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~eral Reserve Bank of Dallas

Business Review

May 1976
Meat ProductionGrain Price Increase
Accentuates Beef and Pork Cycles
Bank LiquidityIs the Level Adequate
For Future Loan El<JI8II8ion?

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

Meat Production-

I Grain Price Increase
I Accentuates Beef and Pork Cycles
Production of red meat in the
United States varies cyclically.
And the fluctuations in supplies
cause large swings in prices of meat
and livestock.
Since most of the meat con·
surned in this country is beef and
pork, changes in production and
prices impact mainly on cattle and
hogs. The basic factor causing supplies of beef and pork to fluctuate
is the lag in the response of production to changes in profitability-that is, changes in prices of
cattle and hogs relative to changes
in costs of producing them. The
periodic cycles are firmly rooted in
biology, as well as economics, and
are about 2 times longer for
cattle than for hogs.
The recent changes in both production and prices of meat animals
have been greater than in most
past cycles, largely because of the

strong rise in grain prices in recent
years. The financial squeeze on
producers surfaced in 1974 as
adverse weather reduced grain production, and increased worldwide
demand caused grain prices and
feed costs to move up sharply. The
index of prices paid for feed by
livestock producers advanced 17
percent in 1974 over the average
for the year before.
The basic factor causing
supplies of beef and pork to
fluctuate is the lag in the
response of production to
changes in profitability.

I
~

The surge of feed costs caught
fanners and ranchers with their
cattle and hog numbers at high
levels. Favorable earnings in the

early 1970's had encouraged producers to increase cattle and hog
production, and as more animals
were marketed, prices dropped
sharply. The index of prices
received for meat animals-cattle,
hogs, and sheeP-decreased 17 percent in 1974 from the year before.
The cost-price squeeze, resulting
from higher feed costs and lower
prices for cattle and hogs, caused
the number of hogs on fanns to be
decreased nearly 20 percent in the
two years ended January 1976. And
where the number of cattle and
calves on fanns had previously
been increasing at a fast pace, the
number decreased in 1975 for the
first time since 1967.
Production cycles __ .
Cyclical patterns in meat supplies
and prices show a large degree of
independence from current con-

Price Inde xes for Meat Animal s a nd Fee d
270 (1967=100) -------------------------------------------------------------------240 -

,
I,

PRICES RECEIVED

FOR MEAT ANIMALS

I \

210 180 -

...".-.'.'

150 -

,, ,"
" ........,

1971

1972

\
~

,-, _... '

,'~

1970

1973

1974

'"...

•

1975

1916

SOURCE: U.S. Department of Agriculture

BWlness Review I May 1976

Cattle Slaughter and Prices
50 BILLION POUNDS - - - - - DOLLARS PER HUNDREDWEIGHT 45

40 -

,-- ..

SLAUGHTER, LIVEWEIGHT

,,"

30 -

-"---,,-----,,-----,-----,-----,,-----,,r1945

1950

1955

1960

1965

1970

1975

SOURCE: U.S. Department of Agriculture

surner incomes and general economic conditions. Reflecting the
biological constraints, production
of cattle and hogs tend to follow
cycles over time, which are initiated by favorable prices for animals marketed and eventually lead
to increased production. But the
larger supplies then cause prices
to decline, which later results in
less production.

The amplitude of the cycles in
prices is large because the
demand for meat, in the short
run, is relatively insensitive
to price.
When prices are high, producers
overexpand because, as a group,
they do not fully consider the
effect of their actions on total
supply and prices in the future.
Overexpansion eventually causes
prices to decline below the cost of
production, which results in excessive cutbacks in production. The
amplitude of the cycles in prices
is large because the demand for
2

meat, in the short run, is relatively
insensitive to price.
The cyclical behavior of output
and prices develops because of the
lag between the time production

decisions are made and the actual
realization of production. Production decisions are in1luenced
heavily by current prices. And
current prices are largely determined by supplies resulting from
current marketings. But because
of the time span before production is realized, actual production
becomes a function of past pricesthat is, the prices prevailing when
the production decisions were
made. The time required to move
from a cyclical high to a cyclical
low in prices is closely linked to
the time needed to produce a new
generation of cattle or hogs.
. .• for cattle •..
Infonnation on the number of
cattle and calves on fanns in the
United States during the last century indicates the buildup in numbers reached its first peak in 1890.
And the latest peak-in 1975-was
the fourth since the midthirties.
In recent cycles, peaks in numbers occurred in 1945, 1955, 1965,
and 1975.

Cattle and Calves on U.S. Farms
140 MILLION

(JANUARY 1 FIGURES)

120 -

100 -

80 -

-;r-----r-----.-----,'r-----r'-----.I-----,'-1940

1946

1952

SOURCE: U.S. Deparlment 01 Agricullure

1958

1964

1970

1976

Beef production cycles have
been about 10 years long because
of the time required for cattle to
reach maturity. A span of at least
three years is needed from the time
a heifer calf is born until it reaches
maturity and can produce an offspring that provides beef for consumption. Thus, in each of the
past three cycles, the buildup
phase has lasted six to eight years.
The expansion phase of a new
cycle begins when demand exceeds
supply. triggering a marked upturn
in cattle prices. At this stage, the
liquidation phase of the cycle has
been completed, and beef output
slows down as cattlemen market
fewer cows and withhold heifers
to increase herds.
In recent times, the beef cow
herd has needed to increase about
2 percent annually to keep pace
with the growing demand for beef.
But in 1972, 1973, and 1974, the
herd grew more than 5 percent
annually. Owners of cow herds
make decisions influencing the sup·
ply of beef largely on the basis of
prices received for calves, which
soared from an average of $36.40
per hundredweight in 1971 to
$56.60 in 1973. In 1974, however,
the average price dropped to
$35.20 per hundredweight. With
the excessive rate of expansion of
cow herds, a downturn in prices
was to be expected.
Producers' decisions to reduce
production cause beef output to
increase in the near term. The
increase results from accelerated
slaughter of animals used to
produce offspring. When cattle
prices decline sharply, farmers and
ranchers limit further financial
losses by reducing the number of
breeding animals. Slaughter of
these animals boosts beef supplies,
adding momentum to the downtrend in prices.
The sharp surge in feed costs in
1974 gave further impetus to the
cyclical decline in cattle prices. For
one thing, the cost of maintaining
Business Review I May 1976

Cattle on Feed
16 MILLION _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ MILLION 9
FEEDLOT PL ACEMENTS MARKETINGS ._.

12-

,
,,

4NUMBER

O-r--------,---------~--------r_-------.- 4

1973

1974

1975

1976

SOURCE: U.s. Dep3rlmenl 01 Agriculture

slightly less than 14 percent and
the 1971-73 average of 12 percent.
And with marked increases in the
rate of heifer slaughter, growth of
the number of cattle and calves
on fanns and ranches stopped last
year. At the start of 1976, the
number was 3 percent smaller
than a year before.
Owners of cow herds make
Because of the steep downturn
decisions influencing the supin fed cattle prices in late 1973 and
ply of beef largely on the
the relatively high level of feed
basis of prices received for
prices, financial losses impacted on
calves.
the cattle feeding industry from
late 1973 to mid~1975. Where
Discouraged by rising costs and Choice steer prices averaged 53
declining cattle prices, cattlemen
cents a pound in August 1973, the
began to market more cows in late average was 35 cents in February
1974; and in 1975, the number of
1975-a decline of 34 percent.
cows slaughtered increased a star~ Meanwhile, the price of grain had
tling 54 percent over the year
increased considerably, pushing
before. The gain in production
the cost per pound of gain in the
feedlot substantially above the
from increased cow slaughter
boosted beef supplies that were
price for Choice steers.
already plentiful. Compared with
The result was a dramatic
decline in the number of cattle in
the year before, total beef output
rose 8 percent in 1974 and almost feedlots. Cattle on feed in the 23
major cattle feeding states at mid4 percent in 1975.
1975 numbered 8.5 million-a third
Total cow slaughter in 1975
amounted to more than 20 percent fewer than two years earlier. With
of the cow herd at the beginning of demand for calves by feedlots
sharply reduced, calf slaughter in
the year. That was substantially
larger than the 1974 proportion of 1975 increased to 5.2 million-

cows and heifers in the breeding
herd increased. More important,
higher grain costs drove the cost
per pound of beef gained in feedlots above the price per poWld of
grain-fed slaughter cattle.

