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MONTHLY REVIEW T W E L F T H F E D E R A L R E S E R V E DI ST RI CT O c t o b e r 1954 Fe d e r a l R e s e r v e B a n k of S a n Fr a n c i s c o REVIEW OF BUSINESS CONDITIONS h e level of economic activity in the nation and the Twelfth District showed no substantial overall change from August to September. Moderate improvement in output and employment in some industrial lines, however, added a firmer tone to the general business situation than has been true in other recent months. Employment in nonfarm activities rose somewhat more than seasonally from August to September in both the nation and the District. Seasonally adjusted nonagricultural employ ment had declined in each of the preceding eleven months in the nation. With the exception of a small rise in Jan uary and a period of no change in April and May, the District’s adjusted nonagricultural employment level had fallen for thirteen months. Although a considerable portion of the nonseasonal employment expansion repre sented gains attributable to the cessation of major labor disputes, a pickup in activity in the machinery and several nondurable goods industries was a significant influence. T Substantial advances in the level of operations have taken place in the lumber industry in the Pacific North west and in northern California since striking workers returned to their jobs in mid-September. This resumption of activity in lumber production combined with a similar return to normal levels of output in the rubber industry has had a substantial effect upon the trend of employment in both the District and the nation. Possibly of more underlying significance, however, has been the recent pickup in the level of output and employment in the machinery industries. A substantial part of the weakness in the general employment situation has been concentrated in these industries along with the metals and transporta tion equipment industries. The strengthening in machin ery production, both in the District and nationally, reflects the recent rise in the rate of contract awards under the defense procurement program as well as a noticeable gain in the volume of new orders from private industrial sources. Production of electrical equipment, including the electronics segment that is quite important in some areas of the District, has continued the rise that started in July. Reversals of previous downtrends also occurred in a number of nondurable industries, although the prelim inary September data available indicate that the rise in these industries in the District may have been not much more than seasonal. Nationally the apparel, paper, chem icals, and printing industries registered small advances in employment of production workers after allowance for seasonal forces. Consum er expenditures well m aintained nationally The maintenance of a high level of consumer expendi tures on goods and services has been a major factor in keeping the current business recession within moderate bounds, in both the District and the country as a whole. Preliminary estimates indicate that on a national basis personal consumption expenditures reached new high ground in the third quarter of this year and were nearly $3.0 billion ahead of their 1953 peak. While consumer expenditures were still below 1953 peak levels for durable goods (largely owing to reduced purchases of new pas senger automobiles), outlays for nondurables and services were at new highs. The sustained high level of consumer spending is accounted for by a number of factors. Of major importance has been the growth in disposable in comes that has occurred despite a moderate downtrend in incomes before taxes. Reduced tax rates on personal incomes and sharply increased payments to individuals under unemployment insurance programs have been in strumental in the maintenance of spendable incomes. An increase in the proportion of current income devoted to consumption purposes, which rose from 91.4 percent in the fourth quarter of 1953 to 92.7 in the third quarter of this year, has also been a factor of considerable signifi cance in holding consumer expenditures at a high level. A lso in This Issue Situation and Outlook for Livestock and Livestock Products................ 131 The District Cash Farm Income S i t u a t i o n ................................136 Income Payments in the District: 1953 ........................................ 139 130 FEDERAL RESERVE B A N K OF SA N FRANCISCO District sales experience reveals similar stability While data on total consumer expenditures or total retail sales for the District are not available by which direct comparisons may be made with the nation, infor mation on District department store sales indicates that they have held at relatively high levels and have fluctuated within a fairly narrow range. Total District department store sales in the first nine months of this year were only about 4 percent under the same period last year. Perhaps more significant is the fact that seasonally adjusted sales have tended to strengthen in each of the first eight months of the year. The District seasonally adjusted index of department store sales was 109 percent of the 1947-49 average in January and 116 percent in August. A pre liminary estimate places the index at 111 percent in Sep tember, which is one point above the index for September 1953. Sales were declining, however, from May through September last year which makes the comparison appear somewhat less favorable. Stability has also been evident in nonagricultural em ployment in the District. This suggests that District con sumer incomes have roughly followed the national pat tern. Nonagricultural employment, after seasonal adjust ment, declined by only 2 percent from the peak in July of 1953 to September this year. As the same factors of tax reductions and increased unemployment insurance payments were operative in the District, it seems likely that District consumer disposable incomes have remained high and may have risen somewhat. The extended lumber strike, which involved up to 80,000 workers at its incep tion, has undoubtedly had an effect upon incomes in those areas most affected by the dispute. Sales in those areas have shown no particular weakness, however. A seasonal rise in activity in other manufacturing lines and in agri culture provided new jobs and offered temporary alterna tive employment to striking workers. In addition, at lum ber mills not directly involved in the dispute or where an early settlement was reached activity rose to unusually high levels. Thus, while the strike tended to depress in comes, its effects were offset to a considerable extent by favorable developments in other sectors and at some lum ber mills. October 1954 As has been true for consumer expenditures in the country as a whole, most of the weakness in taxable retail sales in California has been concentrated in consumer durable goods. While total taxable retail sales declined by 6 percent in the first half of 1954 compared with the same period a year ago, sales of household appliances were down more than 13 percent, homefurnishings sales de clined by almost 8 percent, and sales of new and used automobiles dropped by more than 17 percent. Substan tial declines also occurred in retail sales of farm imple ments, building materials and hardware, and in sales by trailer, boat, motorcycle, and airplane dealers. Sales vol ume of nondurable goods was generally maintained at a rate not substantially different from 1953 levels. Although down somewhat, sales declines in such groups of stores as apparel, general merchandise, grocery, and specialty shops were materially smaller than in the durable cate gories. Improvement (in the sense of a smaller decline from a year ago) was also noticeable in taxable retail sales as between the first and second quarters of the year. In the first quarter total taxable retail sales in California were off nearly 9 percent from the first quarter of 1953, while in the second quarter the sales decline from last year was less than 4 percent. The second quarter improvement was apparent in almost every merchandise line, although those commodity groups that showed the most substantial sales weakness in the earlier quarter, particularly sales of new and used automobiles, continued significantly below their 1953 sales volume. Sales of nondurables generally rose above last year’s levels in the second quarter. Sa le s experience varies considerably by major area within District Taxable retail sales decline in California While the general month-to-month pattern of depart ment store sales this year has been similar in most areas of the District for which data are available, the degree of sales decline from a year ago has varied considerably. Based upon the total value of sales for the first nine months of the year, the largest declines were concentrated in the Central Valley of California, eastern Washington, Utah, Idaho, and in Arizona. Smaller declines were gen eral in northern and southern California, Oregon, and in the western portion of Washington. The trend exhibited by total taxable retail sales in Cali fornia is roughly the same as that for department stores. According to the latest data available, total taxable retail sales in the first half of this year declined about 6 percent compared with a decline of 5 percent for department stores in the state during the same period. The taxable sales information is considerably more representative of over-all retail sales in that it includes sales of items not handled by department stores and covers sales in many areas and communities that do not have full-fledged de partment stores. A look at taxable retail sales in Cali fornia will point up the major differences in sales com pared with last year by type of commodity. In Arizona, department store sales in the first nine months of the year were 11 percent under the same period in 1953, compared with an over-all District decline for this period of 4 percent. Seasonally adjusted sales in this area of the District have declined generally throughout most of the period since June of 1953. Some moderate strengthening, however, has been noticed in the adjusted monthly index of sales for Arizona since May of