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MONTHLY BUSINESS REVIEW of the FEDERAL Vol. 34 RESERVE BANK Dallas, Texas, September I, 1949 of Dallas Number 9 FARMING IS A BUSINESS H. MOORE, Agricultural Economist Federal Reserve Bank of Dallas CARL Present day farming is a complex business involving many problems of production, marketing, and management. Changes have occurred in agriculture during the past two or three decades that require today's farmer to be able to use and maintain power machinery, hire and supervise labor, and obtain and manage substantial amounts of capital. In addition, he must possess managerial ability that will enable him to maintain an adequate volume of business, control expenses efficiently, and achieve a proper balance between all phases of the farm business. These are essential qualifications of the farmer who would be successful in this period of rapidly mechanizing and increasingly scientific agriculture. This development, which has accelerated greatly during the past decade, is of significance not only to farmers but also to those who are indirectly involved in agriculture by their participation in meeting the financial needs of farmers. One of the most spectacular developments influencing the character of American agriculture has been the growing mechanization of farming operations. Twenty years ago making a cotton crop generally required only a mule, plow, planter, cultivator, sharp hoe-a total investment of perhaps $300and plenty of hard work. Today, a tractor, tractor plow, planter and cultivator-an investment frequently exceeding $3,000-are considered essential on most cotton farms; and power sprayers or dusters, fertilizer attachments, stalk cutters, and in some areas a mechanical harvester also are becoming more and more necessary for profitable cotton production. Investment in machinery, even on the small farm, is increasing rapidly. In Texas, for example, the average investment in machinery per farm has more than doubled during the past 10 years. The number of tractors on Texas farms has increased from 98,900 in 1939 to more than 200,000 in 1949, and 25 counties in the State now use no horses or mules for power. Of course, there still are many one- and two-mule farms in the State, but mechanization is progressing at a rapid pace. Mechanization not only has increased the amount of capital required for the operation of a farm but also has tended to increase and make inflexible the cash operating expenses. Prior to mechanization the farmer grew his own feed for his mules, and cash expenses in making the crop generally were limited to an occasional purchase of a new plow, cultivator, or planter, none of which required a very large cash outlay. Furthermore, when farm income was low he could reduce his cash expenses greatly without impairing seriously his farm operations. Now, in addition to the original cost of the machinery, the farmer must buy fuel and grease to operate the equipment, meet expenses of repairs and maintenance, and pay comparatively high cash wages in order to carryon the farming operations. Cash operating expenses such as these tend to be comparatively inflexible, thus making it increasingly important that total production and gross income also be maintained at comparatively high levels to insure profitable operations. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 128 MONTHLY BUSINESS REVIEW Relatively high fixed costs also pose important financial problems with respect to the purchase of new machinery. Greater consideration must be given to the effect that the addition of the machine or piece of equipment will have upon the net income of the farm business. Purchase of any machine or equipment will, of course, increase expenses, and whether or not its use will increase farm income and yield a higher net profit will depend to a considerable extent upon the amount of work that the machine or equipment can do on the farm. A tractor of the proper size and type for a given farm can be used for many jobs and, therefore, will be used many days each year and should increase the volume of work and efficiency of labor. As a result, income usually will be increased more than expenses. But a tractor that is too large for a farm probably will increase expenses out of proportion to the increase in income. A hay baler prob- ~~Ya~;a~lb~~;!r~~~~l~ FARM I NG IS A BUSI NESS could use it only a very few days each year, but on a larger farm where it could be used for a longer period of time, it might be a very profitable machine. The high proportion of total annual costs of operating the machine represen ted by depreciation makes the cost per day or per acre or per hour extremely high when little use is made of the machine. Therefore, it is often more profitable to hire the necessary work done by a custom operator than to own a machine which would be used only a few days each year. Scientific methods of production, including the use of insecticides for control of insects and diseases, planting of new crop varieties, feeding livestock "balanced" rations, and many other innovations in agriculture, have added to the multitude of technical management problems involved in farming. Timeliness in performing farm operations also has become increasingly important. Application of insecticides, harvesting with modern machinery, and preparation of the land with heavy power equipment frequently can be accomplished successfully only under certain limited soil and weather conditions. The period during which such conditions exist may be relatively short, requiring careful planning and prompt execution of the operation for greatest effectiveness. Management, therefore, has become of greater importance, and the successful farmer has been forced to broaden his knowledge of soils, crops, and livestock; to study and understand market conditions and price trends; and to learn how to apply this increased fund of information to the operation of his farm. These developments which have increased the importance of management, finance, and knowledge of business principles in farming have created a different and more difficult problem in appraising the ~ ~ MONTHLY BUSINESS REVIEW 129 individual farm business. It is no longer sufficient to check merely the acreage of crops grown or the number of livestock kept to determine the earning capacity of the farm. Other factors are equally important. Profitable farming today requires an adequate volume of business; maintenance of soil fertility; planning of crop rotations; balancing the livestock program with the available feed and labor supply; control of expenses; efficient use of labor, machinery, and buildings; and sound management. Failure to measure up satisfactorily in anyone of these requirements may result in lower profits or financial loss. A sound, balanced appraisal of all of the elements of strength and weakness in today's farm business obviously is important not only to the farmer, who can obtain higher profits through the application of better management practices and critical appraisal of each phase of farming operation, but to all others who have a more or less direct interest in the achievement of efficient, profitable farming. Bankers and businessmen, for instance, have a stake in promoting better farm management and more profitable farming because increased farm income means more business and more prosperous communities. Moreover, bankers are coming to recognize more fully the necessity of an over-all approach to an appraisal of a farm business, not only from the standpoint of evaluating a loan application but also for the purpose of assisting the farmer customer in improving his ability to repay his indebtedness and to strengthen his financial position. Agricultural leaders are becoming more aware of the importance of the over-all picture of today's farming operations-for instance, they realize that sound programs of soil improvement, important though they may be, will not alone assure profitable farming, nor will crop and livestock programs be most profitable unless planned as a unit. It is the purpose of this article merely to emphasize to all of these different groups interested in the sound development of agriculture that the success of any phase of a farm program is dependent upon the managerial ability of the farmer and upon his success in coordinating all of the parts of the farm program into a well-balanced, soundly managed whole; no part of the farm program can really be successful in the long run unless the entire farm operation is profitable. Only by being aware of the complex nature of today's farming operations and being constantly reminded through repeated emphasis of the importance of the different phases of the farm business can farmers, businessmen, bankers, agricultural leaders, and others promote and build the most profitable agriculture. Size of Farm Business One of the most frequent causes of low income from farming is an insufficient volume of business. A 20-acre cotton farm, even though it is operated in the most efficient manner with a high net profit per acre, is not likely to assure the farm family adequate income. Likewise, a lOO-acre wheat farm may not provide a satisfactory living for the farm family. Many farms are just not large enough to be profitable, and efforts to increase productivity and efficiency and reduce expenses, while helpful, will not succeed in making such a farm a satisfactorily profitable business. How can the size of the farm business be measured? Estimated gross income probably is the most convenient yardstick, although acres of total cropland or of a principal crop, the number of cattle, or the size of the poultry flocks also can be used if income from one of these sources represents a major portion of total farm income. Total gross income can be computed easily by estimating gross receipts from the sale of crops, livestock, and livestock products. In making this estimate, conservative production and price data should be used. Average yields of crops on the farm in the last three or five years should be used as a guide for computing crop production, because in anyone year yields may be unusually high or low, depending upon weather conditions and other factors. Similar methods can be applied to estimating livestock production. The quantity of dairy products sold usually can be determined from sales slips given the farmer by the creamery or dairy that purchased the milk. Use of these records is desirable whenever possible, because the actual amount of milk or cream sold frequently is different from the amount produced or the farmer's estimate of sales. It is safe to assume that the production of at least one cow will be required for needs of the farm family. Comparable allowances should be made 130 MONTHLY BUSINESS REVIEW for hogs slaughtered at home and for eggs and poultry consumed. If the farmer is a tenant, it is, of course, essential to consider only his share of the production from the farm in estimating his income. Prices used in estimating gross income should be realistic. If the farm income is being computed for only one year, the best available estimate of prices for the coming year should be used. Under present economic conditions, with the possibility of further declines in agricultural prices, it might be desirable to use prices somewhat lower than those being received during the current year. If the average farm income over a period of perhaps five years is being estimated, average TABLE I prices for a recent period should be used. PRICES RECEIVED BY TEXAS FARMERS Selection of the exact price to use in these 1948 AND 1938·47 AVERAGE computations depends, to a considerable ex1938-47 average 1948 p Unit Item tent, upon the economic situation and the price outlook. Table I shows the average Crop: $ 0.77 ......... $ 1.35 Barley........... ..... Bushel prices received by Texas farmers for prin1.55 1.04 Corn .............................. Bushel .... . 