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Monthly F E D E R A Volume XXXII L R E S E R R eview V E B A N K Atlanta, Georgia, October 31, 1947 O F A T L A N T A Number 10 The One-Variety Cotton-Improvement Program the multitude of conflicting views on the outlook for production areas differently, considerable acreage shifts have rely primarily upon the domestic market as an outlet for their crop. But, in the second place, cotton must be produced more efficiently if it is to compete successfully in the domestic market with synthetic fibers. For Sixth District farmers these two points have a pro found significance. Over a period of many years cotton has provided a large share of their farm income. Even with a materialization of the widely advocated shift to farming systems that center around livestock, a need for a cash crop will remain. No other widely applicable crop has yet been developed for the Southeast that fulfills this requirement as well as cotton does. Although in the coastal plains of South Georgia and Alabama peanuts have partially displaced cot ton as a cash crop, little additional shifting between these two crops can be expected. It is probable that National policy will demand more effi cient cotton production. For many years various legislative devices have been used in efforts to cope with the “cotton problem.” Often these measures had economic assistance to Southern farmers as their primary motive and, to that end, used a cotton-price policy as a vehicle. In some instances the result was actually to encourage inefficient production. Consideration is now being given a long-range agricultural program to take the place of the legislation now in effect when it expires in December 1948. Long-range programs for agriculture cannot afford to overlook problems related to the efficient production of food and fiber. Although the search is for a program that will be suitable for several years, the plan’s nature is almost certain to be influenced in no small measure by the economic environment at the time the plan is formed. If attention centers on producing the needed food and fiber at the lowest possible cost, it is likely that the program will carefully avoid any subsidization of high-cost producers. In order to obtain maximum benefits under future agricultural programs, therefore, District cot ton growers may have to demonstrate far greater efficiency than they have in the past. During the past few decades the outstanding developments for the entire cotton belt have been a large decrease in acre age and a large increase in yields. The yield increases have come about mainly from a greater use of fertilizer, a shift to higher-yielding areas, a more careful selection of land on individual farms as well as in each area, a more widespread use of improved varieties, and the planting of larger legumecrop acreages. Since these changes have affected the various into the Piedmont; the Coastal Plains; the Delta; and the Eastern Hilly Area, which includes the Appalachian High lands, the Black Belt, the Clay Hills, and the Brown Loam Area. Since 1928-32, the period immediately preceding the advent of the AAA programs, cotton acreage has shifted out side the District into the Delta, the High Plains, and the Irrigated Areas. Although in all the major producing sections except the Irrigated Areas it has declined, the Delta and the High Plains have increased rapidly in relative importance as cotton-producing sections. Most District cotton is produced in the Hilly Area, the Coastal Plains, and the Piedmont. Though these three still retain their relative position as producing areas, from the acreage standpoint they have lost ground as cotton producers. Except in the Brown Loam area, yields have not increased as fast as they have in either the Delta or the High Plains. The District’s decline as a cotton-producing section results partly, of course, from healthful changes in its farm econ omy. Economic pressure and education are two of the im portant forces responsible for a more-diversified farming system with less reliance on cotton as the principal source of income. It is certain that these forces will continue to exert their effects toward that end. It is equally certain, on the other hand, that cotton will remain a basic component of the District farm economy for many years longer. The relatively disadvantageous position of District cotton produc tion, therefore, makes the need for increased efficiency even more acute than it is in some other producing areas. During the period 1937-41 the national average cost of producing lint cotton was estimated to be about 10 cents a pound. Average costs were estimated in the same period to be 7.7 cents in the River Bottom Areas, which include the Delta; 8.9 in the Eastern Hilly Areas; 10.6 in the Piedmont; and 11.8 in the Coastal Plains. In the period 1942-44 differ ences between the Delta and other Southeastern areas in aver age production costs dwindled, but the Delta still had the decided cost advantage. That area, which has also the greatest quality advantage, yields only a small proportion of the District’s cotton. Much of the production in the District, therefore, involves growing a relatively low-quality cotton at a relatively high cost. Production practices that result in lower costs in relation to the value of the product fall into two main classes. In one class are the practices that effect labor savings, and in the other are those that increase yields per acre or the quality rom cotton, at least two things stand out. In the first plaoe occurred among them. Fexports are likely to be relatively small, and growers must District cotton-producing sections may be broadly grouped 118 M o n t h ly R e v ie w o f t h e of the product or both. Of all the cost-reduction means, mechanization continues to receive the most attention. Un doubtedly it will result in labor savings that will materially reduce cotton-production costs. In most District areas, how ever, the topography and the small size of the farms will pre vent any appreciable use of the type of mechanized equip ment now being developed. Since mechanization appears most likely in the relatively level areas of large farms, such as the Delta, it probably will have the effect of lowering most District cotton growers’ level of production efficiency. Of course, equipment adapted for small upland farms may be developed, but, if the mechanization of cotton evolves as that of other staple crops has, the small widely adapted ma chines will be the last to be to put to general use. For in creasing their efficiency the District cotton growers’ best opportunities seem to lie in improved quality and higher yields to the acre. Their progress toward these two objec tives is being hastened by their increasing participation in the one-variety cotton-improvement program under sponsorship of the state agricultural extension services and the Depart ment of Agriculture. Origins and Growth This plan attempts to solve problems that are an outgrowth of historical influences on cotton production. Relatively few varieties made up the early commercial plantings. Under the plantation system, with only one variety to a plantation as a rule, they could be kept reasonably pure. In many instances each plantation had its own gin, which arrangement tended to prevent the mixing of seed. The varieties grown were latematuring highly productive types and were famous for their good quality. During the havoc caused by the spread of the boll weevil in the early 1900’s, however, the growers found that a different type of variety was needed. The newer cotton strains developed to withstand this menace, and which par tially succeeded in doing so, were early-maturing short-staple types that yielded lint inferior in quality to that of the older late-maturing types. In a short time almost all the better types of medium-staple cotton were lost. Since also the special markets for the better cottons of preboll-weevil days were lost, a keen interest in cotton breeding developed. In general, breeders tried to produce strains with fruiting habits that would combat the boll weevil and of a quality that would meet the manufacturers’ specifications. Extensive work by private breeders, experiment stations, and the Department of Agriculture resulted in many superior strains. Unfortunately the benefits of these new varieties were often lost through a failure to keep good varieties separate from inferior ones. Different varieties or strains grown near one another crossbred readily, with the result that planting-seed in the following year was impure. The mixing of different varieties at the gin had the same effect. Cotton growing had become largely a small-farm enter prise, and ginning had developed on a commercial basis. With the large number of varieties that had been introduced, seed could be kept pure only with the greatest difficulty. In fact many farmers could be certain of getting pure seed only by buying it from the breeder each year. Since this method was relatively expensive, most farmers continued to obtain their seed from local sources. Cotton breeders developed many superior strains, only to see them degenerate after they reached the grower’s hands. F e d e r a l R e s e r v e B a n k o f A t l a n t a f o r O c to b e r 1 9 4 7 In an effort to overcome this serious hindrance to cotton improvement, a plan was proposed in 1909 for work on a community basis. In 1912 the first one-variety-cotton im provement community was established in Arizona. Although a few years afterward several state experiment stations be gan a plan of cotton improvement on a community basis, it was not until 1931 that the program in the Southeast got under way on an extensive scale. As it is now practiced, the program is built around the local maintenance of pure seed in quantities sufficient for planting large acreages to a single variety. Farmers, usually in a community served by a single gin, form an association and select a variety best suited to local conditions. In making their selection they take into account not only the money value of the lint and seed but the spinning quality of the cotton. They use a seed-renewal-and-distribution plan under which certain farmers are appointed to multiply breeder seed each year. To prevent mixture with other varieties they make special arrangements with the ginner to gin only the onevariety cotton on certain days. Though the plan hinges on keeping planting seed at the highest level of purity and efficiency, it includes all the practices necessary to the produc tion of larger yields of high-quality cotton. It furthers crop