this year. Most of the sales weakness apparently stems from the substantial losses of employment in manufacturing (largely in aircraft modification), difficulties associated with nonferrous metal mining, and a fairly sharp decline in the tourist trade reported for this year. In addition, October 1954 M O N T H L Y R E V IE W Arizona had the largest percentage decline in cash farm income in the first half of this year of any state in the District.1 Sales of department stores in eastern Washington, Idaho, and Utah have declined in the first nine months of this year by more than 6 percent from the same period in 1953. The larger sales decline in these areas as compared with the over-all District average reflects a combination of unfavorable factors that have affected their economies during the past year or so. Substantial declines in Federal Government employment and weakness in nonferrous metals markets which closed many of the lead and zinc mines in these areas have been particularly important. In Utah strikes in copper mining and refining were addi tional factors contributing to the sales decline, while Idaho had a drop in cash farm income second only to that of Arizona among District states. Improvement in the min ing areas may be expected as operations recover from strike interruptions and strengthening lead and zinc prices raise the level of mining activity. In the Central Valley of California a substantial drop in agricultural income has been the dominant influence in the greater than average department store sales decline in 1For a more detailed discussion, see the article in this issue entitled, “ The District Cash Farm Income Situation.” 131 the first nine months of the year. Within the District, California ranks after Arizona and Idaho in the relative size of the decline in cash farm income in the first half of this year. The areas where sales declines have been somewhat less than the over-all District average are without exception those areas with more diversified economic structures or where development is occurring most rapidly. In the case of southern California and western Washington the high degree of stability in over-all employment and some growth in aircraft employment has sustained business activity at levels not signicantly different from last year. In San Jose and northern California generally, develop ment of new industrial plants and a very high level of residential and commercial construction have been par ticularly important in maintaining over-all economic activity. In general, it should be noted that, with the exception of Arizona and some other areas of the Intermountain region, significant improvement in the level of department store sales has occurred since the first of the year. Most of the major areas of the District have shown moderate uptrends in seasonally adjusted department store sales throughout most of the months of this year and in some cases uptrends have prevailed for an even longer period. SITUATION AN D OUTLOOK FOR LIVESTOCK AN D LIVESTOCK PRODUCTS levels of production, low prices, and reduced income characterize the 1954 situation for producers of livestock and livestock products. Beef production con tinues high with prices low and about unchanged from last year. Similarly, increases in slaughter of sheep and lambs are being scored in 1954 but prices of these prod ucts have dropped sharply since mid-year. Furthermore, supplies of pork are increasing and poultry meats are plentiful. Hog prices are down somewhat from a year earlier and turkey prices, as a result of a record large national crop of birds, have fallen markedly. Production of milk and dairy products also will be unusually large in 1954 despite seasonal reductions this fall in milk out put and additional reductions in certain areas affected by drought. Farm prices of milk have been lower since April when price supports on dairy products were cut from 90 percent of parity to 75 percent. Despite price reductions, the decline of cash income from livestock and livestock products has been small this year. Small farm price reduc tions for beef have been more than offset by increases in marketings and slaughter. Cash income increases for beef, on the other hand, have nearly offset substantial reduc tions in cash incomes of dairy farmers and of poultry and egg producers. ecord R The outlook appears to indicate little improvement in the price and income situation affecting livestock and livestock products during the remainder of this year. Some slight reduction in beef slaughter may occur next year, but this will probably be more than offset by antici pated increases in output of pork. Continued high levels of milk and egg production are in prospect unless pro ducers of these products cut back herds and flocks in response to lower prices. Some small dairy producers currently are reported as having some credit and financial difficulties. Where pos sible credit agencies in working with farmers are attempt ing to resolve these difficulties through extensions of loans. Few are attempting to refinance delinquent dairy loans with real estate loans. But in some instances addi tional collateral of a nonreal character is being requested. Inefficient turkey producers also may encounter finan cial difficulties toward the end of the current marketing season. R ed meat production at near record level Combined production of red meat in 1954 will equal or exceed the record level of production last year. For the period January-August this year District and national slaughter of livestock exceeded 1953 slaughter for the same period by 4 percent and 3 percent respectively (Table 1). Lamb and mutton on a District basis and veal, both nationally and within the District, contributed most im portantly to the increased level of slaughter in the first 8 months of this year. Beef slaughter in the period Janu ary-August, 1954 also exceeded production for the same period a year earlier. The current level of beef production 132 FEDERAL RESERVE B A N K OF S A N F R A N C ISC O T able 1 P r o d u c t io n o f L iv e s t o c k a n d L iv e s t o c k P r o d u c t s w i t h C o m p a r is o n s T w e l f t h D is t r ic t a n d U n it e d S t a t e s , J a n u a r y to A u g u s t - iaii Twelfth District Red meat production (millions of lbs. live w t.) B e e f ............................................................. V e a l ............................................................ Pork .......................................................... Lam b and m utton.................................. Production Percent change from January. ,------January to August------N August 1949-53 1943-52 1954 1953 average average 2,155 + 6.2 + 4 1 . 6 138 + 1 0 .8 + 4 1 .6 449 — 9.6 — 21.0 197 + 1 1 .1 + 2 3 .7 tw Total ..................................................... 2,828 M ilk, total (millions of lb s .) ................. Butter (thousands of lb s .) ............ .. Cheese (thousands of l b s .) .................... E ggs (m illions)............................................ Chickens raised on farms1 (thousands) ............................................ Turkeys raised (thousands) Light b r e e d s ............................................ H eavy b r e e d s......................................... 8,447 83,980 45,900 4,207 Total 1954 + 3.9 + 2 5 .2 + 8.4 + 3 4 .7 + 4.1 + 7.4 ... ... ... + 1 0 .9 + 3 1 .2 + 1 2 .3 49,378 + ... — 2,159 12,736 + 1 1 .2 — 0.9 3.3 6.0 ........................ ... ..................................................... 14,895 + 0.7 ... + 3 2 .8 W o o l (thousands of l b s .) ...................... 53,865 + 0.1 ... — Red meat production (millions of lbs. live w t.) Beef ............................................................. V e a l ............................................................. Pork .......................................................... Lamb and m utton............................. , . 15,124 1,783 9,382 994 + 8.7 + 1 3 .0 — 7.2 + 3.7 + 3 9 .0 + 3 7 .0 — 11.4 + 2 0 .0 ..................................................... 26,556 + 2.7 + 1 5 .6 M ilk, total (millions of l b s .) ................. Butter (thousands of l b s .) .................... Cheese (thousands of l b s .) .................... E g gs (m illio n s )......................................... Chickens raised on farms (thousands) ........................................... Turkeys raised (thousands) Light breeds............................................ H eavy b r e e d s......................................... 88,174 1,080,450 756,025 44,433 + + + + 3.5 4.2 4.9 3.6 620,847 + ..................................................... 61,045 + 8.6 ... + 4 4 .7 W o o l (thousands of l b s .) ...................... 229,371 — 0.4 ... — 14.3 8.6 United States Total Total 1953 m ore im p r e s s iv e w h e n + 6.1 + 1 6 .8 + 1 6 .1 2.0 ... — 16.0 18,096 + 1 6 . 