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MONTHLY
REVIEW
Agricultural and Business Conditions
TENTH FEDERAL RESERVE DISTRICT
VoL. 34, No. 7
JULY
FEDERAL RESERVE BANK OF KANSAS CITY
31, 1949
CASH FARM INCOME AND BUSINESS PAYROLLS
Agriculture was the dominant economic activity. While the foreign market is yet of great
interest of this country in the first one significance for certain farm products-wheat and
hundred years of its existence. In that cotton and tobacco especially-prosperity on the farm
per.iod, also, the foreign market for farm products is now primarily dependent on the buying power of
was relatively much more significant than it is today. the domestic market.
As a consequence, farm conditions in America were
often greatly affected by crop and other conditions Size of Table 1 shows business and government
abroad. It was in this period the doctrine became es- Payrolls payrolls and cash farm income in the
United States for the last ten years. Cash
tablished that business prosperity in America was dependent on good times on the farm.
farm income represents the value of the products
It is doubtful if the changes that occurred in the sold off the farm and in recent years Government
American economy in the following three quarters of payments and unredeemed commodity loans are ina century are yet fully appreciated in farm communi- cluded. Cash farm income does not include the value
ties. The census of 1880 showed that, for the first of products raised and consumed directly on the farm.
The table shows that in the last decade payrolls
time, the value of manufactured products was greater
than the value of agricultural products. By 1900, the in the United States were nearly five times cash
United States had attained first place among in- farm income. Payrolls of manufacturing concerns
dustrial nations, and the value of manufactured prod- alone were nearly 70 per cent greater than cash farm
ucts had become double the value of those of agri- income. Government payrolls were greater than cash
culture. As manufacturing grew apace, so also did farm income, and trade payrolls were 74 per cent as
transportation, trade, and other types of economic great.
Growth of
Payrolls
TABLE 1
WAGES AND SALARIES BY INDUSTRY FOR THE UNITED STATES
(In millions of dollars)
Agriculture, forestry, and
fisheries .............................
Mining ....................................
Contract construction..........
Manufacturing.....................
Wholesale and retail trade.
Finance, insurance, and
real estate..........................
Transpor tation .....................
Communications and
public utilities ...................
Services.................................
Government and government enterprises ..............
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
10-Yr.
Aver.
3,327
3,344
7,208.
46,471
25,749
3,042
2,918
5,834
42,510
22,875
2,795
2,368
4,411
36,475
19,517
2,528
2,173
2,951
38,229
14,638
2,398
2,197
2,888
42,913
13,016
2,192
1,983
3,919
40,883
11,862
1,786
1,769
4,670
30,922
10,958
1,323
1,540
2,889
21,714
10,322
1,108
1,287
1,709
15,584
9,010
1,086
1,137
1,546
13,585
8,366
2,159
2,072
3,803
32,929
14,631
4,808
9,685
4,299
9,047
3,923
8,478
3,141
7,888
2,875
7,525
2,725
6,547
2,606
5,260
2,498
4,261
2,359
3,635
2,287
3,429
3,152
6,575
3,801
11,753
3,287
10,951
2,825
9,745
2,209
8,344
1,994
7,643
1,886
6,817
1,778
6,039
1,681
5,309
1,543
4,895
1,469
4,614
2,247
7,611
19,121
17,498
20,878
35,561
33,463
26,819
16,089
10,165
8,454
8,224
19,627
--Total wages and salaries.... 135,267
Cash receipts from farm
marketings, including
Government payments .... 31,275
122,261
111,415
117,662
116,912
105,633
81,877
61,702
49,584
45,743
94,806
30,500
25,290
22,286
21,042
20,014
16,013
11,742
9,109
8,685
19,596
Source: Survey of Current Busin ess, U. S. Department of Commerce.
REVIEW OF AGRICULTURAL AND BUSINESS CONDITIONS
2
The seven states that are wholly or partly
in the Tenth Federal Reserve District
account for about a sixth of the total
cash farm income of the country. It is of interest to
compare the farm income of these states with the
payrolls of ten large corporations in this country. The
ten corporations selected are large ones, but not necessarily the ten largest in the country. They do, however, represent different types of business. Table 2
gives these corporate payrolls.
Corporate
Payrolls
decade, the payrolls of General Motors equaled nearly
one twentieth of the total cash farm income of the
United States.
Cash farm income in 1948 was the highest ever
known-over 31 billion dollars for the entire country
-yet the 1948 payrolls of the American Telephone
and Telegraph Company were 31 per cent larger than
the cash farm income of either Kansas or Missourithe two most important agricultural states represented in the Tenth District. The payrolls of the
TABLE 2
PAYROLL DISBURSEMENTS OF TEN CORPORATIONS
(In millions of dollars)
1948
1947
American Telephone
& Telegraph Co.*............ 1,582 1,360
General Motors Corp ......... 1,284 1,155
U. S. Steel Corp ................. 1,029
890
General Electric Co .............