0.2970 0.1846 Cotton, lint ...................Pound ......... cipal crops in 1948 and the average for the 46.00 72.00 Cottonseed ....................Ton ................ . 10-year period 1938-47. These prices should 5.70 2.53' F laxseed ....................... BusheL ................... . 2.24 2.95 Grain sorghums ...........Hundredweight. be helpful in arriving at appropriate prices 0.82t Grapefruit ....................Box.......................... . 0.63 19.32 for use in estimating gross farm income. Hay, alfalfa ................. Ton ............................ . 26.00Hay, all ..................... Ton ............................ . 22.00 12.25 0.60 Oats............. ................BusheL. ..................... . 1.00 A fairly accurate indication of the net 1.40 1.66t ~~:~~~:..·.·.·..·.·:·:·.·.:·....::·.J~~;;d··.:::::::::::::::::::::::: 0.102 · income available for family living, retire0.058 Potatoes, Irish. ........... BusheL ...................... 1.96 1.42 ment of debt, and purchase of new equipPotatoes, sweet........... BusheL ....................... 2.55 1.56 Rice ............................... Bushel ... ................... . 2.45 ment and machinery can be obtained by 1.62 Wheat ........................... Bushel .................... . 2.05 1.21 dividing estimated gross income by two. On the average, expenses, including allow- Livestock: 11.90 ances for depreciation, insurance, taxes, and Hogs ..................... ...... Hundredweight .......... 22.80 Beef cattle ................... Hundredweight .......... 20.20 9.65 operating costs, wi 11 amount to about 5 Veal calves ................ Hundredweight .......... 22.40 11.30 6.45 percent of gross income. This is illustrated Sheep ............................ Hundredweight .......... 10.90 Lambs .......................... Hundredweight .......... 20.90 9.90 3.20 by a study of more than 100 farms in the Milk (wholesale) ........ Hundredweight.......... 6.08 0.40 Texas High Plains area which shows that Butterfat...................... Pound ......................... 0.70 Chickens....................... Pound........................... 0.27 0.19 0.23 over a 5-year period expenses ranged from Turkeys ........................ Pound........................... 0.40 0.27 · If h Eggs ............................. Dozen........................... 0.43 5 to 59 percent 0 f gross lllCOme. t ere WooL ...........................Pound........................... 0.54 0.37 are unusual circumstances involved in the ·1938 and 1939 price!! estimated from United Statea data. individual farming program, it may be well tl9SS-S9 to 1947-48 average. D--Preliminnry. to enumerate the estimated expenses to ~Estimated. check more carefully on the probable net SOURCE: United States Department of Agriculture. income. Because of the tendency for farm expenses to remain relatively fixed regardless of the amount of production per acre or per animal, total expenses usually will be less than one-half of gross receipts on the most efficient farms and somewhat more-perhaps as high as 65 percent of gross receipts--on the inefficient, poorly managed farms. ° ° If gross income is obviously too low to provide a reasonable amount for family living and debt retirement, steps should be taken to correct this phase of the business before attacking other problems on the farm. What can be done to increase the volume of business? One of the most effective methods is to increase crop yields and livestock productivity. It costs very little more to produce 30 bushels of corn to the acre than it does 15 or 20 bushels per acre. Even in the case of crops which are hand harvested, such as cotton, where the cost of harvesting represents a large proportion of total costs, the increased income from a larger yield per acre more than compensates for the increased cost of harvesting. This was demonstrated by a farmer near Lancaster, Texas, who increased his income per acre of cotton in 1947 by $25.92 through higher yields, with an addition of only $5.40 in production costs. In the case of livestock, the cost of feeding and caring for a 3-gallon cow is only slightly more than the cost of keeping a I-gallon cow. Records kept by members of Texas' Dairy Herd Improvement Associations show that an increase in milk production per cow from 4,000 to 8,000 pounds increased expenses $96 per cow, but net returns rose $196 per cow. ~ , ~ MONTHLY BUSINESS REVIEW 131 Other methods of increasing the volume of business include purchasing or renting additional land; increasing the amount of livestock on the farm; shifting to more intensive livestock, such as dairy or poultry; and shifting to more intensive crops, such as cotton, peanuts, vegetables, and fruits. If necessary, the farmer might find additional employment off the farm by doing custom work for neighbors or in near-by factories, processing plants, or other industries. The Soils Program Soil is the basic resource of the farmer, and profits from farm operations are closely associated with the effectiveness of the soils program. A survey of 452 farms in the Texas Blacklands shows an average increase in income amounting to about 25 percent as the direct result of the adoption of a soilimprovement program. If soils are unproductive, it is impossible to obtain satisfactory yields; and if the soil is permitted to wash away, the farmer not only loses a major part of his capital investment but no longer has a processing plant for utilizing his labor and operating capital. A profitable soils program must (1) hold the soil in place and (2) maintain or increase the level of soil fertility. In developing such a program, it is desirable to have the assistance of a soils specialist who is familiar with the soil and climatic conditions of the community and with the most effective methods of controlling erosion and increasing the productive capacity of the soil. By working together, the farmer and the specialist can make most profitable use of terracing, strip cropping, sodded waterways, diversion terraces, cover and green manure crops, crop rotations, and commercial fertilizer in planning a program that will be practical for the particular farm in controlling erosion and increasing crop yields. Very low or declining crop yields, gullies, washouts, and accumulation of silt in low places are easily recognized evidence of a weak soils program. More than two-thirds of the farm land in Texas is in need of better care; obviously each farm should have an adequate soils program in operation to save the soil and avoid jeopardizing the income not only of today's farmers but also of future generations of southwestern farmers. The Crop Program Planting the same crop on the same field year after year is not conducive to most profitable farming. It has been demonstrated by actual results on farms, as well as by scientific research, that rotation of crops frequently increases yields from 30 to 100 percent. In the Blacklands of Texas a rotation of cotton and Hubam clover, as compared with cotton following cotton, increased cotton yields 107 percent. Corn yields in a rotation including Hubam clover were 28 percent higher than when corn followed corn. Even a rotation of cotton and corn-not including a soil-building crop- increased both cotton and corn yields as much as 18 percent. The most effective rotation will vary within rather wide limits, depending upon the type-offarming area, the livestock program of the farm, and the preference of the farm operator. In planning the rotation it is important to include only those crops that are adapted to the soil and climatic conditions of the particular farm and which will be consistent with an effective soil-building program. The relative per acre value of various crops also should be considered in designing the crop program. If cotton will return the largest net profit per acre, then the maximum acreage consistent with good soil development should be planted to cotton. But if legume pastures, marketed through cattle, yield the highest return per acre, the maximum acreage of these pastures should be grown. Likewise, if grain sorghums outyield corn and give a higher cash return per acre, then grain sorghums should be grown in place of corn. It is, of course, also necessary to consider the value of the crop in the rotation and in the individual farm plan. Oats may not be the highest dollar value crop, but it may be the crop best suited to a particular rotation and thus may be more desirable than wheat, corn, or other crops that could be grown. Inasmuch as crop rotations are essential for highest yields, it is seldom possible to plant all of the farm 132 MONTHLY BUSINESS REVIEW to the most profitable crop, but an attempt should be made to maximize the acreage of high-value crops. Average prices of most crops, together with local estimates of yields, can be used to compute the relative value of those crops on individual farms. The Livestock Program Livestock offer an excellent opportunity to increase the volume of farm business, utilize crop residue, and increase farm income. Cattle and sheep will convert feed grown on non-cropland and residue left after harvesting grains, cotton, and hay into beef, milk, mutton, and wool, thus increasing farm income by utilization of feed that otherwise would be wasted. Furthermore, each dollar's worth of feed fed to livestock usually will return to the farmer from $1.30 to as high as $ 5.00. As indicated in Table II, cattle and sheep require and utilize large amounts of roughage feedspasture, hay, and silage; hogs, poultry, and fattening of beef cattle and sheep, on the other hand, require large amounts of feed grains. If the farm produces considerable quantities of roughage feeds and very few concentrates, then cattle or sheep are likely to be best suited to the farm. On the other hand, if feed grains, TABLE II such as corn and grain sorghums, are the principal crops, RELATIVE VALUES OF CONCENTRATES hogs, cattle feeding, or lamb feeding may be most profitable. AND ROUGHAGES USED BY DIFFERENT KINDS OF LIVESTOCK Other factors to be considered in determining the kinds and Percent of ration's total value , - --mndo up by: , amounts of livestock to be produced are the amount of Roughages-hay. pasture. and family labor available to care for livestock, quality of hired Class of livestock Concentrates .Uage _ ___ labor available, and skills of the farmer in managing live- Poultry ____ _ ____ ___________ _____ 100 Hogs __ ______ ____________ _____ _______ ._ 97 3 stock. Feeder cattle _________ ..__ ...... _ 76 24 Feeder sheep ________ __ _________ 66 34 The importance of labor in the production of various Beef cow herds ____ ._ _ ___ ___ 40 __ .. 60 __ _ classes of livestock and livestock products is suggested in Dairy cow herds ________ _ __ 35 65 Sheep.. _._. __ _ ._________ ._ __ ......... 