0 42,949 + 6.0 ... ... t h a t in m o r e b e e f w a s s la u g h t e r e d t h a n in a n y y e a r o f r e c o r d . T h i s is tr u e f o r th e D is t r ic t a s w e ll a s n a tio n a lly . O n th e o th e r h a n d , D is t r ic t a s w e ll a s n a tio n a l h o g s la u g h te r in th e fir s t 8 m o n th s o f th is y e a r w a s r u n n in g 8 to 1 0 p e r c e n t u n d e r th e le v e l o f o u tp u t in th e s a m e p e r io d la s t y e a r . A p r in c ip a l fe a t u r e o f t h e liv e s t o c k o u tlo o k th is fa ll, h o w e v e r , is f o r a s u b s ta n tia l in c r e a s e in p o r k p r o d u c tio n . Current levels of cattle a n d calf slaughter reflect recent production patterns T he r e c o r d la r g e o u tp u t o f b e e f la s t y e a r a n d in 1954 to d a te w a s m a d e p o s s ib le b y t h e r a p id in c r e a s e in n u m b e r s o f c a ttle a n d c a lv e s o n f a r m s b e t w e e n th e y e a r s 1 9 4 9 and 1953. fa rm s The w ere dem and in c re a se d a p r in c ip a l s u s ta in e d backed up by s tim u li h ig h to beef p r o d u c tio n le v e l o f c iv ilia n a d e q u a te p u r c h a s in g a id s h ip m e n ts o r fo r e ig n o f th e K o r e a n pow er, r e lie f p u r c h a s e s . W i t h w a r a n d a n in c r e a s e in w o r ld on con su m er d e m a n d f o r m e a t b y th e m ilita r y , a n d With a sharp increase in cattle slaughter in late 1952, beef cattle prices began to drop precipitously. By early 1953 beef prices received by farmers had dropped about 30 percent from the high level of such prices in 1951. Fur thermore, it appeared that cattle numbers on farms would continue to grow, as in past production cycles, for another two or three years. Last year, however, the beef industry with a minimum of Government aid nearly succeeded in halting the growth in farm production of beef. Beef slaughter increased in 1953 and 1954 beyond all reason able expectations. Cattle inventory data next January 1 may reveal a slight drop in total numbers of cattle on farms despite an exceptionally large calf crop last spring. increased rate of cattle m arketings ... ... ... it is r e m e m b e r e d red meat, cattlemen of the District and the United States found themselves with greatly enlarged herds, over stocked ranges, and weakening prices. Production in creases in areas outside the traditional beef producing regions of the United States, such as in the eastern Corn Belt, were particularly great. Lo ng continued drought has contributed to an 1 Estimate for total year 1954 with comparisons. Source: United States Department of Agriculture, Agricultural Marketing Service, Crop Reporting Board. is e v e n October 1954 an fo r e ig n th e en d s u p p lie s o f The higher than expected rate of cattle slaughter over the past two years has resulted partly from drought and poor feed conditions in some areas of the United States. These areas include the central and southern Great Plains regions, the Southwest, Utah, and Nevada. In Idaho and Utah range feed conditions on October 1, 1954 were somewhat worse than last year and rated about 8 points below the average of the last 10 years. In Nevada consid erable deterioration in range feed conditions on October 1 from a year earlier had taken place. Compared with the preceding 10 years the October 1 average range feed con dition in Nevada was rated about 18 points below average and the lowest for the date since 1934. Similarly, long continued drought currently covers most of Wyoming, eastern Colorado, Kansas, Oklahoma, much of Texas, and parts of New Mexico. Arizona, on the other hand, bene fited greatly from early fall rains and in Pacific Coast states range feed conditions are generally satisfactory. They are exceptionally good in Washington. A Federally sponsored drought aid program was re instituted last summer. Nearly 250 counties in 7 states had been designated drought disaster areas by October 1. Late in October several other counties, including 10 in Nevada and 6 in Utah, were so designated. Eligible farm ers and ranchers in drought designated counties are able to obtain feed grains below current market prices and may receive Farmers’ Home Administration loans to meet their credit needs. In addition, emergency loans have be come available to established producers and farm feeders of cattle, sheep, and goats regardless of location. In order to be eligible for such loans, however, a producer must have exhausted his ability to obtain funds from private or October 1954 M O N T H L Y REVIEW cooperative credit sources and must show that he has a reasonable chance to work out of his difficulty. Additional factors which have contributed to the large off-farm movement of cattle and calves are (1) financial difficulties and the disappearance of wide profit margins, (2) the continued relatively high level of consumer in come, (3) the beef purchase program of the Federal Gov ernment in 1953, and (4) the beef promotion efforts of the beef industry and others. Relative stability has m arked cattle prices Most of the decline in cattle prices occurred in late 1952. Since that time farm prices of beef cattle, despite the increased supply, have been remarkably stable. This year farm prices of cattle have been at or near prices of comparable periods a year earlier. Although prices of fed steers and heifers this fall have been down slightly from year earlier levels, stocker and feeder cattle prices have been above last year. With beef prices remaining relatively stable and with an increase in cattle marketings, total cash income received by beef producers has been maintained at a level slightly above the level of such income received last year. Nevertheless, profit margins remain small and in the case of some high-cost producers have disappeared entirely. Beef cattle outlook g o o d but not rosy The growth in farm inventories of cattle apparently has been stopped. There are signs that beef cow herds are being reduced in areas outside the traditional “beef cattle country/’ Relatively great increases in District as well as in national slaughter of veal and heifers seem to point toward potential reductions in other areas. These devel opments do not mean that total production of beef cattle is being cut back to any great extent. However, a small reduction in inventory numbers next January, according to the United States Department of Agriculture, is in prospect. Reductions in the rate of cattle marketings can be ex pected in November and December. Consequently, sea sonal price increases by January may be expected. Other wise, no great change in cattle prices is in prospect for the remainder of 1954. T I ndexes of able P r ices R eceived by 2 F arm ers— U n it e d S tates, S e p t e m b e r 15, 1954 (1910-14= 100) A ll farm p ro d u cts.................... All crops .................................... A ll livestock and products. . Meat a n im a ls........................ Dairy products1.................... W o o l ......................................... Poultry and eggs1............... Index ^----------- Percent change from----------Sept. 15, June 15,, Jan. 15, Sept. 15, Sept. 15, 1952 1954 1953 1954 1954 — 0.8 — 5.0 — 4.3 — 14.6 + 5.6 — 6.4 ,,.. 247 + 1.2 + 2.9 245 — 2.4 — 11.6 — 11.2 — 20.7 , . 277 — 7.4 — 10.4 — 7.4 — 20.6 253 + 10.5 — 7.7 — 7.7 — 17.6 + 5.3 0 297 — 4.2 + 1-4 . 162 — 3.6 — 23.9 — 29.9 — 28.6 1 Unadjusted for seasonal variation. Source: United States Department of Service, Agricultural Prices. Agriculture, Agricultural M arketing 133 Cattle feeders appear more confident this fall than last, following fairly satisfactory profits in feeding last winter and spring. Feeders in some regions, including most Twelfth District areas, are paying more for feeders and stockers this fall even though prices of fed cattle are a little lower. This exhibition of increased confidence appears justified. Published statistics of cattle and feed indicate that a reduced corn crop in midwestern areas may tend to prevent large increases in cattle feeding and hog production. On October 1 this year slightly fewer cattle were on feed in Illinois, Iowa, and Nebraska, the principal midwestern cattle feeding states, than on the same date in 1953. In California, however, about 41 per cent more cattle were in feedlots on October 1 than a year earlier. But since California is a meat deficit area, it is anticipated by Department of Agriculture forecasters that although profits in feeding during the season ahead prob ably will average somewhat less than in the past year they will be considerably larger than the low returns in 1952-53. It is possible that an upward trend in grass cattle prices may be initiated early in 1955. If so, however, price in creases are likely to be small. Nevertheless, it appears that even though additional adjustment in the cattle in dustry will be required for reestablishment of favorable price-cost conditions the low point in the current cycle of cattle prices probably has been reached. Increased slaughter a n d lower prices characterize the current sheep a n d lamb situation District and national increases in slaughter of lamb and sheep in the first 8 months of this year compared to the same period last year were 11 and 4 percent, respectively. The larger summer and fall volume of sheep and lamb marketings reflects both the larger 1954 lamb crop and a trend toward earlier marketings. The larger lamb crop, in turn, was made possible by a slight increase from last year in numbers of breeding ewes on farms and by a par ticularly good lamb crop percentage. For the District and the nation the 1954 lamb crop was larger than the crop of a year earlier by 4 and 3 percent respectively. With increases in both production and slaughter of lambs, the seasonal decrease in lamb prices was earlier and greater than usual. In Pacific Coast states lamb prices received by farmers began to drop in late May or early June and by September 15 had fallen about 5 cents per pound liveweight to about 11.5 percent under the price of the same date in 1953. In most other District states price reductions were somewhat smaller. Sheep and lamb prices ordinarily change along with changes in prices of beef cattle and in the same direction. A high degree of correlation between prices of these two products results partly from the predominant effect which changes in the supply of beef have on the total supply of red meat. The relatively close competitive relationship of 134 FEDERAL RESERVE B A N K OF SA N FRANCISCO the two products in consumption also is a factor. It is reasonable, in view of existing production and consump tion relationships between beef and lamb, to expect the outlook for sheep and lamb to be affected markedly by current and future developments in the cattle industry. Little substantial ch a n g e in lam b prices expected next year With a slackening in the volume of lamb marketings in late September and October lamb prices edged up season ally. Additional increases stemming from a fairly firm demand for feeder lambs and further reductions in mar ketings are in prospect for the remaining months of 1954 and until early spring. The lamb price outlook for the more distant future hinges upon changes since last spring in the size of breed ing herds on farms, the size of the 1955 lamb crop, and the supply of competitive meats. With a continued high level of cattle slaughter in prospect, probable increases next year in hog production, and relatively large pro spective supplies of white meat available, the supply of competitive meats in 1955 probably will be large. Conse quently, barring the possibility of a greatly reduced