593
500
The Pennsylvania
Railroad Co .......................
493
522
New York Central
System ..............................
433
394
International
Harvester Co ...................
318
267
E. I. du Pont
de Nemours & Co ...........
294
262
Standard Oil Co.
(N. J.) ..............................
265
226
F. W. Woolworth Co ........... 104
95
*The Bell System.
10-Yr.
1939 Aver.
1946
1945
1944
1943
1942
1941
1940
1,242
870
694
359
889
764
1,008 1,380
914
787
464
400
713
1,322
869
472
635
859
738
382
571
670
601
257
508
492
439
153
484
386
369
120
875
943
733
370
480
449
454
418
352
277
215
195
386
373
337
354
293
260
216
183
171
301
196
217
211
168
131
123
99
78
181
224
195
195
182
160
135
109
90
185
196
85
177
74
168
70
152
67
143
61
121
52
108
46
108
44
166
70
TABLE 3
CASH RECEIPTS FROM FARM MARKETINGS, INCLUDING GOV&RNMENT PAYMENTS
(In millions of dollars)
1948
522
1,205
1,203
1,069
179
712
154
1947
528
1,252
1,095
1,102
181
658
154
1946
407
897
893
874
151
503
124
1945
356
813
738
753
124
477
102
Seven states.......... 5,044
Illinois .................... 1,846
Iowa...................... _ 2,365
Minnesota .............. 1,367
Ohio ........................ 1,033
Texas ...................... 1,969
United States........31,275
4,970
1,921
2,410
1,353
1,007
1,966
30,500
3,849
1,481
1,796
1,108
886
1,428
25,290
3,363
1,225
1,547
901
764
1,315
22,286
Colorado................
Kansas ...................
Missouri... ..............
Nebraska ...............
New Mexico..........
Oklahoma..............
Wyoming ...............
757
697
691
110
399
95
1942
245
605
563
505
97
381
83
1941
169
418
418
306
69
274
66
3,074
1,190
1,589
894
719
1,247
20,014
2,479
985
1,276
702
607
992
16,013
1,720
737
909
507
439
770
11,742
1944
1943
323
325
3,109
1,202
1,513
839
738
1,278
21,042
746
715
656
112
460
97
In Table 3 cash farm income is given for the seven
states represented in the Tenth District. Figures are
also given for a few other important farm states.
An inspection of these tables shows that the payrolls of the General Motors Corporation alone in the
last decade were more than 31 per cent of the total
cash farm income of the seven states represented in
this District and appreciably larger than the farm
income of any one state. In the last decade the
cash farm income of only three states in this country
-Iowa, Texas, and Illinois-was larger than the payrolls of the General M.otors Corporation. In this
1940
284
300
271
62
215
54
1939
135
276
281
250
55
200
51
1,325
580
716
419
335
597
9,109
1,248
534
643
362
333
680
8,685
139
10-Yr.
Aver.
~
725
690
648
114
428
98
3,018
1,170
1,476
845
686
1,214
19,596
General Motors Corporation were also larger than the
cash farm income of either of these two states, and
the payrolls of the United States Steel Corporation
were nearly as large. The payrolls of the General
Electric Company in 1948 were larger than, and those
of The Pennsylvania Railroad Company were equal
to, the cash farm income of Colorado.
Table 4 gives a breakdown of cash
farm income for the last three years.
The table shows that the cash income
from livestock and its products in the Tenth District
Sources of
Farm Income
FEDERAL RESERVE BANK OF KANSAS CITY
is more than 50 per cent larger than the cash .income
from crops. In 1948 the payrolls of the American
Telephone and Telegraph Company were about half
the cash income from livestock and its products of
the seven states of the Tenth District. The payrolls of
the United States Steel Corporation last year exceeded the cash income from livestock and its products
of great livestock states like Minnesota and Texas.
The total payrolls of the ten corporations listed were
3
general, the payrolls of the four manufacturing concerns in the list dropped nearly two thirds.
On the other hand, the payrolls of the F. W. Woolworth Company were the most stable. It is often said
that depression does not hurt greatly the sales of the
dime stores for when incomes fall people tend, in buying certain kinds of merchandise, to drop from other
types of shops to the five-and-ten-cent stores. It is
also of interest that a service institution like the
TABLE 4
CASH FARM INCOME
{In millions of dollars)
Colorado......................
Kansas ........................
Missouri. .....................
Nebraska ....................
New Mexico ................
Oklahoma...................
Wyoming ....................
1948
243
631
300
359
67
357
43
Crops
1947
259
658
228
414
75
314
43
Seven states ...............
Illinois.........................