23 77 Table III, which shows the proportionate costs of labor, feed, and miscellaneous expenses. These data suggest tllat the addition of dairy or poultry enterprises to the farm program makes use of the maximum amount of labor, while beef cattle, sheep, and hogs require relatively small amounts of labor and maximum amounts of feed. In considering dairy and poultry enterprises, it is also important to study the local market for milk, eggs, and poultry. These products are highly perishable, and unless a dependable local outlet is available, other livestock programs should be considered. TABLE III APPROXIMATE PRORATED COSTS IN PRODUCTION OF LIVESTOCK AND LIVESTOCK PRODUCTS Feed Percent t.":~~tal Milk... __ _ ____ _ __ _ __________ ___ _ ______ . Eggs____ ______ ___ ______________ Sheep. _... _________ ____ __ _________ _ Beef breeding herd_ _ ______ _ Broilers ___ ... _ __ _____ . ____ __ ____ . Hogs _ ______ __ _ _.__ _________ _ __ __ ___ ___ Lamb feeding _ _ ___________ Cattle feeding __ .__...... __ ... ._ 55 55 65 65 67 80 85 85 22 20 12 10 10 7 8 5 c08t~ 23 25 23 25 23 13 7 10 In many sections of the Southwest, me size and efficiency of the livestock program are seriously limited by the lack of adequate fencing. Without the necessary line and cross fences, livestock cannot be used to glean fields following harvest, utilize permanent pastures, or make effective use of rotation pastures. Many farmers could well afford to fence their farms in order to obtain the increased income that would be possible from the addition of livestock to me farm program. Expenses Control of expenses to obtain the lowest possible per unit cost is vitally important in today's highly specialized and mechanized farming operations. Low expense per bale of cotton, per bushel of wheat, per gallon of milk, per pound of beef, and per dozen eggs is the key to profits and should be the goal of every farmer. As indicated earlier, total expenses of a farm business usually amount to about one-half the gross income. In periods of low agricultural prices this percentage tends to increase to perhaps 60 percent or higher, while in periods of high agricultural prices it tends to decrease to the neighborhood of 35 to MONTHLY BUSINESS REVIEW 133 40 percent. During any period, however, this percentage probably will vary from 25 to 70 percent from farm to farm. This variation is not necessarily due to the reduced total expenses on some farms but is largely the result of reduced per unit costs made possible by increased yields, improved efficiency, better management, and perhaps even by increased total expenses for items such as fertilizers, insecticides, and protein and mineral feeds for livestock. Greater expense for these items frequently results in increased net profits. Studies by the Texas Agricultural Experiment Station have shown that the application of fertilizer may yield a return of as much as $7.66 per dollar spent. A Hill County, Texas, farmer spent $7.35 per acre for fertilizer on his corn crop and increased his return $17.92 per acre. A Dallas County farmer found that the addition to the dairy ration of a high-protein feed costing about $9.00 per year per cow increased milk sales $50 per cow annually. Farm expenses include all cash expenditures involved in operating the farm and various non-cash expenses. Among the former are expenditures for seed, fertilizer, feed, hired labor, and various supplies. Among the latter are allowances for depreciation on buildings and machinery; decreases in inventory value of feed, seed, supplies, and crops; interest on investment; taxes; and insurance. It is noteworthy that a study of Texas farms shows that the expenses of depreciation, repairs, and insurance accounted for nearly 30 percent of total expenses, thus emphasizing the importance of controlling these major cost items in farm operations. Careful planning of the work program to eliminate unnecessary tractor work, trips to town, and loss of time, plus close attention to the purchase of seed, fertilizer, fuel, feed, and other required items, will aid materially in keeping operating expenses, including labor, at a desirable minimum. But the rates of depreciation on buildings, machinery, and equipment, as well as repairs and insurance, are largely determined at the time of purchase or construction. It is important, therefore, that the farm manager or operator give careful consideration to the effect of such purchases or construction upon future expenses. Once they become a part of the farm business, the depreciation, repairs, and insurance costs cannot be varied materially from year to year. Efficiency Efficient use of labor, machinery, buildings, and equipment is of primary importance in keeping production costs at a minimum and increasing profits on today's mechanized farms. This phase of the farm business deserves special attention when analyzing the operation of a farm, because the degree of efficiency attained is almost entirely dependent upon the managerial ability of the farmer. Common examples of inefficiency in this phase of farming are failure to plan odd jobs of repairing and maintenance for days when field work is impractical, use of inadequate equipment or unnecessary machinery, and construction of buildings without thought as to the convenience of their arrangement. Labor: A study of the simple task of feeding chickens on one farm reduced by 66 miles annually the amount of walking required for this job. This increase in efficiency was accomplished by rearranging the work routine; by placing the feed supply in a more convenient location; and by making minor changes in the location of nests, waterers, and feed troughs in the poultry house. In another study the installation of a milking machine and improvement of work methods on a dairy farm resulted in a saving of 2 hours and 17 minutes per day in milking time. Similar savings could be made on many farms by a little study and planning. • Labor efficiency frequently is impaired by the inconvenient arrangement or location of buildings, by lack of proper tools, by inadequate planning of work to be done, and by inefficient work methods. Farmers who shift from horse or mule power to tractor equipment may find that the layout of the farmstead is not convenient or efficient for the use of that equipment. Small fields, short rows, and rough terrain, which may n ot affect materially the use of horse-drawn equipment, reduce seriously the efficiency of power machinery. There are many "little things" that can be done to increase labor efficiency. Feed supplies for livestock should be stored near the feed racks and, wherever possible, self-feeders should be used. Sometimes a homemade feed cart that will hold sufficient grain for one feeding can be used instead of making 134 MONTHLY BUSINESS REVIEW several trips from feed bin to livestock with a pail or basket. Grease, oil, and wrenches needed for servicing machinery should be kept near the place where they are used. Sufficient tools should be carried on the tractor to make usual adjustments in the field. Work should be planned so that trips to the fields and to town, as well as extra walking, are reduced to a minimum. Unnecessary turning and stopping while performing field work should be avoided. This phase of business is considered so important in industry that highly trained specialists are employed to study work methods and layouts-even the movements of a worker's hands in performing a job-and to devise improved methods to increase labor efficiency. Farmers usually can improve the work methods on their farms by giving a little more thought and study to the problem. Machinery : Efficiency in the use of machinery and equipment, including the selection of proper types and sizes of machinery, is of particular importance in view of the high cost of modern farm implements. The type and size of machinery and equipment should be adequate to do the necessary work on the farm, but use of a 2-plow tractor when a I-plow size will do the job increases per unit costs and reduces profits. Before purchasing any machine, consideration should be given to the possibility of hiring the work done more cheaply by a custom operator. For example, a farmer with 10 acres of hay probably will find it economical to hire a neighbor or custom operator to bale his hay, while a farmer with 50 acres of hay usually will find it more profitable to own a baler. In determining the relative costs of owning an implement and hiring the work done, the following procedure for computing annual costs is helpful. Operating costs, such as fuel, grease, and labor, are not included in these computations and will, of course, need to be considered. However, such items represent a very small part of total costs, except of tractors, and would not affect the data materially. Tractor operating costs are usually about 30 to 40 percent of total tractor expenses and should be added to the fixed costs. Original cost of machine_____________________________ _______ _ _______________________ ___________ $6 50.00 Estimated salvage or trade-in value at end of usefullife ___ _____________ ____________________________ $100.00 Estimated net cost of the machine for period used__________ _ _ __________ _ _____ _________________ _ ________ $ 550_ 00 Estima ted length of useful life of machine____ _______________________________________________ 8 years ___ _ _ Estimated annual cost of depreciation ___________________________________ _______ __________ $ 68.75 ___ (Net cost divided by years of life) Estimated annual charge for interest on investment_________________________________ _____________ ____ $ 39.00 (6 percent of original cost) Estima ted annual cost of repairs____________________________________________________________________ __________ $ 26.00 (4 percent of original cost) Estimated annual cost of machine____________________ _____ _____________________ _________________ $13 3.75 N umber of acres on which machine will be used____ _________ _____________ ___ ______________________ Annual cost of machine per acre_________________ ______ ___________ ______________________________ ________________ $ 40 3.34 (Annual cost divided by number of acres) The cost of owning a machine can be compared with the usual cost of hiring a custom operator to do the necessary work, and the decision as to the economy of owning the machine can be made on this basis. In estimating the cost of custom work, consideration should be given to the probable average cost over a period of years. Custom rates, although relatively stable, vary from year to year, depending upon the volume of work available to custom operators and the cost of labor. If timeliness in performing the operation makes it necessary to purchase the machine, even though hiring a custom operator would be cheaper, efforts should be made by the farmer to do some custom work for others in the community in order to reduce the annual per acre cost of his machine. Custom rates should be set at levels which will compensate for the labor of the operator and the costs of using the machine, including depreciation, repairs, and interest on investment. ~ ~ MONTHLY BUSINESS REVIEW 135 Buildings: In appraising the value of farm buildings it is advisable to remember that they should . provide necessary protection for the farmer's livestock, machinery, harvested crops, feed, and supplies. They serve no other purpose from the standpoint of the farm business. Personal tastes of the farmer with respect to the design of the buildings on the farmstead are