The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY SusimM&&/feus IN T H I S I S S UE - F E D E R A L RESERVE BANK of CLEVELAND- Trade in U. S. Steel Products: from Plus to Minus........................... . . . .2 Higher Farmland P rice s...................... . . . .9 Revised Monthly Data on Department Store T r a d e .. 13 U.S. DOMESTIC SHIPMENTS AND IMPORTS OF STEEL PRODUCTS -| 800 tons of tons Both domestic ship ments and imports of steel tend to re flect changes in gen eral b u sin e ss activi ty in the U.S. During the latest economic recovery, however, imports have repre sented a larger share of domestic shipments than was the case during the 1958-59 recovery. M PORTS O TAL M EST1C PM EN TS R A T I O S CA L E 1958 three-m onth m oving a v e ra g e 1959 I9 6 0 1961 1962 Sou rce of d ata: Ame ri ca n Iron a n d Steel Institute, N a t io n a l B u r e a u of Economic Research. Trade In U.S. Steel Products From Plus to Minus A few U. S. steel producers have felt the y e a r s prior to 1959, U.S. steel impact of the increased steel imports rather producers exported more steel products than U.S. users imported. However, as shown sharply. For example, during 1961, imports of wire nails represented approximately threein an accompanying chart, the traditional fourths of domestic shipments of that prod favorable balance of trade in steel products uct, and imports of wire rods represented ended recently. During the past three years, approximately one-half of comparable domes foreign steel producers shipped more tons of tic shipments. steel to the U.S. than domestic producers sent abroad.(1) However, most U.S. m anufacturers of steel products have not had to reckon with imports (1) In 1961, U .S. steel exports totaled 2.0 million tons while imports amounted to 3.1 million tons. In 1960 the respective to such an extent. On the average, steel im figures w ere 3.0 million tons and 3.3 million tons; and in 1959, they were 1.7 million tons and 4.4 million tons. ports into the U.S. represented somewhat more than 5 percent of the total volume of U.S. BALANCE OF TRADE IN STEEL domestic shipments from 1959 through 1961. F or f ift y 1947-1961 ins of tons +6 +5 +4 +3 +2 +1 0 -1 -2 -3 -4 -5 •6 ’47 '4 9 '51 ’53 ’55 '57 ’59 ’61 During the past three years, the U. S. has been a net Im porter of steel Ion a tonnage b a sisI, re versing the situation which had prevailed during previous years. Source of data: American Iron and Steel Institute, A nnual Statistical Reports. 2 Parenthetically, it may be noted that the reversal in the position of the U. S. from a net exporter to a net importer of steel prod ucts is related to the larger problem of the U.S. balance of payments. In 1960 and 1961, U.S. trade in mill prod ucts showed a net surplus in dollars, although the excess shrank on a year-to-year basis.(2) (The seeming paradox of a surplus in dollar terms is explained by the fact that the U.S. tends to export higher-priced steel products than it imports.) Moreover, that surplus was eliminated in the first two months of 1962. Steel exports bring payments from the rest of the world to the U.S., and imports repre sent payments by the U.S. An improve ment in the net balance of trade in steel prod ucts, which could come either from increased exports or from decreased imports, or some combination thereof, would contribute toward shrinking the deficit in the over-all balance of payments. However, efforts to improve the (2) In 1961 the deficit in the U .S. balance of paym ents amounted to $2,454 million. D uring th at year, steel exports amounted to $423 million while steel imports totaled $380 million, leaving a net surplus of $43 million. That figure compares w ith a net surplus of $156 million in 1960 and a deficit of $154 million in 1959 (w hich stemmed in part from the steel strike of that yea r). LEADING COUNTRIES IN U.S. STEEL TRADE net balance of trade in steel products must reckon with factors of strength in foreign steel production. Growth of Foreign Steel Production There are several other countries in the world besides the U.S. which have the facili ties to produce sufficient steel to supply their own needs, with enough to spare so that they can export steel and actively cultivate world markets. Like the U.S., these are all highly industrialized nations in which there exists the combination of economic factors necessary to steel making, i.e., a plentiful, low-cost supply of raw materials (iron ore, coal, lime stone, and water), access to large final m ar kets, and resources to meet large-scale capital requirements. As shown in the accompanying chart, most of the countries which export steel to the U.S. are situated in Europe, with Japan being the major non-European nation in the group. Although the U.S. still turns out more steel than any other single nation, capacity in the five other leading steel-producing countries has expanded so greatly that together they now surpass U.S. production.