Iowa .............................
Minnesota ...................
Ohio .............................
Texas ...........................
United States .............
2,000
687
345
361
295
1,082
13,594
1,991
788
450
391
302
1,141
13,696
1946
167
387
187
286
64
209
29
1,319
557
310
244
252
708
10,850
nearly half as large as the cash income of the whole
country from crops and about 40 per cent of the country's cash income from livestock and its products.
The great business boom of the twenties culminated in 1929 and the bottom
of the Great Depression came in 1932.
Table 5 shows the fluctuations in payrolls of eight
corporations between 1929 and 1932, or 1933, whichever year was lower.
Payroll
Fluctuations
Livestock and
Livestock Products
1948
1947
1946
270
259
222
567
582
489
896
855
680
702
675
564
110
.93
102
349
335
276
107
107
89
3,001
1,149
2,009
996
730
871
17,425
2,915
1,122
1,948
953
696
802
16,490
Government
Payments
1948
1947
1946
. --9
71
17
12
7
20
6
12
25
9
14
24
3
4
4
6
8
17
3
4
5
2,413
888
1,440
811
605
680
13,668
43
10
11
10
8
16
65
11
12
9
10
24
257
314
112
35
45
52
27
39
772
American Telephone and Telegraph Company has
a relatively stable payroll.
To anyone interested in the American ·farm, the fluctuations in corporation payrolls are of transcendent significance. There are nearly 45 million more
people in this country than at the time of the Armistice marking the close of World War I, and the per
capita buy.ing power is larger than ever before. Meat
The Farm · and
the Factory
TABLE 5
PAYROLLS OF EIGHT CORPORATIONS
American Telephone and Telegraph Company... .
U. S. Steel Corporation..............................................
General Motors Corporation ....................................•
The Pennsylvania Railroad Company................... .
New York Central System ........................................
General Electric Company...................................... ..
International Harvester Company..........................
F. W. Woolworth Company...................................... .
*1933.
Andrew Carnegie used to say that the steel business
was e.ither a prince or a pauper. The reason for this
is, of course, that the steel business produces the most
important raw material for the heavy industries, and
prosperity and depression are characterized by activity or lack of activity in the production of durable
goods. It is s,i gnificant that the greatest fluctuations
in payrolls of these eight corporations are found in
those of the United States Steel Corporation. In
1929
$527,000,000
420,072,851
389,517,783
328,359,445
283,140,724
163,090,000
100,749,832
46,901,131
1932
$356,000,000*
133,912,809
143,255,070
148,233,236*
133,957,830*
55,287,000*
33,726,437
38,835,581
1932 or 1933
as a % of 1929
67.6
31.9
36.8
45.1
47.3
33.9
33.5
82.8
imports now exceed exports. As population and income increase, the home market more and more is
being depended upon as an outlet for the products of
the farm, and these payroll disbursements with their
great fluctuations give a vivid picture of the ups and
downs of the demand for farm products. In August,
1929, the Bureau of Agricultural Economics' .index of
farm prices stood at 152, while in February and
March, 1933, it was only 55. Between these two dates
4
REVIEW OF AGRICULTURAL AND BUSINESS CONDITIONS
total payrolls in the United States dropped over 20
billion dollars. The accompanying chart shows vividly
the close relationship between the income of industr.ial
workers and cash farm income.
No one in America has more at stake in business
prosperity than the farmer. American payrolls constitute the backbone of the farmer's market, and payrolls expand with increasing business activ.ity. Increased industrial employment is dependent on a
broadening of consumption, and a broadening of consumption hinges on a reduction of industrial costs.
There are large segments of the population bes.ides
those who receive fixed incomes from investments
whose income does not increase as industrial costs
rise. Higher industrial costs reduce the capacity of
these groups to consume and this, in turn, reduces industr.ial activity, employment, and payrolls.
THE FARM AND THE AMERICAN FACTORY
,u1 CENT
IND£X ~ [ I I S ( ... 35-31 a 100)
,ell' CENT
4 0 0 . - - - . . . . . - - - - . . - - - - . - - - . . - - - - . - - - . . . - - -........- - - - . 400
3 5 0 t - - - - + - - - t - - - - - + - - - l - - - - + -- - t - - - - - - + -
350
u. S. INCOME OF
I
3 0 0 t - - - - - + - - - - - - - + - - - - INDUSTRIAL WORKERS-....,._:
300
250
- + - - - - i 200
--+----1150
...... - - - t - - - - - - l 100
!>O
_
-
---+-------+----+---+----+----t
U. S. Department of Agriculture
50
Bureau of Agricultural Economics
BUSINESS AND AGRICULTURAL CONDITIONS
MEMBER BANK CREDIT
The .volume of outstanding loans of Distr.ict member banks increased by 17 million dollars during June.
