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Federal Reserve Bank of Dallas FARM and RANCH BULLETIN March 1971 PROSPECTIVE 1971 PLANTINGS FARM LABOR EXODUS SLOWS Indicated plantings of most major spring crops will be up this year, according to the U.S. Depart ment of Agriculture. These higher acreages reflect the generally strong market for crops, the added flexibility of the new farm program, a degree of uncertainty due to the corn blight situation, and generally low grain stocks. This year’s corn crop will probably be up 6 per cent, with most increases expected to occur in the Western Corn Belt. Farmers in other areas indicated their actual corn plantings will be determined by the availability of blight-tolerant seed. Upland cotton plantings are expected to be down slightly, but plantings of Pima cotton will probably be up about 35 percent. All spring wheat plantings will likely be up about 17 percent. Soybean plantings, up 7 percent from 1970, are expected to reach record levels for the eleventh consecutive year. Barley plantings are expected to rise 5 percent over 1970. Intended sorghum plantings are up 17 percent, with the major increases occurring in Kansas, Nebraska, Oklahoma, and Texas. The U.S. farm labor force declined 2.3 percent during 1970, a smaller rate than the 3.3-percent decrease during 1969. The lower rate of decline last year was due primarily to the very marked slow down in the rate of decline of hired workers, but the 1970 rate of decline of operators and unpaid family workers was also less than during the previous year. The slower rate of out-migration of farm labor in 1970 was due to several economic factors. Para mount were high unemployment rates in the nonagricultural sector, tight farm mortgage markets, and a slowdown in purchases of farm machinery. High unemployment rates in the nonagricultural sector tended to discourage the flow of all types of farm labor by limiting opportunities. The reduced level of mortgage funds in 1970 dampened the farm real estate market and probably prevented the exit of some farm operators and their families. In addi tion, the general downturn in purchases of farm machinery during 1970 slowed the trend of replac ing labor with capital in agriculture and slowed the out-migration of hired labor. INTENDED PLANTINGS OF SELECTED CROPS IN ELEVENTH DISTRICT STATES, 1971 Corn Area 1971 as Acres percent (Thousands) of 1970 Arizona ................... Louisiana................. New M e x ic o .......... Oklahoma ............... T e x a s ....................... District ............... 31 150 51 110 735 1,077 108.0% 87.0 108.0 108.0 115.0 109.0 United States1 . . . 70,088 108.2% 1 35 major producing states SOURCE: U.S. Department of Agriculture Upland cotton 1971 as Acres percent (Thousands) of 1970 230 450 135 525 5,350 1^690 11,765 95.0% 97.0 97.0 100.0 102.0 101.0 99 4% Soybeans 1971 as Acres percent (Thousands) of 1970 — 1,886 — 214 162 2,262 45,903 — 109.0% — 107.0 95.0 108.0 106.9% Grain sorghum 1971 as Acres percent (Thousands) of 1970 168 104 500 1,003 8,062 9,837 20,245 87.0% 120.0 122.0 107.0 115.0 114.0 117.1% 1 The increasing availability of mortgage money, lower interest rates, and the realization of previously postponed machinery demand will probably encour age a resumption of higher out-migration rates dur ing the current year. However, the degree of this increase will depend largely on the availability of jobs in the nonagricultural sector. NEW RURAL ENVIRONMENT ASSISTANCE PROGRAM FUNDED The U.S. Department of Agriculture has allocated $150 million of Rural Environment Assistance Pro gram (R E A P) funds among the fifty states, Puerto Rico, and the Virgin Islands. This plan replaces the Agricultural Conservation Program and will be administered by the Agricultural Stabilization and Conservation Service through its farmer-elected Committee System. According to the USDA, the emphasis of REAP is on problems of communitywide significance and projects that promise immediate impact. The pro gram is a cost-sharing arrangement with farmers bearing a substantial part (about 50 percent) of the cost. It is assumed this will not only encourage re duction of specific farm-related pollution problems but will also afford increased benefits per dollar of public expenditure. ALLOCATION OF RURAL ENVIRONMENT ASSISTANCE PROGRAM FUNDS TO ELEVENTH DISTRICT STATES Area A rizon a .................................................. Louisiana .............................................. New M e x ic o .......................................... Oklahoma ............................................ Texas .................................................... T o t a l.................................................. Amount $ 1,220,000 2,998,000 1,737,000 4,588,000 13,496,000 $24,039,000 SOURCE: U.S. Department of Agriculture FINANCIAL DEVELOPMENTS IN AGRICULTURE Total personal income received by the farm popu lation increased about 1.5 percent in 1970, well be low the gain made in the previous year. The increase in total income was due to a 3.9-percent gain in in come from nonfarm sources, as net income from farm operations declined. Net income from farm sources declined as larger production costs more than offset a small gain in cash receipts from live stock and crops. The increase in the value of farm assets also slowed last year, rising only 1.9 percent — a rate which was in marked contrast to the 1965-69 aver age gain of 5 percent. The smaller gain last year was attributable primarily to a slowdown in the rise of farm real estate values, which increased only 1.7 percent, the smallest annual gain since 1961. Im addition, nonreal estate assets increased only 2.3 percent and financial assets rose 2.5 percent, both well below their respective increases registered in the previous year. In spite of a general shortage of loanable funds and higher interest rates, agricultural debt in creased last year. Agricultural debt outstanding on January 1, 1971, totaled $58.6 billion, a $3.2 billion increase from a year earlier. The major increase in agricultural debt was for nonreal estate