of secondary importance. If present buildings are inadequate, they should be remodeled, if possible, to provide the needed space. Rearranging partitions and improving insulation, roofs, or floors frequently will make old buildings suitable for new uses, and such changes usually can be made at comparatively low cost. An old barn often can be made into a poultry house, and many kinds of sheds and barns can be modified to serve as feed barns for cattle or sheep. If it is necessary to construct new buildings, every effort should be made to obtain the latest information from builders and agricultural engineers regarding the most economical and suitable building materials, types of construction, and floor plans. If a building is to be used seasonally or only in certain years, such as to provide storage space for grain, an effort should be made to design the building so that it can be utilized at other times as well. Buildings with few or no internal posts or supports permit the greatest diversity of use because the floor plan can be changed easily, with temporary partitions, to meet many needs. If there are unused buildings or buildings only partially in use, an attempt should be made to make profitable use of the space. As suggested above, many buildings can be converted easily to poultry houses--either for broilers or laying flocks-and the additional labor and feed required for the poultry would not increase greatly the labor load or feed requirements of the farm. However, the addition of a poultry flock of 300 hens could increase the farm income by more than $1,000 . Other unused buildings may be suitable ·for housing other kinds of livestock and thus offer an opportunity to increase the efficiency and income of the farm. Management Modern, scientific, mechanized farming requires competent management, and the efficient farm manager today is familiar with the latest information on improvements in farming methods, new crop varieties, fertilizer recommendations, price trends, and other important fields pertaining to farming. He is anxious to adopt new and improved practices as soon as possible and keeps informed on new developments through experiment station bulletins and extension service meetings, farm magazines, radio, newspapers, and visits to successful farms. He plans his own farm work well in advance and completes plowing, planting, cultivating, harvesting, and other farm operations at the proper time and with a reasonable degree of thoroughness. A good farm manager, of course, keeps accurate financial records on his business and has a satisfactory credit rating. Inefficient management is often indicated by late planting and harvesting of crops, weedy fields, irregular and inadequate attention to livestock, and failure to give machinery proper care. Adverse weather conditions and unusual circumstances sometimes will prevent proper attention to these details; but if such signs of inefficient management are evident year after year, it can be assumed that the farm operator is neglecting the timeliness and thoroughness of his work program. A farmer who is always the last one in the community to adopt a new and improved crop variety, to follow the feeding practices recommended by livestock specialists, or to install needed soil conservation measures is not a good manager. Failure to keep machinery in good repair and properly greased is also an indication of poor management. A neat farmstead is frequently an indication of a good farm manager. Keeping buildings in good repair and painted; providing adequate protection for machinery from sun, wind, and rain; keeping fences in good repair; and cleaning up trash and weeds around the farmstead are a part of good farm management. It should be remembered, of course, that maintenance of the farmstead with respect to those improvements that involve capital expenditures is the landlord's responsibility on rented farms, but, on the other hand, this fact does not in any way relieve a tenant of the full responsibility of contributing his share toward the maintenance of the farm in the best possible operating condition. 136 MONTHLY BUSINESS REVIEW Review of Business. Industrial. Agricultural. and Financial Conditions DISTRICT SUMMARY Consumer buying reflected by sales at reporting department stores in this District was about 1 percent lower during July than in the preceding month and about the same amount below figures reported for July 1948. This decline during the month of July was about consistent with the usual seasonal decline, as the seasonally adjusted index of department store sales at 387 percent of the 1935-39 average was approximately unchanged from June. Further improvement was reflected during July in inventory positions at department stores and at reporting furniture stores, while sales at furniture stores continued to show improvement when compared with the same month in 1948. ° Significant developments in agriculture in the District during July include estimates of a Texas cotton crop that may reach as much as 1,300,000 bales larger than last year's crop and substantially hi gher crops in Oklahoma, New Mexico, and Arizona; a substantial improvement in yield of cotton per acre in Texas, bringing the estimate up to 21 pounds or the highest since 1912; very high estimates of yields per acre of such other Texas crops as corn, wheat, and sorghums; and very favorable livestock conditions. Virtually all reports dealing with agriculture in the District point to a very bountiful production and to one of the most favorable agricul tural outlooks in years. ° Outstanding among banking developments in the District during recent weeks was the break in the decline in commercial, industrial, and agricultural loans that had persisted for so many weeks, as the seasonal demand for bank credit began to make itself felt. Reflecting the somewhat easier banking position, member banks in leading cities in the District increased their holdings of United States Government securities substantially during the four weeks ended August 10. Gross demand deposits of all member banks in the District showed an increase during July but were almost $119,000,000 less than the amount reported in July 1948 . Reports of all member banks for the first six months of this year reflect a condition of strength among the District's banks and an earnings record more favorable than during the comparable 6-month period in 1948. months. Tendin g to confirm the approximate conformance of sales at department stores in the District during July to the seasonal trend is the fact that the adjusted index of department stores sales at 387 percent of the 1935-39 average was virtually unchanged from the level of the previous month. The index in July, however, was substantia ll y lower than the 4 12percent level that prevailed in July a year ago. WHOLESALE AND RETAIL TRADE STATISTICS P~rcentage Net sates Number of July 1949 from reporting July June firms 1948 1949 48 4 7 4 7 .\ 3 18 -10 -5 -12 -5 - 12 -4 -10 -12 42 3 5 4 3 -11 Retail trade: Department. stores: Totallltn District .. B~r: .~~~~~.', " :: : Fort Worth ....... . Howton ... . .. ... .. San Antonio . ...... Shreveport, La ...... Other cities .... . ... } ~umiture -tores: Totalltth District .. Dallas ............. Houston ., ...... .. . Port Arthur ... ..... San Antonio, ...... Wholesale trade:· Automotive 6uPl!lics Drugs anti sundrICS .. Dry goods ....... .. Grocery ~rull. l ille whole88 eu not spo~soring groupe). Hardware .. _....... Machinery eQuipment and supplies .. Tobacco .......... . 3 26 -22 6 -38 challge in Stock! ! July 1949 from 7 mo. 1949 compo witb. 7 mo. 1948 :":'jj -4 I -11 -7 -1 -5 - 6 -14 -12 -11 3 -13 -22 -12 -2 -13 -1 -6 -3 :":"j -7 -4 -211 -15 -10 - -8 1949 -13 -3 -7 -18 -17 -18 -6 -5 June 1948 -13 -19 -10 1 July :":"j - -I -40 I 3 - 40 -14 -2 - 6 -16 -a -I -38 a 4 - 21 -10 -12 89 5 -8 -1 - 21 -29 -3 4 :":'i3 :":"S -2 12 - 1 1 3 7 -Preliminary data. Compiled by Unifed States Bureau of Census. tlndicate! change oi leu than one-balf of one pet cent. ~tock! at end of month. ( INDEXES OF DEPARTMENT STORE SALES AND STOCKS Daily avcrage salcs-(193.s-39-100) July 1949 11th Dilltrict . .... Dallas .. ... . ..... Houston ........ . 310 263 364 Unadjustcd· May June 1949 1949 331 21M! 391 373 333 ' 38 July 1948 July 1949 387 365 450 330< 287 SOlr Adiurted May June 1949 1949 385 324 '50 384 354 '56 July 1948 412r 399 483r Stocko-(193H9 -100) Crude oil production in the District declined during July, in contrast with the trend reported during the preceding month. Announcement of an increase in allowable production in Texas for September may reflect a turn in the production trend. Demand for gasoline continued strong during July but for gas oil and distillate fuel oil remained seasonally low. Drilling activity continued at a high level, and there are indications that well completions in the District during 1949 may approximate or might conceivably even exceed the total for 1948. Construction contracts awarded during July in the District reached the highest monthly total since October 1942. Residential awards in July were the highest since May 1946, and awards for other types of construction, the highest since October 1942. BUSINESS Consumer buying at department stores in this District during July showed about the normal decline from the preceding month, as the dollar volume of sales declined about 10 percent and was at a level also approximately 10 percent below that which prevailed duri ng July 1948. Part of the decline in sales during July is accounted for by the fact that there was one less business day than in June of this year or July 1948, and part of the decline reflects the usual seasonal trend that occurs in the sale of certain t ypes of merchandise during the summer ( July 1949 11th Distriet .. ... 333 UnadjustedMay June 1949 1949 336r -Unadjusted for seasonal variation. 