diversification by encouraging farmers to plant cotton only on land capable of producing good yields. It also includes educational efforts to improve ginning and promote soil building, good cultural practices, proper fertilization, and efficient insect-and-disease control. Since the program’s inauguration District farmers have steadily progressed in standardizing cotton production. Last year approximately 44 percent of the Six States’ cotton acre age was planted to locally adopted varieties. About 175,000 growers participated in the program. Their average produc tion ranged from six bales in Louisiana to about 11 bales in Tennessee. The Six States’ production of more than 1.5 million bales in locally adopted varieties was about 48 per cent of their total production. In one-variety areas co-operation has not, however, reached the stage at which the maximum benefits can be derived. Bene fits accrue in proportion to the percentage of total acreage planted to the adopted variety. To be fully effective, there fore, variety-standardization programs should enlist all the cotton growers and all of the cotton acreage in an area. In communities and wider areas in which there are large num bers of cotton farmers, usually a few of the farmers will plant varieties other than the one adopted by the association. Even so these communities are designated as one-variety-production areas. In order that they may be accurately and uniformly listed for the protection of the cotton trade as well as that of the participating growers, therefore, standard descriptive terms are used to designate the degree of one-variety development. Communities with 10 to 50 percent of their cotton acreage in an adopted variety are considered in the initial stage, those reporting 50 to 75 percent are classified in the inter mediate stage, and those reporting more than 75 percent but less than 100 percent are classified as being in the advanced stage. A community is considered to be well standardized when more than 90 percent of its cotton acreage is planted to an adopted variety and all other requirements of the pro gram, such as pure planting seed, good culture, and clean M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n ta ginning, are complied with. Relatively few of the District one-variety communities have reached the well-standardized stage. Financial Returns The monetary returns to the District’s participating growers, however, have been large. Last year in Georgia and Alabama, where 82 percent of the District’s cotton crop was produced, the combined additional income to farmers growing locally adopted varieties was estimated to be more than 20 million dollars. This additional income was made possible by quality premiums and higher yields of lint and seed. SIX T H D IST R IC T C O T T O N P R O D U C T IO N - 1 9 4 6 A re a S tate P ro d u ctio n (B ales) A la b a m a ............. F lo r id a ............... G e o r g i a ............. L o u i s i a n a .......... M is s is s ip p i. . . T e n n e s s e e ___ T o t a l.......... 8 0 3 ,5 4 5 3 ,7 6 1 5 5 3 ,3 2 2 2 4 6 ,7 2 2 1 ,0 3 4 ,6 5 2 5 0 9 ,9 4 3 3 ,1 5 1 ,9 4 5 D istrict P e rc e n t oi P e rc e n t oi S tate P ro d u ctio n Pro d u ctio n in th e D istrict (B ales) D istrict A rea P ro d u ctio n in S ta te 8 0 3 ,5 4 5 3 ,7 6 1 5 5 3 ,3 2 2 7 3 ,2 5 0 1 7 1 ,1 2 0 5 3 ,9 0 8 1 ,6 5 8 ,9 0 6 1 0 0 .0 1 0 0 .0 1 0 0 .0 2 9 .7 1 6 .5 1 0 .6 4 8 .5 0 .2 3 3 .4 4 .4 1 0 .3 3 .2 For the 38,000 Georgia growers who were members of one-variety cotton-improvement associations last year the gain was estimated at more than 15 million dollars, almost $400 each. On an average, the individual farmer grew about 15 acres of cotton, which means that his increased income from one-variety cotton amounted to about 25 dollars an acre. In earlier years when the farmers did not get the excep tionally high prices they sold their cotton and cottonseed for last season their average gain from one-variety production was much less. In 1939, for instance, Georgia’s 26,000 onevariety producers received an increase from the program estimated to be approximately $6.50 an acre, or about 80 dollars for the average producer. Last year the program’s estimated financial benefits to Alabama cotton growers aver aged about $8.50 an acre. One-variety improvement associa tions in that state had about 39,000 members, who received average additional returns from cotton estimated at 135 dol lars each. The differences between these averages and the averages for Georgia indicates that the Alabama yield was even more conservatively estimated than the Georgia yield. These figures are only rough approximations, but they do indicate that the growers have received good returns on their efforts to improve cotton production under the onevariety community plan. Actually the financial rewards un der the program may be even greater than they are generally claimed to be. For one thing, the amount of the extra yield from adopted varieties in organized communities is very con servatively estimated at 10 percent of the state average yield. In most places it undoubtedly exceeds that amount. Although the yield increases that farmers have obtained by standardizing their cotton production cannot be measured accurately, they may be estimated by several methods. The acreage and the number of bales produced by grower mem bers are estimated and reported for each one-variety com munity, whereas total cotton acreage and production are re ported for counties. The differences between these two sets of totals for given areas of comparable size are rough esti mates of cotton acreage and production outside the onevariety program. Another method is to compare the average cotton yields in groups of counties that are not standardized with the average yields in groups of counties that are well standardized. A comparison of yield trends in groups of wellstandardized counties with those in groups of counties not f o r O c to b e r 1 9 4 7 119 standardized provides still another means of estimating yield increases in the first group. In Georgia, a comparison of total acreage and production figures with adopted-variety acreage and production estimates shows, 1946 cotton yields on the adopted-variety acreage were about a third higher than those on the other acreage. This increase amounted to about 40 percent of the state’s average yield per acre in that year. The yields on Alabama onevariety cotton acreage in 1946, calculated on the same basis, equaled about 30 percent of that state’s average. Of course, comparisons of this sort are subject to considerable error, particularly if the two types of acreages are not fairly evenly distributed with respect to growing conditions, soil fertility and similar factors over the state. In comparisons made on the basis of smaller, more uni form areas some possibility of this error is avoided. When the acreage and production data from the 1944 census for coun ties in Georgia’s Piedmont region are compared with onevariety production and acreage figures for the same counties, a yield advantage for the latter amounting to about 15 per cent of the state’s yield per acre is obtained. A similar com parison based on 1946 census data on ginnings in the Clay Hill Area of Mississippi gives one-variety production a yield advantage approximating 40 percent of this state’s yield per acre for that year. The apparent yield advantage for onevariety acreage in the Mississippi Coastal Plains, on the other hand, was so small as to be almost insignificant. Average cotton yields in counties with proportions of less than 10 percent of their acreage planted to locally adopted varieties were compared with those in counties that had pro portions of more than 75 percent. For the period 1944-46, average yields were significantly greater in the groups with the higher proportions. In the Georgia Piedmont counties the advantages averaged slightly more than 10 percent. There were marked differences from year to year within the period. The advantage in 1946, for example, was about 20 percent of the state’s yield per acre. When groups of those counties where production is fairly well standardized under the one-variety plan are compared with groups of counties in which there is no appreciable standardization only insignificant differences in yield trends are apparent. Such comparisons show that total cotton acre age, however, has declined less rapidly in those counties where the greatest progress toward standardization has been made. The more rapid rate of decline in the other counties suggests that their cotton acreage is now confined to the very best land. In comparative cotton-yield figures for two groups of counties, the results of greater land selectivity in the unstandardized-cotton planting of one would obscure the effects of the one-variety production of the other where cotton was planted on poorer land as well. Although the various methods of comparison give varying impressions of the effect that variety standardization has on cotton yields, there is little doubt that the estimates used in computing the financial returns to growers understate the actual yield increase. Probably farmers outside the associa tion also have benefited, because the larger quantities of pure seed made available by the one-variety organizations have no doubt improved their cotton. Effect on Q uality Since 1931, when one-variety improvement work was begun in the District, cotton quality has improved markedly. In all the District’s important cotton states the more valuable staple 12 0 M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n ta f o r O c to b e r 1 9 4 7 lengths now make up a greater percentatge of total crops. quality cotton. Most breeders regard the one-variety program Of more importance than staple length from the quality as the most efficient plan yet devised for carrying advances standpoint, however, is the relationship of variety to such in breeding on to the manufacturer. Uniformity of fiber quality has a surprisingly important fiber properties as tensile strength, fineness, length uniform effect on processing costs. One mill representative estimates ity, and degree of maturity. Grade and staple length are the traditional quality measure that almost two fifths of merely the labor costs in spinning ments used by manufacturers as well as marketing agencies. result from a lack of uniformity in raw cotton. Since wage The first provides an indication of probable manufacturing costs constitute a large proportion of spinning costs, labor waste and fiber deterioration. Staple length is an indication savings resulting from improvements in cotton