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MONTHLY
BUSINESS
REVIEW
of
the
Volume 31
FEDERAL
RESERVE
BANK
DaUas, Texas, March 1, 1946
of
Dallas
Number 3
FEDERAL FISCAL POLICY AND TAXATION
Prior to the 1930's, except during periods of war, Federal fiscal policy occupied a comparatively
narrow place in relation to the economic activity of the nation. It presented a much less difficult problem of determination and solution. The sums involved as budgetary receipts and expenditures were
comparatively small considered either from the point of view of the size of the Federal budget, the
amount of the Federal debt, the burden of interest cost upon the economy, or the relation of those
factors to the national income or the wealth of the nation. Furthermore, the consequences of Federal
fiscal policy were, to a much greater extent than is true today, neutral or at least not so significant
with respect to decisions and operations in the various fields of economic pursuit.
The effects of the combined forces of several years of the most severe depression, an intensified
program of national defense, and our participation in total war, have conspired to confront us with
an entirely different situation with respect to the problems of Federal fiscal policy. Now, Federal
fiscal policy dominates the economic scene; the manifold ramifications of the problem, which have
become extremely complicated, reach out into virtually every segment of the economic system. The
consequences of a particular fiscal policy will affect and, in fact, may go far toward actually determining the level of activity in the various economic fields, the achievement of a high or low degree
of stability in the nation's economic life, and the character of the country's economic system.
As an aftermath of war and with the cumulative effects of conditions which have prevailed during
the last 15 years, many perplexing problems now plague the nation's leaders for solution. These problems, including the attainment of so-called "full employment," the maintenance of very high levels
of useful production, stabilization of income payments at a level far above any prewar standard, avoidance of inflation or deflation, attainment of a reasonable degree of economic stability, and determination
of the nation's peacetime credit policy, obviously cannot be brought to a sound practical solution
without careful consideration being given to the impact of fiscal policy. We cannot approach their
solution with an "all other things being equal" attitude.
Until the depression of the 30's the objective of fiscal policy, according to the point of view then
generally accepted, was to provide the funds needed to meet the essential and most necessary services
of Government. Purposes of social reform and economic control were not considered objectives of fiscal
policy. Expenditures were made because of their necessity per se and not because of any stimulative
effect which they might have had upon the economy or any particular part of it. Principal expenditures included meeting the cost of the Federal debt and providing for debt retirement; providing
adequate military, naval, and other policing services; maintaining court, legislative, and executive
functions; operating the postal service; undertaking the construction of highways; and an occasional
venture, involving comparatively small amounts, into other projects which obviously could not be
undertaken profitably by private enterprise.
The severe impact of the depression provided a fertile soil for the growth and development of
economic theories which had received, at most, only slight acceptance in earlier, more prosperous
years. A new school of economic thought compounded of certain of those theories gained increasing
recognition, and its members advanced new views with respect to the objectives of Federal fiscal
policy. The central theme of these views is that fiscal policy should be used as an instrument of economic
control to lessen or possibly prevent fluctuations in business activity and to secure a high degree of
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
30
MONTHLY BUSINESS REVIEW
stability in our economic system at some predetermined desired level. Extremists of this point of view
hold the opinion that a central objective of fiscal policy must be compensatory spending and budgetary
deficits, not merely as a temporary adjustment but as a more or less continuous adjustment to the total
spending, if so-called "full employment" is to be assured.
The middle ground between the position taken by such ex tremists and by those who still contend
for the objectives which were fairly representative of the period prior to the great depression, qffers
probably a more realistic appraisal of the present-day objectives of Federal fiscal policy. That view of
the objectives of fiscal policy gives recognition to the economic developments which occurred during
the turbulent years of this generation and which have modified the framework of our economic system.
It also acknowledges that fiscal policy properly conceived an d timed may have stabilizing influences.
Moreover, this concept of the objectives of fiscal policy recognizes the acceptance of a somewhat
broader and more realistic view of the place of present-day Government in the sphere of economic
activity.
It is not inconsistent to accept this somewhat broader concept of the objectives of fiscal policy and
yet insist that the Government should make t he strongest effort to hold its expenditures within the
limits of its revenue, that it should in every reasonable manner seek to preserve and encourage private
enterprise as the dominant characteristic of our economic system, and that it should avoid the use of
its fiscal power in competition with private enterprise. On the other hand, acceptance of 'those
qualifying conditions does not preclude the use of Federal fiscal power to encourage the highest levels
of production, employment, and income which can be maintained consistently on a stable basis
through the efficient operation of our private enterprise system. By implication, this concept of fiscal
policy means that when, despite the best efforts of private enterprise supported by favorable Government policies, it becomes impossible to maintain a stable high level of e~onomic activity, the Government
may be expected to intervene actively to try to restore, if possible, the desired state of conditions.
The degree of success which can be achieved in accomplishing the desired objectives of Federal
fiscal policy depends not only upon the soundness of those objectives but also, in very large measure,
upon the skill with which the different elements of the policy are conceived and administered.
There are four major elements of Federal fiscal policy. They are, first, the determination of the
amount of expenditures necessary to achieve the objectives of the policy; second, the amount of
Government revenue which can be obtained withou t imposing burdens too restrictive on the economy;
third, the amount of net borrowing which will be necessary to supplement revenue to meet the expenditures deemed to be required; and fourth, the m anagement of the Federal debt. Although the importance of each of these elements cannot be minimized, t he wartime growth of the national debt and
the far-reaching effects of its management give t o that element of fiscal policy a dominant position.
Considered perhaps in a narrow sense, management of the national debt means making adequate
provision to service the cost of the debt, meeting refunding obligations as they occur, and providing
for debt retirement out of current revenue. However, because of the direct effect upon the national
debt, the amount .and timing of net borrowing must be considered as an element of debt management.
In other words, in a broader, more realistic sense, management of the national debt not only involves
management with respect to the outstanding debt but also full consideration of f actors which will have
the effect of increasing the Federal debt. In addition, and certainly a most important factor, management of the Federal debt must include a careful appraisal of its consequences upon the economic
system. It is this last factor which makes the debt m anagement so extremely complicated and difficult
in the present instance.
Since December 31, 1930, the Federal debt, which had been decreased from the high levels of
World War I to approximately $16 billion, has increased steadily year by year, and during the recent
war years, at an average annual rate of more than $50 billion. On June 30, 1936, after several years
of large scale public spending, the national debt was $33.7 billion. Four years later, on June 30, 1940,
when this nation really embarked on its national defense program , the debt amounted to approximately
$43 billion. At the end of 1945, the national debt totaled slightly more than $278 billion.
The problem of the Federal debt has increased greatly n ot only as a result of the sheer magnitude
of the sums involved but for other reasons. A significant change has occurred in the relative position
between Federal and private debt. The character of the ownership of the Federal debt has changed
greatly since the early 30's. Federal financing policies during World War II brought about a signifi-
MONTHLY BUSINESS REVIEW
31
cant change in the composition of the national debt. The much greater annual interest cost on the
outstanding Federal debt bears with a different impact upon the economic system.
Whereas in 1930 the Federal debt represented approximately 8 per cent of the total public and
private debt of the nation, the proportion has increased to almost 60 per cent at present. This shift
in market dominance from private debt securities to securities of the Federal Government has increased
tremendously the importance of sound debt management on the part of our Federal administrators.
Likewise, the changes which have occurred in the ownership pattern of the debt have imposed
new and heavy obligations upon the Government. In the first place, a substantial part of the savings
of many millions of Americans is in the form of Government securities. Over 70 per cent of the earning assets of the nation's banking system is in various issues of Government securities, while the Federal
Reserve System, which is the nation's central banking system, holds more than $23 billion in Governments. Insurance companies, trust funds, and eleemosynary institutions also have invested an increasing
proportion of their funds in the securities of the Federal Government, and many business firms have
substantial holdings. In a sense, the Government has become the custodian of a tremendous volume of the
savings of our people and our institutions. That custodianship carries grave responsibilities and obligations and demands that the management of the national debt and, in fact, the whole fiscal policy of the
Government be conceived wisely and carried out with consummate skill.
Largely as a result of policies followed during the war years, the composition of the Federal debt
has changed so significantly that it poses additional problems. Whereas at the end of June, 1940, shortterm issues in the form of Treasury bills and certificates of indebtedness comprised only 3.5 per cent
of the marketable Federal debt, the proportion had increased to 28.5 per cent by September 30, 1945.