nearly 75 percent more than a
year earlier.
Smaller numbers of calves had
been sent to slaughter each year
from 1965 to 1974. In that period,
the commercial cattle feeding
industry experienced dynamic
growth. Fed cattle marketings in
the 23 states advanced from 17.9
million head in 1965 to a peak of
26.9 million in 1972-8n increase of
50 percent.
As fewer grain-fed cattle were
marketed last year, average slaughter weights dropped dramatically.
The carcass weight of cattle
decreased from an average of 629
pounds in 1972 to 588 in 1975.
Furthermore, the decrease in average weight held the gain in liveweight production in 1975 to 6
percent while the number slaughtered increased 11 percent.
... and hogs ...
Production cycles for hogs are
similar to those for cattle. But
because it takes much less time
for hogs to reach maturity. adjustments are usually more pronounced and of shorter duration
than for cattle. When prices drop
or feed costs rise sharply, producers market more animals. But
with fewer hogs, pork production
declines, so that prices are higher
in a later period. The cycles continue over time because producers, together, tend to increase or
decrease output in response to
price conditions.
Peaks in the nwnber of hogs
and pigs on farms during the past
ten years occurred in 1969, 1971,
and 1974. A decrease in the nwnber of hogs began in the summer
of 1974, when grain prices soared
because of the drouth-damaged
corn crop and a strong demand for
exports caused by poor crops in
other countries. With grain prices
high relative to hog prices, fanners
sold their grain in the cash market
rather than feeding it to hogs for
pork production. Slaughter of sows

•

Ho g Slaughter and Pri ces

DOLL ARS PER HUNDREDWEIGHT SO

30 BILLION POUNOS

,,...,,
,

25 -

: - 40

20-

-30

\
\

1945

-.
I

1950

1955

,,,. ..,

-20

,~.,'

,...

,',

........ - .... _, AVERAGE PRICES
REC EI VED

1965

1960

1970

1975

SOURCE: U.S. Department of Agriculture

in the last half of 1974 increased
more than 40 percent over the
same period in 1973, and total
pork production increased 9 percent for the year as a whole. During 1975, however, production
dropped 18 percent.

A common indicator of the profit
incentive in raising hogs is the hogcorn price ratio because corn is the
main feed. The hog-com price
rati~the nwnber of bushels of
corn that is equal in value to 100
pounds of live hogs-is a measure

Hogs and Pig s on U.S. Farms
70 MILLION ------;;;;;;::o;;;;;;;~:;;;;;;;;:;;;;;;;-;;;;o;;~;;_;;;_:;;;_
(DECEMBER 1 INVENTORY, PREVIOUS YEAR)

,...-

r
,-

,......
50

.j.•

I-

II-

'"7

I-

1964

196B

SOURCE: U.S. Oep8rtment 01 Agriculture

1972

1976

of potential profitability in the
hog industry. The ratio range of
15 to 17 tends to be associated
with stable production. But when
the ratio declines to close to 13 or
below, production decreases; and
when it climbs to near 19 or above,
production increases.
The adjustment between
changes in the hog-corn ratio
and subsequent changes in
the number of hogs can be
carried out in a year or less.
The adjustment between
changes in the hog-com ratio and
subsequent changes in the number
of hogs can be carried out in a
year or less. The ratio fell below
12 in the last half of 1974. And
by the same time in 1975, the
number of hogs on farms had
decreased almost 10 percent. But
by the fall of 1975, the small pork
supply and a large grain crop had
combined to raise the hog-corn
ratio to around 20. Farmers are
now increasing production of hogs.
... curtailed supplies •..
Although increased production
boosted per capita beef and veal
consumption to a record 124
pounds in 1975, decreased production dropped per capita pork consumption to the lowest level in 40
years. Per capita pork consumption decreased to 54.8 pounds in
1975 from 66.6 pounds in 1974.
The sharp drop in pork production more than offset the increase
in the output of beef. Combined
production of beef and pork slipped
below year-earlier levels in March
1975 and totaled 3 percent less for
the year.
The slowdown in total meat production caused most retail prices
to soar to record levels, despite
generally increased beef supplies.
Consumers paid $1.59 a pound for
pork in October 1975-a gain of 45
Businesa Review I May 1976

cents over the March low. And
substitution of beef for pork
helped drive the prices of higherquality beef up also. The retail
price of Choice beef, for example,
reached a high of $1.61 a pound
in July 1975-34 cents more than
the low in March.
The price of hamburger declined
slightly to an average of 93 cents
a pound in August 1975, compared
with 95 cents a year earlier, largely
because its supply was more plentiful. Increased slaughter of cows
and grass-fed cattle added to supplies of beef that could be processed into hamburger. But marketings of grain-fed cattle fell,
curtailing the supply of beef that
usually provides most of the
higher-quality steaks and roasts.
This shift was reflected in a record price spread of almost $40 per
hundredweight between steer beef
carcasses and cow beef in the
summer of 1975 whereas, normally. the spread is much smaller.
The sharp downturn in pork production boosted the average price
per pound of pork last September
above the average price of Choice
beef. But unlike beef, prices for
different cuts (chops, loin, ham,
and bacon) tended to move
together, as they norma1ly do.
Consumers, therefore, did not have
the option of switching to relatively cheaper cuts of pork.
but indicate a turnabout
Beef production has exhibited a
stronger long-term growth trend
than pork production. Expenditures for beef tripled along with
disposable income over the past 20
years, while expenditures for pork
only doubled. As a result, individual consumers spent 2.57 percent
of their disposable income on beef
in 1975-the same as in 1955. But
the share of income spent for pork
declined from 2 percent to 1.35
percent over that period.
Production cycles probably will
be at least as important in infiu.
000

encing meat supplies during the
next several years. The built-in,
seU-adjusting market mechanisms
have been triggered to correct
for overexpansion in the cattle
industry and overliquidation in
the hog industry.
Basic trends suggest that less
beef will be produced during the
next several years. Low prices for
calves in the past two years have
discouraged the withholding of
heifers from slaughter to replace
cows removed from herds. The
number of beef cows at the start
of this year was 4 percent smaller
than a year before-the first decline
from year-earlier levels since 1958.
And nearly 20 percent fewer
heifers are being raised this year
than in 1975 for placement into
the cow herd. The fundamentals,
therefore, indicate smaller beef
supplies in 1977 and 1978.
While drouth is always a threat,
the current liquidation phase of
the production cycle leaves beef
producers vulnerable to the effects
of limited moisture and high feed
costs. Although the number of
cattle and calves decreased last
year, the number at the start of
1976 was the second largest on
record. Thus, prolonged drouth
would affect a large number of
cattle. With prices relatively low
compared with costs of beef production, any additional costs
resulting from drouth could lead
to financial difficulties. Mounting
financial pressures would lead to
increased cattle marketings in an
effort to lower costs of maintaining
breeding herds.
In that event, meat supplies
would be increased, dampening
cattle prices and stretching out the
period of the cycle when profits are
low. But an extended decline in
numbers of cattle would also tend
to lengthen the expansion phase of
the cycle. Because of such possibilities, the exact timing of the
turnaround in the current decline
in the number of cattle is uncer-

•

tain, but past trends suggest that
the most profitable period of the
cycle ahead should be in the last
part of the 1970's and the first part
of the 1980's. If these develop~
ments hold, then the next peak in
the number of cattle could occur
in the mideighties.