The only other month this year in which loan volume
did not show a decline was March, and by the end of
June District member bank loan volume was 101 million dollars smaller than at the end of 1948. The loan
expansion during June was largely in country member banks, as their loans increased by 15 million dollars, or over 2 per cent, and the increase in reserve
city member bank loan volume was nominal. The
country banks experienced an active loan demand
from farmers. In the city banks, the cont.inuing decline in business loans largely offset increases in
real estate loans, consumer loans, and loans to banks.
At the end of June, District member bank loan volume
still was above the level a year earlier, but the increase was principally in the country banks. Of a net
.increase of 82 million dollars during the twelve
months, country bank loan volume accounted for 78
million.
Both city and country banks decreased their
Government security holdings during the month of
June. In the city banks, Government security holdings declined by 43 million dollars, or over 3 per cent.
A loss of deposits dur,ing the period was an important
factor leading to the liquidation of Government
securities by the city banks. In the country banks, a
decline of 12 million dollars in Government obligations
was somewhat less than the increase .in loan volume.
While Government security holdings decreased, other
security holdings expanded by 7 million dollars in the
city banks and by 2 million in the country banks.
Deposit volume declined by 32 million dollars in
District reserve city member banks during June.
There were reductions in deposits of individuals and
businesses, state and local government deposits, and
in interbank depos.i ts. In the country banks, deposit
volume was virtually unchanged for the month, showing a decrease of only 2 million dollars.
SELECTED ITEMS OF CONDITION OF TENTH DISTRICT MEMBER BANKS
(In millions of dollars)
ALL MEMBER BANKS
Loans and investments ................................... .
Loans and discounts ................................... .
U. S. Government obligations ................... .
Other securities ........................................... .
Reserve with F. R. Bank ............................... .
Balances with banks in U. S ........................ .
Cash items in process of collection............... .
Gross demand deposits ................................... .
Deposits of banks ....................................... .
Other demand deposits ............................. .
Time deposits ................................................... .
Total deposits ................................................... .
}3orrowings ....................................................... .
June 29
1949
4,157
1,407
2,357
393
824
560
229
4,835
751
4,084
674
5,509
3
May 25 June 30
1949
1948
4,186
4,164
1,390
1,325
2,412
2,471
384
368
839
. 799 . .
552
634
228
273
4,868
4,964
758
829
4,110
4,135
675
668
5,543
6,632
6
3
RESERVE CITY BANKS
June 29
1949
2,230
775
1,247
208
493
244
212
2,668
698
1,970
359
3,027
2
May 25 June 30
1949
1948
--2,236
~
2,264
773
771
1,290
1,278
201
187
498
481
238
284
211
252
2,698
2,755
704
768
1,994
1,987
361
359
3,059
3,114
4
2
COUNTRY BANKS
June 29
1949
1,927
632
1,110
185
331
316
17
2,167
53
2,114
315
2,482
1
May 25 June 30
1949
1948
1,922
1,928.
617
554
1,122
1,193
183
181
341
318
314
350
17
21
2,170
2,209
64
61
2,116
2,148
314
309
2,484
2,618
2
·1
FEDERAL RESERVE BANK OF .KANSAS CITY
BANK DEBITS
COLORADO
Colo. Springs .......
Denver ..................
Gr. Junction .........
Greeley .................
Pueblo ...................
June
6Mos. Change from '48
1949
June 6 Mos.
1949
(Percent)
(Thousand dollars)
219,996
42,002
+3
+3
2,834,180
0
484,709
-3
77,399
13,000
+4
+4
16,499
-15
106,830
-17
232,408
40,187
0
+7
KANSAS
14,026
9,195
31,923
6,537
64,865
10,350
7,017
10,987
29,520
95,754
224,815
85,864
56,046
250,003
38,016
381,498
59,480
42,017
65,409
195,365
528,133
1,308,428
-7
-3
-37
-10
-5
-8
-20
-6
-24
-5
-4
-6
-2
-10
-5
+2
-3
-11
-6
-15
+4
-3
25,629
998,304
86,989
156,789
5,915,925
524,052
-8
-11
-10
-1
-5
-9
16,041
19,805
12,638
74,938
467,482
94,125
120,479
76,771
453,332
2,668,917
-14
-10
-18
-2
-6
-5
-7
-12
-2
-4
92,506
486,639
+28
+16
140,327
37,029
4,241
23,052
306,244
5,688
18,040
477,538
800,794
i o2,838
25,098
134,550
1,778,563
38,319
101,835
2,914,511
+16
-42
-14
-1
-2
-11
- 6
-6
+36
-22
-4
25,435
29,020
162,837
168,851
-10
+2
+12
+4
District, 35 cities ..... 3,962,332
U.S., 333 cities ........ 109,068,000
23,306,297
612,846,000
-6
0
Atchison ...............