As a result, refunding requirements during the early postwar years will be large. Policies with respect
to refunding, therefore, must occupy an important place in the debt management program. Furthermore, those policies should be consistent with sound fiscal principles in terms of the existing debt
management problem and the general economic and financial situation; otherwise, serious consequences may ensue.
Comparison of the computed rate of interest on the interest-bearing Federal debt during the recent
war years with the rates which prevailed during earlier periods emphasizes strongly the low interest
cost of the Second World War. Whereas World \Var I was a 4 per cent war, World \Var II was a 2 •
per cent war. On August 31, 1919, when the World War I national debt was at its peak, the computed
interest rate on approximately $26 billion of debt was 4.2 per cent. On December 31, 1945, when the
\Vorld War II debt reached its peak, the computed interest rate on slightly more than $275 billion of
outstanding interest-bearing Government securities was 1.97 per cent.
Despite such favorable wartime financing, the interest charge on the national debt has increased
at a faster rate than the increase in the national income, with the consequence that the annual interest
charge on the debt now imposes a heavier though not unmanageable burden on the country. The
computed annual interest charge on the Federal debt increased from $1,095 million on June 30, 1940,
to approximately $ 5,400 million at the end of 1945. That increase in the interest burden is not without
real significance. Uncertainty is a characteristic of economic activity. It is possible, therefore, that at
some future date the burden of interest cost might be more restrictive upon our economy. This possibility, remote though it may be, is one sound reason why the Federal debt should be retired to the
greatest practicable extent as soon as possible, thus reducing the annual interest cost. Also, very large
interest charges on the Federal debt raised through the medium of taxation might conceivably distort
the distribution of the national income in an undesirable direction.
The interest problem, however, cannot be considered solely from the point of view of the impact
of the cost upon the economy, important though that may be. Serious consequences also may result if
interest rates are driven down to artificial levels which are obviously too low. The importance of
interest rates to certain classes of individuals and to institutional investors cannot be ignored. Also,
since interest is in part a payment for risk-taking, rates should be high enough to provide reasonable
compensation for the risk element involved in investment ventures; otherwise, the flow of capital may
be restricted, with detrimental effects upon the private enterprise system.
Retirement of the Federal debt has already been referred to as an important element of debt
management. It has been historically true of our country that periods during which a significant
expansion of the Federal debt was experienced have been followed by periods of substantial debt retire-
32
MONTHLY BUSINESS REVIEW
ment. In the present instance, it should be recognized that the magnitude of the debt militates against
the possibility of there being a significantly apparent favorable record in this respect. If we are to be
realistic we must reconcile ourselves to the fact that a tremendous Federal debt will persist for many
years as an important element of our nation's fiscal problems.
Nevertheless, it can and should be emphatically stated that such rationalization should not be
accepted as justification for failing to strive to retire the largest possible amount of the debt. Budget
surpluses and their use for redemption of the Federal debt, even though in comparatively small amounts,
create a favorable atmosphere for the operation and expansion of private enterprise and are highly
desirable at a time when the volume of private spending is so large as to bring about an upward pressure
on prices. The anticipation on the part of business enterprisers of a declining tax levy as a resul,t of a
smaller debt and interest burden may prove to be a real stimulus to economic activity with a consequent
increase in the demand for labor, thus helping to maintain a state of high employment. We should not
disregard the fact that the attitude of Government with respect to sound fiscal policy and toward
private enterprise can be, oftentimes, almost as significant as the very acts of Government.
If we are willing to recognize that the Government should hold a more important place in the
sphere of economic activity than it has in the past, and to accept the view that fiscal policy directed
within a framework favorable to private enterprise can have stabilizing economic influences when
properly conceived and timed, then we should appraise that policy in the setting of the strong inflationary pressures which exist today as a heritage of the war. It has always been generally acknowledged
that inflation, in more or less degree, is the inevitable consequence of war. World War II, though fought
by this country under conditions of remarkable economic and financial stability, did not prove to be
an exception to that general rule. Wartime financing methods and the huge expenditures of the last
five years have left us with the largest volume of potential purchasing power in the country's history
at a time when serious shortages of goods persist in a great many lines.
During the war taxation was maintained at comparatively high though not oppressive levels, and
individuals and nonbanking institutions purchased large amounts of Government securities. These
sources of revenue and borrowed money, however, were not sufficient in amount to provide the Government with the funds needed to meet its essential war and governmental expenditures. Despite the Treasury's policy during the war period of selling the largest possible amount of its securities to nonbanking
investors, the cost of the war was so great that it was necessary for the banking system to purchase a
large part of the securities. The Federal Reserve System adopted policies designed to enable commercial
banks to assist the Treasury in its wartime financing to the extent necessary. Moreover, it was possible
to carry out this policy and at the same time maintain low interest rates. Although the inflationary and
bank credit-creating characteristics of that policy were fully recognized, the policy followed was
considered the most satisfactory alternative in view of all circumstances. Now that the war has ended
and the nation is directing its efforts toward peacetime activity, it is only prudent to reconsider our fiscal
and related financial policies in their new setting.
It seems obvious that at tlus time compensatory spending by the Government is neither necessary
nor desirable. On the contrary, the expenditures of Government should be restricted to the greatest
extent possible to essential or highly necessary purposes. Moreover, at the earliest moment consistent
with creating conditions conducive to the expansion of private enterprise, the Federal budget should be
, balanced and those expenditures of Government which are deemed necessary should be fully covered
by the revenues of the Government. In fact, in view of the present inflationary dangers, revenue should
be planned to provide a budgetary surplus of (unds to the Government to enable a start on debt
retirement out of current income as soon as possible. In this respect, there is no intention to overemphasize the amount of debt retirement that is possible in the next few years or, in fact, for some
time to come. However, it cannot be too strongly emphasized that the magnitude of the debt and the
comparatively small reductions possible through redemption are not justifiable reasons for an attitude
of complacency or for failing to adopt a policy of public debt retirement. Even though the reduction
in any given year should be apparently insignificant in amount in terms of the total debt outstanding,
such retirement, as matter of policy, would be a move in the direction of sound peacetime finance and
would reflect a very healthy attitude on the part of the Government with respect to fiscal policy.
Onerous as taxes are to all of us, our fiscal policy should provide for the maintenance of taxes at
a comparatively high level. That .level of ,taxatio? s,hould be ,set at a point which will obtain the largest
revenue to the Government conslStent With achIevrng the hlghest degree of economic stability and the
MONTHLY BUSINESS REVIEW
33
most desirable productive and business output. Pressures for tax reduction which arise merely from
a desire for low rates of taxation per se should be resisted, regardless of their source. On the other hand,
a modification of our tax system may be in order, and possibly tax reductions should be effected in
some instances. Pressures for such modifications which may arise because of repressive effects upon some
group in our economic system should be promptly and carefully investigated.
One of the most important keys to the solution of our present economic dilemma is the rapid attainment of the highest possible production of goods by our industrial system and the effective distribution
of those goods by the various factors in the business system. It is undeniably true that there is a substantial demand for goods of virtually all kinds, and, furthermore, it is adequately supported by the needed
purchasing power; only the goods are lacking in the present markets. It is possible that some additional
degree of inflation may occur despite our best efforts to control the situation, but we may be sure
that that degree, whatever it may be, will be significantly greater and more disruptive in its consequences
if we are not successful in launching our private industrial and business system quickly into full productive motion. It is not inconsistent to support a position calling for the maintenance of high and
equitable levels of taxation to provide the Government with revenue sufficient to meet its essential or
necessary expenditures, and yet urge that tax rates on our productive and distributive enterprises, which
in very large measure hold the solution to some of our most difficult problems, not be oppressive or
restrictive.
Because of the existence of inflationary pressures and the added problems which would confront the
nation if those pressures should prove to be increasingly unmanageable or if additional pressures are
created, one of the most difficult aspects of Federal fiscal policy lies in the relationship between Federal
debt management and the nation's financial institutions and the creation of purchasing power.
Since 1932 the Government has pursued poliCies in its fiscal operations which have contributed
strongly to the establishment and maintenance of a low interest rate structure. During the war and at
times prior thereto the central banking system cooperated actively with the Treasury to assist it in
accomplishing its purposes. The present magnitude of the debt and the high interest cost of its service
obviously influence the Government to seek to maintain a low rate structure. Also, there are those who
believe that a very low rate structure, comparatively speaking, is necessary among other things to assure
the attainment of what they call "full employment ."
