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Federal Reserve Bank of Dallas FARM and RANCH BULLETIN December 1973 SURGE IN DISTRICT FARM EXPORTS EXCEEDS NATIONAL ADVANCE Agricultural exports from the five states of the Eleventh District—Louisiana, Texas, Oklahoma, New Mexico, and Arizona—surged to $1.5 billion in fiscal 1973. The total was 72 percent more than in the previous year, compared with the rec ord 60-percent increase for the nation as a whole. The advance was boosted mainly by higher prices, a rebound in crop production in 1972 from drouth-reduced yields in 1971, and renewed world demand. The market improved for several District crops, especially cotton and rice. Exports in the year ended June 30 accounted for 21 percent of total farm marketings, up from 15 percent the previous year. Of particular inter est to the District, export sales took 70 percent of the rice crop, 77 percent of wheat production, and 23 percent of sorghum grain production. The shares of soybean and cotton production going for export advanced to 56 percent and 34 percent, respectively. All these shares were above yearearlier levels, and each of the crops is important to District agriculture. Texas led the District advance in absolute terms with $799 million of exports, over threefourths more than in 1972. The expansion of Texas agricultural exports was broad-based, with the value of wheat shipments increasing well over threefold while hides and skins and feed grains showed gains nearly as sharp. Significant in creases were also shown by shipments of cotton and rice—the state’s first and third most impor tant export crops, respectively. Texas became the nation’s third largest agri cultural exporter in fiscal 1973. Texas is the nation’s leading exporter of cotton, rice, cotton seed oil, tallow, and hides and skins. Louisiana and Oklahoma followed Texas in value of exports with $269 million and $241 million, respectively. They also represented the extremes in relative growth. Louisiana, with more stable crop pro duction over the past two export years, had only an increase of 40 percent; rice, soybeans, and cotton were the major export commodities. But Oklahoma shipments increased 133 percent with the recovery of wheat production, which accounts for over half of Oklahoma’s exports. The other major export commodities for Oklahoma include hides and skins, cotton, and feed grains. Although Arizona, with $113 million, and New Mexico, with $44 million, were the District’s V A L U E OF E L E V E N T H D I S T R I C T A G R IC U L T U R A L E X P O R T S 1970 SO UR CE : 1971 1972 1973 U.S. D e pa rtm e nt of A g r i c u l t u r e VALUE FROM OF C O M M O D ITY THE ELEVENTH EXPORTS D IS TR IC T B IL L IO N D O L L A R S smallest exporters, both had increases of about three-fifths. In both states, cotton is the leading export commodity. And Arizona was the third largest exporter of fruits and preparations in 1973. Arizona trailed only California and Florida and was ahead of Texas. The outlook for fiscal ’74 ... World demand for U.S. agricultural products is apparently still on the uptrend. The Department of Agriculture is now estimating that exports this year may reach as high as $19 billion. Even if this level is not attained, the value of shipments this year is almost certain to eclipse the record $13 billion of last year. Demand for feed grains, cotton, and soybeans is expected to advance this year, but shipments of wheat and rice may moderate. Low stocks should, however, prevent prices from tumbling. And District farmers and ranchers are producing crops and livestock at record rates this year, which will facilitate expansion of export shipments. . . . and beyond All indicators point to expanded agricultural exports in the future. The United States, with the most favorable land-climate mix in the world, has numerous comparative advantages in agricul tural production. And the organizational struc tures of both agriculture and supporting institu tions are capable of rapid response to changing markets. A large share of the basic agricultural research, especially for soybeans and feed grains, has been expressly oriented to U.S. conditions. World food needs will expand in line with pop ulation growth. Total population in 1985 is ex pected to be near 5 billion—35 percent more than in 1970. And over the same period, total world agricultural trade is expected to expand at least 60 percent—or in 1970 prices, total near $70 billion. Because of the advantages U.S. farm ers and ranchers have, they can expect to capture an increasing share of this market. 1974 PEANUT AND RICE PROGRAMS ANNOUNCED BY USDA Rising stocks of peanuts and governmental concern that rice surpluses will develop in the next two years have shaped the 1974 programs for peanuts and rice. However, legal requirements limit the Government’s flexibility in establishing the guidelines. Peanuts The Department of Agriculture has announced that marketing controls on peanuts will be con tinued in the form of quotas. Because of sur pluses in 1973, the 1974 acreage allotment will be lowered to the minimum legal level of 1.61 mil lion acres, as provided in the 1938 act. Price sup port will also be at the legal minimum—75 per cent of parity as of August 1, 1974. But in spite of these moves, stocks are expected to increase by more than 350,000 tons in 1974. To lower the cost of the program, the USDA announced four administrative changes. The changes include: • No price support for peanuts that contain aflatoxin • Elimination of allotment transfers