Emporia...............
Hutchinson ..........
Independence.......
Kansas City.........
Lawrence.............
Parsons .................
Pittsburg..............
Salina...................
Topeka ..................
Wichita .................
MISSOURI
Joplin ....................
Kansas City.........
St. Joseph .............
NEBRASKA
Fremont...............
Grand I sland .......
Hastings ..............
Lincoln .................
Omaha ..................
NEW MEXICO
Albuquerque........
OKLAHOMA
Bartlesville ..........
Enid ......................
Guthrie .................
Muskogee .............
Okla. City.............
Okmulgee .............
Ponca City...........
Tulsa.....................
-2
+1
-3
-16
+3
WYOMING
Casper..................
Cheyenne ..............
measured against a record high in 1948, has been
rather moderate, and dollar volume is still more than
three times the prewar average. Part of the downturn in sales this year reflects lower prices. Unit
sales in some lines, especially "soft" goods such as
apparel, are equal to or above a year ago, but dollar
volume has been adversely affected by price reductions and by a shift in consumer demand to lowerpriced merchandise. It is significant that sales in the
basement store tend to show greater year-to-year
gains, or smaller decreases, than sales in the comparable main store departments. The most pronounced declines in sales this year have generally been
in "hard" lines, especially furniture and major household appliances. A year ago, there still was a relatively
heavy backlog of accumulated demand for housefurnishings items, but consumer buying of housefurnishings this year has narrowed mainly to a replacement bas.is.
Department store inventories decreased more than
is usual during June, and the seasonally adjusted index of stocks declined from 276 per cent of the 193539 average at the end of May to 269 per cent at the
end of June. Inventories had been at a peak of 310
per cent in March of 1948 and have been declining
almost steadily since then. Stocks of merchandise on
hand June 30 this year were 11 per cent less in value
than a year ago, and the volume of outstanding orders
continues about 40 per cent under a year earlier.
Department store sales and stocks in leading cities:
SALES
-1
0
DEPARTMENT STORE TRADE
Dollar volume of sales at reporting department
stores in this Dist rict in the first half of July was
about 5 per cent under that in the corresponding
period a year ago. The rate of decline for July was
little different from the decreases of 6 per cent reported for June and for the first six months of the
year. Sales declined by the usual amount from May
to June, and the seasonally adjusted index of daily
average sales was unchanged in June at 309 per cent
of the 1935-39 average. This compares with the very
high level of 334 per cent last October, just before the
current period of weakness in sales first became apparent.
The definite downward readjustment in department store sales in 1949, as evidenced by fairly consistent declines from year-ago levels, has been accompanied by greatly intensified promotional efforts,
without which the decline conceivably would be somewhat more than .it is. Actually, the decrease in dollar
volume, which it should be remembered is being
6
Denver........................................ .
Pueblo ........................................ .
Hutchinson .................................
Topeka ....................................... .
Wichita ........................................
Joplin .......................................... .
Kansas City............................... .
St. Joseph .................................. .
Lincoln ....................................... .
Omaha........................................ .
Oklahoma City.......................... .
Tulsa ........................................... .
Other cities ................................ .
District........................................
STOCKS
June '49 6 Mos. '49 June 30, '49
comp. to comp. to comp. to
June '48 6 Mos. '48 June 30, '48
(Per cent increase or decrease)
- 5
-5
-10
-7
-9
-7
-15
-3
-7
-2
-4
-17
+1
+1
+7
-14
- 8
-14
-10
-9
-15
-10
-8
*
*
- 3
-6
+5
-8
- 9
-6
+1
-9
-8
-5
-17
*
-15
-6
- 6
-11
-4
• Not shown separately but included in District total.
INDUSTRIAL PRODUCTION
Flour
Flour trade in the Southwest established a
ten-year record during the week ended July
9, as sales climbed to 419 per cent of milling
capacity. This compares with 148 per cent .in the
previous week and 250 per cent a year ago. The purchase of 1,500,000 sacks of flour by a leading southwestern chain bakery led the buying and was followed
by large purchases by independents and other buyers,
Milling
6
REVIEW OF AGRICULTURAL AND BUSINESS CONDITIONS
who covered requirements for 120 days to six months been cut to the legal minimum of 25 barrels daily. Exahead. The news of very light wheat receipt s over the tensive above-ground stocks and oil imports were
holiday weekend, coupled with pessimistic crop re- given as the reasons necessitating this move.
ports, caught many -bakers by surprise and they imTwo oil discoveries in the Forest City basin of
mediately began replenishing their depleted inven- northeastern Kansas are receiving wide attention and
tories. For many months, most bakers had kept in- many are optimist.ic that this may prove to be a rich
ventories at a minimum ,in the expectation that new new field. Two new wells have also been completed
crop prices would be lower, but apparently a large five miles east of Gurley, Nebraska, in what may be
number have decided that there is little likelihood of an important new field for the Rocky Mountain
further price declines.