quality offer of yarn strength and other qualities. Moreover, it has long possibilities for a significant lowering of production costs. been recognized, there are other fiber properties that also If these gains were passed along to the consumer in the form affect spinning performance. In commercial practice they of lower prices, the cotton grower would, in turn, benefit from any ensuing expansion of consumption. are designated by the term “character.” Recently, laboratory methods and devices for measuring M arketing the principal properties that make up character have been For an extensive application of the efficiency improvements developed. The relationships these factors bear to processing presented by the one-variety plan, cotton marketing should performance and to the quality of the end product have been be modified. In most instances the one-variety communities determined within usable limits of accuracy. It has also been are too small for mill buyers to obtain large even-running demonstrated that the various fiber characteristics are in lots of one-variety cotton under present marketing procedures. herent qualities of specific varieties and growths of cotton. One possibility, therefore, is to standardize varieties over Variety has emerged as the single most important determinant larger areas. Under the program, some areas have been or of the spinning quality of cotton. In one study Government ganized on a county basis, but there is still a real need for fiber and spinning laboratories tested samples of 16 varieties larger standardized-variety areas. Another proposal calls for grown at 14 locations widely scattered over the Cotton Belt. some agency to make, during the cotton-harvest season, fiberThe staple lengths of the samples varied from sjeven-eighths quality tests that could be used by mills when they are buy of an inch to longer than 1% inches. Despite the variations ing cotton. To be of maximum efficiency the tests would have in areas of growth and in staple length, the spinning quality to be more rapid than the laboratory tests now used. of the samples in any one variety was practically the same. For the past several years the Government laboratories Through their own research departments mills also are study have made fiber and spinning tests on samples from selected ing the effect of variety on spinning quality. As a result of areas that produce more than 25,000 bales of one-variety cot their studies they are buying more cotton each year on a ton. That only a few of its individual areas produce onevariety basis. variety cotton in such an amount limits the value of this These developments have far-reaching implications for the service for the District. Its growers are faced with more diffi future. As manufacturers learn more about the adaptability cult marketing problems, therefore, than are the growers in of certain varieties for specific uses, there will probably be regions where production is more concentrated. increases in the amount of cotton bought for its variety as A development in marketing that promises to make pos well as its grade and staple. The mills, according to a recent sible a more effective use of the most recent information on survey, use variety designations in addition to commercial cotton quality and, at the same time, aid the farmer who quality designations for about 12 percent of their purchases. produces superior cotton is the lint-certification program. If future demands for large lots of cotton grown from un This plan was started in 1946 under the sponsorship of the mixed seed are to be met, production must be standardized Mississippi Seed Improvement Association. Essentially it is in a manner that will prevent the mixing of varieties. a means of providing mill buyers with reliable information Because of the work that cotton breeders are doing, the on the variety of cotton in a bale and the locality in which manufacturers do not have to be content with the fiber char it is grown. To be eligible for certification, cotton must have acteristics typical of the present cotton varieties. Breeders been ginned in a one-variety gin and produced from seed that are concentrating their efforts on only a few of the best has been certified for variety and purity. Fields are officially varieties to effect changes in fiber characteristics that will inspected for varietal purity. Gins, storage bins, and process meet the manufacturers’ specifications. ing plants are also inspected before approval is given. Last Since individual plants, even within the same variety, have year the association certified the lint from 50,000 acres of outstanding character differences, the breeder has a wide cotton and this year will certify that from approximately choice of qualities without resorting to new varieties. As an 90,000 acres. It is expected that lint from 150,000 acres will aid to his work Government laboratories make complete be certified next year, with a gradual increase from then on. fiber analyses for him at cost. By using the data resulting Adequate quantities of pure seed, readily available, are from these analyses he can select and breed for certain fiber essential to the success of this program also. Because the onequalities just as he would for any other plant characteristic. variety-production plan centers about the multiplication of The seed from one plant can be multiplied so rapidly that pure seed, it is vitally important to the lint-identification only a few years are required for putting a new strain into program. commercial use. By the time the new strain is ready for in For ready identification of the cotton as it moves through troduction, the breeder has several years’ results from the marketing channels, a tag is affixed to each bale at the gin. fiber analyses and spinning tests. He can assure the grower, This tag shows the variety, the year grown, and the name therefore, that the new strain will meet the manufacturers’ and location of the grower. Mills are keenly interested in requirements. The grower, of course, must keep the seed pure the program since it promises to facilitate their obtaining and follow the other practices necessary to produce a high cotton that meets specific requirements. M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n ta If the tagging system is to be successful, its integrity also must be maintained at the highest level possible. In view of the mills’ growing interest in cotton on a variety basis, serious consideration should be given to measures that will make the purchase of cotton by varieties, as well as by grade and staple, practicable and dependable. Past experience has shown that tags not only might become accidentally detached but might be switched by unscrupulous handlers. Under the circumstances buyers were afraid to trust the bale markings. It has been suggested that durable tags be attached to the bales in a manner that would prevent accidental loss in handling and that legislation be passed to make removal of a tag before the bale is opened unlawful. So far lint identification has progressed most rapidly among the Delta growers who plant comparatively large acreages. The need for reliable lint identification is probably greatest, however, in the hill sections typical of the Sixth District, where the widely scattered production by many small producers particularly limits local accumulations of large even-running lots of one-variety cotton. Like most marketing services, lint identification involves additional costs. These costs must be weighed against the probable benefits. The Mississippi association is not asking cash premiums for the certified lint. Instead it assumes that competition among the mills to obtain the quality cotton will result in the growers’ receiving price increases in excess of the additional costs. Some mill representatives, in fact, take the stand that it is the grower’s responsibility to properly label and identify his product. To support their view, these representatives have only to point to the synthetic-rawmaterial suppliers, who deliver accurately labeled packages. Large crops greatly in excess of domestic needs offer the maximum opportunity for mills to select cotton in the quanti ties they want with the characteristics they want. The re mainder of the crop, of course, must be exported to avoid a burdensome carryover. If exports are to bfc relatively small, however, it will be necessary to adjust production to domestic market needs. This adjustment primarily would require not only that total production be geared to consumption but that various kinds of cotton be produced in appropriate amounts. In order to determine what adjustments should be made a research project has been set up under the Research and Marketing Act of 1946 to collect and compare information on the types of cotton now being used and the types best suited for making various cotton products. For successful adjustment cotton growers, instead of pro ducing “just cotton”, would have to produce a raw material adapted to the manufacture of a particular end product. In a market primarily domestic a failure by cotton growers to adjust their product to the manufacturers needs would encourage the mills to turn to synthetic raw materials. Cotton growers, on the other hand, have a less attractive choice of alternatives. A loss of their markets would entail a painful readjustment for them under even the most favor able conditions that are likely. Despite cotton’s decline in importance relative to other District farm enterprises, a rapid loss of cotton markets would have more serious repercussions on the farm economy of the Sixth District than it would on that of some other cotton-growing regions. And in areas such as the Piedmont, where the number of alternative cash crops is very limited, the loss of cotton income would be partic ularly serious. Since most of the District farmers have rela tively small farms and relatively small amounts of land and capital, they must depend on returns from their own labor f o r O c to b e r 12 1 1 9 4 7 for the greater part of their income. Cotton, with its high la bor requirement per acre, is the major source of productive employment on many farms. Its labor requirements are poorly distributed over the year from the standpoint of steady em ployment, but it returns a higher rate of pay than many alternative cash crops. Prospects for the quality premiums and the higher yields per acre that bring increased financial returns have stimu lated cotton-quality improvement under the one-variety plan. The educational work of the experiment stations; the exten sion service; and the Bureau of Plant