lamb crop next spring, there appears to be little prospect of substantial increases in lamb prices during the spring and summer of 1955. Increases in pork production anticipated District slaughter of hogs for the period January through August this year totaled about 10 percent less than for the same period last year (Table 1). For the year as a whole, however, the District pork production probably will exceed the 1953 total. This is true also of the nation. The spring slaughter of hogs was small both nationally and within the District, reflecting breeding herd liquidations in the period 1952-53 and a small pig crop in the fall of 1953. But with District as well as national increases of about 12 percent last spring in num ber of pigs saved, hog slaughter this fall has increased markedly. Since June of this year, pork production has exceeded year-earlier levels. District slaughter of hogs in August was more than 11 percent greater than in the same month last year, and throughout the remaining fall months the slaughter rate is expected to stay above levels of the comparable period last year. Pork supplies this fall, however, will not be excessive compared with recent years and prices received by producers of hogs probably will remain relatively favorable. Cash returns to hog pro ducers in 1954, therefore, probably will compare favor ably with those received last year. However, they will be much below average levels of earlier years. The current fall pig crop is now indicated to be 14 percent above the 1953 crop in 6 Corn Belt states. The District appears slated for an increase of about 16 per cent. Even with this increase, however, District hog pro duction will remain down at least 30 percent under the October 1954 average production level of the years 1943-52. Never theless, general increases from last year in farm inven tories of pigs and a larger fall pig crop this year mean increases at least through mid-1955 in available supplies of pork. The spring slaughter of hogs in 1955 probably will be much greater than last spring’s. As a result hog prices are likely to show less than a normal seasonal re covery from the low point reached this fall. The hog price outlook for the period June-December 1955 hinges largely on the number of pigs farrowed next spring. Available supplies of competitive meat probably will be large. Consequently, a substantial increase in num ber of farrowings next spring could bring prices of slaughter pigs down to relatively low levels during the fall 1955 marketing season. Some increase in the pig crop next spring is anticipated by outlook specialists of the Department of Agriculture. However, they indicate that a smaller corn crop this year and a less favorable hogcorn price ratio has eliminated some of the incentive to increased production. W o o l production a n d prices about u n ch a n g e d from last year Wool prices received by farmers, although down sea sonally, remain about unchanged from year earlier levels. Production of wool in 1954 also is expected to be about the same as last year in the United States as well as in the District. Compared with the average level of produc tion in the period 1943-52, however, national wrool pro duction in the last two years was down about 14 percent and District production was off nearly 9 percent. An increase in price supports for the 1955 wool crop was announced by the Secretary of Agriculture on Octo ber 12, 1954. Next year wool producers will be guaran teed an average return of 62 cents a pound, grease or raw basis, compared with 53.2 cents for this year’s crop. The 1955 support rate will reflect 106 percent of the wool parity as of September 15, 1954. The increase in wool support prices was authorized in the Agricultural Act of 1954. This Act provides for the support of wool prices by means of loans, purchases, direct payments, and other methods. The support price may be as high as 110 percent of parity, but only the direct payment method of support may be used for supporting above 90 percent. The direct payment method involves a cash subsidy to wool producers equal to the difference between the actual market price and the support rate. Therefore, the full effect of the increased level of wool supports will not be felt in market prices of wool. Wool support provisions of the 1954 Act were enacted under the assumption that wool is a strategic material and for the purpose of increasing domestic wool production to 300 million pounds from this year’s 230 million pounds. M ilk, butter, a n d cheese production continues high despite drought in som e areas District as well as national production of milk increased greatly in 1953 and in the first half of 1954. The output October 1954 135 M O N T H L Y REVIEW of milk in the United States last year totaled 121 billion pounds compared with 115 billion pounds in 1952. Dis trict production increased 17 percent in 1953 to about 13 billion pounds. In the first 6 months of 1954 District and national milk production increased 10 and 5 percent, respectively, from the high levels of the corresponding period a year earlier. However, the seasonal decline this year in United States milk output from the early June peak was considerably larger than usual. Hot, dry sum mer weather in some parts of the United States was a con tributing factor. Also, the proportion of cows not milked during July and August increased more than in the same months of other recent years. This indicates the likeli hood of an increase in number of cows freshening in sub sequent months and an increase in milk output during the late fall and winter. Total milk flow during the remainder of 1954 is expected to approximate levels of a year earlier, and output for the year as a whole probably will be around 125 billion pounds or 4 billion pounds more than last year. District producers, largely unaffected by drought, maintained milk output through the fall months this year at a level about 5 percent above the fall months last year. With feed and pasture conditions reported favorable in the major milk producing regions of the District, late fall and winter production probably will continue above year earlier totals. Despite current and prospective increases in milk pro duction, several factors seem to indicate that the upward trend in milk output may soon begin to level off. Milkfeed price relationships in recent months, for instance, have been less favorable for milk production than in the T able A v e r a g e P r ic e s R e c e iv e d b y sto ck and 4 F armers D e sig n a t e d for L iv e L iv e s t o c k P r o d u c t s — M o u n t a i n a n d P a c if ic 15, 1954 S t a t e s, S eptem ber w it h C o m p a r is o n s Average prices received Percent change in prices received Sept. 15, ,-------------- Sept. 15, 1954 from--------------x ,--------- 1954— ------ \ June 15, Sept. 15, M oun✓ ---------- 1954-----------N/ ---------- 1953---------- \ Livestock or tain Pacific M ounM ounlivestock product states states tain Pacific tain Pacific Butterfat in milk (in dollars) states states states states (per l b . ) ................................. 54 .55 + 0.7 ... — 13.4 — 17.2 A ll milk whole (per c w t .) .................... 3.89 4.22 + 7.5 + 6.8 — 8.9 — 12.1 H ogs (per c w t .) .......... 20.60 22.00 — 15.6 — 17.4 — 15.2 — 12.4 Beef cattle (per cw t.) 16.10 17.40 — 5.3 — 3.9 + 4.5 + 9.4 Calves (per c w t .) ____ 16.80 17.00 — 8.2 — 13.3 + 9.8 + 6.3 Sheep (per c w t .) .......... 4.98 4.87 — 24.0 — 9.8 — 10.3 — 2.2 Lambs (per c w t .) ____ 17.70 17.20 — 14.5 — 18.1 + 4.7 + 2.4 W o o l (per l b . ) ........................53 .49 — 2.6 — 16.6 + 0.9 — 1.6 M ilk cows (per head) 170.00 184.00 — 1.2 — 0.5 — 6.6 — 7.1 Turkeys (per l b . ) ...................26 .26 — 6. 9 — 6. 9 — 17.9 — 16.3 Farm chickens (per l b . ) ................................. 18 .15 — 15.3 — 22.8 — 17.6 — 33.9 Commercial broilers (per l b . ) ................................. 28 E ggs (per d o z .) ........................40 .27 .34 — 2.8 + 1 7 .6 — 4.7 — 6.5 — 6.8 — 28.4 — 16.1 — 40.1 Source: United States Department of Agriculture, Agricultural Marketing Service, A g r ic u l t u r a l P r ic e s . p a st several y ea rs. T h e reason f o r th is is th a t in A p r il, th is y e a r , p r ic e s u p p o r ts fo r d a ir y p r o d u c ts w e r e lo w e r e d t o r e fle c t 7 5 p e r c e n t o f p a r it y r a th e r t h a n 9 0 p e r c e n t . I n a d d itio n to le s s fa v o r a b le p r ic e -c o s t r e la t io n s h ip s , s la u g h te r fig u r e s d a ir y herds m ore, such in a in d ic a te m ore num ber as h o g s, are cow s is th a t d a ir y h e a v ily of sta tes r e a d ily d e c lin in g . In fa rm e rs th is year w h ere o th e r areas be la s t. b etter a v a ila b le , th e m a y b e u n lik e ly s in c e fa r m m ay th a n c u llin g F u rth er a lte r n a tiv e s , n u m b e r o f m ilk su b s ta n tia l decreases p r ic e s o f m o s t liv e s to c k a n d liv e s to c k p r o d u c ts r e p r e s e n t p o o r a lte r n a tiv e s . R e p o r te d c r e d it a n d fin a n c ia l d iffic u ltie s a m o n g s m a ll d a ir y f a r m e r s T able 3 of P r o d u c t io n o f M i l k , B u t t e r , a n d C h e e s e — V a r i o u s P e r io d s i n 1954 C o m p a r e d w i t h P r o d u c t io n i n C o r r e s p o n d in g P e r io d s i n E a r l i e r Y e a r s T w e l f t h D is t r ic t a n d U n it e d S t a t e s th e T w e lfth D is tr ic t and e ls e w h e r e , h ow ever, m ay r e s u lt in s c a t t e r e d c a s e s o f fo r c e d liq u id a t io n . N e v e r t h e le s s , D e p a r t m e n t o f A g r ic u l t u r e o u t lo o k s p e c ia lis ts in d i c a te th a t m ilk p r o d u c t io n n e x t y e a r w ill c o n t in u e a t a b o u t th e s a m e h ig h le v e l o f t h is y e a r a n d t h a t t h e r e w ill b e lit t le , ,----------Twelfth District---------^ , ----------- United States----------- ^ Percent Percent change from change from corresponding corresponding Milk production •-----period in— ^ , period in— (millions of lbs.) 1943-52 1943-52 or or 1953 Production 1953 1948-521 Production 1953 1948-521 January-August 7,791 ... 4- 2.2 85,154 ... + 2.5 July-August . . . 