(3) The history of that tremendous expansion may be told briefly. In the postwar reconstruction period, from the end of World W ar II to 1952, steel capacity in Europe and Japan was built up with the aid of the Marshall Plan and other programs, utilizing a large volume of U.S. steel products and other resources. The ob jective at the time was to rebuild wardamaged industrial equipment and buildings. Subsequently, after the period of reconstruc tion was completed in 1952, a steadily in creasing demand came into play in Europe and Japan for consumer and producers’ dur able goods, thus providing continued incen tive for the expansion of steel-making facili ties in those areas. Still more recently, in the (3) In 1939, the total steel ingot output for the four princi pal steel-producing countries of Europe and for Japan totaled 62.4 million short tons. In 1952, steel output for those five countries surpassed the pre-war high, w ith output amounting to 67.5 million ton s; in 1961, output amounted to 124.3 million tons. B y way of comparison, U .S. production during those years was 52.8, 93.2, and 98.0 million tons. 1947-1961 M ill 6 5 3 2 0 * P rin cip ally France, Canada and U nited Kingdom. In the past three years, steel im ports I above) have increased sharply, while steel exports I below I have declined. M illio n s of tons 6 »"* DESTINATIONS OF EXPORTS ALL OTHER EUROPE A SIA Source of data: American Iron and Steel Institute, Annual Statistical Reports. past four years, the European and Japanese steel producers have developed additional markets outside their own borders and, in their exporting activities, they have been so successful that they are competing in a very direct way with U.S. steel producers, even to the point of shipping significant quantities of steel into the U.S. itself. Germane to this story of rapid growth abroad is the question of how it has been possible for European and Japanese steel producers to overtake the U.S. in world m ar kets and, in particular, how it has been possi ble for them to expand their export markets within the U.S., which is the principal steelproducing nation in the world. Prices Are Important A fter payment of a tariff which averages approximately 6 percent (ad valorem), for eign steel products compete without restric tion in the U.S. with domestic steel products. Unlike many finished consumer or producer goods, which vary according to style or engi neering design, once steel products are classi fied according to size and quality there are often only small differences between items produced in the flats of Cleveland, in the valleys of Pittsburgh, or along the Ruhr River. (Of course, there are numerous spe ciality items, but those products bulk rela tively small when compared with the large volume of staples.) Thus, in such a market, steel buyers would be expected to make at least some of their purchases from sources which offer the most attractive price. Comparatively low prices of many types of steel imports in the United States have been a major factor in the marked rise of steel imports during the past four years, as is shown in the accompanying chart. For exam ple, throughout 1958 the prices of eight im ported product groups from W estern Con tinental Europe declined sharply from a level (*) The m easure of imported steel prices used here serves only as an approximation of the average price level of im ported steel products in U .S . markets. The products repre sent eight of the more important steel imports, as determined by tonnage. Moreover, the products are used by both indus trial and construction consumers. 4 approximately equal to that of U.S. prices to levels below U.S. prices.(4) The gap between U.S. and European prices of these eight prod ucts widened further when U.S. prices in creased moderately in August 1958. Con currently, from the first half of 1958 to the second half, the volume of the eight imports nearly doubled. (Total steel imports also rose sharply in that period.) The competitive strength of foreign steel was revealed clearly during 1959 and 1960. While U.S. production was cut off almost entirely during the strike in the last half of 1959, foreign producers took advantage of their fortunate position and raised prices sharply while shipping a record volume of steel to the U.S. But before the strike, when U.S. production was in full swing, and after the strike, when demand began to fall off, the price of foreign steel was held below the price of U.S. steel. Throughout most of 1961, the gap between many domestic and foreign steel prices re mained large, increasing further during the final two months of 1961 when foreign pro ducers cut the prices of many of their prod ucts. (There were further reductions in for eign prices during the first half of 1962.) Reflecting the price advantage of foreign products, the volume of imports of the eight product groups (as well as total steel imports) increased moderately from the first to the second half of 1961.(5) Thus, the relatively low prices of many steel imports prevailing since the end of 1957, appeared to be a “ trigger” which was p ri marily responsible for the over-all increase in the use of foreign steel products by U.S. cus tomers in recent years. Business Conditions and Steel Imports In addition to price considerations, changes in business conditions in the U. S. have been an important factor in the level of steel imports during the past four years, particu larly on a month-to-month basis. ( 5) Other data corroborate the conclusions regarding prices outlined here. See International Monetary Fund, Staff P apers, Vol. IX, No. 1, pps. 91-94. PRICES OF SELECTED STEEL PRODUCTS AND VOLUME OF RELATED IMPORTS I----------------- rt per ton (plotted mid-month) DOMESTIC PRICES P rices of im ported steel p r o d u c t s a p p e a r to have been a m ajor fa c WESTERN EUROPEAN PRICES M illion s of tons to r in the marked rise of steel im ports over the years 7958-6J. C u r rently, the spread be tween the p rice s of eight im p o r t a n t steel im ports and those of c o m p a r a b le domestic products is la rg er than it was during the 195861 period. 