363r July 19'8 July 1949 376r 347 Adiusted May June 1949 1949 350r 356r July 1948 gglr r-Reviscd. A study of departmental sales at reporting department stores tends to indica te some of the weak areas of consumer demand during the month and also identifies in a general way those items of merchandise for which demand was strong. For instance, sales of piece goods and household textiles showed a contrasting trend during the latest reporting month this year when compared with the trend during the same month in 1948 . Sales of this class of merchandise rose from June to July during 1948 but this year experienced a decline of 1 percent during July and were about 25 percent lower in sales volume than during the same month a year ago. Small wares showed a month-tomonth decline of 13 percent, although the decline from July of last year was only 4 percent. Likewise, sales in women's and misses' ready-to-wear accessories declined during July this year. Comparison of women's and misses' ready-to-wear apparel reflects a mixed trend, with total sales for this category of merchandise being down only about 3 percen t from the level of sales reported in June. Indicative of the differences in sales volume within this important classification of merchandise are an in- ° 137 MONTHLY BUSINESS REVIEW crease of 90 percent over June in sales of women's and misses' coats and suits but a decrease of 25 percent in sales of women's and misses' inexpensive dresses. Other items included in this category of merchandise showed similar variations in sales volume. Two of the major departments that showed the greatest strength from the standpoint of consumer demand during July were men's and boys' wear and houscfurnishings. To some extent, the strength in sales of men's and boys' wear probably is a reflection of the vigorous sales efforts undertaken by merchandisers during the month, as evidenced by clearance sales of various types of men's clothing and other price reduction efforts. Sales of men's clothing during July were 7 percent larger than during July last year. Sales of mechanical refrigerators, an important item in the housefurnishings department, were 55 percent above sales in June and 11 0 percent larger than in July 1948. Recent months have shown some improvement in consumer demand for mechanical refrigeration and certain other durable goods. This development has been reflected not only by sales at the retail level but by steps taken by manufacturers to increase the volume of production which earlier in the year had been cut back very severely. Due to the cumulating receipt of fall merchandise and, to some extent, the necessity for retailers to restock in some lines in which inventory reductions had proceeded further than was anticipated, the decline in inventories at reporting department stores in this District during July amounted to only 2 percent, although stocks were approximately 13 percent lower than during the same month a year ago. The adjusted index of department stores stocks in July was 347 percent of the 1935-39 average, as compared with 391 percent at the end of July 1948. As fall buying continued and gained strength, orders outstanding increased 28 percent from the total reported during June but were approximately the same amount below figures for July last year. Although the volume of orders outstanding during July continued to be substantially under that of July 1948, the margin of difference has narrowed considerably during the past three months. For instance, it may be recalled that during April, orders outstanding were 48 percent below the same month a year ago; during May, 51 percent lower; and during June, 41 percent lower. This indication of relative improvement in business buying points nOt only to the fact that merchandisers generally have been able to improve their inventory situations but also to a somewhat more favorable outlook on the part of retailers regarding the sales potential in the months ahead. The relative importance of cash and credit sales at department stores in the District showed no significant change during July, as credit sales represented 65 percent of total sales, which is 1 percent more than during the some month last year and the same as for June 1949. Collections during the month were 49 percent on regular accounts and 18 percent on instalment accounts. During the past ycar there has been a slowing down in collections on rcgular accounts from 53 percent in July 1948 to the 49-percent figure indicated above; however, collections on instalment accounts show no change whatever. The volume of charge accounts receivable outstanding showed a decline of about 10 percent during July but no change from the figure reported a year ago, while figures of instalment accounts outstanding show an increase of 6 percent both from the preceding month and from July of last year. Sales of reporting furniture stores in the District during July, while showing a seasonal decline from June amounting to 11 percent, continued the upswing from a year ago which began in May by showing an increase of 3 percent over July 1948. End-of-month inventories reflected a reduction of 7 percent from June and were 13 percent lower than in July last year. The larger-than-usual reduction of stocks at this time of year, despite the higher level of sales at reporting furniture stores as compared with a year ago, reflects the ability to obtain replacement of stocks on short order and a policy of holding inventories at the lowest point consistent with the current rate of consumer demand. Accounts receivable of furniture stores rose 3 percent during July and at the end of the month were 21 percent larger than a year ago. This increase in receivables over last year reflects the larger volume of total sales, a moderate extension of terms, and a slightly higher percentage of instalment sales to total sales. National developments of interest to businessmen and others in the District are reflected in a report released by the Commerce Department earl)' in August. The report reveals that consumer buying power was augmented further by an increase in personal incomes during June which raised the level for the first six months of 1949 2.2 percent higher than the first half of 1948. The report states that based on the June increase personal income from all sources rose to an annual rate of $213,500,000,000. The figures show that the upturn had been evident for three months, April through June, and had gained in strength as the months passed. Although the principal cause of the June increase is attributed to an increase in farm income, factory pay rolls increased sli gh tly, reversing a steady decline since September 1948 . \Vages rose in the nondurable goods industries and steadied in the durable goods lines. The Board of Governors of the Federal Reserve System recently released figures showing liquid asset holdings of consumers at the end of 1948. This study reveals that individuals increased their holdings of liquid assets by $2,000,000,000 during 1948 to bring the total to $132,000,000,000, excl usive of some $20,000,0 00,000 of currency. While these figures show the situation that preva iled at the end of 1948 and despite the fact that roughly one-third of all spending units found it necessary to reduce their holdings of liquid assets during the last year, it is nevertheless true that consumers as a whole probably never have been as well fortified with respect to their financial position during a period of economic readjustment as is true in the present instance. Figues such as these, reflecting a very high level of personal income payments and of liquid asse t holdings, together with the fact that approximately 60,000,000 people are employed at a wage rate structure that is probably as high as any in the country's history, tend to indicate that consumer buying power is adequate to maintain a high level of retail trade, provided consumers are offered goods of a quality and character that are consistent with their demands. AGRICULTURE The largest cotton crop since 1937 is indicated for the Eleventh Federal Reserve District as a result of greatly increased acreage and prospects for unusually high per acre yields. Cotton production in the five st ates lying wholly or partly within this District was estimated at 6,245,000 bales as of August 1, 1949, by the United States Department of Agriculture. This estimate is 29 percent above the 1948 crop and 54 percent above the 10-ye.,r ( 1938-47) average. An estimated decline from a year ago of 17 percent in the Louisiana crop is more than offset by a probable 1O-percent increase in Oklahoma, record crops anticipated in New Mexico and Arizona, and forecast of the largest Texas crop since 1937. In Texas, cotton production was estimated at 4,450,000 bales, which is 41 percent above the 1948 crop and 63 percent above the 10-year average. The estimated yield per acre of 210 pounds of lint is the highest in the State since 1912 and is largely the 138 MONTHLY BUSINESS REVIEW result of generally favorable weather conditions since planting time, increased use of fertilizer and legumes, and more effective control of insects. If production in the High Plains, the Lower Rio Grande Valley, and the Trans-Pecos irrigated areas reaches current estimates, it will represent a record crop for those areas. In the northern Blacklands and east Texas counties production was es timated only slightly higher than the 1948 crop, and in the upper coastal counties, about equal to lost year's exceptionally good production. Recent storms in the High Plains damaged the crop severely in local areas but should nOt change materially the total production from that section. Frequent showers were conducive to increased damage from boll weevils and other insects, as well as to poor weed control, thus reducing the crop in the northern Blacklands and eastern counties. Cotton harvesting is completed in the Lower Rio Grande Valley and, although delayed somewhat by frequent showers, is making satisfactory progress in the Coastal Bend and eastern counties. TEXAS COTTON PRODUCTION BY CROP REPORTING DISTRICTS (In Crop reporting district I·N ..•.... . . . ........ 1-8 ........... . ...... 2 ........ . ........... thousa.ds of hal_500 Ih. "'... wt.) 1949 indicated 1946 35 198 270 3 ..... . .. .... ...... . • 14 4 .......... ... . .. .... 5 ... .• ...... .. .. ... •. 6 ...... . ............. 7 .• . .. .......... . .... 8 ..• ...... ....... .... 9 ..... .. ....... ... ... 10 • . ... ......... .. .. .. 482 96 99 15 185 46 229 State .............. ..... 1,569 1947 \06 946 494 15 810 185 113 32 315 129 287 8,431 1948 116 558 495 22 773 226 140 20 280 170 351 8,150 AugWit 1 160 1.200 685 SO 850 245 175 35 340 175 535 4,4SO 1949 .. percent of 1948 139 215 138 227 110 108 125 liS 121 103 152 141 In contrast to the very favorable cotton prospects in the Southwest, estimated yields and total production in the United States are below a year ago, despite a 14-percent increase in acreage. The August 1 estimate of 14,80 5,000 bales is 63,000 bales below last year's crop but 3,500,000 bales above the 193847 average. The estimated per acre yield of lint in the United States of 274.4 pounds compares with a record high of 313.1 pounds in 1948 and a 10-year average of 254.0 pounds. Frequent rains throughout the eastern and central parts of the Cotton Belt have prevented effective insect and weed control, causing sharp declines in estimated yields and production in most states in those areas. However, California, like the Southwest, has had favorable growing conditions and is expected to produce a record crop of 1,300,000 bales. Near-record yields per acre are indicated for many other Texas crops on a total acreage that has not been exceeded since 1937, according to the Bureau of Agricultural Economics. Generally adequate surface and subsoil moisture throughout the growing season and continuing even into August has been a major factor in this very favorable production outlook, as well as in improving prospects for fall-sown crops. The estimated per acre corn yield of 21 bushels is the highest in over two decades. However, with the smallest acreage in 70 years, total product ion in the State of 52,332,000 bushels, indicated as of August 1, would be 17 percent above production in 1948 and 23 percent below the 1938-47 average. Estimates of wheat production were again lowered as total production was estimated at 200,358,000 bushels in the District and 105,096,000 bushels in Texas; however, this volume of production would be the second largest Texas wheat crop. The per acre yield of wheat in the State is estimated at 14.5 bushels, compared with 10.0 bushels in 1948 and the 10-year average of 12.2 bushels. Plowing of wheat land was completed rapidly, and moisture conditions arc generally favorable throughout the Wheat Belt for seeding the 1950 crop. Acreage of all sorghums for grain in Texas, estimated at 3,569,000 acres, is 23 percent below the 4,635,000 acres harvested last year