Industry, Soils, and Agricultural Engineering in the Department of Agriculture has been directed toward greater farmer participation in cotton-quality improvement. In standardizing their cotton pro duction District farmers have made great progress, but they must go much further if they are to solve the problems ahead. Though there are indications that yield increases per acre under the one-variety plan are even greater than is generally claimed, the failure of the marketing system to reward farmers for producing cotton of a superior quality un doubtedly tends to retard quality improvement. In the long run the adverse effects of a failure on the part of cotton growers to provide a raw material that will meet all com petition might far overshadow any temporary shortcomings in marketing. To the individual farmer, however, the imme diate monetary gains seem so important that they provide almost the only incentive for improving cotton quality. One proposal for giving farmers an additional incentive to improve cotton quality and uniformity calls for soil-conservation benefit payments to all of them who participate in one-variety-cotton improvement. Experience with similar pay ments for other farm practices suggests that such a program, if adopted, should be accompanied by the most vigorous ef forts to educate farmers on the value that the cotton-improvement plan has irrespective of any payments involved. In the past a failure to sell the idea on which a payment was based has often been associated with the farmer’s failure to con tinue the practices after the payment was discontinued. Though opinions of the best means to the end may differ, it is clear that some means of more-efficient production must be adopted if cotton is to maintain an important place in the District’s farm economy. The greatest possibilities for in creasing efficiency seem to lie in a further expansion of the one-variety cotton-improvement plan. To a great degree further progress depends upon develop ing local leadership and community co-operation. The pro gram offers groups of businessmen who are now sponsoring more general farm-community-improvement work the oppor tunity for further effective efforts. In many instanced onevariety cotton-improvement associations have been formed in communities where farmers had worked together little, or not at all, in an organized way. In enlisting the farmers’ support, state and Federal workers have been faced with two problems. One is to convince the growers that the cotton im provement work is necessary and advantageous for them. The other is to convince them of the necessity for working together. Local business leaders can be very effective in pro moting the conscious community interest necessary to attain ment of the full advantages which are possible in cottonimprovement work. As the competition between cotton-grow ing areas intensifies, cotton farmers will need all the help that people interested in seeing cotton maintained as an important District crop can give them. B rown R. R awlings 122 M o n t h ly T h e In d ex R e v ie w o f C o tto n o f t h e F e d e r a l R e s e r v e B a n k C o n s u m p tio n , a n o f A t l a n t a f o r O c to b e r 1 9 4 7 I n d ic a to r o f D is tr ic t I n d u s tr ia l A c tiv ity as a result of the war Southern industry is now national production was in these gauges. As a consequence producing many new lines of goods, the textile firms are District mills are greater-than-average buyers of cotton, norm still the major manufacturing employers in the Sixth Federalally accounting for more than a third of the entire national Reserve District. In the Six States during the first quarter of cotton consumption with only about a fourth of the looms 1947, 207,000 people, about one in every five factory workers, and spindles in the country. Frequently the Bureau of the Census’ figures for the were employed in textile mills. Approximately 68 percent number of spindles in place are used to indicate trend of them were at work producing cotton textiles. Since the cotton-textile industry is the largest single manu changes in the importance of the cotton-textile industry, both facturing activity in the District, its rate of production nationally and regionally. When used to measure the capac strongly affects the region’s prosperity. One of the most wide ity of the spinning segment, however, this figure is no longer ly used indicators of District business conditions, therefore, as representative as it once was. The number of spindles in is the index of cptton consumption regularly carried in the the District states has been decreasing since 1935 except in Monthly Review . A measure of the amount of raw cotton 1942 and 1946, when they increased slightly, and the total used by manufacturing establishments, it is computed from number in the United States has been falling ever since 1925. the Bureau of the Census reports giving the monthly cotton Predictions of cotton-textile production based solely on the ' consumption of mills in the principal textile states. From trend of the number of spindles in place overlook the tech that data individual indexes showing the activity in each of nical advances made in fibers and in spinning practices and the major producing states in the District are also calculated. machinery. Moreover the addition of second and third shifts They are based on the 1935-39 rate of activity and show, has enabled the industry to adjust its operations to peak out therefore, current figures in percentages of the average for put with no additional machinery. In fact in 1942, though the those years. The latest figure of 136, for September 1947, Sixth District mills consumed more cotton then than they for example, means that activity is now 36 percent more had in any earlier year, the number of spindles required to than it was in the period 1935-39. To improve the compara process the raw cotton was 8 percent smaller than the num bility of the data a daily average basis is obtained, by divid ber necessary during the peak year of 1935. Therefore despite ing the number of bales used for the month by the number the downward direction that the long-time trend of the in of working days in that month. The indexes are therefore dustry as measured by spindles in place is taking, some peo unaffected by differences in the number of working days ple believe the per capita consumption of cotton has become relatively constant, varying, of course, with the national in the different months. Until this month the District index has been computed income. Stability of the Industry only for Alabama, Georgia, and Tennessee, but Mississippi has now been added. The present area covered contains all Year-to-year changes in the rate of industrial production but two of the 174 major cotton mills in the Six States. Data have a Iess-than-proportionate effect on the consumption of for Florida and Louisiana would make little change in the cotton as measured in the national index computed by the index. Moreover, since only five of the major mills in the Board of Governors of the Federal Reserve System. Since Six States are outside the District, in its present form the cotton textiles are nondurable goods which deteriorate rather index closely approximates the cotton-textile activity within rapidly, consumer purchases normally are not postponed for the borders of the Sixth District. any great length of time and thus do not vary greatly. For this reason the production of the cotton-textile industry is Characteristics of the Industry generally more stable than that of many other large indus The cotton-textile industry is made up of a group of related tries, especialy those which manufacture durable goods. Na industries performing one or more of the spinning, weaving, tional cotton consumption, therefore, has been only about and finishing functions necessary in the manufacture of 60 percent as variable as industrial activity in general. The fabric. Not only do mills differ because of the part of the relative stability of this major industry may have important productive process they perform, but mills performing sim implications for the District economy. ilar functions may differ because of the type of product they Though such stability is characteristic of the industry as make. Although integrated weaving mills, for instance, might a whole, from 1930 to 1946 cotton-textile activity in the Sixth be considered similar because most of them take the raw District was affected by the business cycle slightly more than cotton and turn it into woven goods, actually they vary that in the rest of the nation was. Thus a 10-percent increase widely in the type of process used, in the number of skilled in the national consumption of cotton would probably cause workers needed, and in the* amount of cotton consumed ac a 12-percent increase in District consumption. Similarly, cording to the fineness or the coarseness of the fabrics with any decrease in national consumption a more-thanproduced. proportionate decrease would occur in the amount of cotton Differences in the products are largely regional. In the used by mills in the District states. Sixth District most of the mills make such heavy and me Probably the greater sensitivity of District cotton con dium-weight fabrics as ducks, Osnaburgs, drills, twills, and sumption is caused largely by the concentration, within the tire fabrics, which require coarse yarns. Approximately 75 area, of heavy-goods mills, which use more cotton, of course, percent of its yarn production in 1939 was in the heavy than the mills that make lighter goods. Much of the heavygauges, 20 and under, whereas only about 55 percent of the goods production, particularly that intended for industrial lthough A M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n ta use, is subject to a fluctuating demand that depends in part on the degree of general business activity. For this reason District mills may be more subject to changes in the business cycle than are mills in other areas. Seasonal changes within the textile industry are not as great as those in many other industries, since both the raw material and the finished product are readily stored. Usually the heaviest activity is in the early spring and the late fall, but in July and December production is often down be cause of vacation periods. Until 1940 the District index of cotton consumption was seasonally adjusted to minimize the effect of these regular changes. Since the time when war orders began to affect the industry, however, seasonal changes have been irregular and it has been published in only an unadjusted form. f o r O c to b e r S ix t h D is tr ic t I n d e x e s D EPARTM ENT STO R E SALES* A d ju s te d !