1958 1959 1960 1962 * A verage price of 8 imported steel products. * * Domestic prices represent average of 8 comparable items. NOTE: A composite index for prices of steel products imported into the U.S. is not available. The prices shown on the chart are those of eight selected steel products which are imported into the U.S. and comparable products which are turned out by U.S. steel mills. Prices on imports are quoted for steel products landed at N orth Atlantic ports from Continental European producers, with duty, shipping and in surance charges paid. Domestic prices are derived from the wholesale price index published by the Bureau of Labor Statistics. The 8 imported and domestic products include reinforcing bars, struc tural shapes, barbed wire, wire nails, hot rolled bars (merchant bars in the case of im ports), plates, wire rods, and hot rolled strips (hot rolled bands in the case of im ports). The total shown for the volume of imports in cludes all of these items, with the exception of “bands”. Here, the product group “sheets and strip” has been used. The 8 product groups ac counted for more than 70 percent of the total vol ume of imports during the years 1959-61. Sources of data: B L S , W holesale Price Index; STEEL magazine; American Iron and Steel Institute, A nnual Statistical Reports. 5 The accompanying chart shows that over short-run periods, the volume of steel imports has fluctuated up and down along with domestic shipments (i.e. total U.S. shipments less exports). These short-run changes have reflected, throughout the past four years, varied demands for steel products which in tu rn stemmed from the changing tides of U.S. business conditions. For example, when busi ness conditions turned up from the cyclical troughs which occurred in April 1958 and February 1961 (as measured by the National Bureau of Economic Research) imports as well as shipments of domestic steel products had been rising for one month. In contrast, as U.S. business conditions turned sluggish in May 1960, most steel users had already cut back their orders for steel, and imports as well as domestic shipments were declining. I t is important to note, however, that there has been a gradual shift in the relationship between imports and domestic shipments dur ing the past four years which reflects the increasing significance of imports in the U.S. During the latest upturn in business activity, which began after the low of February 1961, imports represented a larger share of domes tic shipments than they had during the pre vious upturn, which began after April 1958. Throughout the year following April 1958, imports ranged between 2y2 percent and more than 4 percent of domestic shipments. However, during the year following February 1961, imports ranged between 4 percent and more than 6 percent of domestic shipments. U. S. Steel Exports Decline W ith regard to the other side of foreign trade in steel, it appears that the United States has not held its share of steel exports in comparison with other steel exporting countries. Total world exports in steel prod ucts nearly doubled between the 1951-53 period and the 1958-60 period. However, dur ing the intervening years, U.S. steel exports declined by one-fourth.(6) (8) Three-year averages, centered on 1952 and 1959, are used in order to reduce year-to-year fluctuations in steel ex ports. 1960 is the most current year that data are available for total world steel trade. See American Iron and Steel Institute, S teel’s C om petitive Challenge, December 1961, p. 33. 6 The divergence between total world trade in steel and U.S. steel exports has become even more pronounced in recent years. In 1957, U.S. producers supplied 16 percent of total world trade in steel. That share shrank to 9 percent in 1958, and then to 5 percent in 1959, as total U. S. output dropped be cause of the strike in the latter year. In 1960, U.S. steel exports increased to 7 percent of total world trade, thereby recovering only p art of the setback suffered during the 1959 steel strike, even though U.S. exports in 1960 benefited from back orders which stemmed from the 1959 strike. Thus, in the four years from 1957 through 1960, steel exports from the U.S. shrank from 16 percent to 7 percent of total world trade in steel. A major factor bringing about the lower level of U.S. steel exports, as compared with earlier postwar years, was the fact that U.S. prices of steel were relatively higher than European prices. In this connection, a com parison of domestic prices with those of other major steel-producing countries during the 1958-61 period serves as a useful yardstick.(7) The following prices represent only a sample of all steel prices in U.S. and European coun tries, but the prices quoted are for products which are important items in world steel trade. During December 1960, the price of carbon plates at mills in the United Kingdom was $103 per short ton, while U.S. producers charged $127 per ton for the same product. Similarly, hot rolled sheets produced in the United Kingdom sold for $119, while the same product was priced at $127 in U.S. mills. Prices of hot rolled bars, wire rods, plates, and structural shapes in each of the four m ajor European steel-producing coun tries were also significantly lower than domes tic prices of similar U.S. products.