2,090 ... + 3.5 22,002 ... — 0.5 August 1,015 ... -t- 4.9 10,624 ... + 0.9 p r ic e s o f m ilk . W i t h th e d e c lin e s in c e J u n e in th e n a tio n a l a n n u a l r a te o f m ilk o u tp u t a n d a s lig h t in c r e a s e in c o n s u m p tio n of flu id m ilk , n a tio n a l p r o d u c tio n o f b u tte r a n d c h e e s e sin c e m id -J u ly h a s b e e n b e lo w a y e a r e a r lie r . G o v e r n m e n t p u r c h a se s o f th e s e ite m s d u r in g th is p e r io d h a v e b e e n ju s t a little o v e r h a lf t h o s e o f a y e a r e a r lie r . P u r c h a s e s o f n o n fa t 1954 January-August July-August . . . August ............... if a n y , i m p r o v e m e n t in f a r m 8,447 2,205 1,070 + 8.4 + 5.5 + 5.4 + 1 0 .9 + 9.7 + 1 0 .5 88,174 22,119 10,494 + 3 .5 + 0 .5 — 1.2 + — 6.1 0 0.3 d r y m ilk , h o w e v e r , w e r e n e a r ly a s la r g e a s la s t y e a r . D is tr ic t p r o d u c tio n o f c h e e s e sin c e J u n e h a s c o m e fo r th in s lig h t ly s m a lle r v o lu m e th is y e a r th a n la s t b u t b u tte r Butter (thousands of lbs.) January-August. 83,980 July-August . . . 20,420 August ............... 10,050 + 3 4 .7 + 1 5 .3 + 1 7 .5 + 3 1 .2 + 2 5 .3 + 3 2 .9 Cheese (thousands of lbs.) January-August 45,900 July-August . . . 13,150 August ............... 6,375 + 4.1 — 0.3 + 1.9 + 1 2 .3 + 1 1 .0 + 1 6 .4 1,080,450 238,905 109,290 + 4 .2 — 7.4 — 8.7 + 1 6 .8 — 4.4 — - 8.2 p r o d u c tio n c o n tin u e s fir st 8 m o n t h s o f 1 9 5 4 r e la tiv e ly h ig h m o r e b u tte r th a n in th e s a m e p e r io d 756,025 + 4 . 9 183,670 — 3.7 84,245 — 5.1 + 1 6 .1 — 0.8 — 3.4 (T a b le 3 ). th e D is tr ic t p r o d u c e d 35 In th e percent of 1954. T h e com p a r a b le fig u r e f o r c h e e s e is 4 p e r c e n t b u t D is t r ic t c h e e s e p r o d u c tio n had in c r e a s e d g r e a tly — a b o u t 8 p e r c e n t — in th e fir st 8 m o n t h s o f 1 9 5 3 . 1 Ten-year period, 1943-52, employed for milk; 5-year period, 1948-52, used for butter and cheese. Source: United States Department of Agriculture, Agricultural Marketing Service, Crop Reporting Board. D a i r y m a r k e t s in r e c e n t m o n t h s h a v e im p r o v e d s lig h t ly fo r fa rm e rs but fa r m p r ic e in c r e a se s so fa r have been 136 FEDERAL RESERVE B A N K OF SAN FRAN CISCO slight because production continues to exceed use and Government stocks are large. Wholesale and retail prices continue somewhat below a year earlier. The outlook appears to call for some continued increase for the Dis trict as well as nationally in total numbers of dairy cows on farms. This means that production of milk, butter, and cheese will continue high in 1955 if weather, feed, and pasture conditions are normal. Continued drought in some areas may force liquidations but these probably will be offset by increases in other areas. Poultry and eg g production high with prices low An increased number of layers on farms, large produc tion of eggs for this time of year, and seasonally increased supplies of poultry meat are holding down prices of these commodities. Nationally, egg production on September 1 was record high for the date. District egg production in the first 8 months of this year was up 7 percent from the same period last year. In the same period numbers of layers on District farms increased 9 percent. As a result farm prices of eggs in Pacific Coast states averaged 39 cents per dozen on August 15 compared with 58 cents on the same date a year ago. Prices of medium eggs have O c to b e r 1954 declined in recent months because of the increasing pro portion of eggs laid by pullets in recent production. Prices of large eggs have shown less net change. Continued low prices and increased production appear in prospect for District egg producers at least until well into 1955. Changes in outlook after June next year depend largely on how producers react to an unfavorable egg-feed price ratio. Heavy culling and some flock liquidations next year could result in an improved fall marketing situation for eggs in 1955. Turkey prices weakened about mid-summer this year as it became evident that national fall supplies of turkey meat would be exceptionally large. For the United States the 1954 turkey crop is expected to be about 9 percent larger than the 1953 crop and to exceed the record 60 million bird crop of 1952. The District increase in turkey production from last year is small— less than 1 percent. Nevertheless, prices received by District turkey producers this fall have been 15 to 18 percent under those of a year earlier. Farm prices of turkeys in District states apparently are strongly af fected by supply-demand conditions in eastern markets. As a result inefficient District turkey producers probably will encounter financial difficulties this year. THE DISTRICT CASH FARM INCOME SITUATION income of District farmers in 1954 may be mod C erately smaller than in 1953. If so, this will mark the third consecutive annual decline of District farmers’ re turns. During the first half of 1954, District farmers re ceived considerably less income than in the first half of last year, and District cash receipts in the second half of 1954 are expected to continue below the 1953 level. The production of two high income-producing District crops, cotton and wheat, was reduced in 1954 by acreage allot ments and marketing quotas. Since a large part of the diverted cotton and wheat acreage was devoted to feed grain production in 1954, marketings of these alternative crops may be the source of an unusually large proportion ash T W E L F T H D IS T R I C T R E C E IP T S F R O M F A R M M A R K E T IN G S A N D U N I T E D S T A T E S P R IC E S R E C E I V E D B Y F A R M E R S , 1924-1953 (1 9 4 0 -1 0 0 ) 1Indicates the District trend of the volume of farm marketings. Source: United States Department of Agriculture, Agricultural Marketing Service, Agricultural Statistics and The Farm Income Situation. of District farm income during the last half of the year. Increased feed grain production also may stimulate an expansion of District livestock feeding enterprises. District cash receipts at relatively high level Examination of the current farm income situation in terms of changes from recent years does not reveal some of the long-term factors that are related to the present level of District farm income. Despite recent reductions, the volume of District cash returns from farm marketings continues at a relatively high level. District cash receipts have more than tripled during the last three decades. The upward trend of cash income over this period has been due largely to the higher prices received for farm prod ucts. The significance of price in determining the volume of cash receipts is indicated by the similar movements of cash receipts and prices (Chart 1). Farm prices in turn are affected by the general level of business activity in the nation. Since prices are such an important factor in determining the volume of cash returns from farm mar ketings, the general health of the economy becomes of primary concern to District agriculture. Although prices received by farmers and cash receipts from District marketings have been closely associated, cash receipts have increased relatively more than prices received ( Chart 1). This indicates that factors other than prices have been operating to boost farm income, and that these factors have influenced cash receipts by expanding farm output and the volume of marketings. Among these O c to b e r 1954 M O N T H L Y REVIEW additional factors have been technological and farm man agement advances, increases in crop acreage, increases in the number of animal units,1 and the growth of specializa tion in agricultural production. District cash receipts have been declining since 1951 If District cash income does decline during 1954 from the level of the previous year, it will be the third consecu tive annual decline. The paramount factors associated with this prospective reduction, however, differ from those associated with the reductions in farm income from 1951 to 1952 and from 1952 to 1953. In 1951 District cash income was at a record high level. During that year practically all circumstances seemed to favor a high level of District cash income. Inflation was affecting the general price level and farm prices reached their post-Korean peak nationally in February of 1951. Bolstered by various forms of governmental assistance, the value of agricultural exports during the year also was at a record high level. As a result of the Korean war, military demand for agricultural products remained high throughout the year. Despite an increase in personal disposable income and a larger volume of District farm marketings, District farm income declined in 1952 from the 1951 level. More than offsetting the effect of higher personal income and larger marketings was the reduced value of agricultural exports and lower farm prices. The decline of District cash in come in 1952 stemmed largely from decreased returns from the sale of livestock and livestock products, as op posed to receipts from crop marketings. The number of cattle on farms reached its peak for the current cycle in 1952 and was accompanied by an increase in cattle mar ketings. The effect of these increased marketings on farm income, however, was more than offset by lower cattle prices. Some crop prices also declined, but their effects were largely minimized by price increases for other crops. The decline of District cash receipts continued in 1953 with much of the income decline again due to the lower volume of cash income from marketings of livestock and livestock products. Personal disposable income continued to rise and a record volume of District farm products apparently was marketed during 1953. The value of agri cultural exports, on the other hand, slipped to lower levels. Farm prices again were an important income-depressing factor. In addition to lower cattle prices, dairy prices also were at a lower level than in 1952. Furthermore, crop prices were beginning to weaken, but the existence of price supports on many important field crops cushioned the over-all decline. For the entire period of 1951 through 1953, the decline of District cash income was due to the drop in farm prices, principally cattle prices. The volume of farm marketings 1This count does not include animals used for power on farms. The number of “ animal units” is not equivalent to the number of “ animals." An “ animal unit” is defined as the average sales value per herd for milk cows. Other animals are assigned unit weights either larger or smaller than “ one” and are counted accord ingly. 