Selected Retail Meat Prices
280 CENTS PER POUND - - - - - - - - - - - - - - -

,.......

240 -

200

Although the cattle cycle is
currently in its liquidation
phase, the hog cycle is in its
expansion phase as producers intend to raise more
hogs in response to higher
prices.

,
, ..... ,, -.. .....,

;

160

4'~
---"

'"" I ........ ,

...........................--•• 1 ........

''''''

••'

,......,

... .•.

·'~AMBURGER

I
I

' .. I

BEEF, CHOIC~••GI:tAD~...

. . ..1""......
120

;
I '....

•

'~'"''

Although the cattle cycle is currently in its liquidation phase, the
hog cycle is in its expansion phase
as producers intend to raise more
hogs in response to higher prices.
In March, hog producers indicated
they had expanded breeding herds
about 15 percent last winter from
the previous winter and planned to
raise about 10 percent more hogs
this spring than last. However, as
of March I, the number of hogs
and pigs in the 14 major producing states was still 16 percent
smaller than two years earlier.
Production cycles will continue
as long as farmers and ranchers
make long~range decisions based
primarily on current prices. Infor~
mation available for more than a
century indicates that periods of
rising prices and rapid herd expansion are followed by periods of falling prices and sharp increases in
slaughter. While recent experience
underscores the importance of
weather to feed supplies and prices
and, consequently, to beef and

I
PORTERHOUSE STEAK:

:.-l~I" '"

.,....,... •............. ..

•

.......

.~I . . .

... .

-r----,----r----,----,1972

1973

1974

1975

SOURCE: U.S. Department of Agri.culture

pork production, production decisions based on the imperfect information given by current market
prices appear to be the dominant
factor explaining the persistence
of cattle and hog cycles.
These cyclical swings would be
dampened if fanners and ranchers
were able to take a 10nger~term.
view in their production planning.
Plans, of course, are affected by
cash flow, equity, and credit as
well as market prospects. A too
generous resort to credit when
prices for cattle and hogs are high
and numbers on farms and ranches
are at record levels and expanding
may prove shortsighted. A more
foresighted strategy in that cir~
cwnstance might be to cut back

or, at least, resist the urge to
expand further at that time.
Likewise, during the liquidation
phase of the cycle, fanners and
ranchers-and lenders also-ca.n reasonably expect improvement,
although timing is always uncer~
Wn. Equity and risk considered,
they could be well advised to
avoid letting the current profit
picture induce excessively conservative plans.
-Carl G. Anderson, Jr.

Bank Liquidity-

Is the Level Adequate
For Future Loan Expansion?
An adequate level of liquid funds
is necessary for commercial banks
to meet day-to-day deposit flows
and accommodate the needs of
their customers. The management
of liquidity for this purpose normally has little impact on credit
markets. However. the management of liquidity to meet variations in the demand for bank loans
over the business cycle generally
has more significant effects.
The cyclical liquidity position
of banks is a principal determinant of their lending policies-and.
hence, the cost and availability of
bank credit. As such, bank liquidity is an important part of the
linkage between Federal Reserve
policy actions and their impact
on the economy.
An understanding of this broader
role of bank liquidity is facilitated
by a simplified view of bank behavior showing how credit availability
is dependent on liquidity. In the
context of this view, it appears that
current bank liquidity is more ade·
quate to accommodate prospective
loan expansion than is indicated
by such traditional measures as
the loan·deposit ratio.
Liquidity and credit availability
Liquidity refers basically to the
ability to raise cash on short notice
with relatively little risk of loss.
When banks had little control over
the size of their total liabilities,
this ability was determined mainly
by the composition of their asset
portfolios. But now that banks
can raise funds by borrowing, as
well as by selling assets, bank
liquidity has come to depend on a

broader range of factors. It is not
possible, therefore, for any single
statistical measure to capture the
concept completely.
A simplified view of bank behav·
ior brings out the relationship
between credit availability and
liquidity.' As a first approxima·
tion, to be modified later, assume
that all liabilities are determined
by factors outside a bank's control.
In this extreme case, liquidity is
derived solely from the bank's
assets. In addition, suppose that
the assets can be classified arbi·
trarily into two homogeneous
groups-loans and liquid assets.

Bank liquidity is an important
part of the linkage between
Federal Reserve policy
actions and their impact on
the economy.
Loans are illiquid in the sense
that, although they can be sold
prior to maturity, a smaller pro·
portion of their full market value
is obtainable than for liquid assets.
To offset this illiquidity, loans
nonnaUy earn a higher interest
rate than do liquid assets. The
liquid assets serve as a buffer that
insulates loans from variations in
deposits. Liquid assets lend them·
selves to this purpose since, by
definition, they can be sold with
minimal transaction costs and
capital loss.
If a bank could be assured of
stable deposits, it would maximize
profits by holding only loans, which
earn a greater nominal return than

do the liquid assets. By protecting
a bank against risks associated
with variations in deposits, liquid
assets provide an "income" in
addition to their nominal return.
This extra return is in the form of
a reduced probability of unfavor·
able sales of loans. The full return
on the liquid assets is balanced
against the return on loans as man·
agement undertakes to maximize
the profits of the bank. The balance point of maximwn profits
clearly depends on the variability
of deposits and on the rates of
return on liquid assets and loans.
Consistent with this view, a loan
supply schedule can be visualized
in terms of the ratio of loans to
deposits. A hypothetical schedule
is shown in the accompanying illustration, where the rate of return
on liquid assets is held constant.
As the rate of interest on loans
increases, the bank would be
induced to sacrifice liquidity in
order to earn the greater return
on loans and, so, move to a higher
loan·deposit ratio. At the new
point of maximum profits, the dif·
ference between the return on
loans and the return on liquid
assets is offset by the increased
probability of loan sales.
According to this view, there is
no fixed limit on loans for a given
amount of deposits. Rather, the
optimal loan-deposit ratio varies
with the ratio of the rate of return
on loans to that on liquid assets.
Furthermore, as indicated by the
shape of the loan supply schedule.
the increase in the loan rate neces·
sary to induce bank managers to
provide an extra dollar of loans is

L The analysis presented is s imilar to that in James L. Pierce, "Commercial Bank Liquidity." Federal Reserve Bulletin,
August 1966.

Business Review I May 1976

likely to be greater the higher is
the loan·deposit ratio. It is in this
sense that a higher loan·deposit
ratio indicates lesser availability
of bank credit.

The optimal loan-deposit
ratio varies with the ratio of
the rate of return on loans to
that on liquid assets.
To bring our simplified view a
step closer to reality, liabilities
that the bank can control, at least
to some degree, are now intro·
duced. By varying the rates it pays
for money market funds, such as
large certificates of deposit, Euro·
dollars, and Federal funds, the
bank can-within limits-<:ontrol its
total liabilities. The existence of
such sources of funds gives the
bank an alternative method of
adjusting to variations in deposits.
Instead of selling liquid assets as
deposits are withdrawn, the bank
can raise funds by incurring new
liabilities. The profit-maximizing
bank attempts to choose the mix

The Supply

of asset and liability adjustment
that costs the least.
Since the existence of the markets for short·tenn borrowing does
not remove the original option of
selling assets, the mix of the two
adjustment methods must be no
more expensive than relying exclusively on asset sales. Within some
range, therefore, the existence of
these markets must reduce the
desired buffer of liquid assets.
Thus, the optimalloan·deposit
ratio would be higher for every
value of the loan rate, shifting the
loan supply curve to the right.