(8) In contrast, during the years 1955-57, U.S. steel products had been “ competitive [in regard to price] with European and Japanese (7) Export prices of steel products have varied somewhat from domestic prices in response to each steel-producing country’s local and foreign demand, and, in some cases, according to government rebates or bounties. products,” according to trade sources.(9) The change from 1957 to 1958, as noted earlier, was due prim arily to sharp reductions in prices of European and Japanese steel. Of course, shipping costs, duties, special taxes in some countries, and insurance charges increased further the prices of all U.S. steel in European markets, while such charges did not apply to European mills to such an ex tent. (There are only a very few quota re strictions on U.S. steel exports to the coun tries of the European Coal and Steel Com munity, and no restrictions on U.S. steel ex ports to the United Kingdom.) Fluctuations in European Demand Due to the premium prices of many U.S. steel products in European markets during the past four years, European users have purchased U.S. steel products sparingly. Nevertheless, when the pace of business activity in Europe has pushed close to the capacity of the steel industry, subsequent shortages of steel have created bottlenecks in the operations of many steel users. During such periods of stress, U.S. steel exports to Europe have risen sharply. For example, in 1960, when the pace of industrial output in the European countries was pushing close to capacity, European steel users bought more than one million tons of U.S. steel products. However, during 1961, the pace of industrial activity in many Euro pean countries slackened somewhat, and Euro pean steel users found that they could be supplied in good measure from local mills. As a result, during 1961, U.S. steel exports to European countries were slightly less than (8) Organization for European Economic Cooperation, The Iron an d S teel In d u stry in E urope, Paris, 1960. All prices are quoted f.o.b. mill. Prices quoted during December 1960 were only slightly lower than prices quoted during July 1958 and April 1959. D uring February 1961, prices reported by the B ritish Iron and Steel Board indicated little change in the pattern of European and U .S . prices shown for Decem ber 1960. Steel prices in major continental steel producing countries are quoted for Bessem er products, while prices in the U .S. and the U nited Kingdom are quoted for open-hearth products. Although the open-hearth process of making steel produces a somewhat higher quality product, in a large number of cases there are only small differences in price between simi lar products made by the two processes. (9) See Staff P a p ers, op. cit. one-quarter of the volume that they had been in 1960. U. S. Steel Exports to Other Areas of the World Inasmuch as European steel producers, in many cases, have currently an advantage in price over U.S. steel producers in the Euro pean market, some observers of the interna tional steel scene have looked to other areas of the world as possible markets for an in creased volume of U.S. steel exports. Never theless, as the accompanying chart shows, during the past four years (1958-61) the vol ume of steel exports to the non-industrialized countries and Canada was considerably below the volume of the preceding three years (1955-57). The record shown by the chart, together with other pertinent developments, raises a question whether the non - indus trialized countries and Canada will represent expanding markets for U.S. steel products in the near future. One factor in the recent decline of U.S. steel exports was the reduction in foreign in vestment by U.S. petroleum companies. D ur ing the years 1955-57, large-scale foreign in vestments by the U.S. petroleum industry contributed to a rise in U.S. steel exports, principally to many of the non-industrialized countries in South America and Asia, as well as to Canada. Those investments were com pleted in 1958, and investment during 195961 was not nearly as large as during 1955-57. A second factor, which had a bearing on the level of American steel exports to the nonindustrialized countries and to Canada, was the high price of U.S. steel during the past four years. The fact that European steel pro ducers could undersell U.S. producers in their own market, as was noted previously, seives as an indication that European steel pro ducers were able to do the same in many of the non-industrialized countries (at least with some products). A further insight into the competitiveness of U.S. steel exports is provided by a look at the way non-industralized countries have 7 spent U.S. economic aid. The record of pur chases made by countries which received funds from one agency of the U.S. govern ment, the International Cooperation Agency (IC A ), sheds some light on that m atter.