137 appears to have increased. Although District cash income declined from the 1951 level, the relative decline was less in the District than in the country as a whole. The prin cipal reason for this difference is that a smaller propor tion of the District than of the national cash income is derived from marketings of livestock and livestock prod ucts. Returns from farm marketings of livestock and live stock products generally are about 40 percent of the Dis trict's total cash receipts. Nationally, marketings of this type of farm product account for about 60 percent of total cash receipts. Further decline of District cash receipts indicated for 1954 In contrast to the situation in 1952 and 1953, the bulk of the income decline this year will apparently stem from reduced crop receipts. Since crop marketings are a com paratively more important source of farm returns in the District than in the nation, a reduction in total District cash receipts of somewhat more than the 4 percent pre dicted for the nation may be expected. Some of the factors that have had or are expected to have a depressing effect on District farm income during the year are reduced crop output, lower prices at the farm level, and a reduced volume of crop marketings. On the other hand, the level of disposable income and the value of agricultural exports generally have been somewhat above 1953 levels. During the first six months of 1954, District farm in come was about 11 percent lower than during the com parable period a year earlier. Cash receipts from crop marketings declined 17.4 percent compared with a decline of only 2.8 percent in farmers' returns from farm market ings of livestock and livestock products. In addition to lower crop prices, there is evidence that a reduced volume of crop marketings also contributed to the decline in cash income. With the farm price of wheat and cotton below support levels during and after harvest, price support loans were obtained on these important District crops at a rapid rate in the latter part of 1953. These compara tively heavy farm marketings did not conform to the usual seasonal pattern and probably left a relatively small pro portion of the crops to be marketed by farmers in the first half of 1954. That this was the case seems especially likely in view of the drastic decline in cash receipts from crop marketings in the District’s cotton producing states dur ing the first half of the year. Declines in crop income in District wheat producing states were not as pronounced as in the cotton producing regions. This difference in the behavior of cash income in the two areas cannot be fully explained at present owing to the absence of data concern ing cash receipts by individual crops. The relative decline in cash receipts from the first half of 1953 to the first half of 1954 was considerably larger in the District than in the nation. National cash receipts declined only 3.6 percent, while District cash receipts de clined 10.9 percent. Since a comparatively large share of District farm returns is obtained from crop marketings, the reduced volume of such marketings, lower crop prices, 138 O c to b e r 1954 FEDERAL RESERVE B A N K OF SA N FRANCISCO and the relative strength of cash receipts from livestock marketings resulted in a relatively greater decline in Dis trict farm income. The volume of District cash receipts obtained during the last half of the calendar year depends to a large extent on crop marketings. Cash income from the sale of crops generally accounts for two-thirds of the total District cash receipts received from July through December. District farm income in the second half of this year will be affected, however, by acreage allotments and marketing quotas on wheat and cotton. Although carry-over stocks of sup ported commodities have accumulated under the price support program, cash income was not greatly affected as long as output of these commodities was not curtailed. These increasing stocks of price supported commodities, however, were largely responsible for the imposition of acreage allotments and marketing quotas in 1954 on two important District crops, cotton and wheat. These acreage controls prompted a production shift to alternative crops such as feed grains. There are at least two possible ways by which this pro duction shift from wheat and cotton may reduce District cash receipts during the last half of 1954. First, in District areas specialized in their production, cotton and wheat provide more income per acre than generally results from the production of alternative crops. Secondly, a portion of the increased 1954 feed grain production may be mar keted indirectly through livestock instead of being sold outright as is common with wheat and cotton. Such a practice would reduce crop receipts if livestock feeding enterprises were expanded on the farms producing the feed grain, so that no cash transaction was involved in transferring the feed to the livestock. The shifting of cash receipts from 1954 feed grain production to livestock and livestock products not only would reduce cash income from crops in 1954 but would also tend to shift cash re ceipts from 1954 to subsequent years. The receipts from the utilization of feed grains produced in 1954 would not be realized until the animals consuming the grain were ultimately sold. In the case of feeder cattle, this sale takes T able 1 R e l a t i o n s h i p B e t w e e n S o u r c e a n d C h a n g e o f C a s h R e c e ip t s fro m F a r m M a r k e t in g s , T w e l f t h D is t r ic t , 1951 a n d 1953 Proportion of total cash receipts derived from farm marketings of livestock and livestock products 1951 38.4 A r iz o n a ................................................... ................. Percent change total cash receipts 1953 from 1951 + 10.8 — 5.7 + 0.3 W ashington ......................................... ................. Oregon .................................................. .................... 41.0 49.0 — 10.7 — 6.8 Utah 76.0 — 20.4 ....................................................... .................... — 39.1 ................... 59.8 — 5.3 — 5.6 Source: United States Department of Agriculture, Agricultural Marketing Serv- ice, Farm Income Situation. T able 2 C a s h R e c e ip ts F ro m F a r m M a r k e t in g s , T w e l f t h D is t r i c t , J a n u a r y -J u n e 1954 Percent change from January-June 1953— ^ Livestock and Crops Total prod(in thousands of dollars) ucts Crops Total 445,341 500,634 945,975 — 2.8 — 19.4 — 12.4 Livestock and livestock products California .......... . W ashington f— .......... 87,501 121,154 208,655 — 6.3 + Arizona .................... 55,319 104,852 160,171 — 0.3 — 24.8 Oregon .................... 77,697 62,481 140,178 — 5.2 — ...................... 65,600 40,015 105,615 + 1 .2 ........................ Idaho Utah 5.7 9.2 — 32.5 + 0.4 — 17.9 — 7.1 — 14.9 50,961 9,376 60,337 — 3.1 — 16.5 — 5.4 .................... 14,235 1,825 16,060 — 3.9 — 30.9 — 7.9 Twelfth D istrict.. 796,654 840,337 1,636,991 — 2.8 — 17.4 — 10.9 — 1.5 — — Nevada United S t a t e s . . .. 8,345,795 4,252,606 12,598,401 8.6 3.6 Source: United States Department of Agriculture, Agricultural Marketing Serv ice, Farm Income Situation. place from 3 to 9 months after the animals are placed on feed. The effect of the reduced District output of crops on District cash income may be partially offset by price changes during the last half of the year. Farm prices of several important District crops have been strengthening in the last few months. A continued high level of cash receipts from cattle marketings would also help to bolster farm cash receipts. Dairy, poultry, and egg prices, how ever, have had a depressing effect on farm income and are currently below their year-ago levels. Based on informa tion obtained at the Agricultural Outlook Conference in Washington, D. C. during the last week in October, Dis trict and national farm income in 1955 is expected to be somewhat lower than in 1954. Smaller wheat and cotton allotments are scheduled for next year. The support level for 1955 crop wheat also will be moderately lower than this year. Hence, incomes of wheat producers will be af fected by both smaller production and lower prices. Farm income changes during 7954 vary am ong District states There is considerable variation in the annual changes in farm income among District states. These variations depend in large part upon existing differences in the com parative importance of crops and livestock as sources of farm income in each state. Between 1951 and 1953, farm income declined in five Twelfth District states but in creased in Arizona and Washington. As indicated in Table 1, for the period of 1951-53 changes in farm income among District states were closely related to the relative importance in each state of crops and livestock as sources of farm income. Since cattle prices and receipts from cattle marketings were declining during 1952 and 1953, the most drastic income reductions occurred in those states obtaining a large share of their receipts from live stock marketings. During the first six months of 1954, cash income from farm marketings in most District states was again lower than in a like period of the previous year (Table 2 ). On the whole, the largest income declines occurred in those O c to b e r 1954 139 M O N T H L Y REVIEW states depending largely on crop marketings as a source of income. The state of Washington, however, was an excep tion. Although depending heavily on cash receipts from crop marketings, the volume of farm cash receipts in Washington increased slightly instead of declining. Re turns from apple marketings apparently maintained cash receipts in this state. On the other hand, Idaho generally receives a relatively small proportion of its farm income from crop marketings, but cash receipts in this state de clined