On the other hand, certain other significant f acts deserve serious consideration. A plethora of
funds, together with access to the services of the central banking system at a very low interest cost, is
a circumstance which breeds additional inflationary pressure. Also, the interest rate pattern which has
been maintained since early in the war period has made it profitable for commercial banks to seek
investment in the longer term Government securities, although an effect of that demand has contributed
to forcing down the yield on such securities significantly. A consequence of this development has been
a shifting of short term securities into the central banking system and an increase in the holdings of
long term securities by the commercial banks, with a consequent expansion in bank credit. The increase
in bank credit subsequently contributes to the inflationary pressures as the credit-created savings of
individuals flow over into the security markets, real estate and other tangibles. It seems obvious that, in
view of the present inflationary trend, Federal fiscal policy should avoid as much as possible the creation
of additional inflationary conditions or forces.
T hese problems of fiscal policy are so far-reaching in their ramifications and are so complex in
character it is unlikely that they will be solved by one or a few men, no matter how highly placed those
men may be. They challenge the best effort of all intelligent Americans, who actively take a leading
part in the operation and policy direction of our business and economic system. We must recognize
that we have an important personal interest and part to take in the solution of these problems. We
have the responsibility to contribute to their solution to the limit of our ability. No individual is so
unimportant, nor is any business so small, as to escape completely the detrimental consequences which
will flow from a Federal fiscal policy which is unwisely conceived. On the other hand, all of us must
inevitably share in those benefits which will accrue to the nation from a policy soundly conceived and
wisely administered. Therefore, we cannot afford to fail to accept to the fullest our responsibility in
aiding to reach the best possible solution and to share freely our thinking upon the problems with
those responsible for policy formulation.
(The foregoing is an addre~s delivered by R. R. Gilbert, President, Federal Re5erve :Bank of Dallas, before a Marketing Conference hel d under the auspices
of the United Scates Chamber of Commerce at Dallas. Texas, February 18, 1946.)
34
MONTHLY BUSINESS REVIEW
Review of Business. Industrial. Agricultural and Financial Conditions
DISTRICT SUMMARY
The outlook for crops and ranges was improved by general
rains during January and February over most of this district,
but moisture deficiencies still persist in some areas in the western
half of the territory. Recent rains have been especially beneficial to the wheat crop in northwest Texas, where considerable
deterioration had resulted from the prolonged period of dry
weather. The continuance of mild temperatures, together with
better moisture supplies, will be conducive to the early growth
of range weeds and grasses which would partially compensate
for the shortage of dry feeds. Construc tion activity is apparently
gaining momentum despite the acute shortages of building
craftsmen and materials. The value of construction contracts
awarded is running far above that of a year ago and substantially higher than in December 1945. Petroleum production in
this district increased further in January and February and in
the latter month is expected to be nearly as large as in February
1945. Refinery operations have declined somewhat. In view of
the reduction of about 350,000 barrels daily in the March allowable for Texas, crude oil production is expected to decline
sharply in that month. Buying at retail has continued to exceed
expectations. Sales at department and furniture stores during
January declined seasonaliy, but continued to show a wide margin of gain over those of January last year.
BUSINESS
Consumer buying at department stores in the district con~;nues at an exceptionally high level for this season of the year.
January sales at reporting stores were 17 per cent above the large
volume in the corresponding month of 1945. This gain was well
above the margin of gain registered in December or in
the last quarter of 1945. Weekly reports indicate that the margin of gain in February over a year ago may be higher than that
in January. Increased supply of certain scarce items that are in
heavy demand has contributed to the large volume of sales.
Moreover, some stores have apparently resumed the practice of
running end-of-season clearance sales, which have brought
forth a widespread response and have stimulated sales of merchandise generally.
In January inventories at reporting stores in this district increased 5 per cent and at the end of the month were 9 per cent
higher than at the close of January 1945. Despite this overall increase in inventories and the larger receipts of some scarce
items, acute shortages still persist in several departments, especially in men's and boys' wear. Inventories in these latter departments on January 31, had declined to a level 38 per cent
below those of a year earlier. Low inventories of men's wear
were in part the result of the urgent demands of returning servicemen for civilian clothing.
Work stoppages caused by industrial disputes, shortages of
materials, and the uncertainties of wage-cost factors continue
to hamper all-out peacetime production of consumer durable
goods. Despite these difficulties, shipments in December 1945 of
such consumer items as refrigerators, sewing machines, vacuum
cleaners, electric ranges, and washing machines incrcascd from
10 to 30 per cent over those in November, according to reports
of the Civilian Production Administrator. These reports also
indicate that it may be possible to attain prewar levels of production of these items by June of this year, provided present
obstacles to all-out production are removed shortly.
January sales at furniture stores in this district, although
showing a seasonal decline of 23 per cent from the large December volume, were 35 per cent above those in the corresponding
month of 1945. Stocks at the end of January stood at 3 per cent
above the December level, and wcre 3 per cent highcr than in
January last year. Cash sales during January amounted to 29
per cent of total sales, as compared with 24 per cent in January,
1945.
AGRICULTURE
The moisture situation in the Eleventh District was generally
improved by rains and snows in January and February, but
deficiencies persist in many areas. Adequate moisture was reported throughout the eastern section of the district and the
Low Rolling Plains of Texas during the third week in February.
H eavy snows and light scattered rains over most of the High
Plains improved conditions there, and good rains were reported
in the Edwards Plateau and parts of southern Texas. Some rain
and snow in New Mexico and Arizona improved moisture conditions, but soil moisture in the Trans-Pecos district of western
Texas still is inadequate. Cold weather in the commercial vegetable areas retarded the growth of crops. A heavy frost on January 23 reached into many of the Rio Grande districts, but no
serious damage occurred.
The large exports of wheat from Oklahoma and Texas during
the last half of 1945, together with the feeding of unusual quantities of grain to cattle, have resulted in a sharp decline in stocks.
On January 1, 1946, only 22,957,000 bushels were reported for
Texas and 22,991,000 bushels for Oklahoma. Stocks in all storage positions in these two states were below those of last year.
Interior mills, elevators, and warehouses reported stocks of only
3,610,000 bushels in Texas and 3,852,000 bushels in Oklahoma,
3S compared with stocks for the corresponding date last year
of 10,500,000 and 9,350,000 bushels.
Good growing conditions prevailed in the commercial vegetable areas of Texas during the first part of January, but the
general rains and cold weather starting about the middle of the
WHOLESALE AND RETAIL TRADE STATISTICS
Number
of
Reta.il trade:
Dep.'\rtmcnt stores:
Tatnl II th District ... .
Dallas ........... .
Corpus Christi ... .
Fort Worth ..
---::--Perccn I8~C
challge in:- --
_
Stocks f- --
---Net sales
January 1946 rrom
January 1946 from
reporting
Ja.nuary
Decemoor
Junuary
December
fll'ms
48
1945
+17
+22
+ 4
+ 9
+19
+24
1945
-45
-42
-48
-52
-46
-40
=:~
1945
+ 9
+12
+10
+11
+14
+22
1945
+ 6
+ 6
+ 8
+ 3
+16
+ 4
':":'io
+
+35
+35
+.2
- 9
+23
- 23
- 16
- 16
-10
+.1
- \4
3
-
+24
....
4
+IG
+2.
+ 8
7
4
4
7
Houston . ... .... .
San Antonio ...... .
5
3
Shreveport, lA... .
Other cities ..
Retail rurniture:
Total Iltb District ..
+1~
18
61
DaH
as.
4
8
3
Houston .. .. .
Port Artbur .. .. . .
Wichita Falls . .. .
Wholcsulc tradc:Machincnr, equipment
and suppl.iea. . .. .
3
D,ugs........ .......
9
+3
+
2
+3
+.
-
Electrical supplies .. "
3
+21
9
G,oocncs ... .... .. . ..
22
+20
+24
Harow.ro . ..... . . . .
9
+29
+31
+ 7
-Compiled h:,.' United States Bureau of Census (wbolesa.1e figures preliminary).
tstocks at end of month.
+i4
INDEXES OF DEPARTMENT STORE SALES AND STOCKS
Daily avernge salcs-(1935-1939=100)
UnadjustedAdjualw
Jan.
Dec.
Nov.
Jan.
Jan.