by lease, sale, or owner privileges • An increase in storage, handling, and inspec tion charges—to $17 from $15 per ton—that producers must assume • No tolerance in measured acreage will be allowed for program compliance As a result of the new guidelines, program costs should be cut approximately $6.6 million in the next year. Rice The USDA announced changes in the rice pro gram that are apparently offsetting. Two of the changes—reducing the national acreage allot ment to just over 1.6 million acres and lowering the loan and purchase rate to the minimum level of 65 percent of parity—should reduce produc tion. On the other hand, marketing quotas have been lifted for the 1974 crop—in effect, encour aging expansion of production. While seemingly at cross-purposes, the inverse program adjust ments are required by law. The acreage allotment level is determined by a formula that considers the projected supply situation for the upcoming marketing year given the current situation. The Department of Agri culture anticipated a serious surplus developing if the 2.2 million-acre base in effect this year was maintained, especially since exports are expected to decline by two-fifths and the removal of mar keting quotas could potentially add 600,000 acres to production. By law, the marketing quota must be lifted in any year that shows a short carryover. Because of unexpectedly strong exports, a decline in yields, and low beginning stocks, carryover for the 1974 crop year fell to 4.7 million hundred weight. As a result, marketing quotas for the 1974 crop had to be lifted. The effective loan and purchase level for the 1974 rice crop will be $6.23 per hundredweight (rough rice). However, if this level is below 65 percent of the August 1974 parity price, the loan and purchase price will be increased to that level. Acreage allotments for producing District states in 1974 include 475,008 acres for Louisi ana; 422,313 acres for Texas; and 229 acres for Arizona. These account for over half of the na tional total. AGRICULTURAL EQUITY IMPROVES WITH INCREASE IN ASSETS The value of agricultural assets at the begin ning of 1973 totaled $385.5 billion, 12.5 percent more than at the beginning of 1972. The gain was sharply higher than the 7.8-percent and 3-per cent increases in the two preceding years. Preliminary data show the advance in the value of physical assets is broad-based. Because of a sharp gain in farmland values, real estate assets, which account for two-thirds of total physical assets, increased $28.2 billion, or just over 12 percent. Non-real-estate assets advanced nearly 15 percent to over $98 billion, as livestock values rose more than a fourth. And the liquid financial assets position of farmers rose about 7 percent. To finance this expansion in assets, farmers and ranchers assumed additional liabilities at a record rate. But with record incomes last year, the agricultural debt-to-asset ratio declined for the first time in several years, falling to 19.2 from 19.6 the year before. Total debt on January 1, 1973, was $7.1 billion above a year earlier. Real estate debt was up 10 percent to $34.5 billion, while non-real-estate debt increased 12 percent to $37.3 billion. With the improved asset and financial position of agriculture at the beginning of 1973, farmers and ranchers have been able to respond to record demand for agricultural products. Despite ad verse weather conditions last spring, farmers planted record acreages and are now harvesting bumper crops. The expanded base will also fa- B A L A N C E S HE ET O F T H E UNITED S TA TE S FARMI NG SECTOR, J A N U A R Y 1 (B illio n dollars) Percent change 1973 from Assets Real estate ........................................ Non-real-estate ............................... Financial ............................................ Total .............................................. Total liab ilities ..................................... Debt-to-asset ratio ............................. ........... ........... ........... ........... ___ ........... 1973 1972 1963 1972 1963 $258.7 98.5 26.3 383.5 $73.6 19.2 $230.5 85.7 24.9 341.1 $66.9 19.6 $143.8 59.0 18.6 221.4 $31.7 14.3 12% 15 6 12 10 -2 % 80% 67 41 73 132 34% SOURCE: U.S. Department of Agriculture cilitate additional expansion of production to meet future demands. On balance, with the expansion this year of physical assets—especially equipment and live stock—and financial assets, agriculture will have significantly more productive capability in 1974. And in all likelihood, for the second consecutive year, agriculture will show an improved debt-toasset ratio. AGRICULTURAL BRIEFS • Price ceilings on domestic fertilizer were lifted on October 25. This will permit farmers to compete with foreign buyers more equitably. • The 1973-74 orange crop—over 190 million boxes—is expected to be within 4 percent of the record crop of last season. There is a fairly large carryover of processed items, so prices are expected to continue at about this year’s level—estimated at $2.51 per box. • The 1973-74 grapefruit crop is estimated at 66 million boxes—5 percent above last season. Consumer demand is expected to expand some what and both export and processing demand may grow moderately, indicating prices should hold up fairly well. • Milk production may decline further in 1974 if high slaughter prices continue along with high feed costs. However, average per cow pro duction is expected to recover after slipping this year. Prepared by Dale L. Stansbury
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