(10) Recently, countries which received eco nomic aid from ICA bought non-U.S. steel products in preference to U.S. products. D ur ing the fiscal year 1961 (July 1, 1960, to June 30, 1961), ICA aid was used for the purchase of iron and steel products which totaled $93 million, a dollar amount equivalent to more than two m onths’ total U.S. steel exports in 1961. But only 14 percent of that expenditure was used for iron and steel products of U.S. mills, while the remaining 86 percent went to other countries, principally the European countries and Jap an .(11) Measures have been taken recently by the Federal government to encourage the spend ing of an increased share of economic aid funds in the United States. On December 5, 1960, the Secretary of State ordered that such funds should not be used for the purchase of iron and steel products (as well as certain other commodities) in 19 countries, including the m ajor steel producing countries of West ern Europe and Japan. Since firm commit ments which had been made prior to the Sec retary of S tate’s order were not affected, the effect of that order on U.S. steel exports possibly will be felt by U.S. steel producers for the first time during the current year. But regardless of these new requirements, the depressed conditions of many interna (10) The ICA (and earlier related organizations) have dis tributed funds to countries in nearly every area of the free world for the development of local industry and agriculture, throughout most of the postwar years. D uring the past six years, however, non-industrialized countries have received the bulk of the aid. On September 4, 1961, the ICA and the Development Loan Fund were reorganized and combined into the A gency for International Development. (11) International Cooperation A dm inistration, O perations R eport, June 30, 1961, W ashington, 1961. 8 tional commodity prices clouds the outlook for U.S. steel exports (as well as other ex ports) to the non-industrialized countries. In this connection, the U.S. and other major in dustrialized countries of the world have a common problem as contrasted with the price competition among themselves. In short, the non-industrialized nations as a group are facing increasing difficulties in paying for steel as well as other imports. The non-industrialized countries mainly produce prim ary commodities, i.e., industrial raw materials and raw foodstuffs, for sale in world markets. W ith the notable exception of tin, most industrial raw materials, such as crude rubber, copper and nickel, as well as many foodstuffs, have declined in price (some markedly) in the past three years. Currently, prices of many im portant prim ary commodi ties which are traded in international markets are at their lowest levels in many years.(12) Although consumption of most industrial raw materials, as well as many foodstuffs, has increased during the past three years, de creased prices of those goods have had the effect of reducing the export earnings of many non-industrialized countries. Thus, in the past three years, many non-industrialized countries have been faced with their own balance of payments problems which have been met by withdrawals of foreign reserves, all types of loans, and private investments from industrialized countries. W ithout outside financial aid, the nonindustrialized countries of the world do not appear at present to have the means of gen erating the financial resources which are needed to buy an expanded volume of steel, along with related products, from the U.S., W estern Europe, or Japan. (12) See B usiness Conditions, Federal Reserve B ank of Chi cago, February 1962. Higher Farmland Prices ception of 1958, was at the highest level since h e p r i c e paid for farmland throughout 1953. The advance in net farm income, how the nation pushed sharply higher in the year ended March 1, 1962, following the someever, was not so large as to alter significantly the trend of farm land value relative to that what smaller increases which had been regis of farm income which developed after 1953. tered in the preceding two years. The results Farm land value has moved up in each year of the annual survey conducted by the U. S. since 1953 despite the fact that total net farm Department of Agriculture on March 1 of income has been below its 1953 level in each this year showed that the price of farmland year except 1958. had moved up 5 percent from the year-earlier level to a record $123 per acre.(1) That in On March 1 of this year, the price of farm crease was considerably greater than the ad land in the nation was 83 percent above the vances of 3 percent recorded in the 1960 level of the 1947-49 base period, while net survey and of 1 percent in 1961. On the other income per acre was 14 percent below the hand, the percentage increase in the year level of that period. These divergent trends ended March 1, 1962, was the same as the suggest the existence of a number of upward average annual advance in farm land prices pressures on farm real-estate values. since 1950. W ith the most recent increase, the price of farm real estate has now moved up Higher Income Through More Acres in 10 of the past 12 years, and in 26 of the It seems likely that the downdrift in net past 30 years. income of farmers has actually contributed to higher land prices. In that connection, farm It is likely that an important factor in the ers have tried to offset declining or stable renewed sharp upward movement in land margins per acre by the acquisition of ad prices was the increase in farm income in 1961. Over