** This is the sixth in a series of articles on those indexes reg ularly carried in the Monthly Review. Back figures for the individual-state and District indexes of cotton consumption are amilable on request to this bank. U n a d ju s te d S e p t. A ug. S e p t. S e p t. A ug. S e p t. 361 422 394 363 351 325 430 311 346 380 352 418 306 484 352 397 364 365 329 314 429 303 331 42C 342 394 306 465 367 422 402 347 384 334 448 344 357 387 348 434 309 485 368 448 429 378 365 374 422 318 363 296 373 426 327 460 309 389 328 322 293 289 378 278 274 28 1 305 355 267 405 374 447 438 361 399 384 439 351 375 302 369 443 330 460 1947 D IS T R IC T .................. B a to n R o u g e . . . B ir m in g h a m ___ C h a t t a n o o g a .. . J a c k s o n .................. J a c k s o n v ille ___ K n o x v ille .......... .. M ia m i.................... M o n tg o m e r y .. . N a s h v ille ............. N ew O rle a n s . . . T a m p a .................... Use of the Index The cotton-consumption index is more useful for measur ing textile activity over a short period. During the war it could have been used to predict District textile employment to the end of the war with a fair degree of accuracy. On the basis of a trend line computed from the wartime relationship between District cotton consumption and textile employment, however, any prediction of employment in the transitional and postwar periods would have shown more workers than were actually employed in those periods. Production of Dis trict mills during the war was at an unusually high rate, and efficiency was hampered by absenteeism, some machinery breakdowns, and a lack of skill on the part of a large pro portion of the workers. By the time peacetime orders again began to be filled these handicaps had to a great extent been eliminated. Changes in production techniques and improvements in machinery and fibers also seriously affect the validity of the index as a measure of long-run activity. Furthermore, changes in the weights of the fabrics produced by District mills can further disturb the long-range accuracy of the index. There is also a factor that can weaken the predictive value of the index even over a short period. A shift to a different grade of goods will reflect a change in cotton consumption just as a change in the rate of mill activity will. The use of the cotton-consumption index requires, as does the use of all other business-activity indexes, analysis and judgment. As it is regularly published in the Review the in dex provides one of the best means of keeping track of shortrun changes in the District economy. Whatever efficiency the index may have for longer-run predictions, however, will in the future depend strongly on the position cotton is able to maintain in the face of stiff rivalry from other fibers. During 1946 the national con sumption of about five billion pounds of cotton made up approximately 75 percent of the entire textile-fiber consump tion in the United States. But in that year the consumption of cotton was only about 33 percent greater than it was in 1939, whereas the total fiber consumption of cotton, wool, rayon, and silk had increased 43 percent. It may be, there fore, that competition for textile uses will grow even more as postwar adjustments continue. Thomas R. Atkinson 123 1 9 4 7 1947 1 1946 1947 1947 DEPARTM ENT S TO R E S T O C K S A d ju s te d ** U n a d ju s te d S e p t. A ug. S e p t. 1946 A ug. S e p t. 1947 S e p t. 1947 1946 282 392 253 276 446 256 273 277 405 230 314 436 228 311 418 257 308 483 269 295 403 225 291 444 264 305 432 233 351 473 240 1947 D IS T R IC T .................. A tla n ta .................... B ir m in g h a m ___ M o n tg o m e r y .. . N a s h v ille ............. N ew O r le a n s ... 413 224 294 444 281 1947 - G A S O L IN E TAX C O L L E C T IO N S *** A d ju s te d * * S e p t. 1947 SIX STATES .......... A la b a m a ............... G e o r g i a ............... L o u is ia n a ............. M is s is s ip p i----T e n n e s s e e .......... S e p t. 1947 1946 181 187 165 171 168 193 196 157 167 145 154 150 15 4 170 171 179 159 164 155 181 194 1947 TO TA L 136 A l a b a m a .. . 144 G e o r g ia ... 134 M is s is s ip p i. ' 91 T en n essee. 126 A ug. 1947 134 135 136 91 124 SIX STA TES. A l a b a m a .. . F lo r id a ___ G e o r g ia ... L o u isia n a .. M is siss ip p i. T en n essee. 173 182 17 4 128 135 143 152 114 129 1 44 161 155 140 1 5 2r 111 126r 1 42 155r 152r 139 145 1 09 137 129 14 8 151 160 176 14 2 161 158 1 59 174 Ju ly A ug. 285 276 266 193 201 260 376 273 1947 SIX STA TES, . . . H y d ro g e n e ra te d . .. F u e l g e n e ra te d . 1947 1946 A ug. Ju ly A ug. 1947 D IS T R IC T .. . R e s id e n tia l 1946 473 708 360 585 685 476 2 41 317 317 353r 464r 299r 324 487 345 301 236 259 447 739 306 609 458 611 134 174 429 A la b a m a . . . F lo r id a . . . . G e o r g ia ... L o u i s i a n a .. M is s is s ip p i T en n essee. ANNUAL RATE O F TU RN OV ER O F DEM AND D E P O S IT S C O N S U M E R S ' P R IC E IN D EX Ite m A ug. ALL I T E M S ... F o o d ............... C lo th in g ... R e n t............... F u e l, e l e c ., a n d i c e ___ H om e fu r n is h in g s . . . M is c ............... P u r c h a s in g p o w e r of d o l l a r ............. 166 205 185 n .a . 164 202 182 n .a . 149 181 1 56 115 12 9 130 114 179 143 177 1 43 154 133 .6 0 1946 179 189 160 174 170 199 198 A ug. 1947 1946* 1947 S e p t. 1947 C O N S T R U C T IO N C O N T R A C T S 1947 Ju ly 175 188 156 171 162 187 198 1946 Ju ly 1947 A ug. 1947 EL EC TR IC P O W E R P R O D U C T IO N * A •‘ “u oa .1 1947 S e p t. S e p t. M A N U FA C TU R IN G EM PLO YM EN T*** P la c e U n a d ju s te d A ug. C O T T O N C O N S U M P T IO N * S e p t. 1946 A ug. S e p t. 1946 .61 * D a ily a v e r a g e b a s is **A d ju s te d fo r s e a s o n a l v a r ia tio n * * *1939 m o n th ly a v e r a g e = 1 0 0 ; o th e r in d e x e s , 1 9 3 5 - 3 9 — 100 .6 7 1947 U n a d j u s t e d .. A d ju s te d * * I n d e x * * ............. 1 7 .5 1 8 .0 7 3 .0 A ug. 1947 1 6 .2 1 8 .5 7 4 .8 S e p t. 1946 1 6 .7 1 7 .3 6 6 .8 C R U D E PETRO LEU M P R O D U C T IO N IN C O A STA L LO U ISIA N A A ND M IS S IS S IP P I* S e p t. A ug. 1947 1947 259 262 256 256 U n a d j u s t e d .. A d ju s te d * * ... rR e v is e d n .a .N o t a v a ila b le S e p t. 1946 230 232 124 M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n t a f o r O c to b e r 1 9 4 7 District Business Conditions Trade igher sales at Sixth District department stores during the last two weeks of September more than offset in dollar value the declines occurring in the preceding weeks of the month and somewhat exceeded the sales for September 1946. Because there were more working days in the month this year, however, the index of average daily sales adjusted for seasonal variation at 361 percent of the 1935-39 average was six points lower than that for the corresponding month last year. Despite a gain over the August index, which was 352, it was below the year’s peak, 367 percent reached in May. During the weeks ended October 4 and 11 the sales at those stores which report every week were 9 and 2 percent, respectively, above the levels for the corresponding weeks in 1946, but for the week ended October 18 they were 6 percent below the level for the corresponding period last year. In preparation for heavier fall and holiday sales, depart ment stores normally increase their inventories at this time of the year. Beginning at the end of July, however, the stores have increased their stocks at a greater rate than those influ ences alone would warrant. The seasonally adjusted index at the end of September was 282 percent of the 1935-39 aver age, an increase over the index for August, which in turn was three points higher than the index of 270 for July. Stocks as measured by the adjusted index declined progressively be tween December 1946, when the index was 363, and July of this year. The greater-than-seasonal gains since July have not been sufficient to bring stocks to the level of September last year. Price increases have played their part, of course, in raising the levels of both the sales and the stocks indexes. Despite the stock increases during the past two months there are no indications that the stores are embarking on inventory-building programs similar to those of last year. Out standing orders of Sixth District department stores were larger at the end of September than they were in August, which is a normal seasonal condition, but were only 1.9 times the September sales, against a ratio of 2.9 in September 1946. Reversing the situation in June and August, during which months their sales were lower than they were in the corre sponding months of 1946, furniture stores sold goods in Sep tember this year that exceeded in dollar value their Septem ber 1946 sales by 14 percent. September jewelry-store sales, on the contrary, were not quite as great as they were in 1946, the decline amounting to only one percent, however, which is less than their declines reported in preceding months. Sales at household-appliance stores, however, were up 26 percent. The elimination of consumer-credit controls on November 1 will provide retailers with an opportunity to expand their credit sales, either by reducing the size of down payments or lengthening the repayment periods. Already, within the limits of the regulation, consumer credit has expanded greatly. In department stores during September of this year cash sales amounted to 48 percent of total sales, compared with 53 percent in September 1946. Both open-book sales and in stalment sales had become more important parts of the total. Last year in September the Sixth District department stores collected 56 percent of the amount of their open-book charge accounts that were outstanding at the beginning of the month. The average account was outstanding, on the basis of this H collection ratio, for a period of 54 days. This September the collection ratio for the same type of account was 49, with the accounts outstanding for approximately 61 days. On instal ment accounts also the September collection ratio declined this year, from 32 to 29. Similar changes have taken place at the other types of stores. Despite the increases in consumer credit and a lengthening of the period for which accounts are outstanding, conditions by no means have returned to those of 1941. In September of that year, for example, only 36 percent of the sales at de partment stores in the Sixth District were made for cash, with the open-credit