Measures of bank liquidity
A simple but still commonly used
measure of bank liquidity is the
loan-deposit ratio, in which the
denominator includes large CD's in
addition to other time and savings
deposits and demand deposits.
This ratio came into use when
banks were operating under conditions not unlike those first
assumed in our simplified view,
and it would be a fairly good
measure of liquidity under those
hypothetical conditions. But for

of Bank Loan s

RATE
OF INTEREST
ON LOANS

1.0
LOANS TO DEPOSITS

this measure to reflect the liquidity position of banks precisely,
there has to be a clear distinction between loans and liquid
assets, and uncontrollable deposits
have to be the principal source of
bank funds.
Under these conditions, the
loan·deposit ratio would measure
the extent to which banks have
already used up their available
resources to meet the credit needs
of their customers. The presumption would be that the higher this
ratio, the less able and willing are
banks to make any further extensions of loans. That is, the larger
would be the increase in the loan
rate relative to the rate on liquid
assets that is required to supply
another doUar of bank loans.
Since banks no longer operate
under such conditions, the loandeposit ratio may give a misleading picture of bank liquidity and
credit availability. For one thing,
it is risky to characterize broad
classes of balance sheet items as
more or less liquid than others.
Some items classified by banks as
loans may be more liquid than
some securities; nor does the
liquidity of asset groups necessarily remain the same over time.
For another, the loan·deposit ratio
ignores nondeposit items as a
source of funds for large banksitems that have increased in importance in recent years.
The ratio of loans to totalliabilities attempts to recognize the
importance of nondeposit sources
of funds to banks. But a problem
still remains in interpreting this
ratio since it treats all liabilities
as homogeneous. It is clear that a
change in the composition of liabilities could affect bank liquid·
ity and credit availability. For
example, a shift in funds from
demand deposits to large CD's
would probably increase the degree
of control over total liabilities and
thereby affect liquidity and bank
lending behavior. But the shift

wou1d not be reflected in the loanliability ratio.
Despite such deficiencies, these
two ratios continue to be widely
used as indicators of bank liquidity
and credit availability. If interpreted properly, they can still be
useful-in spite of their shortcomings-for tracing broad changes
in the liquidity of banks.
Charting these ratios for weekly
reporting banks in the period from
the fourth quarter of 1963 through
the first quarter of 1976 reveals
several notable features. 2 Both
ratios have a definite cyclical
movement, increasing during
expansionary periods when loan
demand increases and decreasing
during contractions. Moreover, the
cyclical movement of the ratios
usually lags the business cycle.
Finally, while both ratios displaya secular upward trend, the
upward movement of the loandeposit ratio is much more pronounced. The difference represents,
of course, the increased reliance
on nondeposit sources of funds.
Assessment of current liquidity
In order to assess current liquidity,
it is first necessary to detennine
whether the long-term upward
trend in these two ratios indicates
a general decline in aggregate bank
liquidity and, hence, credit availability. That is, does the long-tenn
increase in the values of these
ratios imply that banks are likely
to be less willing and able to
extend additional loans? In fact,
it appears that the trend in the
ratios mainly reflects contemporaneous developments in liability
management.
The period charted was a time
of extremely rapid development of
relatively controllable sources of
bank funds. Negotiable CD's,
which were introduced in 1961,
became an important source of

Measu r es 0 1 B ank Liq u idit y

85 PERCENT----------------------------------------(OUARTERLY AVERAGES
OF WEEKLY DATA)

80 --

75 --

70 -65 -60 -55 -50 -,lc.~6~3'1---rI~.6~5crl--'lc.6~7~1---r1.=6=9-,r--,1~.:7'~---r1.~7:3'1r--,,~.7~5~1---r
NOTE: Economic: rece ssi ons. measured from peak to trough of real GNP, are sho .... n
asshaded ale as.
SOURCE: Board 01 Govern of5 . Federal Reserv e S~slem

bank funds, and major money market banks started treating Federal
funds as a continuing source of
funds. From time to time during
the period, other instruments and
techniques-such as short-term
promissory notes, commercial
paper, and Eurodollar borrowingwere also heavily used by banks
to acquire funds.
Growth in nondeposit funds
raised loan-deposit ratios quite
mechanically. But the general shift
away from demand deposits, by
giving banks greater control over
their total sources of funds,
relieved them somewhat of dependence on asset liquidity and
thereby reduced their desired holdings of liquid assets. This shift
away from asset liquidity tended
to raise the loan-deposit ratio even

more and is also reflected in the
upward trend of the loan-liability
ratio. Consequently, the downward
trend in asset liquidity does not
necessarily indicate that credit
availability at banks decreased
during the period.
Changes in Federal Reserve
regulations have also been important in increasing the ability of
banks to manage with less asset
liquidity_ An especially significant
change was the exemption of largedenomination CD's from Regulation Q ceilings on interest rates.
Previously, the ceilings made
CD's an uncontrollable source of
funds during periods of high interest rates. In 1966 and 1969, for
example, banks were prevented
from paying the market rate of
interest on their CD's and faced a

2. The weekl y reporting banks include about 320 commel'Cial banks, each with deposits in excess of $100 million. These
banks account for over 55 percent of the assets of all commercial banks.
Business Review I May 1976

severe runoff of these deposits. But
in mid·1970. large CD's with
maturities of less than 90 days
were exempted from the interest
rate ceilings. Then in 1973, aU
large CD's were exempted. Because
of their exemption from Regula·
tion Q ceilings, these CD's are now
a controllable source of funds
throughout the business cycle.

The general shift away from
demand deposits, by giving
banks greater control over
their total sources of funds,
relieved them somewhat of
dependence on asset liquidity
and thereby reduced their
desired holdings of liquid
assets.
Another regulatory change
was the introduction of relatively
lower reserve requirements on the
longer·maturity CD's, which have
induced banks to lengthen the
average maturity of their CD
issues.' The longer average matu·
rity has helped banks stabilize the
terms on which they obtain funds.
These regulatory changes have
tended to enable banks to reduce
their asset liquidity further. And
both have supported the continued
upward trend in bank loan-deposit
and loan-liability ratios.
The question remains as to
whether credit at banks is at least
as available to borrowers now as
it was at the beginning of the
previous economic recovery. A
careful interpretation of the measures of asset liquidity provides
grounds for believing that it is.
Because of the long-term upward
trend in these measures, there is
more significance in the improve·
ment since their recent highsnear the peak of the business

cycle in 1974-than in a compari·
son of their current levels with
levels in earlier recoveries.
And so far, this improvement has
been considerable. Up to the first
quarter of 1976. the loan-deposit
ratio had fallen almost 10 percent
from its high in 1974. This drop
equals that achieved following the
1969 peak in the loan-deposit
ratio. In addition, the improvement in the loan·liability ratio now
exceeds that of the comparable
period during the previous cycle.
So, the availability of credit at
commercial banks would appear to
be at least as great as that during
the last business recovery.
In terms of our simplified view,
the continued trend toward less
dependence on asset liquidity has
shifted the banking system's loan
supply schedule further to the
right. Thus, the same degree of
credit availability is achieved at
a higher loan·deposit ratio than
before. And since the cyclical
improvement in the ratio is currently at least as large as in the
previous cycle, the degree of movement down and along the function
due to the decline in loan demand
has been at least as great in this
cycle as in the last. Consequently,
as loan demand picks up in the
coming months, the increase in
the loan rate relative to money
market rates that is necessary to
bring forth another dollar of bank
loans would seem to be no larger
than that required in the previous
economic recovery.
-Charles J. Smaistrla

3. For a de~iled analy~ill of the shift in~o longer·maturity CD's, see Clifford L. Fry and Edward E . Veazey, "Certificates
of Deposlt-Changes In Reserve ReqUirements Influence Volume and Maturity," Busine•• Review, Federal Reserve Bank
of Dallas, Auguat 1975.