Dee.
Nov.
1945
1945
1945
1945
j9'6
1945
19'6
467
352
211r
District . ....
2.8
306
287
288
210
Dallas .. .. ..
257
454
357
313
287
295
334
193
294
Houston .... . 230
461
290
276
2
+·2
- 10
Jan .
1945
260,
257
247
Stock.-(I9:l5-1939-IOO)
Jan.
1946
161
Unadjusted·
Dec.
1945
169
Nov.
1945
202
District ..
·Unadjusted for seasonal variation.
r-Revi&ed.
Jan.
1945
1'8
Jan.
1946
179
Adjusted
Nov.
Dec.
1945
1945
202
189
Jan:.
1945
165
35
MONTHLY BUSINESS REVIEW
month retarded the growth of most crops, interrupted planting,
and made harvesting operations difficult and costly. Considerable loss of spinach and cabbage was reported due to the delay
in harvest. Moisture is ample in all districts and, with more
fa vorable weather conditions during the first part of February,
improved growth has been repor ted for most crops. Growers'
planting intentions indicate a slight increase in acreage of spring
and summer Irish potatoes above 1945 plantings and well above
the 1935-44 average. The estinuted 58,300 acres of onions for
harvest in Texas this year is an increase of 2 per cent above the
harvested acreage in 1945 but about 5 per cent below the 10year average harvested acreage. Production of winter carrots
on February 1 was estimated at 2,942,000 bushels compared
with 3,383,000 last year and the 10-year average production of
1,984,000 bushels. Most of the land for the planting of cantaloupes, watermelons, and cucumbers has been prepared in spite of
the unfavorable weather, and planting was under way by midFebruary. Shipments of spinach and beets on February 1 were
below those reported On the same date last year. Shipments of
Texas grapefruit for the season were reported on February 15 to
be 11 ,3 73 cars compared with 10,718 cars to the same date last
season; orange shipments were reported at 2,346 cars compared
with 2,516 and mixed citrus at 4,065 cars compared with 4,302.
Excessive soil moisture and cold weather during the latter
part of January and the first part of February damaged some old
grass in the eostern part of the district, and range and pasture
feeds were somewhat limited. Additional moisture and warmer
weather were needed in the High Plains and in southwest Texas,
but range conditions in bOlh Texas and Oklahoma were reported
as average or better. Snow and rain in New Mexico and Arizona
improved the soil moisture situation, but range feed is limited
and warmer wea ther is needed to make additional range weeds
and grasses. Range conditions in these areas are slightly below
a,"erage and below those of last year . Small grain pastures
throughout the district have supplied little feed, and this condition, together with the acute shortage of grain feeds and concentrates, has necessita ted the heavier feeding of hay and roughage. As a result, hay stocks have been rapidly depleted, and
locally grown feeds are very short in most areas. Pear burning
was active in western Texas, and range cattle were being fed in
some south Texas counties.
Catde and calves were in fair to good condition in Texas and
Oklahoma on February 1, but some shrinkage occurred during
January, particularly in southeastern Oklahoma, the High
Plains, and western Texas, where range feeds were short. The
cold, wet weather and the shortage of grains and concentrates
which limited feeding operations in these areas also contributed
to the decline in weight. The condition of cattle in New Mexico
and Arizona was good, dthough falling below the 20-year average, and little shrinkage was indicated during the month. Sheep
are in fairly good condition throughout the district but slightly
lower than average, and some improvement was expected with
bettered feed prospects from January moisture. Breeding ewes
were in good condition, and early lamb prospects were fairly
good.
Livestock receipts at Fort Worth underwent a sharp decline
during January as a result of the curtailment of marketing
operations by strikes between January 15 and January 28.
Receipts of cattle, calves, and hogs at San Antonio fen slightly
below those of December but were well above January 1945
receipts. The movement of sheep at San Antonio declined sharply, falling more than 40 per cent below receipts for both December and January of last year.
Preliminary figures for 1946 indicate a considerable decline in
the number of cattle on feed at the beginning of the year in the
Southwest as well as in the United States as a whole. In Texas,
only 115,000 head of cattle and calves were reported on feed on
January 1, 1946, compared with 150,000 on the same date last
year. Substantial declines from last year were also registered in
Oklahoma, New Mexico, and Arizona. The total number of cattle and calves on feed at the beginning of this year in the United
States was 4,157,000 head compared with 4,324,000 in 1945.
Sheep and lambs on feed in Texas and Oklahoma in 1946 also
declined from 200,000 to 150,000 and from 60,000 to 39,000,
respectively. In New Mexico the nwnber declined from 58,000
at the beginning of 1945 to 52,000 in 1946, while in Arizona ,
the only state in the Southwest to register an increase, the number rose from 10,000 head in 1945 to 40,000 head in 1946. The
1946 total for the United States of 6,724,000 head represents a
2 per cent decline from last year.
Mid-January prices received by Texas farmers, as reported
by the Department of Agriculture, showed important increases
for beef cattle, sheep, and sweet potatoes compared with midDecember prices, and noticeable declines were registered in the
prices of Irish potatoes, eggs, and citrus fruits. Prices of other
farm commodities remained about constant or showed no significant changes. Prices of oats, ricc, cottonseed, and shecp wcre
slightly lower than those reported on the same date last year,
while all other farm commodities showed substantial price gains.
FINANCE
The daily average of combined gross demand and time deposits
of member banks in this district rose further in January, reaching a new peak of $5,668,000,000, which was more than $100,000,000 above the December average and $1,20{),000,000 above
that of January 1945. The increases over both the preceding
month and the corresponding month last year were about equally
divided between reserve city banks and country banks.
The reserve balances of member banks also reached a new
high level during the first half of Janu ary but declined steadily
during the subsequent thirty days. The daily average during the
first half of February, amounting to $739,000,000, was about
$18,000,000 below that of January but was $132,000,000
above that for February 1945 . During January, when reserve
balances were at a high level, the daily balances of these banks
with correspondents averaged nearly $9 00,000,000, which was
also a new peak. The required reserves of member banks showed
CASH FARM INCOME
(Thousands of dollars)
...--November 1945;------Total receipt...---~
,
_Receiptsrrom~
Nov.
Nov.
Jan. 1 to Nov. 30
CroP6
AriJona ..........•.•...
Louisiana ........ .
New Mexico . . ... .
Oklahoma
Texas
Livestock"
194.5
1944
5.765
44.714
4.894
22,504
82.338
6.606
7.204
22.377
20,619
58.440
12.371
61,918
27.271
45,678
138.223
9,891
47,908
19.449
51,857
156.825
1045
Total. ........ 160.215
115.246
275,461
285,930 1.920.899
'Includes receipts from the sale of livestock amI livestock pt'oduct-a.
SOURCE: United St.'1Ws Department of Agriculture.
Cattle .
Calves.
Hogs .....
ShIX!P .• .
1944
118.847
108,396
210.623
209.83"
108.836
90.17'
399,917
440,077
1,032.676 1.099,437
1.948.519
LIVESTOCK RECEIPT8-(Numbc,)
_ - -Fort Worth
San Antonio - -_
January January December January Januan' December
1946
1945
1945
1946
1945
1945
82,892
37,879
64,472
26,494
20,634
27,301
21,212
41,776
39.005
18, 183
22,775
10.540
70,147
62.785
15,500
14,138
10,050
96.4S'
13,419
50,383
93.963
86,448
23,952
22,440
COMPARATIVE TOP LIVESTOCK PRICES
(Dollars per hun:ired weight)
- - - F o r t . Worth- - - - - - San Antonio - - _
January JUlluary December January January December
1946
1945
1945
1946
1945
1945
Beef st.ccrs ..
Swcker steers.
Heifers and yerulings ..
Butcher cows ..
Calves ..
Hogs ........ .
Lambo .. . . . ... .
$17.35
~g~
13 .00
15.00
14 .65
14.00
$16 .00
it~
12.75
14.25
14 .55
15.00
$16.50
~U~
13 .25
1425
14.05
14.00
$16 .00
.;600
13 .00
14.75
14 .6.)
13.25
$14 .00
315.7.
14 .25
1I .5O
1550
12.5O
14.00
14.75
14.55
13. 85
14 .65
13 .00
36
MONTHLY BUSINESS REVIEW
little change from December to January, but excess reserves rose
moderately, reflecting the increase in average reserve balances.