accounts outstanding for approximately 80 days and instalment accounts for 14 months. Both competi tion and economic conditions will undoubtedly determine whether many retailers can carry out their announced policy of not returning to their prewar practices. c. T. T. Finance The large Volume of farm-land sales made since the end of the war has not resulted in widespread farm-mortgage lending by Sixth District commercial banks, according to information obtained in June 1947 by the Federal Reserve Bank and the Federal Deposit Insurance Corporation in a survey of farmreal-estate loans. Estimates made in that month from the reports of 188 insured Sixth District Banks, both member and nonmember, showed that the amount outstanding on the 27,314 loans secured by farm-real-estate mortgages at all in sured District banks was about 44 million dollars. This sum is only 12 percent of the estimated 350 million dollars in farm-real-estate-mortgage debt outstanding in the Sixth Dis trict. If the experience of the member banks is typical, most of the postwar expansion which did take place occurred in 1946. From December 31 of that year to June 30,1947, the amount of loans on farm real estate outstanding at the member banks increased only a million dollars, bringing their total to 21 millions. During the preceding six-month period it had increased more than five million dollars. Although loans secured by farm real estate are of con siderable importance to some individual banks, in value they constitute less than one tenth of one percent of the total loan portfolios at all member and nonmember banks. This sort of loan, however, is concentrated more in some types of banks than in others. More than half the mortgage loans were held by the nonmember banks, although these banks hold only 25 percent of total bank loans in the District. Al most 90 percent of such loans held by member banks were at the smaller banks, those with deposits of less than 10 mil lion dollars. In this size classification those banks which had deposits of less than two million dollars, and which to gether had little more than one percent of total member-bank deposits in the District, held 28 percent of them. Farm loans constitute a very important part of total earn ing assets at some of the smaller banks. Of the total loans at 30 of the 340 member banks in the District, farm loans, including farm-production loans, constitute 50 percent or more, and farm-real-estate loans make up about half of this percentage. Consequently developments in farm lending are extremely important to a sizable portion of the member M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n t a banks. For the same reason an understanding of the character of that lending is important to a fair appraisal of current banking conditions. That activity in the farm-real-estate market has been great since the end of the war is well known. Almost equally well known is the increase in the sale value of farm real estate. The Bureau of Agricultural Economics reports that the aver age value per acre of farm land sold in the District states in July 1947 was 110 percent greater than the 1935-39 aver age. Failure of the increase in turnover and value to be ac companied by a greater gain in lending is, of course, partly explained by the large number of cash transactions and higher down payments which the accumulation of liquid assets by the farmers and other purchasers has made possible. The survey indicates that a large part of commercial-bank lending on farm real estate has had nothing to do with the purchase of land. Of the total amount of farm real-estatemortgage debt outstanding in June of this year, the banks re ported, only 55 percent was incurred to buy land. The re mainder was borrowed to erect or repair buildings, 11 per cent, and for still other purposes, 33 percent. Only 45 per cent of the value of those loans for which agreements were signed in 1947 was borrowed for the purpose of buying land, and only 56 percent of the value of those incurred in 1946. Farm real-estate mortgages are frequently used at Sixth District banks as security for short-term loans for purposes other than buying land. Of the total amount of loans secured by farm real estate that were outstanding in June, 64 percent was to mature either on demand or in less than a year’s time. About 21 percent was to mature in periods of from five to 10 years, and five percent in 10 years or more. About one percent was reported past due. The principal danger to a bank in long-term farm-mortgage lending lies, of course, in the possibility that the land mort gaged may decline in value before the mortgage matures and thus, in die event of foreclosure, the bank may be unable to realize the full amount of the loan. In an effort to avoid such contingencies, National banks are forbidden by law to lend more than 60 percent of the appraised value even when the mortgage is amortized and more than 50 percent when it is not. Even this protection could be nullified by a sharp decline in land prices, which generally follows periods of inflated values. The Bureau of Agricultural Economics estimates that a debt of 75 percent of current farm-land values exceeds in dollar amount a debt made for the full value three years ago. If loans were made now at a high proportion of the appraised value, a return to the values of three years ago would wipe out any of the margins allowed at present. Many banks have, consequently, been even more conservative in their policies than the law requires them to be. Only 28 percent of the banks even in 1940, before the recent trend toward increasing land values began, reported that their policy was to lend as much as 60 percent of the current selling price of the land being mortgaged. The most frequent maximum at that time was 50 percent, but about 20 banks out of every hundred were unwilling to lend even that much. By 1947 their policies had tightened. This year, according to the survey, only 11 out of every hundred have been will ing to lend as much as 60 percent of the current selling price. About 33 in every hundred are unwilling to lend as much as f o r O c to b e r 125 1 9 4 7 S ix t h D is tr ic t S ta tis tic s CONDITION O F 28 MEMBER BANKS IN SELECTED CITIES __________________ (In T h o u sa n d s oi D ollars)__________________ O ct. 22 1947 I ft e L o a n s a n d in v e s tm e n ts — T o t a l . .............................................. L o a n s — t o t a l ....................... ............ C o m m e r c ia l, in d u s tr i a l, a n d a g r i c u lt u r a l l o a n s . . L o a n s to b r o k e r s a n d d e a le r s i n s e c u r i t i e s . . . O th e r lo a n s fo r p u r c h a sin g a n d c a rry in g s e c u r i t i e s ................................. R e a l e s ta te l o a n s ..................... L o a n s to b a n k s ....................... O th e r l o a n s ................................. I n v e s tm e n ts —t o t a l ..................... U. S. d ir e c t o b l i g a t i o n s . . O b lig a tio n s g u a r a n t e e d b y U. S............................ O th e r s e c u r i t i e s ....................... R e s e r v e w ith F . R, B a n k ___ C a s h i n v a u l t ................................. B a la n c e s w ith d o m e s tic b a n k s .............................................. D e m a n d d e p o s it s a d j u s t e d . T im e d e p o s i t s ............................... U. S. G o v 't d e p o s i t s ................ D e p o s its o f d o m e s tic b a n k s B o r r o w in g s ...................................... S e p t. 24 1947 O ct. 23 1946 2 ,3 7 1 ,9 7 3 2 ,3 3 7 ,0 8 4 7 5 0 ,7 4 1 8 0 0 ,4 3 4 2 ,4 8 2 ,3 0 2 6 7 4 ,9 1 1 4 7 2 ,4 2 6 4 3 0 ,8 3 5 3 7 8 ,8 1 9 7 ,2 6 0 7 ,6 3 4 1 1 ,4 2 8 8 5 ,3 4 8 6 1 ,4 6 2 5 ,6 3 6 1 6 8 ,3 0 2 1 ,5 7 1 ,5 3 9 3 5 1 ,8 2 2 8 0 ,6 5 4 5 9 ,5 1 8 5 ,6 0 0 1 6 6 ,5 0 0 1 ,5 8 6 ,3 4 3 3 6 2 ,5 8 9 1 0 3 ,7 4 6 4 7 ,3 7 6 3 ,7 8 8 1 2 9 ,7 5 4 1 ,8 0 7 ,3 9 1 5 7 6 ,1 8 5 1 ,0 2 4 ,9 4 3 1 9 4 ,7 7 4 4 6 4 ,9 4 8 4 3 ,0 2 2 1 ,0 2 9 ,8 2 6 1 9 3 ,9 2 8 4 4 0 ,0 8 8 4 3 ,1 0 3 1 ,0 3 5 ,2 2 3 1 9 5 ,9 8 3 4 3 9 ,8 5 2 3 9 ,0 0 2 1 8 2 ,4 0 2 1 7 2 ,9 3 0 1 ,7 7 9 ,0 1 6 1 ,7 4 6 ,6 3 4 5 4 9 ,4 5 8 5 4 8 ,8 0 7 4 2 ,4 1 2 3 6 ,3 8 7 5 1 8 ,3 7 3 4 8 4 ,5 0 3 5,U 00 1 8 8 ,8 3 3 1 ,7 1 6 ,9 8 6 5 3 7 ,0 7 2 1 6 8 ,7 7 2 553 629 1 1 ,3 0 0 8,000 P e rc e n t C h a n g e O ct. 22, 1947, irom S e p t. 24 1947 O ct. 23 1946 '+ i + 7 + 10 — 4 +> 19 — — 36 + 25 5 — +. + + — — + § t! + 1 —1 3 — 18 30 49 30 13 39 — 1 —1 + 6 + 10 —0 + 5 + + 2o + ll7 + — 3 + +■ I2 — 75 —6 — 37 — 56 DEBITS TO INDIVIDUAL BANK ACCOUNTS (In T h o u sa n d s oi D ollars) P la c e N o. of B anks B eportin g S e p t. 1947 A ug. 1947 S e p t. 1946 3 6 2 3 4 3 1 8 ,5 5 5 2 8 9 ,3 0 3 1 1 ,9 4 3 1 6 ,0 4 1 1 1 4 ,2 7 0 7 0 ,2 6 5 1 7 ,2 8 3 2 6 7 ,8 8 0 9 ,9 7 0 1 4 ,7 6 5 1 1 6 ,3 1 9 6 3 ,9 8 7 8 7 12 3 3 3 3 2 2 6 ,3 3 4 1 9 3 ,6 3 8 2 5 8 ,0 4 3 3 9 ,0 0 7 3 0 ,9 9 2 4 1 ,3 6 7 9 1 ,2 3 3 2 4 3 2 P e rc e n t C h a n g e S e p t. 1947 irom A ug. 1947 S e p t. 1946 2 1 ,9 9 5 2 5 3 ,2 1 0 9 ,6 6 1 1 3 ,9 8 3 9 9 ,8 3 9 5 7 ,8 0 8 <+ + 7 8 20 + 9 — 2 + • 10 — + + + + +, 16 14 24 15 14 22 2 2 8 ,0 8 3 1 8 0 ,5 9 2 2 4 3 ,4 9 1 3 5 ,7 2 9 3 0 ,5 2 6 3 8 ,5 8 7 8 9 ,8 8 7 1 9 8 ,1 1 1 1 7 3 ,5 5 1 2 3 7 ,6 7 3 4 1 ,2 6 6 2 7 ,9 8 4 3 9 .0 8 5 8 2 ,2 2 2 — + + + + + + + + + — + + + 14 12 9 5 11 6 11 1 3 ,2 6 1 6 5 5 ,6 9 4 4 3 ,9 5 6 7 ,7 3 3 5 3 ,9 5 9 3 ,2 1 1 S a v a n n a h ........... V a ld o s ta ............. 9 ,9 1 4 5 9 ,7 9 6 7 .9 2 2 1 7 ,5 0 8 8 2 ,2 8 7 3 6 ,0 0 8 1 2 ,4 1 6 6 3 2 ,9 9 4 4 8 ,3 7 4 7 ,5 9 5 4 7 ,7 1 4 3 ,4 7 0 1 1 ,6 6 8 8 ,3 9 5 5 1 ,5 4 3 8 ,1 3 1 1 7 ,2 3 1 7 6 ,8 7 8 9 ,2 3 7 rf 16 2 3 2 3 2 3 4 2 1 5 ,3 2 8 7 2 2 ,3 2 7 5 0 ,6 6 7 8 ,9 8 6 5 3 ,5 7 7 4 ,0 7 6 1 2 ,6 7 2 1 0 ,3 2 6 6 0 ,4 2 7 8 ,0 7 5 2 0 ,3 4 0 8 9 ,1 0 6 1 3 ,7 4 7 + + + — + + + + + + + — 10 15 16 1 27 6 4 1 2 19 8 62 + + + •f + + + + + — + •f + 23 14 4 18 12 17 9 23 17 1 21 16 49 L O U ISIA N A B a to n R o u g e . . L ake C h a r le s .. N ew O r le a n s .. 3 3 7 8 1 ,4 9 0 2 7 ,5 0 4 5 9 1 ,3 7 8 7 3 ,0 3 8 2 5 ,7 6 4 5 5 1 ,7 1 2 6 3 ,2 9 7 2 2 ,9 8 5 5 1 7 ,2 7 9 + + + 12 7 7 + 29 + 20 + 14 M IS S IS S IP P I H a ttie s b u r g .. . J a c k s o n ............... M e r id ia n ............. V ic k s b u r g .......... 2 4 3 2 1 5 .1 3 7 1 1 0 .7 8 9 2 7 ,7 7 3 2 2 ,8 3 8 1 4 ,5 6 7 1 0 3 ,4 8 5 2 4 ,1 0 9 1 8 ,9 5 9 1 4 ,7 6 7 8 9 ,4 7 1 2 6 ,5 5 5 2 4 ,1 5 8 + 4 + 7 + 15 + 20 + 3 + 24 + 15 — 5 4 6 1 2 5 ,8 1 7 1 0 2 ,1 6 3 2 6 2 ,3 3 5 1 2 1 ,7 5 6 9 9 ,0 4 3 2 6 1 ,8 1 5 1 1 3 ,0 0 4 9 4 ,6 6 5 2 2 7 ,2 7 1 4* + + 3 3 0 + + + 11 8 15 109 3 ,5 3 6 ,4 0 4 3 ,3 5 1 ,6 8 3 3 ,1 1 1 ,0 1 9 + 6 + 14 U NITED STA TES 3 3 4 C it ie s ............. 