumer spending occurred in March, instalment debt at com mercial banks increased less than usual. Department store sales did not change from February, but debits to bank accounts rose, and furniture store sales set a new record for the past five-year period. Preliminary data indicate, however, that department store sales may have declined slightly in April. )S — ERCEN T OF REQUIRED R E S E R V E S P B o r r o w i n g s f r o m F. R. B a n k s 1962 rTI . .TTTTI 1963 1964 ♦Seas. adj. figure; not an index. .n . ■.. I 1965 jX A further expansion in total bank credit occurred in April at member banks. Loans increased somewhat more than usual, reflecting strength in both real estate and business loans. Investments were unchanged: A decline in U. S. Government securities offset a rise in other securities. Meanwhile, total deposits declined, as demand deposits decreased and time deposits expanded at less than the usual rate. N o t e : D a t a o n w hich statem ents are b a sed h ave been adjusted whenever p o ssib le to elim in ate se ason al influences.