New member banks

Olton State Bank, Olton, Texas, located in the territory served by the Head Office
of the Federal Reserve Bank of Dallas, became a member of the Federal Reserve
System on March 31, 1976. The new member bank has a capital structure of
$1.562,200, consisting of capital stock of $350,000, surplus of $650,000, and
undivided profits and reserves of $562,200. The officers are: Kenneth L. Burgess,
President and Trust Officer; !.auis Hair, Executive Vice President; Alan D. Brown,
Vice President and Cashier; Dale L. Cary, Vice President; Rachel Ruthart,
Assistant Vice President and Assistant Trust Officer; Betty Jo Hall, Assistant
Cashier; and Jim S. Ferguson, Assistant Cashier.
National Bank of Commerce, Edinburg, Texas, a newly organized institution
located in the territory served by the San Antonio Branch of the Federal Reserve
Bank of Dallas, opened for business April 7, 1976, as a member of the Federal
Reserve System. The new member bank opened with capital of $400,000, surplus
of $400,000, and undivided profits of $200,000. The officers are: John C. Jones,
Chainnan of the Board; Shelley H. Collier, Jr., President; John C. Moore,
Executive Vice President; Jesse Alvarez, Vice President; and Mary Ann Noel,
Cashier.
Western National Bank, Austin, Texas, a newly organized institution located
in the territory served by the San Antonio Branch of the Federal Reserve Bank
of Dallas, opened for business April 23, 1976, as a member of the Federal R eserve
System. The new member bank opened with capital of $400,000, surplus of
$400,000, and undivided profits of $200,000. The officers are: Tom Joseph,
Chairman of the Board; Donald R. Joseph, President; Richard D. Peterson,
Executive Vice President; Dean Doggett, Cashier; Virginia Straghan, Assistant
Vice President; and Lou Davis, Assistant Cashier.

New par bank
Bank of Oak Ridge, Oak Ridge, Louisiana, an insured nonmember bank located
in the territory served by the Head Office of the Federal Reserve Bank of Dallas,
began remitting at par Aprill, 1976. The officers are: C. E. Shepard, President;
E. H. Allen, Executive Vice President; and Joyce B. Baker, Cashier.

Business Review I May 1976

Federal Reserve Bank of Dallas
May 1976

Eleventh District Business Highlights
The liquidity position of large commercial banks in the Eleventh District has been improving since
mid-1973. The ratio of loans to deposits-one of the most widely used
measures of liquidity-appears to be
bottoming out at 64 percent, or
near the level of the cyclical low in
early 1971. And the ratio of loans to
total Iiabilities-a more broadly
based measure-has dipped below
51 percent, the lowest level in more
than six years.
The measures normally follow
the business cycle, reflecting the
rise and fall aflaan demand as business activity expands and contracts.
Accordingly, the loan-deposit ratio
gradually rose after the economic
recovery in late 1970, reached a
cyclical peak in 1973, and then fell
just before the sharp drop in business activity in 1974.
Liquidity is considered a principal determinant of lending policies-and, hence, the cost and availability of bank credit. Both ratios
gauge liquidity by measuring the
extent to which the resources of the
banks are tied up in loans. The
declines by the ratios indicate holdings of marketable securities are
increasing and that the liquidity
position of the banks is improvi .g.
The current low levels of the two
ratios suggest there is considerable
room in bank portfolios for additionalloans. In fact, a comparison
of the current levels of these ratios
with their levels in previous recoveries may well understate the
banks' present ability to extend
new loans.
In recent years, banks have developed alternative sources of liquidity-through their ability to borrow-that are not fully reflected in
these ratios. And the importance of
such borrowed funds as negotiable

certificates of deposit, Federal
funds, and Eurodollar borrowings
has been increasing.
Furthermore, recent changes in
Federal Reserve regulations have
increased the ability of banks to
control fluctuations in their funds.
An especially important change, for
example, was the exemption of all
large-denomination CD's from
Regulation Q ceilings on interest
rates. The exemption makes large
CD's a controllable source of funds
throughout the business cycle.
The Federal Reserve also lowered
reserve requirements on the
longer-maturity CD's. This reduction has induced banks to lengthen
the average maturity of their CD
issues and stabilize the terms on
which they obtain funds.
Because of these changes, banks
need fewer liquid assets to operate.
Hence, the current value of the
loan-deposit ratio probably indicates more loan availability than
did the value of 62 percent in the
previous recovery.

BANK LIQUIDITY
80 PERCENT - - - - - - - -

75 -

LOANS TO DEPOSITS

l \ ,'\

70-

\
65-\

l
;-

\ ../-.1

\ -.......
"

60-

55-~
50 -

LOANS TO LIABILITIES

Overbuilding and a decline in
demand for rigs have brought about
a worldwide surplus of mobile offshore drilling rigs, primarily semisubmersibles. The Gulf Coast has
felt the impact. For one thing,
many rigs have been moved there in
the search for work. In April, there
were 83 rigs off the coast of Texas
and Louisiana, including four without work. Six months earlier, there
had been only 69 rigs and only one
without work.
For another, contracts for mobile
rigs are depressed, and Gulf Coast
yards are suffering a paucity of new
orders. Drilling contractors are
worried that it could take years to
work off the world surplus, especially in the case of semisubmersibles. Jackup rigs-rigs that support
themselves above the ocean floor on
long legs-are less expensive to
operate and are not having as much
difficulty finding work.
Builders tend to overcommit
themselves in boom times, which
results in a surplus of rigs later on.
The present oversupply, however,
has been exacerbated by American
and foreign government subsidies
and other inducements. In particular, tax laws in Norway have
encouraged speculative building.
Generally, a cautious owner does
not order a rig without having a
contract in hand for its use. But
some rigs are coming out of the
yards without contracts.
The decline in the demand for
mobile rigs is largely due to uncertainties over U.s. and foreign offshore leasing policies. Though
geologic tests are underway off the
Atlantic Coast in preparation for
lease sales scheduled for later this
year, contractors fear the sales
might be postponed. And many
(Continued on back page)

CONDlnON STATISnCS OF WEEKLY REPORTING COMMERCIAL BANKS
Eleventh Federal Reserve District
(TlIousand doll.,.)