sharply during the first half of the year. Potato prices during the first few months of 1954 were consid erably below the prices received by Idaho farmers in the first part of 1953 and accentuated the farm income decline in Idaho. The most drastic decline of cash receipts during the first half of 1954 occurred in Arizona and probably resulted from a smaller volume of cotton marketings. In 1953, cotton marketings accounted for about 60 percent of Arizona’s cash receipts from farm marketings. Since marketing quotas and acreage allotments were placed on cotton in 1954, Arizona’s cash income probably will con tinue below the 1953 level of income during the last six months of 1954. Prospects for decreased farm returns in the last half of the year are not confined to the state of Arizona. Prac tically every state in the District depends heavily on the income from marketings of either wheat or cotton, or both. Acreage allotments and marketing quotas on these two crops may be expected to result in a decrease for the year in cash receipts in most District states. Reductions may be relatively small for Utah and Nevada where cash re ceipts are derived largely from marketings of livestock and livestock products. Lower prices for these commodi ties are being offset for the most part by significant in creases in production and marketings. INCOME PAYMENTS IN THE DISTRICT: 1953 payments to individuals in the Twelfth District rose 6 percent from 1952 to 1953, reaching a record $36 billion.1 This increase, paralleling a 6 percent rise na tionally, represents an average of a somewhat wide dis persion of income changes among the seven states of the District. California— accounting for approximately 83 percent of the dollar amount of the District rise— regis tered a 7 percent gain, while at the extremes Idaho had a 3 percent decrease and Nevada a 9 percent increase in total income payments. The marked dispersion in changes in income payments among the District states (Table 1) largely reflects geographical dissimilarities in economic structure and varied developments among industries. An examination of income payments by major source indi cates that a decline in agricultural income exerted the strongest downward pull in total income payments in both the District and the country as a whole. Manufacturing payrolls, on the other hand, showed strong parallel in creases in both this region and the nation and represented I n c o m e xThis article is based primarily upon the estimates which appear in the United States Department of Commerce, S u r v e y o f C u r r e n t B u s i n e s s , August 1954, pp. 9-17. T able 1 T o t a l a n d P er C a p it a Income P aym en ts C h anges— T w elfth D is t r ic t a n d w it h P ercentage U n it e d S t a t e s , 1952 a n d 1953 Total Per capita payments------- % <f-------income payments--------, Percent Percent 1952 1953 change 1953 change f--------income 1952 (in m illion s of dollars) Arizona Idaho . Nevada Utah . . Californi Oregon 1 ,3 0 8 874 412 1 ,0 7 5 2 3 ,2 5 7 2 ,7 4 6 4 ,4 5 8 T w elfth D is tr ic t.. . 1 9 5 2 -5 3 (in dollars) 1 ,3 7 0 851 448 1 ,1 0 8 2 4 ,8 5 6 2 ,7 6 2 4 ,6 6 3 + 5 — 3 + 9 + 3 + 7 + 1 + 5 1 ,5 0 3 1 ,4 8 4 2 ,2 2 7 1 ,4 5 9 1 ,9 7 8 1 ,7 1 2 1 ,8 1 0 3 4 ,1 3 0 3 6 ,0 5 8 + 6 2 5 6 ,0 9 1 2 7 0 ,5 7 7 + 6 1 9 5 2 -5 3 1 ,4 7 3 1 ,4 1 1 2 ,1 7 5 1 ,5 1 0 2 ,0 3 9 1 ,7 2 4 1 ,8 8 2 — 2 — 5 — 2 + 3 + 3 + 1 + 4 1 ,8 9 7 1 ,9 2 9 + 2 1 ,6 4 4 1 ,7 0 9 4 -4 Note: State income statistics for 1952 have been revised by the Department of Commerce. Source: United States Department of Commerce, S u r v e y o f C u r r e n t B u s i n e s s , August 1954. the major sources of increase in total income payments during the year. Owing to a relatively larger increase in population in the District than in the nation, per capita income pay ments in the District rose by a moderate 2 percent from T a b le 2 P e rc e n ta g e D is tr ib u tio n a n d P e r c e n t C h a n g e o f T o t a l In co m e P a y m e n ts 1952 a n d 1953 b y S e le c te d C o m p o n e n ts , Agriculture -income— Per Percent cent distribution change Manufacturing -payrolls— Percent Percent distribution change Government ------ income-----Per Percent cent distribution change 1952 1953 2 5 .6 2 5 .1 3 3 .6 2 5 .3 2 8 .5 2 8 .0 2 6 .5 + 5 2 5 .4 2 2 .5 3 1 .8 2 4 .5 2 8 .4 2 6 .5 2 6 .3 6 2 7 .6 3 0 .0 2 5 .6 2 6 .0 1952 1953 1 9 5 2 -5 3 1952 1953 1 9 5 2 -5 3 1952 1953 1 8 .5 2 2 .5 8 .2 7 .4 6 .0 8 .7 6 .7 1 5 .6 1 7 .9 3 .7 5 .2 4 .6 6 .5 5 .6 — '14 — 21 — 52 — 29 — 14 — 12 + 4 7 .1 1 0 .9 4 .3 1 0 .5 1 8 .7 2 2 .0 1 8 .6 7 .6 1 1 .2 4 .3 1 1 .3 1 9 .5 2 2 .1 1 9 .1 + 14 0 + 12 + 11 + 12 0 + 7 1 9 .1 1 5 .9 1 7 .3 2 3 .1 1 8 .7 1 6 .2 2 1 .1 1 9 .4 1 7 .1 1 7 .8 2 3 .6 1 8 .6 1 5 .9 2 1 .5 + 6 + — + 6 2 Twelfth District 7 .3 5 .6 — 19 1 7 .9 1 8 .6 + 10 1 8 .9 1 8 .9 + United States 6 .7 5 .3 — 12 2 4 .5 2 5 .7 + 11 1 5 .9 1 5 .9 + 5 Area Arizona Nevada ................. Utah . . ................. California ............ Oregon ................. Washington .. 1 9 5 2 -5 3 + + Trade and -services income----Per Percent cent distribution change I 5 + 13 1 9 5 2 -5 3 Construction Mining ------ payrolls-----—pay roll s PerPer Percent Percent cent cent distribution change distribution change 1952 1953 1 9 5 2 -5 3 1952 1953 6 7 16 6 7 4 4 5 .6 5 .1 8 .6 4 .6 4 .8 4 .0 5 .2 6 .2 4 .7 9 .4 4 .2 5 .0 3 .9 5 .0 + 18 — 10 + 20 — 5 + 12 — 3 0 4 .3 2 .5 3 .9 7 .0 0 .8 0 .2 0 .3 4 .5 2 .3 4 .5 7 .3 0 .8 0 .2 0 .3 + 9 — 11 + 26 + 9 + 10 + 6 + 4 + 7 4 .9 5 .0 + 8 1 .1 1 .1 + 8 + 6 4 .1 4 .0 + 4 1 .5 1 .4 + 2 + + + + + + Note: Figures may not add to 100 percent due to rounding. State income statistics for 1952 have been revised by the Department of Commerce. Source: United States Department of Commerce, S u r v e y o f C u r r e n t B u s i n e s s , August 1954. 1 9 5 2 -5 3 140 FEDERAL RESERVE B A N K OF SA N FRAN CISCO T able 3 P e r c e n ta g e D is tr ib u tio n o f T o t a l In c o m e P a y m e n ts by Type of P a y m e n t , 1 9 5 2 -5 3 Pro prietors’ income 23.4 20.1 Property income 9.0 9.5 Other income 1953 Wages and salaries 61.8 64.2 1953 57.8 60.4 27.7 24.0 8.6 9.2 5.9 6.5 1953 63.8 67.2 19.4 15.6 12.4 12.5 4.4 4.7 17.3 8.0 1953 68.9 70.8 14.8 8.3 5.8 6.1 1953 68.1 69.1 15.0 13.9 11.1 11.2 5.8 5.8 O regon ........................... . . 1952 1953 66.4 67.2 17.0 16.3 9.3 9.7 7.3 6.7 W a s h in g t o n ................. . . 1952 1953 69.0 69.0 15.5 15.1 9.3 9.4 6.2 1953 67.6 68.6 16.0 14.7 10.5 10.7 6.0 6.0 1953 68.5 69.6 15.2 14.1 10.5 10.5 5.7 5.8 N e v a d a ........................... Utah ............................... Tw elfth District ... United S t a t e s ............ 5.7 6.3 6.6 Note: State income statistics for 1952 have been revised by the Department of Commerce. Source: United States Department of Commerce, S u r v e y o f C u r r e n t B u s i n e s s , August 1954. 1952 to 1953 compared with a national increase of 4 per cent (Table 1). Idaho had a 5 percent drop in per capita income payments which reflected a decline in total income payments as well as a moderate rise in population. Ari zona and Nevada had moderate declines in per capita in come payments but only because of population increases. Washington was the only District state in which the in crease in per capita income payments was as large as the 4 percent rise in the country as a whole. The percentage distribution of total income payments by type showred varied changes from 1952 to 1953 in both the District and the nation (Table 3 ), largely reflecting differences in developments between the agricultural and nonagricultural sectors of the economy. Proprietors’ in come, which includes the net income from unincorporated farms, showed substantial declines in Arizona, Idaho, Nevada, and Utah, all states in which agricultural income is both relatively important and also showed the largest percent declines. These four District states combined had a 12 percent decrease in proprietors’ income payments during 1953. The decline in farm income coupled with substantial rises in nonagricultural payrolls in 1953 made wages and salaries a larger fraction of total income pay ments in these four Intermountain states than in 1952. On the other hand, proprietors’ income experienced only moderate declines in both California and Oregon. In con trast to the experience in the other District states and the nation, proprietors’ income rose in Washington, largely reflecting an increase in agricultural income in that state. Agricultural income declines in District and nation For the second successive year, farmers in both the Dis trict and nation suffered declines in their income pay ments. In contrast to a smaller percentage decline in farm income in the District compared with the nation in 1952, O c to b e r 1954 agricultural income in the District decreased by a larger percentage in 1953 than in the country as a whole. All states in the District, except Washington, shared in a 19 percent decline in District farm income, with Nevada registering a very sizable drop of 52 percent. Both the District and national decreases resulted from a fall in the value of farm output (reflecting lower farm prices) which was only slightly offset by a much smaller percentage de cline in farm production expenses. Again as in 1952, varied fluctuations in agricultural income between the District and the nation and among the seven western states largely reflect differences in regional specialization in crop and livestock farming. Lower livestock and livestock product prices during 1953 coupled with unfavorable growing conditions during the summer and fall contributed to sizable declines in the income of Nevada and Utah, states receiving a large por tion of their income from livestock farming. The value of farm crop production was also moderately lower in both the District and nation. Owing to a drastic cut in prices, the value of the 1953 national potato crop was less than half that of 1952 and this contributed to a 21 percent de cline in Idaho’s agricultural income. Washington, fav ored with an exceptionally good fruit crop, had a 4 per cent rise in farm income— the only District state record ing a gain in farm income.1 Rise in District nonagricultural income parallels national trend