region. Considerable drilling activity is being planned
Flour prices are showing notable strength and have in both areas.
scored gains of 20 to 30 cents per hundredweight on
hard winter wheat flours dur.ing the past two weeks. Employment Unemployment rose to a seven-year
high of 3,778,000 during June as
Flour production is up and averaged better than 80
per cent of milling capacity during the first two weeks students entered the labor market. Industry was able
of July, as compared with 74 per cent for the month to absorb roughly two thirds of this influx, according
of June and 66 per cent during May. Production, to estimates of the Bureau of the Census. Employwhich during the first half of 1949 had been consider- ment was at the highest level yet this year but totaled
ably below that in 1948, ,is now approaching the 1948 about 1,500,000 less than in June, 1948. For the first
time since December, nonagricultural employment
level.
showed an increase. This was partly attributable to
1
a
continued high level of activity in the construction
Petroleum Crude oil production in the United States
industry,
and it has been reported that a record total
declined considerably during June after
leveling off through April and May, and daily average of $8,453,000,000 was spent for new construction in
crude oil output dropped 152,000 barrels in the week the first half of 1949. Construction volume was 4 per
ended July 9 to the lowest level since February, 1947. cent above the previous record high set during the
Refinery runs were little changed from May to June. first half of 1948.
In Wyoming, unemployment continued to decline
Tighter production curbs are responsible for part of
the crude output decline. State reductions in daily during June but remained about tw.ice as large as a
crude product.ion allowables for July include a cut of year ago. The outlook points to further decreases in
30,000 barrels in Kansas, 20,776 barrels .i n Oklahoma, unemployment through the summer months, with a
125,101 barrels in Texas, 44,902 barrels in Louisiana, noticeable drop when youths return to school. Job
and 10,400 barrels in Arkansas, a total curtailment opportunities at the local offices of the Wyoming
exceeding 230,000 barrels a day. These cutbacks and State Employment Service ran well ahead of June a
other declines in crude production have aided in pro- year ago, but there was more labor competing for
tecting the crude price structure. The margin be- these jobs. Total employment in the state was slightly
tween crude prices and over-all refinery prices has higher than ,in June, 1948.
narrowed rapidly during the past year, however, and
The employment situation in Kansas is somewhat
there is currently a great deal of confusion in petro- more favorable than that of the nation, even though
leum markets over the existing lack of balance be- unemployment is greater than in 1948.
Unemployment is still causing considerable concern
tween crude and refined products prices and over
in Oklahoma. Tulsa's employment outlook is the least
possible remedies for the situation.
In Wyoming, independent operators have shut favorable since the war. Unemployment increased by
down production for the summer in three fields in 1,000 from May 15 to June 15, raising the ranks of
the northeastern part of the state to avoid a threat- the jobless to approximately 5 per cent of the area's
ened cut in the posted price of $2.65 a barrel for labor force. Layoffs in local manufacturing plants,
40 degree gravity, or light, o.il. This is expected to which totaled 350, were the largest single factor in
hold back 7,000 to 8,000 barrels a day from the Mush the drop in employment, while in construction there
Creek, Fiddler Creek, and Skull Creek fields and is were 200 more unemployed. Unemployment ,is 96 per
almost certain to slow down exploration and drilling cent greater than in June, 1948.
activity in that area. Wildcat activity is increas,ing
Mining employment is down considerably in the
along the west side of the Powder River basin, how- Rocky Mountain region as well as in the Tri-State disever. On July 8, the Kansas Corporation Commission trict of Oklahoma, Kansas, and Missouri. Most operaordered a cutback in normally nonregulated areas be- tions in the Tr.i-State area have been shut down,
cause larger wells in protected fields already have estimated employment standing at about 500 as com-
FEDERAL RESERVE BANK OF KANSAS CITY
pared with approximately 3,000 on March 1. Production cutbacks, reduction of the work week, and layoffs
have been effected in Colorado and New Mexico but
generally the pattern appears to be one of curtailment
rather than complete shutdown. Small independent
operators have been the hardest hit by the drop in
metal prices. In Grant County, New Mexico, an area
accounting for most of New Mexico's metal production, three major producers have shut down, however, and unemployment totals more than 1,000.
AGRICULTURE
The deterioration of the winter wheat crop
· during June was, without doubt, the outstanding feature of the crop year to date. The acreage was
large, the crop had come through the winter in excellent shape, and moisture conditions in the early
part of the growing season had been unusually favorable. During May everything pointed to a crop that
would be one of the largest ever produced. A combination of c.ircumstances during June - circumstances already so well publicized they need not be
repeated here-reduced the crop to nearly an average
one and a crop of extremely low quality.