The average of excess reserves during January, which amounted
to $143,000,000, was close to the three-year peak reached in
July 1945.
The return flow of currency from circulation which began
in the last week of December continued in substantial volume
during January and the first half of february. On February 15,
the total circulation of Federal Reserve notes of trus bank
amounted to $601,000,000, representing a net decrease of $26,000,000 since the all-time peak in circulation was reached
around the middle of December last year. Total circulation on
February 15 was at the Iewest level since last August and was
only $54,000,000 above that of February 15, 1945. The decline
since mid-December represents the nrst major reduction in the
Federal Reserve note circulation of trus bank in six years. The
usual heavy month-end demand for currency to meet pay rolls
and business settlements was apparently about counterbalanced
by receipts of currency from circulation since there was only a
very slight increase in circulation during the latter part of January and the early part of February. Although the decline in circulation during the past seven weeks occurred in bills of all
denominations except the $50 and $100 bills, the major portion
of the decline was accounted for by the decrease in the circulation of bills in denominations of $20 and under.
The deposits in weekly reporting member banks in this district, after reaching a now high level early in January, declined
by $60,000,000 between January 9 and February 13. This decrease was accounted for by the nct withdrawal of $71,000,000
in interbank deposits, which was only partially counterbalanced
by a moderate increase in other deposits. To m eet the decline
in deposits, the reporting banks withdrew $14,000,000 from
their reserves with the Federal Reserve Bani, and $37,000,000
from their balances with correspondent banks and decreased
their loans and investments by $4,500,000.
Although the aggregate loans of these banks declined by $5,400,000 during the five-week period ending February 13, there
was an increase of $5,900,000 in commercial, industrial, and
agricultural loans, $2,200,000 in real estate loans, and $4,200,000 in "all other" loans. The principal decrease, aggregating
$17,600,000, occurred in loans to brokers and dealers in securities and to others for security trading. This decrease reflected
chiefly the liquidation of loans made to customers during the
Victory Loan Drive for the purpose of entering subscriptions
to Government securities offered during the drive. Although
these loans have declined approximately $44,000,000 since the
close of the Victory Loan Drive, the total of $162,000,000 on
February 13 was still $88 ,000,000 higher than at the beginning
of the drive and $107,000,00 0 above the total on the corresponding date last year.
The investments of weekly reporting member banks, on February 13, were slightly larger rhan those of five years earlier, but
during the period there were substantial changes in the distribution of holdings among the classes of securities. Holdings of
Treasury bills were reduced by $30,000,000 to the lowest level
in more than three years, and holdings of Treasury notes declined
by approximately $4,000,000. These decreases, however, were
CONDITION OF THE FEDERAL RESERVE DANK
(Thousand:; of dolJara)
Total casb reserves ... ' ..
Discounts for member banks ..
Foreign loans on gold .....
U. S. Government securities ....
~O:;llt!~rb~':1 =~~e' d~~it~,' .. _......... .
}i'ederal Reserve Notes iUllctual circulation .. .
Feb.15.
1946
1497.989
None
1,440
892.733
894.173
741,341
600.979
Feb.15,
1945
1.133,697
275
None
669,274
669,549
608,005
547,326
Jan. 15,
UH6
1.130,244
None
1,410
893.791
895,201
791.348
610.670
CONDITION STATISTICS OF WEEKLY REPORTING MEMBER BANKS
IN LEADING CITIES
(Thousands of doU!lrS)
Feb. 13,
1946
Total loans and investmentl!.
. . . . . $2,168,850
Tot.fillo3IlH .. _.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
661,82i
Commercial, indU!ltrial, and agricultllralloans. .
388,485
Loans to brokers and dealers in securities........
5.461
Othcr loall.s for purchasing or carrying: securities. .
156,899
Real cstllte 1000ITls. .
31.584
Loons to banks ..
1.343
An other lonD8.
78.055
Total invcstmC!lls . . . .
1.507,023
U. 9. Treasury hills .....................
61,399
U. S. Trcru;ury certificates of indebt.edn6!18
511.493
U. S. Treasury notes ... ..
213.231
U. S. Government bonda
. .. .. ...
658,580
Obligations guaranteed by United States Gov't..
145
Ot.her 8eCurities
. __ •.
...........
62,175
Reserves with Federal Reserve Bank..
382,972
Bn.h:nccs with domest.ic \:milks .... ... .
275,335
Demand deposi~diuated·........
1,3:';8.203
fti~\~lSt:~\;o~;;~~~~t' d~~i~: : .
:~:82l
Feb. 14,
1945
11.659.374
404,517
271.896
3.392
52,158
22.485
139
54,447
1.254.857
6,1.245
316.141
273.046
540,243
14,20 1
45.981
337.268
215,534
1.163.155
220,688
255.152
5OR~~~
Intcrbank dcpot;ita . ..... . . . . . . . . . .. . . . . .
602,960
Borrowings from Federal Reserve Bank:.
None
·Include.s all demand deposita other than interbank and United
cash items reported on hand or in process of collection.
State.~
Jan. 9,
1946
$2.173.302
667.250
382,587
6.422
173,:;41
29.395
1,447
73,858
1.506.052
90.956
494 ,432
216,931
641 .923
253
61,557
396.6M
312,315
1.366.514
287.700
483.7C6
673.549
None
Government. le3l!
DEBITS TO mDiVIDUAL ACCOUNTS
(Thousands of dollars)
January Petg.change
oYer year
19'5
20,988
+10
47,780
+ 7
102.109
+15
64 ,572
+3
57.878
+19
7.082
+35
633.803
+5
71,484
+30
- 5
227.576
45.290
+15
636,286
S88.434
+8
13,830
12.391
+ 12
40.373
38.395
+5
26,299
21,869
+20
24,279
24,5M
+ 1
12,171
9,630
+26
22,541
18,169
H4
163,360
197.287
HI
-4
92,571
96,455
-9
22.158
20.000
+3{J
33.090
42,81l'l
29.704
25,402
+17
32.16,1
39.175
+22
32.425
39.397
+22
January
1946
22,983
51.188
117,6Q2
M,81'
68,99'
9,560
667,516
92.916
215.732
52,275
Abilene ..
Amarillo .
Austin .....
Bca.umont .....
Corpus Cnrirli .
Corsicana. ..
Dallua ....
EI Paso ... ...
Fort Worth ..
Galveston .
HOU8t.oll ..
Laredo ....
Lubbock ...
Monroe. La ...
Port Arthur ...
Roswell, N. M.
San Angclo ..
~n Antonio ..
Shreveport, La
Texarkalla' ...
Tucson, Ariz ...
Tyler ...
WacO ...........
Wichita Falls. __
December
1945
21,1)74
bO,i(!7
74,998
60.530
69,676
8.928
778,104
89,m
2'6,047
53.371
696,269
12,807
36.705
23,933
24,600
11,767
20.030
201,506
95,128
W,621
39.589
32,159
39.891
40.788
---
Pct.g.ehange
o,'er month
- 5
+1
+67
+10
- 1
+7
- 14
+4
- 12
- 2
- 9
+8
+10
+10
-j
+3
+13
- 2
-3
-3
+8
- 8
- 2
-3
- 5
12,751,914
Totul- 24 cities.
.. 12.602.863 12,396,784
+ 9
·Includes the figures of two banks irfTexnrlmol\, Arka:l!l38, loe:l.Led in the Eighth District.
tlndieates chango less than one-half of one per ce:lt.
GROSS DEMAND A..'ln TIME DEPOSITS OF
ME~mER
DANKS
(Average of daily figures- Thousands of dollars)
Combined total
Reserve city banks
Country banks
G"",
G",,,
Gross
Time
demand
Time
demaod
demand
Time
.. $3 ,242,366 1270,576 11.699,310 116,1.973 $1,543,056 1104.6~3
January 1944 ..
345,591 2.090.671 218.338 2,014,075 127,253
January 1945 ... ...... 4,104,74G
438.792 2.276.265 281.535 2,242,533 157,257
.. 4.518,798
September 1945 ...
... 4,562,1I9
438.196 2.200.933 278,991 2,27 1,186 159,205
October 1945 ..
444,S63 2,441,944 284,172 2,382,OM 160,11H
..... 4,824,008
November 1945 ..
. 5,109,300r 451,887 2.634.630 285,371 2,4i4,730r 166,516
December 1945 ..
. 5.215,222
452,353 2.681,476 286,583 2,533.746 165,770
January 1946
r-Revised.