9 1 ,8 8 9 ,0 0 0 8 4 ,4 0 6 ,0 0 0 •N o t in c lu d e d in S ix th D is tric t to ta l. 8 3 ,2 9 5 ,0 0 0 + 9 + 10 ALABAMA A n n is to n ............. B ir m in g h a m .. . D o th a n .................. G a d s d e n ............. M o n tg o m e r y .. F L O R ID A J a c k s o n v i l l e .. . M ia m i.................... G r e a te r M iam i* O r l a n d o ............... P e n s a c o l a ........... S t. P e t e r s b u r g . G E O R G IA A tla n ta .................. A u g u s t a ............... B r u n s w ic k ----C o lu m b u s .......... E lb e rto n ,............... G a in e s v i lle * . . . G riffin * ................ N e w n a n ............... T E N N ESSEE C h a t t a n o o g a .. . K n o x v ille ............. N a s h v ille ............. SIXTH D IST R IC T 3 2 C i t i e s ............... 4 4 12,uOB + 1 7 6 9 2 7 1 126 M o n t h ly R e v ie w o f t h e 50 percent, and only 30 of every hundred are willing^ to lend as much as 33 1/3 percent. These policies contrast sharply with the current practices of all mortgage lenders as a group, whose customary practice, as reported by the Bureau of Agricultural Economics, is to lend 75 percent of the current value. Just as in commercial and industrial lending, both the size and the term of a farm mortgage influences the rate of interest paid on it at the bank. According to the survey, about 80 percent of the banks in 1930 ordinarily charged 8 percent on farm real-estate mortgages. The interest rates charged by the banks, however, have been declining progressively since that time. By 1940 the number charging that rate made up less than half the banks. This year about three fourths of them are usually charging 6 percent or less. The average interest rate reported by banks for all farm-mortgage loans was 5.8 percent. The rates contributing to this average ranged from an average of 6.9 percent on loans originally made for less than $500 down to one of 4.9 percent on loans whose original amount was $25,000 or more. For loans of equal size in amounts of less than $1,000 farm-mortgage borrowers paid approximately the rates that commercial and industrial borrowers did. The rates for larger loans were from a half of one percent to one percent higher. Since the interest rates for individual loans are influenced by many other factors, they may, of course, differ considerably from the averages. C. T . T . Employment and Industry In the Six District states August showed a gain in manu facturing employment of 2.5 percent over July and one of 3 percent over August 1946. Even so the total in the District was still somewhat below the peacetime peak, which was reached in the winter months of 1946-47. Only Alabama failed to participate in the gains. In that state employment remained at the July level. Employment gains in the coal mines and steel mills at Birmingham bal anced layoffs in the textile industry in the Montgomery area. In the other states the increase resulted partly from sea sonal changes in industrial activity, especially in food-processing. With the opening of the fishing season the seafood in dustries in the coastal states added numerous workers. In Louisiana, for example, where the shrimping season opened on August 12, employment increases occurred not only in fishing, and canning but in the related tin-can and paperboard-container industries. These gains offset to some extent a decrease in shipbuilding employment and smaller declines in the number of workers employed by the chemical and petroleum industries. In the New Orleans area the gain in the shrimp industry’s employment consisted of a large addi tion to the number of women workers in the packing plants as well as the addition of a thousand men to the fishing fleets. At the opening of the season the seafood industry faced an unprecedented demand for its product because of the rising meat and poultry prices. Canning of late summer vegetables in Tennessee has continued the employment increase in that state. In central Georgia a lull in food-processing operations that was occasioned by the close of the peach season will be counteracted to some extent when the pimiento crop is har vested. An additional prospect is that the citrus fruit-canning industry in Florida will probably experience a large expan sion in employment when the 1947 season gets fully under way. F e d e r a l R e s e r v e B a n k o f A t l a n ta f o r O c to b e r 1 9 4 7 A number of factors promise to have a favorable influence on District employment and production in the near future. One of these is the near completion of two paper plants in the Savannah area, and another is the completion of a large automobile-assembly plant just outside Atlanta. The work called for by contracts awarded for ship conversion in Mo bile, Alabama, and for ship repair in New Orleans and by the progressive conversion of the Brunswick, Georgia, ship yard to industrial use also may be expected to contribute to employment stability, if not to an increase. Petroleum production in the Sixth District States in Au gust registered a slight gain over that in July and a consid erable increase over that in August a year ago. This expan sion, which has been gradual since the first of the year and unbroken except for small declines in February and April, is attributable to continual completions of new drillings and to operations of the Louisiana Gulf Coast refineries at a rate of from 97 to 98 percent of daily capacity. In July the drill ing of 115 new oil wells had been completed in Louisiana. As a result, in that month Louisiana reported the second largest increase in daily output (8,000 barrels) in the na tion, exceeded only by Oklahoma’s gain of 10,000 barrels a day. The demand for petroleum and petroleum products for both domestic use and export has outstripped production in the country as a whole. In turn, the rate of increase in de mand for the past year has been exceeded by the rate of in crease in prices. Though the total demand for petroleum and petroleum products was 10.2 percent higher in July than it was in the same month last year, prices were 37.9 percent higher than they were at that time. Since crude-oil produc tion during the past year has increased 10.2 percent in Louisiana and the national increase has been only 7.5 per cent, Louisiana producers have been in a very favorable po sition to reap the advantage of the high prices. Steel-ingot production continues high in the District as well as in the nation as a whole. Since the settlement of the labor difficulties in the coal industry during the first week of July the operations of Southern steel plants have averaged 99 percent of weekly capacity. This is considerably above the national average. During August, however, the blast fur naces in Alabama were operating at only 76.2 percent of capacity. l . c. Agriculture Damage to District crops from the storms in September and October, though not widespread, was severe in some sections. When the mid-September hurricane struck, about two thirds of the Louisiana rice crop had been harvested, but the re maining third was damaged heavily. Favorable harvesting weather and an increased use of combines saved most of the damaged crop. Since early-crop yields that exceeded expecta tions offset much of the storm loss, the crop was estimated on October 1 at about 21.6 million bushels, or only 300,000 bushels fewer than the estimate a month earlier. The Septem ber storm flattened and twisted part of the sugarcane crop in the main producing sections of Florida and Louisiana. On October 1 the Louisiana production of sugarcane for sugar and seed was estimated at 4.7 million tons, a 6 percent re duction from the September forecast. No acreage abandon ment is expected in that state, but harvesting will require more hand labor. Losses from high winds and water during September reduced the Florida sugarcane crop about 10 per M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n ta cent. Further damage from high water during October may have reduced the crop even below the 1.1 million tons in prospect on the first of the month. Mississippi and Louisiana pecan growers, who normally produce about 28 percent of the District’s pecans, lost about a fourth of their prospective crops during October. Although high winds caused some damage to pecans in Georgia, the 25.4-million-pound crop remaining in prospect at the begin ning of October was of average size. Since Florida’s heaviest-producing sections for fall snap beans and tomatoes are located within the areas damaged most by the hurricanes and heavy rains, the volume of these crops has also been drastically reduced below that of previ ous years. In the Everglades, where the bulk of the fall snap bean crop is grown, the September hurricane and subsequent heavy rains destroyed all early snap-bean plantings. Though the Everglades growers have had to battle continually against high water since mid-September, they were able to plant con siderable acreage before the storm of October 11-12 com pletely destroyed the planting in some fields and seriously damaged that in others. Consequently the total crop in this area was estimated at only between 5,000 and 7,000 acres in mid-October. Total losses have not been determined, but yields of the surviving crop are likely to be light. Injuries to Florida’s fall tomato crop were also great, par ticularly in the heavy-producing section around Fort Pierce. About 5,000 acres had been planted there, but floods, winds, and strong beating rains reduced the crop to 2,000 acres or even fewer. Since a recovery from the September storm de pended upon ideal growing conditions, the October storm virtually ruined prospects in the area for a good fall crop of tomatoes. Although the high winds and heavy rains considerably damaged Florida’s citrus crop for 1947-48, the total output is estimated at 84.8 million boxes. The grapefruit crop in the lower Indian River territory sustained the heaviest storm los ses. Only about 10 percent of the state’s grapefruit crop is produced in this area, but about a fourth of that part sold as fresh fruit is grown there. Growers on the west coast also lost a great deal of grapefruit because of storm damage. Since over most of the state the set of grapefruit was heavy, how ever, storm losses reduced total production, estimated on the October 1 conditions, no lower than 31 million boxes. This crop is about 7 percent larger than last year’s and 17 per cent larger than the 26.5-million-box crop utilized last sea son. The early and midseason orange crop