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Federal Reserve Bank of Dallas FARM and RANCH BULLETIN January 1973 EXPANDING DEMAND PROMISES GOOD YEAR FOR AGRICULTURE Expanding demand promises another good year for U.S. agriculture. A third consecutive record year is expected for agricultural exports, as foreign demand is projected at some $10 bil lion for fiscal 1973, 25 percent more than in 1972. Continued growth is also expected for domestic demand on the strength of general economic growth, rising personal disposable income, and some population growth. I N D E X O F A G R IC U L T U R A L P R I C E S 1967=100 160 ——------------------------------------ Almost across the board, agricultural supplies are more in balance with demand than in any recent season. This creates a market-sensitive sit uation in which frequent price moves are likely. The disappearance of major commodity surpluses has pushed most prices above their seasonal levels. Since demand seems to be advancing ahead of supply, prices are expected to average well ahead of last year, at least through the first half of 1973. If these expectations are realized, farm income could set another record this year. Agriculture should also enjoy more predict ability in 1973. Although some adverse weather, disease, and market shifts can be expected, big shifts caused by unusual developments—such as the corn blight or Soviet grain deal—are not an ticipated this year. The details of all Government programs for 1973 are not yet firm, but it is expected that their overall intent will be to maintain the generally viable balance between supply and demand. A new agricultural act will be drafted in Congress this year, but it will not directly affect 1973 agricultural operations, which are still under the Agricultural Act of 1970. National outlook The domestic market is primary for livestock, and beef dominates the livestock market. Con sumers’ demonstrated preference for beef, as well as expanding personal income and a slight population increase, should assure continued ex pansion in demand for beef. In view of expected increases in beef production, good average farm prices for beef should be maintained. Beef production in 1972 was slowed somewhat due to expansion of beef cow herds. Cow slaugh ter fell to a record low as stockmen retained cattle for herd expansion. These enlarged herds are not likely to impact strongly on the beef market this year, although they will aid greatly in meeting growing demand in the years ahead. Pork production, under the stimulus of higher prices last year, should increase this year but at a slower rate than in 1970-71, when too rapid expansion led to sharp price declines. Lamb and mutton production will probably continue to de cline, but better prices are expected for wool and mohair as world supplies remain tight. Produc tion of broilers and turkeys is expected to in crease, but stronger prices are also anticipated. Egg production will probably decline to a level more in line with demand and thereby contribute to higher prices. Generally expanding supplies and equally ex pansive demand framed the crop picture in 1972. Anticipated surpluses of feed grains, wheat, and rice failed to accumulate, thanks to increases in demand for exports. Strong export markets for these crops are anticipated again this year. An increase is also expected in domestic demand for feed grains to supply the growing livestock feeding industries, but the foreign market still holds the greatest potential for expansion of com modity sales. Of the major crops, only cotton and soybeans appear to be somewhat out of balance. Although cotton stocks have expanded, they are not un manageable. And cotton production this year is expected to about equal offtake. The soybean supply, on the other hand, continues tight in spite of a near-record crop in 1972. In the short run, this suggests higher prices, but the longrun picture includes increasing foreign produc tion and the substitution of other products. Even greater expansion in production will be needed if soybean producers are to hold their market. A G R I C U L T U R A L P R O D U C T S M IX, 1969-71 A V E R A G E District picture FOOD GRAINS FEED GRAINS COTTON ALL OTHER CROPS OTHER LIVESTOCK DAIRY PRODUCTS MEAT ANIMALS SOURCE: U.S. Depa rtm ent of Agriculture Because of the composition of agriculture in the five Eleventh District states (Arizona, Louisi ana, New Mexico, Oklahoma, and Texas), 1973 should be an even better year for farmers and ranchers in these states than for agricultural pro ducers in the nation as a whole. The outlook for beef is about the brightest on the agricultural scene, and beef dominates agriculture in the Dis trict states. The resulting demand for feed grains —as well as strong export demand for feed grains, wheat, rice, and soybeans—will also strengthen the agricultural economy of the Southwest. Cot ton is the only major commodity for which pros pects remain uncertain. However, the existing surplus is neither oppressive nor unmanageable, and favorable prices are expected as production is brought in line with disappearance. The possibility of severe drouth can probably be excluded from the agricultural producer’s ros ter of concerns for 1973. The same moisture con ditions that plagued harvest in late 1972 will enhance prospects for this year’s crop. T O T A L F A R M I N C O M E IN D I S T R I C T S T A T E S 1 BILLION DOLLARS 10 ---------------— 1968 — ---------------------------------------------------------------------------------------------------------- 1969 1970 1971 1972 1. Arizona, L o u isian a, New Mexico, Oklahoma, and T e x a s SOURCE: U.S. Depa rtment of Agriculture CATFISH FARMERS HAVE PROBLEMS DEVELOPING MARKET, IMAGE Catfish farming, centralized in the South and particularly in the lower Mississippi basin, is a relatively new development in agriculture. It was originated in the natural catfish market as an alternative enterprise for the region’s de pressed agriculture. But catfish farmers have had problems establishing