the longer run, the attempt by ditional acreage. In attempts to increase individual farmers to raise net income by income by enlarging the volume of business, enlarging their scale of operations has con farmers have bid aggressively for additional tinued to exert an upward influence on land land. Furthermore, in many instances, farm enlargement results in a better utilization of prices, especially in view of the fact that farmers interested in purchasing land have available labor and machinery, which serves been bidding on fewer numbers of farms as an additional incentive to buy more land. offered for sale. The importance of these factors in the ad vance of farm land prices is evident in the Net Income Up steady increase in the proportion of farm sales that involve purchase of land for the Net farm income in the U. S. in 1961 totaled enlargement of existing farms. For example, $13 billion, which was 8 percent, or $1 billion, although ten years ago only one out of four more than the 1960 level. As shown in an farm transfers represented a purchase for accompanying chart (plotted on an index enlargement, the proportion has increased basis) net income per acre thus advanced for steadily, so that by last year nearly 50 per the second consecutive year and, with the ex cent of all farm transfers were for this p u r (1) All data used herein, unless otherwise specified, are pose. from publications of the U . S. D epartm ent of Agriculture. T 9 NET INCOME AND FARM LAND VALUE (per acre) 1 947 -4 9 = 100 ----------v— --------m IN D E X 175 150 Farm ers have attem pted to offset a decline in net < 1ARAALAI MD \/ A H (o o f ft arch l) 125 s 100 - J 75 - N et income per a cre by a c quiring r additional a cre age, which has exerted upw ard pressure on farm * ir ^ c o ME land prices. 50 ’45 '47 ’49 •51 ’53 '55 '57 ’59 ’61 Fewer Farm Sales Another factor in the advance in land prices is that the amount of farm land offered for sale has been declining sharply. Dealers in farm real estate have reported a steady drop in the average number of farms listed for sale. For example, in 1955, dealers were reported having an average of 21.5 farms listed for sale; by 1958, such listings had fallen to an average of 13.0 farms; and on October 1, 1961, an average of only 6.6 farms were listed for sale. The reduced supply of land for sale is evi dent in the sharp drop in the number of transfers of farm real estate. As shown in an accompanying chart, the transfers of farm land during the year ended March 1, 1962, totaled only 150 thousand, or less than 5 per cent of all farms in the nation. At that level, the number of transfers was down 45 percent from the 1952 figure and about 66 percent from the total number of transfers in 1946 (the postwar high). This sharp decline in the number of farm transfers represents both a declining percentage of all farms being sold and a drop in the total number of farms. 10 FARM T IT L E TRANSFERS Estimated Number Per 1,000 Farms 1945 1950 1955 1960 1962 V oluntary Forced Other* T otal 51.5 37.0 31.9 30.7 28.5 2.9 1.8 2.4 2.2 2.2 15.1 13.4 12.3 14.2 15.2 69.5 52.2 46.6 47.1 45.9 * Includes inheritances, gifts, adm inistrator, and unclassified sales. As the data in the above table show, only 46 of every 1,000 farms were involved in land transfers during the year ended March 1, 1962. In 1950, the rate stood at 52 farms per 1,000, while in 1945, 70 farms per 1,000 were involved in farm land transfers. The small amount of farm land being offered for sale is also reflected in the sharp drop in the number of voluntary sales of farm prop erty.(2) As can be noted from the table, only 28.5 of every 1,000 farms were involved in a sale that did not result from the death of the farm owner, or a forced sale. Thus, in the latest year, only 62 percent of all farm trans fers represented voluntary sales; by compari (2) V oluntary sales do not include estate settlements, in heritances, gifts, foreclosures, or tax sales. son, voluntary sales in 1945 and 1955 amount ed to 74 percent and 68 percent, respectively, of all farm transfers. Due to this reduced rate and the drop in farm numbers, only 92 thousand farms throughout the nation were sold on a volun tary basis during the year ended March 1, 1962. In contrast, 138 thousand farms were involved in voluntary sales in 1955, and more than 300 thousand were sold in this manner in 1945. Reluctant Sellers I t would seem reasonable to expect that the steady rise in farm land values along with the declining or stable net income situation discussed earlier would serve as sufficient en ticement for many farmers to sell land. This view is further strengthened when it is re membered that the 1959 Census of Agricul ture showed that 40 percent of the nation’s commercial farms had gross sales in that year of less than $5,000 (less than one-third of all farms in 1959 contained 70 or more acres of land). A number of factors help to explain why many farmers are reluctant to sell their farms. First, many farm owners have sub stantial equity in their farms, and are not financially forced to sell, even though they may be so interested. This flexibility regarding time of sale is of special importance in the bargaining process, since it permits the pros pective seller to await a more attractive bid. Second, although the potential seller of farm property may be underemployed in his pres ent situation, nonfarm employment opportun ities may be at a minimum due to age or other factors; thus, selling the farm would not necessarily solve his income problem. Another contributing factor in the unwill ingness of farm owners to sell is that, in many instances, the sale of a farm would involve paying taxes on the capital gains which have accrued with the rise in farm land values. In addition, sale of the farm would require the owner to make an alternative investment with which he may not be fam ilar or which he does TRANSFERS OF FARM REAL ESTATE T h o u s a n d s of transfers 500 450 400 350 300 The to ta l num ber of transfers of farm real estate 250 200 during the year ended M arch J. 7962, was only 34 percent of the 1946 level. 