ASSETS

1916 '

Fede<. 1 lunds s .. d . nd secu'i~ es purcl'laHd
under lOIoJ,e.omenlS to , ... ell
0It>e, IN ns. 11'015
L.... INn 10.. '_r~
Othe, INnS, nel
Comm",Clal and indullrialloa"s
-'!Iricultu,. I INn., ucludi"ll CCC
cerlilical.s 01 inle'e'l
LNnS to bfO~ers and <leal .... to,
purchasing 0, ca'rylng:
U.S. Go .... nm""l . ecuriliM
Olt"" secu,ili ...
Ottwt, INns 10, purenas<ng 0' C<I'ryinll:
U S GO .... nm.nl lecu,WelI
otn ... ncurities
Lo .... 10 nonb.nk linanci.1 institutions:
5.1(1$ linane., o-rsonallinance, lacto,..
and 0111. , bUlln.... credit companies
Oth ...
A.... I estate loan.
LNns to domellic commfl,elal banks
Loanl 10 Io""\ln I>8nk.
ConI um., inslalm""t INnS
Le .... 10 Io''';\ln gevernments. effic; a l
"'"titulion$. cenlral blink S, and International
,nslilutlon.
Othl"e. ns
Tet.1 in_tm,nl.
Tot. , U S GO_nm.", securi~ ...
T,easu,y bill.
T' ....... ry c"ni~ca t u 01 Indebted"...
Tr"U u,y notes Ind U S Go ... ,nment
bond. matu,ing:
Within 1 )'elr
1 Y"" 10 5 year.
Aft .... 5 )'earl
Obligations el 11111' llnd p<>iliC<lI . ubdiviS<on l;
Tax wa"tnls end Ihon·tl,m rrote. a nd !)ill.
Allott>er
Oth ... bondi , co,po,ate Sloek., and 5aCuriti •• ·
Cenlll<:ales ,,,pres.nting psrticip8~on s in
1111",al agencyl""n.
All oth" , (I~udil>\l corporale .toeks)
Cuh It"ms in proe ... s 01 collection
A_~ with F.deral AeS«V<l Blnk
Currency and cein
B. '.neas wltn banks in the unilld Sial ••
Bi linee. with b<onks in loreilln countries
Oll1er .s..." (includin!l investml nts In .ubsidi.rtes
nol conlOlk!aled)
TOTAL ASSETS

Ma,24 ,
1915

", ".

1.111,349
10.721 ,ca3

10.U6,314

214,628

195.086

1975

To!al d<!posits
1.260.616
10.7ca.485
265,828
10.442.657

5.326.U7

I.U9.47~

223.340

77.534

1.029
81 ,002

26.835

3,302
367,8<10

5,991
359.498

2.334
394.543

2CK1 ,639
616,428
1,345.175
45.803
75.463
I,089.().I9

230.029
608.488
1,325,160
40,676
56.950
1,100.022

139.618
569.1 45
1,(95.4 89
...8.89
8.8,548
1,109.210

5.S.4
1 ,332.243
5,188,:>-14

14.927
t ,276 ,270
5,685,313

1,318 ,668
4.796,829

2 ,193. 101
526.280

2,081.070
500.549

1.24i1,().14
198.083

f otal d"",and depo.it.
Indlvidu l ll, PoIrln.rships, l lId carpo'allons
Sta te. and political .ubdlvil"'n.
US GO • • ,nml nt
Banks in Ihe U",'ed Stales
Fr>r119n :
Gove< nmlnll. el1icill lno!itutlonl. cannal
ban ks, Ind Internalional institutions
Commercial !>ankl
Cer1illlll and e tlie ....· Checks, elc
Total limfl and .avlngl dopesll.
Total ...y i ~. de~11I
IndMdu l ls and nonp,ol~ o'lI"nizaliorrs
Pa'tne'ships a nd co'porations opara tlll
10'Pfolrt
Dome.tiC g""ernmflntai "nlll
All olh ... savings <lepo.i!.
Tota! tim. dopellts
Indr.-iII uall , pa'iner""ips. a nd co'por."""s
Sla!, s and pohtlc. ,.ubd .... iaton.
U,S ao.ernmenl (Ineluding pestal.avlngl)
Bankl in the United Stat ...

-.'
"'
-.'
---"'
5,406,213
5.081 .68.4

241 ,686
1,216,650
208,(85

234,033
1.1541,707
181,181

220,847
692 ,987
137 ,121

204,_
3.().IS,903

215,79 1
3.053,463

IOS. 121
3,140,909

18,243
326,193
1.453,243
1,430,192
143,745
4 81,891
228,31>0

13,455
321 ,529
1.429,329
1,002,220
135 ,091
542 ,070
23O ,1!88

5 ,41J.1
296,151
1, 547,846
1.203 ,3711
130,306
462 ,894
21 ,396

1,353.881

1.282 ,303

1,002 ,&84

----

M.r 24.
1976

Ap' 21.
1916'

LIABILITIES

la,

1115

11,133.726 16.980.749 16. 162.442
---1,825,559
7.651.800 7.612,&36
5,681,832 5.582,030 5.60..107
(IJ.I,UI
486,050
40. ,821
17.,931
66.459
140.~09
1.317.503
1.357,236 1.309,721
3,1~7

1.822
61,669
90.53(
9 ,328,949
1.101,173

1( ,961
108,364
9,306,167
1.157.227

,,660,383

2 ,622
69,.35
141.801
8,489,_
1.213.222

"'
-.'

96 ,354

""'"

"'
n.a ,

"'
-.'

7,550,940
(,801,061
2.233.901
10,829
483 ,595

7.621,776

"'
"'

492.446

l ,216.S84
.,452,336
2.401.511 1
9.857
325,211

13,333
2,221

14.139
9,359

22.133
5,. 00

3.178 ,924
55,.40

3.199,519
13 ,1)47
991,685

3,0:W,o.l
80.917

~.9 2 .

1.666 ,575

l ,sse,eM

1.457.919

~ ,820,300

2.281.083
10,~ 4 9

Fo,eig ~ :

Go .... nm."lI, off .. ill ;"stit"tlon., c"nt,aI
bankl. and Int", ,,atienal inltilulions
Commerc ia l ba nk.
FIII",., lund. p,,'c hU ed a nd MCU,mel Krld
ulld ... ~r H m.n1S to rewrcl>asa
Othe, liabilities Ir>r borrowed money
Othe, lil l>llltl...
Tola l equity capilal and l ubo,dinatll<l note.
and dat>entu, ..
TOTAL LIABILITIES AND
CAPITAL ACCOUNTS

-.=

----

22,5119,689 22.145,626 21,526.123

Bec a" ... 01 lormal ,e.,llon. . . of Ma,ch 31, 1976, ... "i ... dlta III nol lul ly comPolr. ble.
n a -Nol availlbll

DEMAND AND TIME DEPOSITS OF MEMBER BANKS
Eleventh Federal Reserve District

22,589,589 22.1(5,626 21 .526 ,723
DE MAND DEPOSITS

1974. Ma,ch
1975: Ma,ch
Ap(!!

Eleven th Federal Reserve Distri ct
(Mill",n dollara)

,,ASSETS
LNna and ,hcounls, !ll'011
U.S . Go .... nm. nt obllga1",ns
Othe, lIICu,ilies
A.serv.swith F_,aI Ras8fYe Bank
Cion In .autl
!hrlan ces wilh banks In tn" Un~ed Stat ...
Ballnces wilh bIInk l in 1 (If~ countries_
C.sh Itlms In prOcel. 01 col tion
Othe, aSWI. ,
TOTAL ASSETS"
LIABILITIES A~O CAPITAL ACCOUNTS
O..... nd dflpositl 01 I>fonks
Other demlM de posita
Tim. dflpolitl
TOIII d<!po1i1S
Borrowlnlll
Ort.. , liaOilitlase
Total capital aecoun,._
TOTAL LIABILITIES AND CAPITAL
ACCOUNTS·

Mar 31 ,
1976

F. b. 25,
11176

23 ,497
3,970
1.123
1,822

22,1178
3, 7~9
1,631
1,725

'"'

1.526

1.749

'"
'"

M. , 26 ,
1915
22 ,115

''''
'"
1,319
1,762

1,4ae
~

1.967
2.355

1,71)4
1.837

43,331

42.510

38 ,849

2.078
13.829
19,460

1,855
13,248
19,113

1,721
12 ,181
17,315

35.381
3.763
1.291
2.910

34.216
3.7(11
1.8012
2,81 1

31.211
3.265
1,682
2,685

1.988
,~

43.331

"'.
."