SA VmGS DEPOSITS
January 31. 1946
Number
reporting
bank!
Beaumont .....
Dallas .. . . . . . . . . . . . .
EI Paso ...........•.
Fort Worth .........
G:!.Iveston .........•.•...
Houston ............
Lubbock . .......•.•
Port Arthur ..
San Antonio
Shreveport, La ..
Waco ..........
Wichita Falls ...
All other ..
..
Total ....
3
8
2
3
4
8
2
2
5
3
3
3
57
103
Percen;,e chango in
savings eposita from
Number of Amount of
savings
savings
depositors
deposits
12.446 I 7,667,166
128,034
67,832,021
27,601
2I,909.M9
39.446
30,912,221
23.322
19.188.053
93,041
62.972,293
876
1,027,160
5,734
5,346,255
35,148
40,963.966
32,766
24.929,314
9,119
8.684,303
7.138
4.731 .579
59,018
48.064,557
Jan. 31,
1946
+21.6
+31.6
+ 40 .0
+29.9
+ 18.8
+22.6
+B5.8
+25.0
H9.8
+29.9
+32.6
+17.9
+27.0
Dec. 31,
1945
+1.1
+1.4
+ 2.7
+ .7
+ 1.6
+ .4
.8
+ 1.6
+ .9
+ 1.3
+1.1
-1.0
+ 1.6
1344,128,537
+28 .1
+1.1
473,689
-
MONTHLY BUSINESS REVIEW
about offset by additions to holdings of certificates of indebtedness and United States Government bonds.
On February 16, the Treasury Department announced that
the 3 % per cent Treasury bonds of 1946-56, which have been
called for redemption on March 15, 1946, and the 1 per cent
T reasury not es, due on March 15, 1946, will be redeemed in
cash. In announcing an offering of % per cent Treasury certificat es of indebtedness in exchange for the issue maruring
March 1, 194 6, it was stated that since approximately $1,000,000,000 of the maturing certificates of indebtedness would be
redeemed in cash, exchange subscriptions received from holders
of the maturing certificates would be allotted on an equal percentage basis, except that subscriptions in amounts up to $25,000
would be allotted in full.
37
CRUDE OIL PRODUCTION-(Barnls)
Increase or decrea3C in daily
January 1946
average production from
Dailyavg.
Total
Jan. 1945
Dec. 1945
production
production
+ 3.020
233.800
7.247.800
North Texas .. ... · , . . . . .
+ 1.950
+22,766
+ 11.219
489.819
· . . . . . . . . . 15.184.400
West Texas . .
- 6;.463
+ HI,700
461.016
East Texas . . ... . · . . . . . . . 14.291.500
+11.403
9.944
332.406
Southwest. Te::c.a.s . . .. . ...... ,. 10,304.600
+26.663
- 50.129
497.471
T.... lJoa<Ml.. .. . .. . ...... •. 15.421.600
.. ..
.
..
.
-
62.449.900
3.049.550
2.451.600
Distri c ~ .....
Total
.
2.oI4.512
98.3TJ
19.218
+
- 116.361
4.809
10.302
+89.611
+ 578
+ 2.839
61.957.050
Total Texas ..... ' .
New Mexico .. . . . .•.•.•.•.. ..
North Louisiana .......... . ...
2.192.1 63
- 110.874
+93.058
SOURCE: Estimated from American Petroleum Jnstitute week1y reports.
BUILDI NG PERMITS
JO
DWll'Y 19-48
INDUSTRY
Current data indicate that the value of construction contracts
awarded during January in the district was sustained at a level
far above that of a year ago and approximately 50 per cent
higher than in December 1945. This conclusion is confirmed
by t he value of building permits issued during January in sixteen principal cities of trus district, which totaled nearly $25,000,0 00, or about eight times the value of perrnits issued in those
cities in January last year. Reports indicate that very large gains
in acti vi t y have taken place in the construction of residential
buildings, especially in Te xas, and of some types of commercial
buildings. A major development relative to the construction
industry during recent weeks was the announcement of a Veterans' H ousing Program. The goal of this program is the construction of 1,200,000 additional homes this year and 1,500,000
ho",es during 1947. Of the total units to be added, 1,600,000
would be conventional houses, and 850,000 would represent permanent prefabricated units. The program contemplates vast
increases in output of building material with Government subsidies where necessary. It is proposed that "the largest part" of
the allocated equipment and material would be channeled into
homes selling for not more than $6,000, or renting for not more
than $50 per mon tho
On February 11, the Administrator of the Civilian Production Administration announced that regulations would be issued shor tly which would drastically curtail industrial and commercial construction, as well as residential building which does
not conform to the veterans' program, since the use of scarce
building materials would be restricted to approved projects. The
announcement al so indicated that construction started at trus
COTIONSEED AND COTIO NSEED PRODUCTS
T e.."t .l\S
Cottonseed received at mills
(to"') .. . . . . ... . . . . .... . . . .
Cottonseed crushed (tons) .. . ..
Cottoraeed on hand Jan. 31
August I to J anuary 31
Thi8 season
Last season
869.032
601.68.1
587.836
565.009
(to..) . . ..
Production of producta:
Crude oil (thousand Ih!.)
C'ake nul meal (t ous) ..
(tons) .. . . .. . . .
Li nlcnt (running balCB)
131.085
178.602
137.826
Hull~
120.815
United States----
August 1 to January 31
This seuon
2.801.547
2,385.542
I...art aeason
3.933.951
2.694.851
312.842
634.053
170.ZOO
177.316
277,191
741.648
1.052.949
568.742
720.601
Abilene ..
Amarillo . .
AUBt.iu ..•..
Cake and me1.1 (tons)
1I ulls (tons) .. .. . . ". . . . "
Linters (running bales) .. "
El Paso .....
Fort Worth .. .
Galveston ...
Houston .....
Lubbock ....
Port Arthur .
181,101
15.755
16.346
19.302
23.912
13.019
21.923
21,791
38.008
61.813
61.072
51.109
08.389
56.m
84,288
January
1946
11.825
811.368
January
1945
16.161
85().425
U. S. stockB--cud of montb:
Tn l.'olUluminJl; cstablO't13 . ..
Public st.g. &:
COUlpm!SC3 • •
............
Waco . . . . ... . ...
Wichita Falls ...
Total .
tO ver 1.000
pet
-
-
+692
-
33
ecnt.
VALUE OF CONSTRUCT IO N CONTRACTS AIV ARDEO
(ThOUBaDda of do1l8J1l)
December
1945
I 22.945
M19
160'26
330,685
86. 134
244.551
January
1945
January
1946
I 32.891
9.561
23.330
Eleventb District-total.
Resi:ientiaJ. .. . .... .
All other . . . . ..... .
$ 15,216
951
14.265
140.949
19.536
121.413
351.601
89.715
Red-tentb..I .... . . .. .. . .. .
267.186
AUother . . .................. .
"37 states east of the Roe,y Mountains.
SOURCE: F. W. Dodge Corporation.
Urlite;i Statest-totaL .. . .. .
VAWE OF CONSTRUCTION CONTRACTS AWARDED
(Thousands or dollars)
December
1945
Eleventh D:i!trict-total. .. $ 22.945
Residential . . . . . . ..... .
6.519
Allother .. . ... . . . . . . . .
16.426
United Statest- total.
330.685
Deoemher
1944
$ 29.891
1.188
28.706
188.481
8~. 134
Residential .. .. .
All other .. . ..
244.651
23,902
164,670
November
1945
$ 30.194
3.702
26.492
370.087
88.374
281,71 3
Jan. I to Dec. 31
194.5
1944
219M 1
42 .609
236.432
3,290,300
663.461
2.735.836
$ 118.224
23.9 70
164.264
1.90f,01 6
348.443
1.645.573
-37 atales east of the Rocky Mountains.
SOURCE: lo' . W. Dodge Corporation.
PORTLAND CEMENT STATISTICS-TEXAS MILLS
(Thousands of barrels)
Month
January .. . ..
_-Production
1944
1945
2,366.336
0.064.513
2.292.765
12.080.186
August ......
September ...
October . . . . .
November . . .
December.
653
465
576
566
651
561
726
715
686
812
801
831
430
419
466
575
641
464
530
554
597
520
523
501
Total ...
51 .0~
122.886
8.042
6.160
jI' ebruary .. . .
Much ..... .