is estimated at 26.5 million boxes, or an amount 13 percent less than last season’s production. Estimated at 23 million boxes, Valencia-orange production shows little change from last year’s figure. Tan gerine prospects indicate a crop slightly less than last year’s, or 4.3 million boxes. These initial estimates can be taken only as an approxi mation of the Florida citrus fruit that will be harvested dur ing the 1947-48 season. Economic conditions and additional weather losses may make the final harvested crop much smaller. Last year, for example, the crop was estimated on October 1 at slightly more than 100 million boxes, but sub sequent cold damage reduced it to 87.4 million boxes, of which only 83.1 million were harvested. Because of low prices fruit sufficient to fill about 4.3 million boxes was left unharvested. B. r . r . f o r O c to b e r 127 1 9 4 7 S ix t h D is t r ic t S t a t is t ic s INSTALMENT CASH LOANS V olum e L ender F e d e r a l c r e d it u n i o n s ............. S ta te c r e d it u n i o n s .................... I n d u s tr ia l b a n k in g c o m p a n ie s ................................. I n d u s tr ia l lo a n c o m p a n ie s . . S m a ll lo a n c o m p a n ie s ............. C o m m e rc ia l b a n k s .................... O u tsta n d in g s P e rc e n t C h a n g e S e p t. 1947 from P e rc e n t C h a n g e S e p t. 1947 from No. of L e n d e rs R eport in g A u g u st 1947 S e p t. 1946 42 25 — 5 — 28 4- 2 9 11 20 54 34 — 2 4- 3 4~ 3 4- 12 — 10 4- 3 4- 4 4- 68 A u g u st 1947 + + 32 44__ 4+ S e p t. 1946 2 1 4- 60 4- 5 4 1 4444- i 1 3 20 20 17 79 RETAIL JEWELRY STORE OPERATIONS P e rc e n t C h an g e S e p te m b e r 1947 from N um ber of S to re s R ep o rtin g Item A ugust.1947 44 40 40 40 41 C r e d it s a l e s ..................................................... A c c o u n ts r e c e iv a b l e , e n d of m o n th C o lle c tio n s d u r in g m o n t h .................... S ep tem b er 1946 — 4- 2 1 + 3 — 1 4- 16 — 1444- 1 18 13 32 19 WHOLESALE SALES AND INVENTORIES* INVENTORIES SALES No. of F irm s R eport in g Item s C lo th in g a n d f u r n i s h i n g s .......................... S h o e s ...................................... D ru g s a n d s u n d r ie s .. D ry G o o d s .......... ............... E le c tric a l a p p l i a n c e s . C o n f e c tio n e r y .................. G r o c e r ie s ............................ F u ll l i n e s ....................... S p e c ia lty l i n e s .......... G e n e r a l h a r d w a r e ___ P lu m b in g a n d h e a t in g S u p p l i e s ............... L u m b e r a n d b u il d in g m a te r i a ls .......................... M a c h in e r y , e q u i p m e n t, a n d s u p p lie s . T obacco p ro d u c ts. .. . M is c e l la n e o u s .................. P e rc e n t C h an g e Sep t. 1947 from P e rc e n t C h a n g e No. of Firm s S ept. 30, 1947, from R eport A ug. 31 S e p t. 30 in g 1947 1946 A ug. 1947 S e p t. 1946 4- 1 4- 6 4- 12 — 5 4- 9 4- 9 *3 3 3 5 4- 2 9 — 3 + 15 4- 8 4- 9 4- 6 26 7 8 4- 6 4- 16 — 7 4- 13 4- 21 + , 11 14 3 3 4 6 4- 21 0 4- 4 8 — 1 5 3 4- 8 4- 3 7 4- 11 4- 4 -f 2 0 4- 7 4- 2 4 4~ 8 4- 61 4- 17 3 3 9 8 4 3 16 20 125 '7 16 57 4- — + 2 15 1 4- io 4- 3 6 4- 9 0 4- 11 8 3 4- 3 9 4 - 28 4- 41 2 — io 4- ’ 5 4- 6 4- 2 4- 2 3 4- 8 4 4- 4 6 — — — * B a s e d o n U . S. D e p a r tm e n t o f C o m m e rc e f ig u r e s Place DEPARTMENT STORE SALES AND STOCKS SALES INVENTORIES P e rc e n t C h an g e P e rc e n t-C h a a g e No. of No. of S e p t. 1947 from S to re s S tores S e p t. 30, 1947, from R eport A ug. Sept. R eport A ug. 31 S e p t. 30 in g in g 1947 1946 1947 1946 ALABAMA B ir m in g h a m ............... M o n tg o m e r y ............... FL O R ID A J a c k s o n v ille ............... M ia m i.............................. O r la n d o .......................... T a m p a .............................. G E O R G IA A tla n ta ............................ A u g u s t a .......................... C o lu m b u s .................... M a c o n .............................. L O U ISIA N A B a to n R o u g e ............... N ew O r l e a n s ............. M IS S IS S IP P I J a c k s o n ............................ TE NN ESSEE B ris to l.............................. C h a t ta n o o g a ............... K n o x v ille ....................... N a s h v ille ....................... O TH ER C IT IE S* D IST R IC T 5 5 3 4- 13 4- 18 4- 18 444- 4 4 3 5 4- 7 4- 1 4- 21 4- 9 4- 0 4- 2 — 11 + ,4 6 4 3 4 4444*. 11 22 22 28 4444- 4 5 4- 2 6 4- 18 4 3 4 4 6 18 94 4 4- 14 4- 10 3 4- 6 — 3 3 4* 4- 5 4 — 20 — 10 3 + i3 4- 2 0 4 2 2 1 5 3 44- 4 9 — 3 — 12 4 4- i — 44- 2 3 4 4 44- 2 2 4- 2 4- 12 4- 2 4 4- ^ 4 4- 5 4- 444444- — — — 444- 0 5 6 0 0 2 3 3 44- 8 1 4 -1 3 3 4- 45 4- '9 4- 5 4- 5 4- ’2 4- 3 4- 2 10 20 10 15 13 13 7 8 5 5 22 73 \2 6 6 * W h e n f e w e r th a n 3 s to r e s r e p o r t in a g iv e n c:ity, th e s a le s o r stto ck s a r e g r o u p e d t o g e th e r u n d e r " o t h e r cil :ie s ." 128 M o n t h ly R e v ie w o f t h e F e d e r a l R e s e r v e B a n k o f A t l a n t a f o r O c to b e r 1 9 4 7 National Business Summary ndustrial output and employment expanded somewhat further in September. Value of retail trade increased, re Iflecting partly a further rise in prices. In the early part of Oc tober department-store sales declined. Prices of wheat, hides, rubber, and steel scrap showed marked advances, while prices of most other basic commodities showed little change. Bank Credit Commercial and industrial loans at banks in leading cities continued to increase substantially during September and the first half of October. Real-estate and consumer loans also showed further growth. Holdings of Government securities de clined somewhat, reflecting Treasury retirement of bonds ma turing on October 15. Additions to monetary gold stock continued to supply re serve funds to banks. Treasury balances at reserve banks, which were expanded considerably in late September as a re sult of large quarterly tax receipts, declined in October. The effects of these fluctuations on the reserve positions of banks were offset by changes in Federal Reserve holdings of Gov ernment securities, which increased in the latter part of Sep tember and declined during the first three weeks of October. Employment Nonagricultural employment increased by 450,000 persons in September and was at the record level of 43 million, accord ing to Bureau of Labor Statistics figures. The increase largely reflected seasonal gains in nondurable-goods manufacturing and trade, and in the number of school employees of state and local governments. Industrial Production Output of manufactured products and minerals showed some further rise in September, and the Board’s seasonally adjust ed index of industrial production advanced three points to 185 percent of the 1935-39 average. This was the same as the May index and five points below the postwar peak in March of this year. Activity in durable-goods industries as a group increased further in September owing mainly to larger output of steel and of most types of machinery and transportation equipment. Steel production was temporarily curtailed around the middle of the month as a result of an industrial dispute but advanced sharply in the latter part of the month and continued to rise in October, reaching a scheduled rate of 97 percent of capaci ty. Output of passenger automobiles and trucks rose sharply in September but declined again in the early part of October. Production of railroad equipment, chiefly freight cars, showed a substantial gain in September, reflecting in part improved supplies of materials. Output of building materials was main tained in large volume to meet demands arising from the ad vanced rate of construction activity. The Board’s index of nondurable-goods output showed a slight increase in September, reflecting mainly increased pro duction of rayon textiles, paperboard, and petroleum prod ucts. Activity at cotton mills and output of manufactured food products and some other nondurable goods showed little change from the level of the preceding month. Minerals production rose further in September, reflecting a new record rate of crude-petroleum output and a substantial gain in coal production. Output of bituminous coal advanced 7 percent and was close to the same volume produced in Sep tember of last year. Output of fuels continued to rise in early October, under the pressure of exceptionally strong demand. Construction The value of new construction activity on projects under way, as estimated by the Departments of Commerce and Labor, in creased somewhat further in September. Work was started on 88,000 new dwelling units in September, an increase of 2,300 from August, and work was completed on 77,000 units. The value of construction contracts awarded, as reported by the F. W. Dodge Corporation, declined in September following a sharp increase in August and was at about the level of other recent months. Declines occurred in most lines, but the great est reduction took place in public utilities, which had in creased most markedly m August. Commodity Prices The general level of wholesale commodity prices in the mid dle of October was at the advanced level reached in the mid dle of September. Prices of wheat and some other farm prod ucts and foods reached new high levels. Prices of blitter, com, and meats, however, declined following earlier sharp in creases. Wholesale prices of most groups of industrial com modities continued to show advances in the early part of Oc tober. Retail prices rose further by about one percent from July to August, with the largest increases shown in prices of foods and fuels. Further marked advances in retail food prices have occurred since August. B a n k A n n o u n c e m e n ts The newly-organized First National Bank of Pica yune, Mississippi, opened for business on Septem ber 29 as a member of the Federal Reserve System . This bunk has capital stock of $75,000, surplus of $15,000, and reserves of $5,600 . Its officers are William C. Carter, chairman of the board; S. G. Thigpen, president; J. M. Smallwood, executive vice president; /. E. Mitchell, vice president; and P. G. Cooper, cashier. On September SO the Merchants and Farmers Bank, Greenback, Tennessee, began remitting at par. This is a non-member bank located in Nashville-branch territory . It has capital amounting to $25,000, surplus and undivided profits amounting to $23,000, and deposits of $590,000. S. F. Carroll is president, /. A. Walker vice president, C. L. Mel ton vice president and cashier, and C . H. Everett assistant cashier.
@FedFRASER