CONDITION STATISTICS OF AU MEMBER BANKS

42.570

36,8019

• Eslima'ed
NOI. : Etlectlva March 31. 1976. lhe B. nk Al gullting Autllorit.. (Fed",a! AeM"'e, CompIrolle, 01 Ihe Currency. I nd Federal Deposillnsu,.nce Co'perillon) InlrolluCI " new
accounlin!l proeedu,as lor bank balance sheels Tile.. cn.nge. a re r.llacted in "' .. a nd
IUbsequent . tat .. liclllllbies

June
July
Allgust
Sa!>llmbe,
O.lobe r
No.,mbe,
Dec. ml>rrr,
1916: Jlnu a ry
FI l>rulry
MI,eh

13.1133
14,1\ 4
14 ,247
14.\06
U .333
14,501
14,51 4
14,1(8
14.725
1~ , 072

15,( 18
15,736
15,363
15.315

Adjusled'

TIME DE POSITS

"'
""
'"
'"
'"
".
'"

Govarnrnenl

10,150
10,3019
10.512
10,374
10.529
10.698
10,745
10,608
10.752
10,947
11,217
11,438
1\,178
11.280

TOlII

Sovinga

15.116
17, 177
17,196
17.303
17.213
17,31 5

2,968
3.226

17.~52

17, 563
17,715
18 ,031
18,249
18.558
18,955
19,255

'"
'"
'"
''''
'"
'"

J.32~

3.3018
3.409
3, 480
3.493
3.513
3.561

".'"
3.689
3.817
(.063
4.287

Other Ihan tho", 01 U S G"".. nmenl and domestic comme,elll blink., I... cesh
i' ems I ~ proelOS el collection.

RESERVE POSITIONS OF MEMBER BANKS
Eleventh Federal Reserve District

Te lll ,eservel held
With F_ral AH8fVe Blnk
CY"8flcy 100 coin
fl8(luirlld ,as..""..
.... """'"
Exc
Bor'owings
Fr" ' "serv'"

5 WHk •• ndlll
Ma, 31. 1916

4 week • ."ded
Feb 25. 1976

5 w""ka ""ded
Apr 2. 1975

2,101,("
1.743.31 4

2.098,922
1,136,509
362.413
2.092,329
6,593
12 ,918
- 15.325

1.995.532
1,660,521
334.911
1.985,320
10.212
9.1115

J64.1&O

2,I().1,051

3.~ 2 3

59,358
- 55 .935

BANK DEBITS, END-Of-MONTH DEPOSITS, AND DEPOSIT TURNOVER
SMSA's in Eleventh Federal Reserve District
(0011., amounts in thouunds . ..... o n.lI., adl'-"tl>d)
DEBt TS TO DEMAND DEPOSIT ACCOUNTS'

DEMAND DEPOSITS'

." ".." ."
,,.
."
..
"
-,
-. "
P .. centc..., nge

1916 110m

1916
(Annu.I-<.to
l>Ioil )

St.nd.'d """'oPOlite n
..... ' isli<:.1 voo
ARIZONA, Tucson
LOUISIANA: Mon,oo
Sh,_pon
NEW MEXICO, Ro_II'
TEXAS: Abil_
Amorillo
Austin
lkaumonl·PorI ArthUf-Or",,~
Brown .... ilte-Hat1I'111.n-8on ..,,10
Br;a n.Colioge Sla~on
Co'P'l1 Ch,iSTi
Corolc.e ... '
DI ll. .
EIP ..o
FortWorIh
G. "ellon- r. ...1 Cil)'
HC UIton
Killeen-Tlmpll

3 monlhs.
1!H6 1,om

$31,S90.099
8.230.68 1
19.' . 7.765
1.748,484

•

McAI""'.P1l.,,-Edinburg
Midllnd

"'-

SanA'IIIfllc
Sat1 Anto nio
She"""n-O.nison
r.," ",O ... (T. ' "s-A,kln ... )

:r.-'"

Wlchill F.lls

T0101-30 cernor"
County ba. 1s

1971 ,462.151
plrt""""i~.

a nd corporabon .ond or SII ' .

"""

POI~lcal

""",
"

~ 07 . 610

' . 7,.37
38-4.969
W ,i)27
165.829
280.!r67

..""

"""
""
'""
"
"""
""
""
""
"
"
"""
-,"
'"

~ 67 .SS3

39.5 .605
1$0,112
71.362
352,691
.8.572
3.297,452
368.0t0l
1.06 • . 978
169.5ro
• •• 59.223
143.735
87.559

"""
"""
"•
"'"
"
""
"
""",
"•

. ubdi. iSioons

31.
Ig78

~ e'

197~

,
"•,
-,",
"
-,"•
",,
•,
"
-,",,

w_
LubbOCk

,, Deposits or Individuals.

1 97~

1976

212 . ~

198.816
263.1141
ISO,51B
119,523
992,882
93,51 1
101. 867
166.5-41
181 .181
197.5-47

$ 15 .360.5&1

.".
"

Annuli ,ale
01 tv,nQ¥8l'
,~

10 78

1976

7B.l
57.S

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~.

...'"
".
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47,3

".
...
.
'"
au
38.7
~,

74.7

'"
".

'"
".,
'"
13.3
'"

10.5
2 1.4

'"
".

'"
28.9
~,

."..,

1975

'"
",

'"
'"

'"
."

41 .S

.9.0

"'" ,

39.6
~.
~.

2B.8
W .,

...".

'"'"
".

M.'

".,

. 5 ,3

. 3.8

'"'"m
".

K .'

'"'3.3
28.7

4S.5

'"
"".,.
'"
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'"

'"
26.0

19.1
26,0

10.•

'"
'"
'"'
".
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39,'

28,4

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5S.7

CONDITION Of THE FEDERAL RESERVE BANK OF DALLAS
(Tho ..ond dolla,")

BUILDING PERMITS
.~

TOIal \IOId c""~cal. ' ..........
Lo.", 10 "'""'bet wnk.
Oth",lojon.
Flde,ologency oblig.' ioo,..
U.S. Govornment sacu,lt",1
Tetor IIIni'lll .... ts
Membet b.nk r_"," depooll.
Fad..., , . ..."'" notes in IClua l
circulation

Apr 28 .
1916

M", 3 1.
1976

Ap' 3ll .
1975

.22.062

1.10I,03Q
18 .100

122,062

337.756
4.459,556
4,798.212
1.1" .800

337,761
4.162 .491
• .800. 825
1.821 ,8 96

3.799, « 1
• .053 .289
1.911,737

3 .072.395

2.993.853

2,871 ,5-66

'",

ty~

1976

1.1 68

...
on

3.61 8
2.561

• 0 .
~,.

AAIZDNA

'"-

C"'~CMI1I

Jan ua ry_M a rch
,~.

1978

1976

'"
'"
'"'"

6.119
2.5-46
'.~

, A'izona, LOU'''anl, New Me.<ico, Oklahoml '.'"
. a nd T"IS
'm

NU MBER

LOUISIANA
Mon,ooW....tMo n,OI
S II' • • e!)M
TE XAS
Abilene
""'a,Hle
AUltin
Be.u monl
Btc wnlvllll

(Milhon d olllrs )

Area I nd

Porc..,1 clll"1/8
1.11' 1916

23~ . 148

VALUE OF CONSTRUCTION CONTRACTS

FIVE SOUTHWIOSTEAN
STATES'
Re"d e ntial bu,ldi'lll
Non,eside n".1 b uilding
Ncn1>uold,,'IQ con.tnJc~cn
UNITED STATES
R""id,nlia lt>uildi 'lll
Non,e.id emi. 1bujld,'III
Nonbujlding ccnltr ""hon

VALUATION (001II< amounts In Ihousa nds )

,_AI.ised
NOTE : D.'a,11 maynOlldd 10 tota ls because 01 rounding
SOURCE : F. W Doelli<'. McG' "W-HiII , Inc.

