Full text of Economic Review (Federal Reserve Bank of Cleveland) : July 1962

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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 ..

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.

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.

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

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.

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.

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.

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.

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.

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

100

- J
75

N et

income per a cre by a c
quiring

additional

a cre

age, which has exerted
upw ard pressure on farm

*
ir ^ c o ME

land prices.

’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.

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.

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

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

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

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

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 “

Full text of Economic Review (Federal Reserve Bank of Cleveland) : July 1962

FRASER