but is about the same as the 10-year average. [ncreased plantings of cottOn and wheat caused reductions in the acreage of grain sorghums. Harvest of the crop has been completed in southern counties and the Low Rolling Plains, while the crop is making satisfactor y progress in other areas. The August 1 estimated yield of 19.0 bushels per acre compares with 16.5 bushels last year and a 10-year average of 16.8 bushels. This estimated yield would give Texas a 1949 grain sorghum crop of 67,811 ,000 bushels, II percent below the 1948 crop but 16 percent above the 10-year average. Acreage of peanuts for picking and threshing is estimated at 572,000 acres, a reduction of 24 percent from the 1948 figure, largely the result of acreage controls on this year's crop. However, the August I production forecast indicates a per acre yield of 525 powlds, compared with 400 pounds in 1948 and the 10-year average of 454 pounds. On the basis of the estimated y ield, production in 1949 would approximate 300,000,000 pounds, almost the same as last year's production and well above the 10-year average of 266,000,000 pounds. The estimate of the Texas pecan crop as of August I was 36,000,000 pounds, compared with the 1948 crop of 57,000,000 pounds and the 10-year average of 26,215,000 pounds. CROP PRODUCTION (10 thousands of bushels) States in Ele\'entb District- Te.... Estimared IA9v3erage 847 Average 1938-47 1948 6G,290 S3,9JJ 121,5801 44,698 67,694 11Q,200 14,240 33,977 6M18 1.891 4.125 12,546 3,1SO 2,722 4,064 1,311 1.423 4,421 4,356 4,419 9,978 3,250 5,220 14,484 6 23,040 16,416 37.9581 -Figures are combined totals for the fivo States lying wbollf or Ilartlf in the Eleventh Federal Reserve District: Texas. luizona, Louisiana, ):lew MexiCO, and Oklahoma. August I, 1949 Winter wheat... ..... 105,09G Corn. .. .. .. ............. 62,332 Oats .. . . . . _. __ .... . . . .. . 31.800 Bul.y . .. .. __ ......•. 2,489 Cotlon! .. __ _ 4,450 AU ha.yD... .... . .... 1,4-40 Potatoes. Irish ..... 3,686 Potatoes, 8weet . . . 5,225 Rice ... _.... ." 23,782 Estimated Auguot 1; 1949 1948 200,3581 159,1271 99,625 96,178 62,659 35.560 10,134 10,563 6,245 4,BJJ 4,780 4.726 7,379 8.813 13,02IA lO,IJ73.Q. 46.6821 4M621 tln thousands of bales. tArizona. New Mexioo. Okla.homa, and Texas. 6Louisiana, Oklahoma. and Texas. fLouisiana and Texas. °In thousands of tons. SOURCE: United States Department of Agriculture. Flaxseed production in Texas of 1,774,000 bushels is a new record for the State and exceeded 1948 production by 34 percent and the 10-year average by 405 percent. Rice production in Texas was estimated at 23,782,000 bushels as of August 1, which is 500,000 bushels lower than the July 1 estimate. Present estimates indicate that this year's crop may be a record crop fo r the State. Activity in most commercial vegetable areas has been centered largely on planting and preparation of fall-crop tender vegetables and early winter hardy types. Transplanting of eggplant, tomatoes, and peppers has been completed in the LaredoEagle Pass-Winter Garden district, and field work in the Lower Rio Grande Valley is making rapid progress. Harvest of potatoes and onions and preparation for early fall planting of lettuce and carrots have been virtu ally completed in the Panhandle. Cantaloupes and watermelons continue to be in abundant supply, and some sec tions quit harvesting because of poor market demand. C itrus trees in the Lower Rio Grande Valley continue to show a slow recovery from the severe freeze in J anuary of this year. Additional orchards are being taken out of production because of poor prospects for fruit. The light set of fruit that has held made fairly good growth during July and is more advanced than usual for this time of year. Conditions have been parti~- • , 139 MONTHLY BUSINESS REVIEW ularly favorable in the VaUey because of above-average rainfall and plentiful supplies of irrigation water. ~ The United States index of prices received by farmers as of July 15, 1949, at 249, was 1 percent below the June 15 index and 17 percent below the index for July 1948. Although substantial declines in prices received by farmers occurred during the past year, the costs of items purchased by farmers, including taxes and interest, declined less than 3 percent. In Texas, the index of prices received by farmers as of July 15 was 264, a decline of 3 percent from the June index and 20 percent below the index for July 1948. Only potatoes and milk cows were selling at prices higher than those which prevailed a year ago in the State. Increases over mid-June were registered for wheat, oats, barley, sweet potatoes, peanuts, hogs, eggs, and whole milk, but declines in prices of other commodities more than offset these gains. July was the fourth consecutive month in which the index of prices received by Texas farmers declined, and the index on July 15 was at the lowest level since September 1946. Spot market prices from mid-July to August 15 indicated some further weakening in prices of livestock, particularly hogs, as the movement of spring pigs and grass-fed cattle began. The prices of corn and grain sorghums declined, while prices of other grains remained relatively unchanged. Ma71~9 em", May 1948 Livestock Total Total S 11,583 6,416 6.819 25.416 98.044 S 17,762 12,181 11.058 35.576 133,981 S IM86 12,091 8.256 34,798 136.720 Total .. .. .. .... ... 162,281 SU8,277 1210,158 SOURCE: United States Department of Agriculture. 1206,451 AnIon•.. . , . ......... Loui9iana ...........• N.." Mexico . ..•••... Oklahoma . ...... . ... Telas ... .. . .. . .. ... . S 6.179 5,765 4,239 10,1 61 35,937 1949 1948 92,800 S 117.278 60,203 161.428 681.455 82,m 106.918 60.433 184.807 678.919 $1,102,222 CASH FARM INCOME BY MAJOR INCOME GROUPS FOR THE STATES OF THE ELEVENTU FEDERAL RESERVE DISTRICT, 1048 COMPARED WITH 1947 (In thouaao<h of dollars) Crope Aruona .. .......... ....... 1948 1947 Louuu.a ........ .. .. ...... 1948 1947 New Mexico ... . ... •. .. . . .. 10043 1947 Oklahoma .... . . .... ...... . 1948 19(7 T ..... ..... .. ............ . 1048 1947 Fi.. Stat........ .. ... ... .. 1048 1047 140.240 112.192 243.785 227oM4 69,473 67.232 327.945 307,936 1,071.708 1.129.992 1,853.151 1,844.896 Livestock &lid livestock Government Total (arm products paymrnts income S 80.443 72,392 107,675 107,"53 11g~ 18 101,311 345,384 331 .195 882.947 803,087 1.635.687 1,411,838 S 1,792 2,165 8,558 9.079 2,M2 3.689 5.676 8,467 16,438 23.9a 35,016 47.31! (Number) Fort Worth market CIaos Cattle .. " ... . . . ... . .... . Calvea . •. .. ... .. . . .••... . U.... .. .. . . ...... ...... . Sheep ... . . . . ••....•..... S222,475 186.749 359.918 344.476 IPl,343 172.232 619.005 674.698 1.971.093 1,9511.993 3.423 .834 3,308,048 SOURCE: United St.ate8 Department of Aariculture, Bureau of Agricultural Eeonomi08. An abundant supply of faU and winter livestock feed appears to be assured in most areas of the District as ranges and pastures continue to supply abundant feed and a large tonnage of hay has been baled for winter feeding. Timely July and August showers kept grass green in most areas of the District. Cows were generally fat and calves were making good development On the adequate grass supply which has been available since early spring. Because of price uncertainties, only a limited number of this year's calf crop has been contracted. Delivery weights of calves arc expected to be considerably heavier than usual. Lambs made only fair progress in most Edwards Plateau counties of Texas because the good supply of cured grass is generally too coarse for best utilization by sheep. Furthermore, the heavy needle and three-awn grass seed crop and the more serious screw worm infestation, although declining in recent weeks, have necessitated additional handling of ewes and lambs July 1949 54,104 18,071 32.234 85.582 July June 1948 69.831 22.799 37,863 124,602 1949 59.562 13.7114 40.672 179,308 San Antonio market July 1949 23,730 10.505 6.163 42,705 July 1048 26.520 17,014 6.862 54,699 June 1949 32,282 11,699 4,358 51.168 TOP LIVESTOCK PRICES (Do1b.rs per hundredweight) Fort Worth market Cw. ~:~~~~~~.:: : : : : ::: : Slaughter COWl • • • • • , ••••• Slaughter heiren and yelU'lings ..••. ... • . • .•.• Slaughter lambs .•....... .. Hogs •............ .• .... Cumulative reeeipt8 January 1 to May 31 11,013,164 ),IVESTOCK RECEIPTS ~~1~:e:.f!!!~: ::::::::: CASH RECEIPTS FROM FARM MARKETINGS (In thouuada of dollars) State on many ranches. However, in the Trans-Pecos area, where grass did not make such rank growth, lambs are making good to excellent gains. With sheep numbers generally at the lowest levels in more than 20 years, ranchmen plan to hold a majority of ewe lambs for restocking. Contracting of lambs which are to be sold, however, was active in western counties of Texas. July 1949 126 . 25 22.00 18.00 July 1048 135 .00 28 .50 24 .50 1949 S27.00 25 . 25 19. 50 28 . 75 26.00 25.00 25.00 22 .50 35 . 00 32 .50 29 . 50 31.50 28 . 76 27 . 50 28 . 00 27 .00 3000 21.76 June Ban Antonio market July June 1049 July 1949 $22.50 1948 132. 00 124 . 00 17.25 '26:00 ' jo:~ 22 . 50 27 . 00 24 . 00 22.50 22.50 30 . 25 32 . 50 27.75 26 .50 20 .00 25 . 00 27.40 26 . 00 29 . 00 21.50 Marketings of livestock at the Fort Worth and San Antonio markets during July continued to decline seasonally and were 31 percent below combined receipts at these markets in June. All classes of livestock shared in the decline except calves, which increased 12 percent. Cattle declined 15 percent; hogs, 17 percent; and sheep, 44 percent. Combined receipts at the two markets were also below those of a year ago, with all classes sharing in the decline, which amounted to 25 percent. The decline from a year ago was caused, in part at least, by the ample supplies of range feed which encouraged farmers and ranchers to withhold marketings of cattle and sheep until later in the season and to withhold most of the she-stock for herd and flock replacements. The decline in marketings of sheep was also caused, in part, by the very low number of sheep on farms and ranches. Movement of all classes of livestock probably will be accelerated in August and September as grass-fed cattle and calves, as well as spring pigs, move to market in volume. FINANCE Condition reports of all member banks in the Eleventh Federal Reserve District as of June 30, 1949, show that during the latest reporting period, extending from April 11 through June 30, loans, total deposits, and cash and balances due from banks were among the principal items reflecting decreases, while holdings of United States Government securities and total capital accounts showed increases. A decline in total loans during that period amounted to $41,754,000 to bring the total loans of the 621 member banks in the District to $1,738,133 ,000. Despite the decline that occurred between April 11 and June 30, the amount of total loans outstanding on June 30, 1949, was approximately $97,639,000 larger than on the same date a year ago. The decline that occurred in total loans of member banks in this District during this latest reporting period and, in fact, since the first of the year was confined to the banks located in Reserve cities, for loans of country member banks showed no significant change between April 11 and June 30 and increased slightly during the first six months of the year. 140 MONTHLY BUSINESS REVIEW In an attempt to maintain a rather fully invested position in the interest of using