150 N O TE: Numbers of transfers estimated by using the rates of transfers published by the U .S .D .A . and the numbers of farms from the Census of A griculture. Straight-line interpola tion used in determining numbers of farms in intercensal years. Rate of decline in number of farms between 1954 and 1959 carried forward for 1960 and 1961. 11 not consider as secure as farmland. It is likely that non-economic factors, such as community ties and family tradition, are also significant in the reluctance of many farmers to sell their land. Thus, any one, or some combination, of these conditions serves to reduce the amount of land offered for sale. Fewer farms on the market, coupled with continuing demand by other farmers to purchase land in order to enlarge their operations, has played an im portant p art in the steady advance in farm real-estate values. Land Values in the Fourth District The March 1 survey showed market values of farm land to be at record high levels in each of the states located wholly or partially in the Fourth Federal Reserve District. As shown in the following table, the sharpest year-to-year gain occurred in Kentucky, where land values advanced by 7 percent. The price of farm land in Ohio was the highest of the states in the Fourth District, averaging $253 per acre. PRICE OF FARM REAL ESTATE (per acre) Percent Change From Ohio Pennsylvania Kentucky West Virginia United States March 1, 1962 a year earlier $253 200 149 76 123 +4% +4 -j-7 -(-5 +5 Market Values by Class of Land Estimates of land value by major classes of land recently have been published for the first time by the U. S. Department of Agri culture.(3) As shown in the following table, the value of cropland, pastureland, and other land (chiefly woodland) varies widely among the states in the Fourth District. Crop land value in Ohio, which was the highest in the District at $229 per acre, ranked fourth among the Com Belt States. The value of cropland in California and Florida, which (3) See the June 1962 issue of “Farm R eal E state Market D evelopm ents,” U . S. Department of Agriculture. 12 VALUE OF FARMLAND BY MAJOR CLASS, 1960 (per acre) Cropland Ohio Pennsylvania Kentucky West Virginia United States T otal Land & B uildings Pasture O ther $128 86 119 46 39 $32 27 21 21 29 $229 156 132 81 177 $246 188 137 75 116 includes irrigated orchards, vineyards, and groves, was the highest in the nation at $913 and $893 per acre, respectively. Cropland in Ohio accounted for more than one-half of the $4.6 billion value of farm real estate in that state in 1960. This is due to the VALUE OF FARM REAL ESTATE, 1960 Total (in m illions) P ercen t of Total i n : CropOther Buildland Pasture Land ings Ohio $ 4,550 Kentucky 2,326 Pennsylvania 2,230 West Virginia 452 54% 29 40 19 11% 33 9 22 United States 52 20 102,292 3% 5 4 13 7 32% 33 46 46 21 large proportion of Ohio farm land devoted to field crops as well as the high per-acre value of cropland. In Kentucky and West Virginia, however, a large proportion of the land in farms is in pastureland or woodland. As a result, land not used for the production of field crops accounts for more than one-third of total farm valuation. Farm buildings account for a much larger share of total farm real-estate value of states in the Fourth District than is the case na tionally. Buildings accounted for nearly onehalf of the total valuation in Pennsylvania and West Virginia, and for approximately one-third of the total in Ohio and Kentucky. A reason that farm buildings account for a larger proportion of total value in the District is that the average farm in these states is much smaller than for the nation as a whole. In 1960, the average size of farms in the Dis trict ranged from a high of 138 acres in West Virginia to a low of 113 acres in Kentucky. In the same year, the average number of acres per farm in the U. S. amounted to 302 acres. Revised Monthly Data On Department Store Trade (Fourth District) In this connection, an average of the threem o n t h l y d a t a on department store year period 1957-59 will hereafter serve as trade published regularly in index form by the Federal Reserve System for both the the yardstick for measuring current fluctua tions rather than that of 1947-49. The choice nation as a whole and the individual Federal of 1957-59 as the new base period follows Reserve Districts have been revised. the wide usage of this three-year span for The revision has involved the use of new other national series. benchmark data, and the carrying forward he T of the reference date upon which the index numbers are based. In addition, seasonally adjusted data