purposes, rising to $29.4 billion — 8.9 percent higher than a year earlier. During the same period, farm real es tate credit outstanding advanced to $29.2 billion — a 3-percent increase, which was well below the aver age gain made in the previous five years. The demand for nonreal estate credit rose p ri marily because of the continuation of the trend to replace labor and land with capital inputs, since capital inputs require additional credit. The smaller increase in real estate debt reflected a slower de- • mand for land, a general reluctance of farmers to assume long-term credit at high interest rates, and a shortage of mortgage money. In addition to these factors, most farm mortgage lenders noted a slow' down in the payoff rate of farmers, indicating that they were carrying their relatively lower cost real estate debt longer than usual in order to afford higher cost production credit. With credit markets tighter, there were substan tial shifts in sources of agricultural credit during 1970. Even though the total amount of nonreal estate credit rose last year, the amount loaned to farmers by commercial banks decreased, while pro duction credit associations, manufacturers, and dealers increased their lending of nonreal estate credit. The two major institutional lenders of farm real estate credit, insurance companies and the Farmers Home Adm inistration, decreased their holdings of such credit last year, while the growth rate of mortgage holdings by Federal land banks slowed. Individual sellers, however, financed a larger proportion of new farm mortgages in 1970, offsetting part of the decline by institutional lenders. Some of the factors that restricted growth in farm credit last year are not anticipated to do so during 1971. The cost of credit eased in the first quarter this year, and apparently the demand for both long and short-term credit has increased. Several sources indicate that loans to farmers and ranchers were at a higher level during the early part of 1971 than during the same period in 1970. Also, more encouraging to the farmer is the fact that farm prices have been generally better during the early months this year than in the comparable periods last year. However, prices of most input factors continued to rise, more than offsetting the gain in prices of farm products. cial sales is due primarily to increased demand from Western Europe and Japan, the principal foreign commercial markets for U.S. farm products. U.S. FARM EXPORTS SHOULD RECORD NEW HIGH IN 1971 The rising level of exports will affect total demand for several crops that are important to the south western economy. Cotton exports are expected to increase since stocks in many importing countries are down. However, larger U.S. production last year will probably hold prices fairly stable on the world market. U.S. wheat exports will probably show the largest increase of any crop and may total between 725 million and 750 million bushels, primarily due Agricultural exports are projected to reach a record level of over $7 billion in 1971. This will be substantially above the $6.6 billion level of last year and will surpass the previous record of $6.8 billion reached in 1967. Most of the growth is expected to occur in commercial sales, which reached a record high of $5.7 billion in 1970. The advance in commer U.S. A G R IC U L T U R A L EXPO RTS: C O M M E R C IA L AND UNDER G O V E R N M E N T P RO GRAM S BILLION D O L L A R S 8 ---------------------------------------------------- —----------- Y e a r e n d i n g J un e 3 0 1971 e s t i m a t e d SO U R C E : U.S. D e p a r t m e n t of A g r i c u l t u r e AGRICULTURAL EXPORTS FROM ELEVENTH DISTRICT STATES, FISCAL 1970 CITRUS FRUIT PRODUCTION (Thousand boxes) (Million dollars) Area Amount A rizon a ............................... Louisiana ........................... New M e x ic o ....................... O klahom a........................... Texas ................................. T o t a l ............................... Percent of national total 61.9 154.0 20.1 114.7 421.6 772.3 0.9 2.3 0.3 1.7 6.3 11.6 SO U R C E : U.S. Department of Agriculture State and crop Arizona O ran ges............ G rapefruit........ Texas O ra n ges............ G rapefruit........ Indicated 1970 1969 1968 3,800 2,900 4,760 3,160 5,380 2,510 5,100 8,500 4,200 8,100 4,500 6,700 SOURCE: U.S. Department of Agriculture NEW IRRIGATION SIPHON DEVELOPED to major declines in European and Argentine wheat production. Demand for U.S. feed grain is also ex pected to rise, but increased world competition and unusually high U.S. prices could restrict any large advance in feed grain exports. Shipments of rice, one of the major export crops of the Eleventh Fed eral Reserve District states, are not expected to increase this year because world production im proved significantly last year. A new siphon tube that automatically resumes operation after interruptions in water supply has been developed by Robert V. Worstall at the Snake River Conservation Research Center in Kimberly, Idaho. The automatic resumption of the siphon prevents ditch overflow and possible washouts with resumed water flow. Other benefits of the design in clude reduced erosion below the outlet and fewel cloggings. The tube has been designed to hold its prime from ten to 14 days, but it is critical that the inlet and outlet cups be at the same level. S E L F -S T A R T IN G IRRIG ATIO N SIPHON CASH RECEIPTS FROM FARM MARKETINGS (Dollar amounts in thousands) Area 1970 Arizona ............. $ 663,000 640,200 Louisiana ........ New Mexico .. . 393,900 Oklahoma ........ 947,700 T e x a s ... 3,100,000 Total ............. $ 5,744,900 United States $48,678,300 1969 Percent change $ 662,000 0 572,200 12 390,300 1 939,300 1 2,905,300 7 $ 5,469,100 5 $47,229,200 3 SOURCE: U.S. Department of Agriculture The developers estimate the cost of the self-start ing tube to be twice that of a conventional siphon' But the advantages of the siphon and increased con venience may justify the additional cost. Prepared by Dale L. Stansbur}'
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