."
'"
'"
'.'"
~,

6,390
2,157
1,939

1'78

1975'

2.851
1.252

2.2&0

1.00 1

Dell..
D.nison
EIP ..e
Fc-rtWc-rth

...

21.131
8.310
6.1511

..'"

'"
,.",

IS.I511

6.617
• •503

1.2SO

Tol. 1 26 cltlM

10.583

~,,-~

j,j idllnd

Pori Art hur
San A'III1Ie
San Anlenlo
Sh«mln
Te . .","nl
w~
W lch~ a

'm~
1978

$9.29<1

$16.303

1. 100

1.269
B.7!>5

3,839
16.487

•.

8 .166
17.406
. '.936

3 .201

21.a..S
2.862
1.182
3.239
27.(1.15

12.220
7.639

I .Ml7

Fi lii

G a~e"on

1976

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no

Houston

1978

3 mos •
1978

3.M7

1.110

1.515
1 ,(1.12
~

6.765
~

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,"
".
."

1976

,~.

-,
",

- •.- ..

2 .• 92

71 .069
1,832
11,228
2.ISO
13.473

.00

1.228
32.177
22.165
2.499
155.715

'.~

22.361
7.717
18.8M
1.911
1.69-8
38.930

1.277
1.533
7.2ro

2.B75
4.795
11 .997

25.m

123-3.717

$567.399

.,'
1975

'""
-"
-"
'00
'""
-"

-,"

,.= -,",
-"
'"

3 monlh • •
1978 ,,"om
1975

. . ,.

'""
-"" -"
,.13.159
-"" '00"
9-8.537
-"

I.BI8
11.692

2.878

"
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-"
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.-.

INDUSTRIAL PRODUCTION AND TEXAS
MANUFACTURING CAPACITY UTILIZATION

LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
Five Southwestern States'

(Seasonally .cIju . to<l itlde.eo, t 967 _ tOO tor p"oducllon)

Ar.,. .nd type 01 Ind • •
TEXAS
TOlal indullfial produc~on
MenulKlu,ing
Dur(t{J'"
Nondurable

Minin!!
Utililift
C_ity utllizalion
In manulKluring (1972 -1(0)
UNITED STATES
To1 .. indul lflal JIIodUClion
Man"'Klu' ing
O<Ir"''''
Nondurable

Mining
ut;1~in

1975p
1289
136,6

",.
""
10~ 2
1748

1209
1199
1112
1326
1072
1~9 6

1976

1271
134 7
132.2
1366
1053
1748

1975'
1219

132.2
1342

1284
1222

,~.

""
'M',

1202
1193
1103
132 I
1029

1194
1160

,~.

1312

'00'

12 ~ . 0

11 00
1077
1035
11 31
1069
154 I

ClVlhan labor lorce
Tot ~ 1 em ploymen,
TOlal u"" mplo~ menl
UnempfOym enl ra il
TOla l nooag,icullUrll
a nd ..,llry ..... pIQ ~m ent
r.t anulacruring
O\Jr. t>k>
Nondur.ble
NOnm.nu tacturing
Mining
eonstruclion
fran.panalion ano
publ'c utili!ies

,,-

,, "''''001. \..ou";ana.

1976p

1976

1975,

9,3100
8 ,U24

9.3458
8.763,0

9,188 .2
9,630 2

6.2%

'" , =,

7,7448
1.280,4
110 '
5700
6,4645
274 2
484 4
~,

1.&616
4285
1.339 4
1,511 4

F.... n<:e
SeMce
Go •• mment

N&w

7.764 5
1.285,5
713.6
5719
6.419.0
2HO
4919

"'''

1.8650
4281
1,336.7
1,5128

Pl rcenl change
"'ar 19761rom

."..'"
.
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-"
-.
"'''
"'. , ,, ""
."

TI>ou .... nds at poI,..,n.

1277

1148

p- Pre1imina r)'
r_R .... ised
SOURCES : BO<Ird 01 Gov"moraollhe f _ral Re-..e Syslem
FIOd"'. 1Re"",e S.n ~ o l Dallos

(Seasonallv·dlusl"")

'"
-,

1976

-2.6

7.59' 3
1,262 a
7076
5548
6.3319
,~,

4948

1.811 0

1.3().4 5
1.5284

Me>leo. Oklln"",,,. a nd Te>M

1975

-0'%

,
-,

"•

- 2.1

2. 6~

Actual cllang.e
p-Prellm,n a ry
r- Re.ise<!
NOTE : Delaol. ma1 nOl . dolO tOla ls becau"" 01 rounding
SQtJACES Siale employment IOO"""'iIIS
FlOderal R......... e Ba nk at D.llat(.eBsonalldjuSimenl)

foreign countries have discouraged
outside explorers.
Other areas apparently cannot
take up the slack in the demand for
rigs. The North Sea area, for example, is moving from the stage of
sinking exploration wells-mainly
from mobile rigs-to the stage of
drilling production wells-mainly
from fixed platforms.
Moreover. an offshore lease offering in New Orleans last February
generated only mild interest. Of 132
tracts offered, only 41 received bids.
Since the Gulf Coast is a mature
exploration area, most of the best
acreage has probably been leased
already.
On the other hand, a lease sale in
April for acreage in the Gulf of
Alaska opened acreage that, some
believe. may have the greatest
potential of any offshore U.S. area.
This sale had originally been scheduled for 1969. Because companies
have already committed rigs to drill
there, however, this will not add
much to the world demand for rigs.
Other highlights:
• Cash receipts from farm and
ranch marketings in states of the
Eleventh District increased 3 percent in the first two months of this
year over the same period last year.

All the increase in sales, however,
was from livestock. Receipts from
livestock marketings rose more
than a third, while crop sales
dropped a fifth.
For the nation as a whole, total
farm and ranch sales increased 9
percent over a year earlier, as a 24percent gain in livestock receipts
offset a small decline in crop sales.
Higher average cattle and calf
prices and increased marketings
expanded livestock receipts, while
price decreases lowered crop sales.
• The unemployment rate for the
five southwestern states edged
downward in March to 6.1 percent.
However, both the civilian labor
force and total employment
declined as well.
The biggest gain in employment
was in the services industry, where
2,700 workers were added to
payrolls. Smaller increases were
posted in finance, transportation
and public utilities, and mining.
• Based on April 1 conditions,
winter wheat production in Texas.
Oklahoma. and New Mexico is
expected to total about 193 million
bushels, or more than a third below
the record 1975 crop. Although
planted acreage is essentially
unchanged from a year ago, only
four out of every five acres will be

harvested. Moreover, the average
yield per acre is expected to be
about 20 bushels. or a fifth below
the 1975 average. Most of the reduction in winter wheat production
will be in the Panhandle area of the
three states, where drouth conditions have persisted throughout
much of the growing season.
• Bank credit at member banks in
the Eleventh District rose 3 percent
in the first 31h months of 1976. Most
of t he gain continued to stem from
acquisitions of U.S. Government
securities. However, total loans
and holdings of other securitiesespecially at smaller banks-also
increased.

Full text of Review (Federal Reserve Bank of Dallas) : May 1976

FRASER