and extending markets. The negative image the catfish often arouses out side its natural home in the South has been a sig nificant barrier to market extension. Size economies Catfish farming is done largely in man-made ponds, and the size of a farm is given in terms of the surface acreage of ponds. Production from larger farms in the South can reach as much as 2,000 pounds an acre. Although catfish farm ing is an important enterprise in Texas, average yields in the state often lag behind those of some other areas. In addition, Texas markets are some what less developed. A recent study by Ronald Lacewell, Harold Jambers, and John Nichols of the Texas Agricul tural Experiment Station cites definite size econ omies for Texas catfish farming. The average investment for farms of 10 acres or less was $1,325 an acre. Larger farms averaged $640 an acre. Production costs declined, too, with in creasing size, falling from about 80 cents a pound for smaller producers to about 37 cents for larger producers. Texas catfish farmers have the facil ities to produce more, but the limited markets seem to preclude this. Part of the difference between large and small producers lies in their different markets. Many of the smaller producers are able to operate profitably by selling only to local stores and restaurants. These special markets pay higher prices, partially offsetting the higher production costs at smaller farms. But there are definite limits to these special local markets. Larger producers cannot depend on such markets, and it is assumed that they only harvest what they believe can be marketed profitably. This con tributes to their lower average per-acre yield. Market problems The fact that catfish farms are located in areas that often have an abundant seasonal supply of wild catfish also affects the market. The uneven supply of wild catfish causes significant price variation during the season and disrupts demand for farm catfish. The regional nature of demand is also limiting. A recent survey by the U.S. Department of Agri culture showed that a large number of consumers had never tasted catfish. The proportion reached two-thirds in Philadelphia. And many people as sociated catfish with poor flavor, bad water, and oily taste. A majority felt that catfish sales would improve if the name were changed. WEATHER ALWAYS AN UNCERTAINTY FOR SOUTHERN PLAINS AGRICULTURE Texas folklore offers this candid advice about weather in the Southern Plains: “If you don’t like the weather, wait ten minutes and it will change.” The Southern Plains—New Mexico, Oklahoma, and Texas—are part of a 300 to 400mile-wide belt stretching from Mexico to Canada that has been aptly termed a “meteorological battleground.” The warring air masses can pro duce drouth, torrential rains, tornados, hail, blizzards, and ice storms with astonishing rapid ity and unpredictability. Sudden temperature swings—of as much as 60 degrees in a few hours —are not at all unusual. And unexpected killing frosts are a persistent problem in the spring and fall months. Drouth frequency The most consistent feature of the generally unpredictable weather in this area is drouth. Rec ords of the past century indicate that a drouth of at least 35 days can be expected every year. Once every ten years, it is likely that the drouth period will last from 60 to 70 days. Less fre quently, the drouth lasts up to 120 days or longer. The most recent drouth in the Southern Plains lasted from the fall of 1970 until lateJuly 1971. The frequency of drouth is due to the domi nance of weather-producing air masses entering the Plains from Mexico. These winds are so hot and dry that their rain-producing potential is almost nil. When an occasional moist tropical front from the Gulf does make its way over the Plains, the resulting violent storms may dump a third or more of the average annual rainfall in a single day. Such was the case when the 197071 drouth finally broke. The early development of this area centered on livestock operations. But with the inducement of the 1862 Homestead Act and increased migra tion after the Civil War, waves of settlers entered the Plains in the 1880’s. By coincidence, this was one of the rainiest periods the region has ever had, and farming had no great difficulty getting established. The next decade, however, was one of drouth, and many of the farmers took up dry farming, or summer fallowing. Although this method had its short-term advantages, it encouraged more ex tensive cultivation and ultimately led to the infamous Dust Bowl days of the 1930’s. Conservation and irrigation Another major drouth in the 1950’s prompted Congress to pass legislation establishing a special Great Plains Conservation Program, with the major goal of getting a permanent vegetation cover back on Plains cropland, thus alleviating the high risk of wind and water erosion. In spite of the periodic setbacks, however, demand for agri cultural commodities that are generally com patible with the Southwest has grown. The development of irrigation has helped to offset some of the climatic problems. It was dis covered that large areas of the Southern Plains lay over major aquifers that could be tapped with wells. This discovery, along with the ex tensive development of reservoirs, allowed cot ton production to shift westward and allowed feed grain production to expand significantly in this area. And the expansion of feed grain pro duction has greatly aided the important livestock feeding industries of the Southwest, particularly cattle feeding. Help from science Advancements in science and technology are producing further hope for relief in the Plains. The Earth Resources Technology Satellite launched last year is supplying vast amounts of data about weather, soil, and moisture condi tions. Work is being done to develop plants more compatible with the adversities of the Plains. Analysis of the links between weather and the spread of disease and insects is also underway. Prepared by Dale L. Stansbury
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