District income payments from the nonagricultural sectors of the economy increased 7 percent from 1952 to 1953, a rise equal to that in the country as a whole. In come arising from manufacturing activities showed the largest percent gains for the year— both nationally and regionally. These gains offset the declines in farm incomes in all but one District state. Manufacturing payrolls in the District were 10 percent higher during 1953 than in 1952, compared with an 11 percent rise in the country as a whole. Despite a 54-day strike in the aircraft industry lasting from October into December 1953, California manufacturing payrolls rose about 12 percent above the 1952 figure. Payrolls in the lumber industry were about the same in 1953 as in the previous year, thereby dampen ing increases in total manufacturing incomes in the lum ber-important economies of Washington and Oregon. Income payments arising from each of the remaining major sectors of the economy during the year showed larger percentage increases in the Twelfth District than in the country as a whole. Income from governmental activity in the District was 6 percent above the 1952 figure compared with a 5 percent rise nationally. Oregon was the only District state to have a decline in government income while Nevada, at the opposite extreme, showed a 13 percent gain above 1952. The rise of 7 percent in trade and service incomes from 1952 to 1953 in the District was slightly higher than in 1 For a more complete review of Twelfth District agricultural developments during 1953 see this R e v i e w , February 1954, pp. 39-47. O c to b e r 1954 M O N T H L Y REVIEW the nation as a whole. Unlike changes in other major sources of income, all states in the District shared in this 7 percent regional increase. Nevada again had the largest gain (16 percent) among the seven District states, with trade and service incomes accounting for slightly more than one-third of its total income payments during the year. California had a 7 percent increase, while both Oregon and Washington, with 4 percent increases, had the smallest gains among the District states. Income payments from construction and mining activi ties increased substantially more in the District from 1952 to 1953 than in the country as a whole. Construction payrolls in California and Nevada, despite a 41-day strike during the year, showed sizable increases in 1953. Con struction payrolls in the District rose 8 percent compared with a 4 percent national increase, reflecting sizable per centage increases in three states (Arizona, California, and Nevada) and substantial percentage decreases in three other District states (Idaho, Oregon, and Utah). 141 Somewhat in contrast, an 8 percent climb in mining pay rolls in the District from 1952 to 1953, compared with a more moderate 2 percent rise nationally, represents in creases by all District states except Idaho.1 The differences in the patterns of change in income payments from 1952 to 1953 among the nation, District, and component District states, reflecting diverse move ments in major sources of income, suggest that regional differences in income fluctuations may be significantly associated with regional differences in economic struc ture. A review of annual fluctuations in per capita income payments over the pre- and postwar years, to be pub lished in a future issue of the Monthly Review , indicates that those states in the District deriving a large propor tion of their total income payments from agricultural activity have been, in general, also subject to wide annual swings in their per capita income payments. 1For a more complete review of Twelfth District nonagricultural developments during 1953 see this R e v i e w , February 1954, pp. 19-30. FEDERAL RESERVE B A N K OF SAN FRANCISCO O c to b e r 1954 BUSINESS INDEXES— TW ELFTH DISTRICT1 (1947-49 average=100) In d u s t r ia l p ro d u ctio n (p h y sic a l vo lu m e )* Year and m o n th 1929 1931 1933 1935 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 Lum ber P etroleu m * C r u d e R e fin e d C e m e n t Lead* C opper* W heat flour* T o ta l C ar R e ta il n on agri T o t a l D e p ’t m f ’g food c u ltu ra l lo a d in gs store E le c t r ic e m p lo y e m p lo y ( n u m sales prices 1» s pow er b er)3 (v a lu e )2 m e n t4 m ent 80a 42a 34a 45a 61a 48a 60a 65a 77a 77a 74a 74a 61a 80a 94a 102a 104a 116a 115a 111a 119a 87 57 52 62 71 75 67 67 69 74 85 93 97 94 100 101 99 98 106 107 109 78 65 50 56 65 64 63 63 68 71 83 93 98 91 98 100 103 103 112 116 123 54 36 27 33 56 45 56 61 81 96 79 63 65 81 96 104 100 112 128 124 130 165 100 72 86 114 92 93 108 109 114 100 90 78 70 94 105 101 109 89 86 74 105 49 17 37 88 58 80 94 107 123 125 112 90 71 106 101 93 115 115 112 111 90 86 75 87 84 81 91 87 87 88 98 101 112 108 113 98 88 86 95 96 96 29 29 26 30 38 36 40 43 49 60 76 82 78 78 90 101 108 119 136 144 161 118a 113a 114a 115a 114a 109 109 109 110 109 124 126 125 121 125 134 133 137 128 120 69 73 69 69 67 110 111 112 112 104 92 101 99 98 96 122a 122a 119a 120a 124a 103a 79a 88a 109 109 108 107 107 107 106 104 121 120 118 119 123 119 118 115 114 117 116 134 143 140 143 137 60 79 76 71 67 69 63r 73 107 102 99 98 103 105 99 97 98 96 96 96 92 101 W a te rb o rn e fo re ign trade*» • E x p o r t s Im p o r ts 30 25 18 24 30 28 31 33 40 49 59 65 72 91 99 104 98 105 109 114 116 64 50 42 48 50 48 47 47 52 63 69 68 70 80 96 103 100 100 113 115 113 190 138 110 135 170 164 163 132 124 80 72 109 119 87 95 101 'ÍÓÓ 101 96 95 99 102 99 103 111 118 122 **47 60 51 55 63 83 121 164 158 122 97 100 102 97 105 122 132 139 102 68 52 66 81 72 77 82 95 102 99 105 100 101 106 100 94 97 100 101 100 “ ¿9 129 86 85 91 186 171 140 ” 57 81 98 121 137 157 200 308 168 166 163 157 158 122 122 122 121 121 139 140 141 137 138 99 98 95 97 102 114 110 111 112 109 113 114 114 113 113 127 129 133 139 141 337 368 316 287 256 163 160 171 168 174 183 179 121 121 120 120 120 120 138 137 136 136 136 137r 131r 130p 109r 107 111 111 114 114 115 115 114 114 113 113 114 114 113 113 108 156 156 157 158 141 210 271 233 232 271 237 1953 August September October November December 1954 January February March April M ay June July August 91r 73p 119r 119p 93 90 94 99 97 96 88 90 BANKING AN D CREDIT STATISTICS— TW ELFTH DISTRICT (amounts in millions of dollars) C o n d itio n Ite m s o f a ll m e m b e r b a n k s 7 Y ear and m o n th 1929 1931 1933 1935 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 U .S. Loans an d G o v ’t d is c o u n t s s e c u r it ie s T o ta l Dem and d e p osits tim e a d ju ste d 8 dep osits 2,239 1,898 1,486 1,537 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,254 2,663 4,068 5,358 6,032 5,925 7,093 7,866 8,839 9,220 495 547 720 1,275 1,270 1,323 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016 6,415 6,463 6,619 6,639 1,234 984 951 1,389 1,740 1,781 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536 9,254 9,937 10,520 10,515 1,790 1,727 1,609 2,064 2,187 2,221 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255 6,302 6,777 7,502 7,997 9,241 9,255 9,248 9,220 6,481 6,556 6,693 6,639 10,018 10,248 10,255 10,515 7,794 7,854 7,815 7,997 9,198 9,176 9,106 9,045 9,001 9,049 8,989 8,977 9,054 6,844 6,667 6,500 6,903 6,991 6,981 7,190 7,574 7,610 10,540 10,138 9,922 10,190 10,045 10,087 10,310 10,257 10,463 7,995 8,071 8,175 8,234 8,306 8,428 8,444 8,501 8,555 Bank rates on short-term b u sin e ss loan s* M e m b e r b a n k reserves a n d related It e m s 19 Reserve bank cre d it11 __ + + — + + + + + + + 3.20 3.35 3.66 3.95 4.14 + + + + C o in a n d C o m m e rc ia l T r e a su ry cu rre n cy In o p e ra tio n s12 o p e ra tio n s12 c ir c u la t io n 11 34 21 2 2 1 3 2 2 4 107 214 98 76 9 302 17 13 39 21 7 14 0 - 154 110 163 90 - 240 192 148 - 596 -1,980 -3,751 -3,534 -3,743 -1,607 - 510 + 472 - 930 -1,141 -1,582 -1,912 -3,073 + 23 + 154 + 150 + 219 + 157 -1- 276 + 245 + 420 +1,000 +2,826 +4,486 +4,483 +4,682 +1,329 + 698 - 482 + 378 +1,198 +1,983 +2,265 +3,158 113 19 137 50 - 308 391 149 432 + + + + 217 394 330 438 1 98 125 5 9 21 29 18 16 + - 308 245 213 324 148 254 307 28 170 + + + + + + + + 125 80 315 381 136 277 170 12 196 __ + + + + + + + + + + — — — — + + + Reserves B a n k d e b its 1ndex 31 cities*« ” (1 9 4 7 -4 9 100)* 6 48 18 14 3 20 31 96 227 643 708 789 545 326 206 209 65 14 189 132 39 175 147 185 287 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 2,269 2,514 2,551 42 28 18 25 32 29 30 32 39 48 60 66 72 86 95 103 102 115 132 140 150 4 7 23 26 2,425 2,449 2,476 2,551 149 142 149 158 86 2 29 7 36 15 3 7 8 2,468 2,398 2,413 2,477 2,432 2,413 2,308 2,317 2,368 146 153 158 150 143 157 145 154 152 1953 September October November December 4.17 4.19 + + + — + + 1954 January February M arch April M ay June July August September 4.12 ............. 4.14 + + + + + + — — — + + + + + 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, as follows: lumber, various lumber trade associations; petroleum, cement, copper, and lead, U .S. Bureau of Mines; wheat flour, U .S. Bureau of the Census; electric power, Federal Power Commission; nonagricultural and manufacturing employment, U .S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U .S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U.S. Bureau of the Census. * Daily average. * N ot adjusted for seasonal variation. 4 Excludes fish, fruit, and vegetable canning. * Los Angeles, San Francisco, and Seattle indexes combined. 6 Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, “ special category” exports are excluded because of security reasons. 7 Annual figures are as of end of year, monthly figures as of last Wednesday in month or, where applicable, as of call report date. * Demand deposits, excluding interbank and U .S. G ov’t deposits, less cash items in process of collection. M onthly data partly estimated. • Average rates on loans made in five major cities during the first 15 days of the month. 10 End of year and end of month figures. 11 Changes from end of previous month or year. 12 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 11 Debits to total deposits except interbank prior to 1942. Debits to demand deposits except Federal Government and interbank deposits from 1942. a — New revised series. p — Preliminary. r— Revised.
@FedFRASER