The July 1 estimate of the Department of Agriculture for all wheat production was 148 million bushels
lower than the estimate a month earlier. Of this
amount, 105 million bushels represented a decline .i n
the winter wheat crop and 43 million in spring wheat.
The greatest deterioration in the crop occurred in
Kansas, the July 1 estimate being 28 per cent under
that of June 1. The reduction of the Oklahoma crop
was placed at 17 per cent, and that of Nebraska at 8
per cent. The estimate for Colorado was raised 5
million bushels, or 13 per cent. The deterioration
estimated by the Department of Agriculture was more
moderate than that of most local crop reporters.
Many observers believe that the winter wheat crop
is more nearly 200 million bushels under the June 1
estimate, a shrinkage approximately twice that reported by the Department of Agriculture.
The drop in production is only one of the factors
reducing the value of the wheat crop. The amount of
lightweight wheat undoubtedly is of record proportions. Competent observers are of the opinion that
more than half of the Kansas crop will test under 55
pounds. While the shrinkage both in bushels and in
value has been great, it st.ill remains true that the
wheat crop is a large and valuable one in terms of
average conditions. Reflecting the unfavorable turn
in crop conditions, the price of wheat has risen moderately.
The July 1 corn estimate of the Department of Agriculture of 31/2 billion bushels indicates the second
largest crop of record. The corn acreage in the United
Crops
7
States is virtually unchanged from a year ago, but
the crop is estimated to be 3 per cent under last year's
record one. However, present acreage is somewhat
below the average as soybeans and other crops have
tended to compete with corn in recent years. Favorable moisture conditions and higher-yielding varieties account for the large indicated crop. Another
large corn crop on top of last year's phenomenal one,
together with a very large amount of lightweight
wheat, assures an unusually large amount of feed for
livestock and poultry.
Sugar beet acreage in the Tenth District ,is little,
if any, larger than the small acreage last year. Some
areas report that plantings this year were somewhat
smaller than a year ago but that abandonment has
been less. In Colorado, plantings were 2 per cent
higher but, because of low abandonment, acreage
for harvest will be 18 per cent larger. The Department of Agriculture states that beets in northern
Colorado are making an unusually fine showing and
that yields per acre should be much above average. A
crop in Colorado of 1,769,000 tons .is indicated, an increase of 28 per cent from the small harvest of 1948.
Labor is generally in adequate supply and the use of
machinery in cultivating and harvesting beets is
said to be increasing rapidly.
The unsatisfactory acreage of this year and last .is
attributed mainly to a shift to more profitable crops.
Not only have other crops been more profitable but
farmers continue of the opinion that prices of these
competing crops w.ill remain high and consequently
they are reluctant to plant sugar beets. Depending
upon location, beets in Colorado have had to compete
with beans, potatoes, grains, and truck crops. In
western Nebraska corn has tended to supplant beets,
and around Garden City, Kansas, beets have met increasing competition from wheat.
Pastures and ranges have seldom been
better and cattle are in splendid condition. Considerable uneasiness is reported among
cattlemen regarding fall prices because of the large
supplies of pork that are in prospect. The tendency,
consequently, is to market grass-fed cattle early.
The spring pig crop of 59 million head was 15 per
cent larger than the one a year earlier and prospects
are for a fall crop of 37 million pigs. The corn-hog
ratio is favorable to hog production and another large
corn crop following so closely the record one of last
year will greatly stimulate hog numbers. The Department of Agriculture states that, at the heavier
slaughter weights of recent years, 96 million hogs in
1949 would permit pork consumption per person in
1950 of approximately 75 pounds, the highest in 40
years except for 1943 and 1944.
Livestock
8
REVIEW OF AGRICULTURAL AND BUSINESS CONDITIONS
NATIONAL SillAMARY OF BUSINESS CONDITIONS
INDUSTRIAL. PRODUCTION
PMY'SCAL VOllME SCASOHALLY ADJUSttD, 19J5• lt• 100
"-1tClNT
2 5 0 - - ~ ----'-,---'~~
By the Board of Governors of the Federal Reserve System
Industrial output declined further in June. Department store sales declined somewhat more than usual in this period, while sales of automobiles
were maintained in record volume. Construction contract awards increased
further. Prices of basic commodities showed some recovery from mid-June
to mid-July; the average level of all wholesale commodity prices showed little
change.
INDUSTRIAL PRODUCTION
!50 "'_ __,___
__,___
__, ' - - - _ . _ - ~ - - ~ -1939
1940
1941
1946
1947
1948
1949
F ederal Reserve indexes.
shown are for June, 1949.