.~ ... ...
1. ay .. ... ...
June . . . . . ...
DOMESTIC CONSU MPTION AND STOCKS OF COTI0N-(BaI,,)
Teus mills." . . . ..
United State! mills.
.
..... . . .. ...
San Antonio ..
Shreveport, LA
Percentage change
valuat.ion from
Doc. 1945
Jan. 1945
+21 8
7
+358
+ 36
+751
+206
+ 45
+ 94
+3~ 1
5
- 30
+304
+11
+446
+151
+3~7
- 54
+ 191
- 62
+989
+ 36
+526
- 62
+ 259
+ 188
+ 51
+4r l
+161
$24.467.639
468
goJC: ~.h~~.~ : :::::
827.865
1.234.861
623.798
787.192
SOURCE: United States Gureau of Census.
Consumption at:
5.695
91
198
. ..... .....
&aulDont . .... . ...•
Sto~ks
on hand January 31:
Crude oil (thousa.nd Ibs.) .
223
195
1,125
115
579
95
625
209
157
1.133
314
105
63
Valuat.ion
$ 526.115
694.490
1,397.612
229.210
765.663
5602.264
405.156
1.91O.3M
264.468
3.065.235
425.849
291.906
2.605.985
&W.995
212;l46
369.390
1.350.856
26 1,456
~wubcr
December August I to January a1
Thi8 season J..qt season
1945
fl3.349
13.652
94.988
4.401.219
651.184
4.870 .811
July ...
SOURCE: BllIUu of MiD(!.
Shipmcnb! ----Stocks (end of month)1945
1944
1915
1944
1,050
1. 11 6
449
512
1. 124
1.018
410
491
1.032
549
997
698
991
622
984
572
1.014
512
825
815
519
767
888
T.lO
515
724
843
758
725
837
716
560
907
627
714
638
679
650
H48
700
.93
47H
558
002
1,010
385
656
734
8.397
6.285
38
MONTHLY BUSINESS REVIEW
time is subject to the risk of prolonged delays unless it is sufliciently essential to receive approval under the proposed regulations. It was indicated that it may be necessary to prohibit the
completion of some projects already under way.
The Texas cement industry has experienced an upward trend
in production during recent months coincident with the expansion in construction activity. In December production of cement
in Texas amounted to 831,000 barrels, which was the largest
monthly output since July 1943. While December production
was only 4 per cent higher than in November, it was 66 per cent
above the output in December 1944. Production during 1945,
amounting to 8,042,000 barrels, exceeded that of 1944 by 31
per cent, in comparison with a 13 per cent increase at all mills
in the United States.
After declining substantially following the termination of the
war, consumption of cotton in United States textile mills increased sharply in January, when 811,000 bales were utilized.
This amount represented an increase of 24 per cent over that
consumed during the preceding month and was only 4 per cent
under that used in January 1945. Total consumption during
the first half of the 1945-1946 season, amounting to 4,407,000
bales, was 10 per cent less than that during the corresponding
period of the preceding season. On January 31, 1946, stocks of
cotton in consuming establishments, amounting to 2,366,000
bales, were 3 per cent higher than a year ago, but stocks in
public storage and compresses, totaling 9,965,000 bales, were
about 23 per cent lower.
Petroleum production in this district increased further in
January, the daily average of 2,192,000 barrels being 4 per cent
larger than the average in December but 5 per cent under that in
January 1945. In other sections of the country, production was
maintained at approximately the same rate in January as in
December. Production allowables for Texas, which were increased by 98,000 barrels daily during February, were cut by
approximately 350,000 barrels daily for March. On the basis
of March allowables, the State's production for that month
will drop to the lowest level since last fall when the refinery
strikes were in progress. The reduction was ordered in view of
the accumulation of crude oil stocks and of mounting gasoline
the district resulted chiefly from the huge proven reserves in
this area, which permitted marked production increases before
reaching maximum efficiency rates, and from the policy of the
Petroleum Administration for W'ar in endeavoring to bring the
production of the various states into a more equitable relationship with proven reserves during a period in which the Nation's
need for petroleum was increasing rapidly. Although production in the Eleventh District increased from about 40 per cent
of the National total in 1942 to 48 per cent in 1945, the district
still had approximately 60 per cent of total proven reserves in
the United States on January 1, 1946, or about the same percentage as four years earlier.
In the face of an unprecedented demand for petroleum and
petroleum products, drilling activity was curtailed sharply
during 1942 and 1943, when our economy was being geared
to full-scale war production. The 40 per cent decline in well
completions between 1941 and 1943 reflected such factors as
the readj ustment in drilling programs, shortages of manpower
and materials, and Government conservation regulations. Dur-
ing 1944 and 1945, in recognition of the need for additional
petroleum reserves to compensate for the expansion in production and to provide for future contingencies an intensified
exploratory program calling for the drilling of an increased number of wildcat wells was ptlt into effect, and in the distribution of
equipment and materials, preference was given to the requirements for carrying out that program.
Despite the decline in total well completions in the United
States during 1942 and 1943, the number of new fields discovered was larger than in the immediate prewar period. During
the 1942-45 period, the yearly average number of new fields
discovered increased to 403 as compared with 289 for the 19381941 period. As a result of the readjustment in development
programs, drilling operations deelined by more than 50 per cent
in the older, well developed producing areas, such as Illinois and
southern Louisiana, and increased in Arkansas, Kentucky and
Wyoming. New well completions in the Eleventh District declined from 11,400 in 1941 to 4,756 in 1943 but rose substanSIGN IFICANT INDICATORS OF PETROLEUM ACTIVITY
UNITED STATES
inventories.
ELEVENTH DlSTIUCT
Proven Petroleum Ra!crvca--(Jlluuary 1 of each )'ear)
Although crude oil runs to refinery stills in this district, which
averaged 1,391,000 barrels daily in January, declined about 4
per cent from the December average, the demand for southwestern crude oil from other sections of the country was sustained at a high level. The high rate of refinery operations in the
United States, which is being maintained in an effort to meet
the heavy demands for fuel oil' and kerosene, is expanding
greatly the supply of gasoline. While the increase is a normal
seasonal development, stocks of gasoline on February 16 had
risen to 105,000,000 barrels, or only about 4,000,000 barrels
under the all-time peak reached in the spring of 1942.
The high level of crude oil production during the war period
has created much interest in and concern about its effect upon
the proven petroleum reserves in the Eleventh District and in
the United States. Crude oil production reached newall-time
peaks for three successive years and this district was called upon
to furnish a large proportion of the total increase in United
States production. The relatively larger expansion of output in
19,589.296
20,082.793
20,064.152
20.453,231
20,970,011
1942
1943
1944
1045
1946
Year
11,936.697
12.513.304
12,24Q.176
12,223.963
12.653,853
Total Annual Petroleum Production
(Tbousands of barrels)
1.386,645
1,503,176
1,678,421
1.710,275
194.2
1943
1944
1945
Pm·
ductive
!{143
1944
1945
1942
Productive
523
546,i20
656.808
809,056
814.974
Number of New Well!:! Completed Annually
UnproProUnproductive
Total
ductive
ductive
12,922
11,149
15.456
16,375
1942
Trends in Petroleum Production, Proven
Reserves, and Drilling Activity
1942-1945, Inclusive
('l'bouaanda or barrels)
y"",
5.684
5,928
6.751
7.226
18.606
17.077
22.207
23.601
3.949
2.808
4.333
5.406
1.882
1,948
2.432
2.714
Number of WUdc.'\t Wells Completed Annually
UnproProUnproducti ...e
Tobl
ductive
ductive
2.643
3.166
220
1.016
1943
644
2,968
3.612
239
1,108
11144
805
3.519
4.324
327
1.383
194.5
818
3,519
4,337
321
1.4005
Number of Drilling Rip in Operation--(January 1 of each year)
Year
United States
Eleventh District
1942
1943
1944
1945
2,797
3,605
4.683
4.637
SOURCE: Bureau of Mines a.nd The Oil Weekly.
71J
1.118
1.652
1.402
TotAl
5,831
4.;56
6,767
8.119
Total
1.236
1,347
1.710
1,726
MONTHLY BUSINESS REVIEW
tially in the subsequent two years, totaling 8,119 during 1945 .
The decline was most pronounced in the intensively developed
East Texas field. Drilling activity was well sustained in the
Texas Gulf Coast region and in New Mexico, with new well
completions in the latter state during 1944 and 1945 exceeding
those in 1941.