have been modified where changes in the seasonal pattern have been brought to light. The respective index figures are derived from monthly totals of department store sales and stocks which are estimates obtained by comparing a sample count each month with an established benchmark, i.e., with a total count taken at some earlier date. As a more recent total count becomes available, the esti mating formula must be adjusted for shifts that may have occurred in the proportion of the total which is represented by the sample between the two benchmark dates. The cur rent revision involves a shift from the 1954 Census of Business tabulations of department store data to those of 1958; it produces re vised monthly estimates for 1955 through 1958 which are in line with the actual 1958 Census count and furnishes a more recent basis for all estimates subsequent to January 1959. Accordingly, department store data in the Fourth District, from the beginning of 1955 to the present, have been adjusted to the 1958 benchmark level. The second aspect of the revision involves an advancement of the base period in terms of which the current values are expressed. In the accompanying tables, monthly index numbers of department store sales and stocks in the Fourth District are shown beginning with 1947. These figures have been adjusted to the 1958 benchmark and are stated as a percent of the base period (1957-59) which is equal to 100. The figures have thus been made comparable to corresponding current data which will be made available in each future month. Because the average of the 1957-59 period was equal to about 133% of that for 1947-49—for both sales and stocks— the revised figures (before seasonal adjust ment) are about one-fourth lower than the old ones. The seasonal pattern of the series was re examined in the light of observations for several more years than previously. The re examination was aided by the availability of modern computer equipment which permits the use of the latest methods of seasonal analysis. The revised seasonally adjusted data in the tables are “ smoother” than the values previously published. Similar adjustments for benchmark level, base period, and seasonal pattern have been made in the series for individual metropolitan areas in the Fourth District. Revised tables are available upon request to the Research Department of this bank. 13 FOURTH DISTRICT DEPARTMENT STORE SALES (daily average) (1957-59=100) Without Seasonal Ajdustment Year Jan. Feb. Mar. Apr. May June Aug. Sept. Oct. Nov. Dec. Avg. for year 61 70 62 77 76 82 75 89 75 87 72 84 96 95 88 83 124 127 121 142 73 78 74 80 1947 1948 1949 1950 50 56 60 57 54 61 60 57 67 73 66 67 69 73 79 76 73 79 77 78 69 75 69 74 Ju ly 57 63 57 75 1951 1952 1953 1954 78 67 68 63 71 64 70 63 76 74 84 64 79 80 81 83 81 82 90 78 76 82 87 80 64 64 70 65 73 77 82 75 88 86 89 84 88 93 91 88 108 108 112 106 140 152 147 153 85 86 89 83 1955 1956 1957 1958 69 73 74 74 66 72 76 69 74 85 80 83 89 87 96 86 88 91 93 92 83 90 91 88 77 79 81 82 83 88 93 95 93 102 102 99 100 98 95 99 117 122 121 118 165 170 178 187 92 96 98 98 1959 1960 1961 1962 74 80 80 84 78 81 80 81 89 86 100 93 94 110 97 114 101 104 102 111 97 100 103 88 89 94 96 98 102 103 107 109 107 112 110 130 129 140 193 198 210 104 108 110 Adjusted for Seasonal Variation 1947 1948 1949 1950 67 74 78 73 70 78 76 73 74 77 78 76 69 76 76 77 72 78 77 79 72 79 74 79 73 80 71 96 71 80 71 87 72 80 72 86 72 84 70 81 78 79 73 68 75 77 73 85 1951 1952 1953 1954 99 85 87 81 91 83 91 82 82 89 93 82 85 80 88 81 83 84 93 81 81 87 92 85 82 82 89 82 82 86 91 83 86 85 88 83 85 89 87 85 87 87 89 85 83 89 85 88 1955 1956 1957 1958 90 95 97 98 87 95 101 92 90 97 103 94 92 96 94 95 91 95 97 96 88 97 99 95 95 96 98 99 91 96 101 102 92 100 100 98 97 97 94 99 94 98 99 97 94 95 99 103 1959 98 1960 108 1961 108 1962 112 105 108 107 109 100 108 110 118 105 110 107 112 106 109 108 117 105 108 110 105 107 112 104 106 111 103 108 110 106 111 109 107 106 115 105 107 114 14 FOURTH DISTRICT DEPARTMENT STORE STOCKS (end of month) (1957-59=100) Without Seasonal Adjustment for yeai Feb. M ar. Apr. May June Ju ly Aug. Sept. Oct. Nov. Dec. 68 75 74 72 72 82 80 77 71 84 76 79 68 80 77 77 63 75 71 71 61 73 67 67 67 78 70 77 70 82 77 88 78 86 83 98 80 90 81 103 64 70 63 82 69 79 74 80 95 83 88 86 108 88 92 92 110 89 93 93 105 87 92 93 96 77 88 85 92 78 86 83 95 80 92 88 99 89 98 95 100 95 107 101 97 99 106 102 79 76 83 83 97 85 92 90 80 88 97 94 86 94 104 98 88 96 106 98 86 94 104 97 81 88 97 90 80 86 94 90 84 92 98 93 91 98 108 103 99 108 116 111 100 109 117 111 82 87 92 88 86 92 103 103 106 98 113 111 114 101 111 113 116 100 112 111 115 94 108 106 96 111 106 98 114 110 109 121 119 118 128 130 121 141 133 95 102 105 Adjusted for Seasonal Variation 69 78 76 75 68 78 76 73 68 80 72 74 67 78 75 75 67 79 75 75 68 80 73 73 69 80 73 80 67 79 73 84 69 77 74 88 71 79 72 91 72 79 71 93 98 86 91 90 103 85 90 90 104 85 90 90 103 85 90 91 102 82 93 90 101 84 93 89 98 83 95 90 94 85 93 90 89 85 95 89 87 87 93 89 90 86 92 91 84 92 101 99 85 92 103 97 85 93 103 96 85 92 103 96 86 93 103 96 87 93 101 96 86 94 101 96 87 93 102 97 87 95 102 98 88 96 102 96 90 96 102 98 98 110 111 114 98 113 110 114 100 110 113 115 100 113 111 115 100 114 111 101 116 110 101 116 111 102 114 112 103 113 114 104 120 113 105 112 115 93 102 97 101 113 112 FOURTH FEDERAL RESERVE DISTRICT “