Monthly figures,
!50
latest
CONSTRUCTION CONTRACTS AWARDED
MIU.IONS M OOLL.lftS
.... uoNSo,ooLLAIIS
800
1200
600
400
600
200
200
200
0
1945
1947
1949
194!5
1947
1949
F. W. Dodge Corporation data for 37 E ast ern States.
Monthly figures, latest shown are for June, 1949.
The Board's seasonally adjusted index of industrial production in June
was 169 per cent of the 1935-39 average--3 per cent lower than in May and
13 per cent below the postwar peak level reached in October and November,
1948. The decline in June reflected mainly further curtailment of output in
most durable goods industries and a marked decline in activity in the coal
mining industry. Production of nondurable goods as a group was maintained
at the reduced levels prevailing in April and May.
Iron and steel production decreased sharply in June and declined further
by mid-July. Output of open hearth steel in June was at 85 per cent of
capacity, while electric steel output, following a decline of one third from the
reduced May level, was at 39 per cent of capacity. Activity in most machinery
industries was curtailed further in June. Production of lumber and of stone,
clay, and glass products remained about 11 per cent below last year's level.
Output of passenger automobiles, which had been reduced in May by a labor
dispute at the plants of a major producer, increased considerably in June and
was at a new high rate in mid-July.
Activity in the textile industries increased somewhat in June from the
very low levels reached in May. Output of apparel wool textiles showed a
further recovery from the April low point. Production of manufactured foods
rose slightly in June. Newsprint consumption, however, decreased from the
record May rate, and activity at petroleum refineries and chemical plants also
declined somewhat.
Minerals production decreased in June reflecting largely a marked reduction in coal output as a result of a work stoppage and the beginning of the
annual vacation period. Coal output remained at a low level in July with
most mines operating three days a week. Production of crude petroleum
was curtailed slightly in June and somewhat more in early July.
CONSTRUCTION
Value of construction contracts awarded in June, according to the F. W.
Dodge Corporation, increased further to 946 million dollars as compared
with 880 million in May and 935 million in June, 1948. The increase reflected
chiefly a further rise in awards for private residential work and an expansion in awards for public utility construction. The number of new housing
units started in June totaled 100,000, according to the Bureau of Labor Statistics. This was 5,000 more than in May and equal to the postwar high
reached in May, 1948.
EMPLOYMENT IN NONAGRICULTURAL ESTABLISHMENTS
DISTRIBUTION
Value of department store sales showed somewhat more than the usual
seasonal decline in June and the Board's adjusted index was estimated to be
284 per cent of the 1935-39 average, as compared with 292 in May and 307
in June of last year. Sales in the first half of July remained near the June
level, after allowance for the usual seasonal changes.
I
TRANSPORTATION
ANO UTIL ITIES
I
I
COMMODITY PRICES
o'---l'---l'---l------'------'------'------'-~-~ o
1941
1942
1943
1944
1945
1946
1947
1948
1949
Bureau of Labor Statistics' estimates adjusted for
seasonal variation by Federal Reserve. Proprietors
and domestic servants are not included. Midmonth
figures, latest shown are for May, 1949.
Prices of nonferrous metals and some other industrial materials advanced
from mid-June to mid-July, following sharp declines in recent months. Steel
scrap prices, however, decreased further by 5 per cent. Prices of hogs and
pork showed marked seasonal increases in this period, while prices of worsted
fabrics, paints, and some other finished products were reduced.
BANK CREDIT
MEMBER BANK RESERVES AND R.ELATED ITEMS
IILLIONI Ofl' DOLUltS
30
IIONEY IN CIRCULAT__,,.,...__ ___,..-,._
- I
ft£
25 1-----+---+---
20
r
.
1
'
80LO STOCK
I
20
15
15
Required reserves of all member banks were reduced by about 800 million
dollars on June 30 with the expiration of the temporary reserve requirement
authority granted to the Board of Governors by Congress in August, 1948.
Subsequently, during the first three weeks of July, Government security holdings at the Reserve Banks declined by about one billion dollars, reflecting sales
of bills and certificates made in response to a strong market demand for
these securities.
Business loans at banks in leading cities were reduced further during
June and the first half of July, but the declines were somewhat smaller
than in other recent months. Holdings of Government securities increased by
over one billion dollars in the first half of July.
SECURITY MARKETS
~ '---'---L.----L.------'---'---'----'--~ o
1942
1943
1944
Wednesday figures,
1949.
1945
1946
1947
1948
1949
latest shown are for July 20,
Shortly before the reduction in reserve requirements, the System announced a change in open market policy. These developments were reflected
in sharp declines in yields on Government securities early in July. System
sales of bills and certificates checked this decline, but the resulting yields
were still substantially below previous levels. Prices of other securities-bonds
and common stocks-advanced steadily in the first three weeks of July.
@FedFRASER