During the 1942-1945 period, exploratory drilling, as measured by the number of wildcat wells completed in the United
States, increased each year with total completions rising from
3,166 in 1942 to a record level of 4,337 during 1945. The center of interest in exploratory drilling shifted from area to area
during the course of the war period, but well completions were
concentrated in the states of Oklahoma, Illinois, Kansas, and
Texas, these being the only states in which as many as 300 wildcat wells were drilled during any year of the period. California
intensified its search for new oil fields, the number of wildcat
completions increasing from 120 in 1941 to 297 during 1945.
In the latter year, however, most of the wildcat wells drilled
were unproductive. In the Eleventh District exploratory drilling
increased throughout the four-year period, and in 1945 wildcat
completions totaled 1,726 wells. The greatest nwnber of wildcat
wells was drilled in the North Texas district, although the
largest number of productive wildcat tests was drilled in the
lower Gulf Coast area. In East Texas and in the Panhandle district, exploratory drilling was relatively inactive throughout
the period.
The intensive exploratory campaign was disappointing in the
sense that relatively few new fields of substantial size were discovered. With the emphasis upon exploration and with the decline in developmental drilling, the percentage of total completions represented by dry holes naturally increased, the ratio of
dry holes drilled to total well completions in the United States
rising to a yearly average of 29 per cent during the war period
from 22 per cent during 1940 and 1941. The following t able
which gives the amount of new oil discovered for each dry hole
or wildcat well drilled, furnishes a measure of the efficien cy of
the search for new oil.
OIL D1SCOVEfiED IN RELATION TO
DRY HOLES AND WILDCAT TESTS
- - - U nited Stat"'csr----- Elcvenl h District -----..
OJ d ~co \' ered in
I
rc1ati on to each
Dry bole
Wildcat
Oil discovered in
relation to each
Dry hole
Wildc.'ll.
(bam la)
Annual average, 193!J.41 ...
A....... 1942.(6. .
·1939 only .
(barrela)
(barrels)
(ba""I.)
307,100,000
293,900,000
647,100,000
499,100,000
400, 700,000
396,000,000
672,800,000 .
694,600.000
Except in 1943, extensions and new pays in previously discovered field s, combined with revisions in estimates for older
fields, added substantially each year to proven reserves, both in
this district and in the United States. Total discoveries of the
four-year period amounted to 5,779,000,000 barrels, of which
61 per cent, or 3,540,000,000 barrels, were found in the Eleventh Federal Reserve District. When converted to an average
annual rate of discovery, these amounts repr<"enr declines of 31
per cent and 17 per ~e nt, respectively, f rom t he discovery rate
during the three-year period immediately preceding our entry
into the war. Although no very large new fields were discovered
during the war years, there were a few significant discoveries.
Oil was discovered in Florida during 1943 , and in Alabama the
following year, but the principal new sources found were in
other areas. Large amounts of new oil w ere found in West T exas,
the Fullerton field of Andrews County and the Keystone field of
89
Winkler County being the largest current producers. In Oklahoma, discoveries included the Pauls Valley field and the West
Edmond field. The latter has been regarded as one of the most
significant discoveries in recent years. Mississippi rose to the rank
of tenth state in proven reserves, due primarily to the discovery
of the Heidelberg field. Currently, attention is being devoted to
Rangley field, Colorado, which has been termed perhaps the most
important discovery during 1945.
As mentioned earlier, production of crude oil reached successive all-time peaks during each of the past three years, the 1945
production for the United States totaling 1,710,275,000 barrels,
or an increase of 27 per cent over the average for the 1939- 1941
period. Meanwhile, pmduction in this district rose even more
rapidly, the 1945 production of 814,974,000 barrels representing a 46 per cent increase over t he average for the three prewar
years. Despite this unprecedented production, proven reserves
of the Nation increased each year, the net gain for the four-year
period being more than 1,390,000,000 barrels. The largest excess
of new oil found over production occurred during the past year,
when the net gain in reserves was estimated to be more than
500,000,000 barrels. Reserves in this district declined in 1943
and 1944 under the impact of curtailed drilling and increased
production. Nevertheless, large discoveries during 1942 and
1945 enabled the district to make a net addition of more than
717,000,000 barrels to its proven reserves during the war
period. As a result, Eleventh District reserves, which represented
61 per cent of the United States total on January I, 1942, remained virtually unchanged percentage-wise at the end of 1945.
Proven reserves in the United States as of January I, 1946, were
estimated by the Oil Weekly to total 20,970,011,000 barrels,
12,653,853,000 of which were within the Eleventh Federal
Reserve District. More than 80 per cent of the Nation's reserves
are located in four states: Texas having 11,764,296,000 barrels; California, 3,288,977,000 barrels; Louisiana, 1,653,522,000
barrels; and Oklahoma, 931,257,000 barrels.
Despite increases in proven reserves of 717,000,000 barrels
in the Eleventh District and of 673,000,000 barrels in the area
outside the district, seven states experienced declines in reserves
during the four years. In addition to New Mexico, whose reserves declined 95,746,000 barrels from 1942 to 1945, largely
because of revision in earlier estimates, the states of Kansas,
Oklahoma, Pennsylvania, California, Arkansas, and Ohio sustained losses in proven reserves. Since the majority of fields in
some of these states are among the older oil producing areas,
increased production and restricted drilling served jointly to
reduce remaining reserves. In Texas, estimated reserves showed a
net increase of 788,655,000 barrels, or 57 per cent of the
Nation's net additions, Net additions to the proven reserves of
four other states are estimated by the Oil Weekly to be 264,000,000 barrels in Wyoming; 223,000,000 barrels in Louisiana;
214,000,000 barrels in Colorado; and 135,000,000 barrels in
Mississippi.
The progress of the war and the effects of its termination
influenced developments in the petroleum industry to a large
extent during 1945. Nevertheless, a number of additional significant factors might be mentioned. The end of the war brought
a sharp decline in the military demand, which was only partially
counter-balanced by the expansion in civilian demand. Wells
were drilled deeper, as reflected by new depth records in 11 states.
A larger number of new gas, oil, and distillate producing sources
were found than during any previous year; also, discoveries of
2,227,000,000 barrels were larger than during any year since
MONTHLY BUSINESS REVIEW
40
1939. Despite the continued shortage of labor and materials,
there were 400 more rigs drilling on January 1, 1946, than on
the same date four years earlier. The year's outstanding single
development was the discovery of the Rangley field in Colorado,
where the widely expanded limits have not yet been defined. This
field enabled Colorado to rank next to Texas in exploratory success during 1945. Texas continued to lead in virtually every
phase of oil and gas activity, with deep explorations in the West
Texas Permian Basin setting the pace for the State and Nation in
contributing to crude reserves. North Louisiana had an active
and satisfactory year in 1945 , the Delhi field developing into one
of the Nation's major fields.
By the end of 1945, average daily production per well in the
United States had declined to 10.7 barrels, as compared with
11.4 barrels a year earlier. It appears reasonable to assume that
a number of wells may be abandoned during the current year,
since approximately 70 per cent of the 421,000 producing wells
were receiving subsidy payments at the end of 1945, and the
reduction or elimination of such payments would likely result
in many wells being withdrawn from production.
At the end of 1945, the Eleventh Federal Reserve District
had 112,300 producing wells with an average daily output of
19.9 barrels per well. This reflects in part the fact that 85 per
cent of the 49,000 flowing wells in the United States were
located in the district.
After a period of peak production, the petroleum industry is
now experiencing a period of at least temporarily reduced operations. While some new civilian demands have developed during
the war period, the over-all requirements are likely to be restricted for a considerable period of time. The Oil Weekly estimated that total United States crude oil requirements for 1946
would be close to 4,300,000 barrels daily; that rate, while substantially under the 1945 rate, would represent an increase of
450,000 barrels daily over the 1941 production rate. The concensus in the petroleum industry appears to indicate some decline
in the number of wells to be drilled during 1946, with the emph.sis being placed upon deeper drilling, which requires larger
expenditures and more time per well. However, the trend of
recent years toward extensive exploration seems likely to continue.
ACCUMULATED CRUDE OIL DISCOVERIES
UNITED STATES AND ELEVENTH FEDERAL RESERVE DISTRICT
o
BILLIONS
10
20
OF BARRELS
30
40
50
60