available funds profitably, member banks in the District increased their purchases of United States Government securities as the demand for loans declined. As a consequence of this policy, holdings of United States Government securities rose between April 11 and June 30 by $31,835,000 and on June 30 amounted to $2,06 8,511,000. This increase in investn1ent in Government securities, however, was not sufficient to offset the volume of previous sales, and consequently the amount outstanding on June 30, 1949, was $94,087,000 less than the amOunt outstanding a year earlier. The trend of deposits between April 11 and June 30, 1949, was in contrast with the trend which prevailed during the same reporting period in 1948, when demand and time deposits of individuals, partnerships, and corporations, as well as interbank deposits and total deposits, showed rather substantial incrzases. For the latest reporting period total deposits of the member banks in the District showed a decline of $32,270,000 and amounted to $5,639,918,000. The steadily upward trend in capital accounts, including capital stock, surplus, undivided profits, and reserves, continued during the latest reporting period to bring the total of these ownership accounts to $362,802,000 on June 30. This total reflects an increase of about $28,848,000 as compared with the amount reported on June 30, 1948. Figures taken from the earnings and dividends reports of the member banks in this District show a very favorable profit trend during the first six months of 1949. For instance, total earnings from current operations of all member banks in the District amounted to $74,664,000 during the 6-month period ended June 30, 1949, in contrast with total earnings of $67,219,000 reported for the comparable period in 1948. Despite an increase of about $4,400,000 in current operating expenses, net earnings from current operations during the latest 6month reporting period exceeded those for the ' comparable period in 1948 by slightly more than $3,000,000. Net profits after taxes of the 621 member banks in this District amounted to $19,080,000 during the 6-month period ended June 30, 1949, as compared with $14,818,000 during the same period in 1948. The member banks of this District continued to follow a conservative dividend policy, as total dividends paid amounted to $5,358,000 through June 30 of this year, or approximately 28 percent of net profits after taxes. TIus figure compares with a rate of 34 percent during the first six months of 1948. On August 6 the Board of Governors of the Federal Reserve System announced a reduction in reserve requirements of member banks by 2 percent of net demand deposits and 1 percent of time deposits. The reduction was carried out on a staggered weekly basis, with reserves on net demand deposits at Reserve city banks being reduced y, percent from August 11 through September 1, inclusive; reserves on net demand deposits at nonReserve city banks reduced 1 percent on August 1 and an additional 1 percent on August 16; and reserves on time deposits reduced 1 percent effective August 11 at Reserve city banks and August 16 at non-Reserve city banks. The effect of these changes was to place reserve requirements on net demand deposits at 18 percent for Reserve city banks on September 1 and at 12 percent for non-Reserve city banks on August 16. The reserve requirement on time deposits became 5 percent at Reserve city banks on August 11 and at country banks on August 16. Changes in the condition of weekly reporting member banks in selected cities in the Eleventh District during the 4-week period ended August 10 included a further decline in commer- cial, industrial, and agricultural loans, offset in part by increases in real-estate loans and "all other" loans, an increase in holdings of all types of Government securities, and an increase in total deposits adjusted. The downward trend in commercial, industrial, and agricultural loans which was so apparent throughout the first six months of this year began to taper off somewhat during July and early August. For instance, during the weeks ended July 20, July 27, and August 10, these types of loans, reflecting largely the demand of business for working capital, showed increases. It is possible that the seasonal demand for bank credit by business and industrial borrowers is beginning to assert itself to the point that the downward trend of loans may be checked or reversed. Holding of United States Government Securities by these member banks in selected leading cities of the District increased by $64,986,000 between July 13 and August 10, with the increase rather well distributed between Treasury bills, certificates of indebtedness, and Goveromen t bonds. This development reflected to a considerable extent the easier reserve position of these selected member banks resulting from the reduction of reserve requirements on June 3 and the subsequent announcement of lower reserve requirements released by the Board of Governors on August 6. ° CONDITION STATISTICS OF WEEKLY REPORTING ME!.IBER BANKS IN LEADING CITIES-Eleventh Fed"al R.oervc (In thousands of dollars) D~uiot August 10, Auguat 11, July 13, Hem 1949 1048 1949 Total loans and investroente .. ....•.•••.....•.•••• 12,321.2{11 $2,275,496 $2,260,130 Totall...,......N.~I.................. 1.004.823 1,024.700 1.00.;.~ To!alI...,....{J,""........... ... ............... 1.011.924 1.0:n,072 1.016.902 Commercial, industrial, and Q6ricultun.lloana.... 673,668 702,223r 676.416 Loans to brokers and deaJer81D securities........ 6.516 7,043 6,034 51 ,703 60.4AI 52.132 Other loana for purchasing or carrying securities.. Reakstale I..." .. .. .. .. . . . . . . .. .. .. .. .. .. .• . 88.624 85,880 1fI.9'1!1 Loan! to banks.. .......... . . .. .. .. .... .... . .. 212 672 136 All oth.,r............... . ......... 1940201 174.763, 193.268 Total inveatmenta. .. . ...... . ........ . . . ... 1,306.367 1,244,424 1,244,228 U. S. 1T...ury bilb.. ....... . ..... . . . .. .. .. .. . 90.676 46.930 63.650 U. S. Treasury certificates of indebtedn('QI....... 303,850 186.435 288,181 U. S. Treasury notes...... ........... . ........ 44,170 122,148 -12,770 U. S. Government bonds (inc. gtd. obligatioils} . .. 745.998 767,487 725,107 121,773 121,424 124,620 Other securities.... ........ .... . ... .... . ... .. . Reserves with Federal Reserve Dank................ 487,630 502,455 477,716 278,085 282,272 337,392 Ba.lances with dommic banks...................... Demand depooit..--adiU3ted·....................... 1.040,417 1.910.486 1,943.2Q9 Time dg><lllts except Governmen'.... .. .. .. .. •. • . . . . 134,622 410,787r 434,056 30,976 4.1 ,881r 26,510 United States Government deposits........... ...... Interbank demand deposits. . . . ... .. ... .. .. . . .. . . .. 529.952 006,344 532,010 0 0 0 Borrowings from Federal Reserve Dank. . . . . . . . . . . . . -Includes all demand deposits other than interbank and United States Government, Jess cash items reported as 00 hand or in process of collection. tArter deductiona for reserves and unallocatod charge-offs. r-Revised. Gross demand deposits of all member banks in the District rose during July to a daily average of $4,977,743,000, as compared with $4,948,074,000 a month earlier. All of the increase in gross demand deposits that occurred during the month was reported by Reserve city banks, as the country banks of the District showed a decline of approximately $9,000,000 in this elass of deposits during the period. On the other hand, time deposits at country banks of the District increased by slightly more than $4,000,000, an increase, however, which was not sufficient to offset the decline in time deposits at Reserve city GROSS DEMAND AND TIME DEPOSITS OF MEMBER BANKS Eleventh Federal Reserve District (Averages of daily 6gures. In thousands or dollars) Combined total G,,,,, Da.te demand .. . 14.768.677 July 1947 .... July 1948 .......... 6.096.434 March 1949 .... .... 5.139.728 ~riI1949 ......... 6.000.682 • ay 1949 .......... 4.942.647 June 1949 .......... 4.948.074 July 1049 .......... 4.077.742 Time $M2,083 687.716 607.104 621.486 631,531 636.740 62\1.655 Reserve city banks G,... demand 12.288.215 2.456.933 2.460,349 2.388.424 2,365.633 2.379.108 2.417.780 Counb'y banks 0_ Tim. $330.600 375.215 388.208 400.65.1 411,889 413.072 402.930 demand 12.470.462 2.639.601 2.689.379 2.612.268 2.577.014 2.568.966 2,550.063 Time 1202,493 212.501 218.806 220.931 219.642 222.668 226.72G ( 141 MONTHLY BUSINESS REVIEW banks. Consequently, total time deposits of all member banks in the District declined from $635,740 ,000 during June to ~ $629,6 55,000 during July. Debits to deposit accounts at banks in 24 reporting cities in the District were 4 percent lower during July than in the preceding month and 8 percent lower than during the comparable month in 1948. Largest declines in bank debits during July occurred in Austin, Corsicana, and San Angelo, while largest increases were reported from Roswell, New Mexico, and Amarillo, Texas. Only 6 of the 24 reperting cities, however, showed an incr~ase in bank debits during July . The annual rate of turnover of deposits at banks in these 24 cities declined slightly during July and was reported at 12 .1 times, as compared with 12.4 times in June and 13.3 times in July of last year. 134,000 on August 15, an increase of almost $3,300,000 over the amount in actual circulation on July 15 but approximately $6,500,000 less than the amount reported in circulation on August 15 last year. CONDITIO~ OF THE FEDERAL RESERVE BANK OF DALLAS In ~bousanda of doll"') August 15, I\em 1919 Total gold eerti6catereserves ..................... _ 1668.139 Discounts for member bankl . ..................... . 'OS Fore.ign 10lUllI on gold ........................ o •••• 3.580 U. S. Government securities .. . ............... 786.445 Total earning L'lSCta . . ••...... ••••• ••••••••••.•.•. . 700.433 797.871 Member bank r~e deposits . ..... ............... . 603,131 Federal Reserve notes in actual circulation ......... . . 0 •••• NEW PAR BANK , BANK DEBITS, END-OF-MONTH ~~Pg~lJ3str~D ANNUAL RATE OF TURNOVER (Amounts in thousands or doUan) --- Debits+--~ Percentage change over City ~ July 1049 July 1948 Arilona: Tucson. .... 1 49.OS7 I..ollisiana: Monroe .. ........ . 34.304 Sbreveport ..... . ... 122.933 Nelf Mexico: Roswell. 16,770 Texas: Abilene .•, . ........ 29.655 Amarillo .•.......•• 95.180 Austin ....... . ..... 105.651 Deaumoot. . ....... 92.592 Corpus Christi ...... 73.096 Corneana ... 8.234 Dallas ..... 953,520 EI Paso ...... 109.833 313,140 }I'ort Worth .. Galveston .. 71.836 1,004,331 Hou!lton ... 13,737 Laredo .... 51,198 Lubbock ... 34.043 Port Arthnr. 25,073 San Angelo .... . 229,088 San Antonio .. 13,605 Texarkanat . .. 39.284 ~Ier .... . .... 45 ,378 \ aco ....•... Wichita Fa.lb ....... 56,224 June 1949 -18 - 13 1 -9 20 End-or·month depositoS· July 31. 1949 Annual rate of turnover July 1949 July 1!H8 80.626 7.2 8 .8 8 .2 -3 -6 18 41.674 160.881 17,682 9.8 9.1 10.7 10.3 10.3 9.1 10.3 9.7 9.0 -9 1 -1 7 -24 -4 -13 -13 -10 -8 -10 1 -8 -19 -14 -11 -15 -6 -16 -10 -6 2 -/ 37.738 86.671 102.376 92.068 77.630 18.719 7'0 •.5O\l 114.573 289.879 93.769 9.6 13.3 12.2 11 .9 11 .4 6.2 15 . 1 11 .6 12.8 9 .0 13 .4 7.9 10.0 10.4 8.0 8.9 7. 3 9. 2 8.' 8.4 9.2 13.3 12.1 11 .9 13 .3 6.0 17 .6 12.8 16.1 92 14. 8 8 .8 10.6 11.5 8.9 9 .2 8.5 9.7 9.2 8.3 9.6 12.7 15.8 11.5 11.4 6.2 14.9 11.0 13.3 8.6 13.6 8.8 10. 1 10. 4 9.6 10.1 7.0 9.1 8.9 8.6 , -1 -19 -2 2 -4 3 -2 -12 -/ -2 -17 -13 3 2 -7 -2 900.506 20.837 61.703 39.127 37,751 310.241 21.877 60.600 64.618 80,231 Jun. 1049 -4 TotaJ-24 cities .. . . . . 13.586.642 -8 13,651,084 12.1 13.3 12.4 'Indicates change of ICS'I than on~hatr of ODe percent. "'Debits to deposit aecouot.s except. interbank acoounUJ. -Demand aod time dcJ:jt:l at. t.he cnd or the month include certified and officers' check! ou~ lltaoding but exclu c dcpotliLs to the credit of banks. tTbiJ figure includes ouly one bank in Texarkana Texaa. Total debits for all hanks in Texarkana.. Texas-Arkansas, including two banks ioca.ted in the Eighth District, amounted to 123,291. SA VINGS DEPOSITS Numher of re~rting Ci~y b Louisiana: Shreveport ............. Percen~e Kumbe~u!rr 3~~~ savings savings depositon saviDtl depwu July 31. 1948 41.080 I 25.698,229 12.170 142.078 31,343 43.920 23,366 98.008 1,789 5.765 40.323 9,668 7,540 64,285 6.100.9OS 78.222,237 22.143.750 35.35.1.415 21.319,h38 74.495,186 ..007,967 4.567.7f>5 44.>34.935 10,137,808 4,518.690 54,671,486 -1.3 Houston .. ... . .. ..... . . Lui>bock ............... Port Arthur ............ Ban Antonio ........... \\'aco ........... . . .... Wicbita Falla ... " .. Allother ........ ..... . ... 3 8 2 4 4 8 2 2 5 8 3 55 Total ............ ....... 102 521,415 1384.861,912 0.6 Tex&.!: Beaumont . .... .. o. o. Dalla.8 ................. El ra.o ............... Fort Wortb ............ 0_ Galveston ......... ... . 0 ••• U - 0.1 -1.1 3.1 3.2 2.1 68.3 - 6 .• - 2.8 3.4 - 2.0 0 .• - change in eposits from June 30, 1949 - The Citizens Indmtrial Bank, Carjms Christi, Texas, located in the terri/ary served by the San Antollio Branch, changed its name Ott January 17, 1949, to the Citizl!1ts State Bank, Carjms Christi, Texas, alld was added to the par list on Augmt 1, whm it began operating as a commercial bank. This bank has capital of $200,000 and mrplus and undivided profits of $109,000. The officers are: John T. Wright, Sr., President; Ha yward White, Exec1tti-ve Vice President; John A. Mobley, Vice President; and John T. Wright, Jr., Cashier. INDUSTRY The downward trend in the daily average production of crude petroleum in the Eleventh Federal Reserve District was resumed during July, when the production rate was 2,051,000 barrels per day. This volume was 98,000 barrels per day less than during the previous month and 619,000 barrels daily less than in July 1948. Declines outside the District were somewhat smaller, so that production in the Nation averaged 4,684,000 barrels per day during July, or 185,000 barrels daily less than in Junc and 775,000 barrels per day less than a year earlier. These decreases from June to July amounted to 5 percent in the District and 4 percent in the Nation, with the District rate of production reaching a level 23 percent lower than a year earlier, and production in the Nation, 14 percent lower. Cessation of the 8-month downward movement of production in the Eleventh District was indicated by the increase of allowable production in Texas for September by 132,000 barrels per day. 0.1 - July 15. 1949 1678,291 608 3.266 803.418 807.291 838.189 699.863 Ausurt 16. 1948 1586,019 3.750 7.912 976,665 988,327 1W7,497 609.617 0.6 CRUDE OIL PRODUCTION -1.1 - 3.2 - 1.0 - 0. 1 - 0.4 4.1 - 0 .• - 1.7 - 0.2 - 0.4 - 0.4 - 0.8 The condition of the Federal Reserve Bank of Dallas between July 15 and August 15 showed a decline of slightly more than $ 10,000,000 in gold certificate reserves and declines of about $17,000,000 in beldings of United States Government securities and over $40, 000,000 in member bank reserve deposits. Federal Reserve notcs of this bank in ac tual circulation increased slightly during the 30-day period and totaled $603,- (Barrels) July 19.9 Area TeXM: District 1.... . . ........ 2................. 3................. 4.. ......... .. .... 5. .. .. .. .. .... .. .. 6................. Othet 6........... 7b........... ..... 7..... ...... ... ... 8................. 9 ......... ,....... 10..... ........... . Total T.... .. ... . . .. .. . New Mexico................. Total production Daily average production 703,050 3.301.900 10.416.250 5.434.400 999.800 6,883,300 2,416.500 1.7&1,200 1.286,400 15.542,200 4.2>3,400 2.907.000 56.136.400 .,157,500 3,280,250 63,573,150 25.582 109.416 335.976 175.303 32.262 222.042 78.919 67.523 41.4R5 501.361 137.206 93 .774 1.810.819 North Loui:,iana.. ........... . Total Eleventh District...... Outside Elevcntn District...... 81,640.650 United Stalei................ 145,213.800 SOURCE: Estimated from .<\mmcan Petroleum InereMe or decrease in d&ily average production from July )948 3,333 - 67.866 -155.266 - 73.674 - 1M80 - 81.456 - 42.337 8.216 1.467 - 189.587 861 5.101 - 616.887 134,113 5,432 106,815 2.050,747 7,306 -618,761 2,633,56g -156,530 1.684.316 -775.300 Institute weekly reports. June 1940 466 8,il96 18.599 9.842 2.005 19.806 4.134 2.122 668 - 26.894 594 981 - 90.947 1,359 5.613 - 97.919 - 87.273 -186.192 - 142 MONTHLY BUSINESS REVIEW Stocks of crude petroleum in the District declined again during July, the decrease amounting to 3,458,000 barrels, but were still 14,820,000 barrels higher than a year earlier. Similarly, stocks in the Nation declined by 2,314,000 barrels during July but were 48,862,000 barrels higher than at the corresponding date last year. These decreases in stocks of crude petroleum during July amounted to 2 percent in the District and I percent in the Nation. Stocks in the District were 12 percent higher than a year ago, and stocks in the Nation, 22 percent higher. Any appreciable increase in crude oil stocks in the near future seems unlikely, due to the firming of demand and the continued close control of allowable production in Texas and other important producing states. Refinery operations as measured by crude oill'uns to refinery stills decreased fractionally in the District during July and decreased by I percent in the Nation, reaching levels 13 percent below that of July 1948 in the District and 9 percent lower in the Nation. The Nation's stocks of the four leading petroleum products- gasoline, kerosene, distillate fuel oil, and residual fuel oil-at the end of July totalcd 2 percent higher than at the end of June and 12 percent higher than a year earlier. The demand for gasoline continued strong during July, with gasoline stocks in the Nation being drawn down by 4 percent despite a I-percent increase in production. The increase of demand for gasoline during the first seven months of this year has been a bright spot in the petroleum picture. Gasoline sales havc sustained refinery operations during a period when heating oil sales have been even lower than the seasonal normal. It has been somewhat more than a year since the petroleum industry has been able to supply virtually all of the gasoline rcquired by motorists. During that time gasoline consumption has followed an upward trend, reflecting in large part the increase in the number of motor vehicles. During the first half of 1949, domestic sales of motor vehicles were 25 percent greater than during the corresponding period in 1948. Factory sales for the domestic market during the 12 months ended June 1949 amounted to 5,700,000 vehicles. In 1948, motor vehicle registrations increased by 9 percent, with a large part of this gain occurring in the last half of the year. If the present trend in sales a,nd registrations persists, the year-to-year trend of demand for gasoline should continue gradually upward. The demand for gas oil and distillate fuel oil has remained seasonally low. Stocks in the Nation increased by 6 percent during July, reaching a level 25 percent higher than a year earlier. Refiners have been maximizing yields of gasoline and minimizing those of distillate fuel oil. However, as the fall and winter marketing season approaches, these tendencies may be reversed, with some reduction in the yield of gasoline in order to prevent an excessive piling up of stocks, and with a sharp increase in the production of distillate fuel oil to meet seasonal heating requirements. Because of last winter's unexpected surplus of heating oil and because of the expectation by many consumers and resellers that prices may be cut, dealers and users have been particularly slow to fill their tanks. The unusually small stocks in the hands of consumers and resellers, together with the increased number of consumers and the possibility of more severe weather this winter, suggest that the heating oil situation may bear watching over the n ext few months. The current high level of stocks in refiners' tanks should not lull the industry into a state of unpreparedness. Residual fuel oil stocks increased 2 percent during July, reaching a level 38 percent above that of a year ago. The demand for this heavy fuel oil recently has held up better than in the case of distillate oil and kerosene, so that currencly the accumulation of stocks of this product is relatively less rapid. Prices for residual fuel oil recently have been increased on the Atlantic Seaboard and on the Texas Gulf Coast. Hewever, these prices are still considerably below levels which prevailed before the sharp price decline of last winter. Moreover, prices of heavy fuel oil are also below those of bituminous coal on the basis of heat equivalents, and there is evidence of a continuing shift of industrial consumers from coal to oil. Thus, Federal Power Commission reports show that in June electric utility plants used 16 percent less coal than a year earlier but 20 percent more gas and 62 percent more fuel oil. ~ Drilling activity continues at a high level. During the first half of 1949, well completions in the Nation totaled 17,554, or 869 more than during the corresponding period of last year. However, an appreciable increase in completions during the second half of the year is less likely, so that the total for the year is expected to be somewhat less than last year's record of 36,491 wells. In the District, completions during the first half of this yea r totaled 7,355, or 960 more than during the first half of 1948. So far this year, well completions in the District have been sufficiently ahead of last year's annual rate to suggest the possibility that the 1949 total may exceed that for 1948. Whether or not more wells are drilled this year than last, the greater average depth of this year's wells makes it probable that the total footage drilled will set new records in both the Nation and the District. In its midyear report, The Oil and Gas journal carries a prediction that the total demand for all oils during the last half of 1949 will be 6 percent greater than during the corresponding period of 1948, with increases of 4 percent for residual fuel oil, 6 percent for gasoline, and 14 percent for distillate fuel oil. Crude production in the Nation during the last half of this year is expected to be about 2 percent greater than during the first half of the year, although about 6 percent less than during the corresponding period of 1948. Part of the increased demand is expected to be met by drawing upon stocks of crude, so that the impact of rising consumption will have a somewhat delayed effect upon crude production. ~ VALUE OF CONSTRUCTlOli CONTRACTS AWARDED (In thousands or dollars) July 1949 Eleventh District-total. RCllidential. . All other. ........... . United Statc6·-total . . . Residential .... . ....... . All other .... . . July 1948 June 1949 1 97.659 30.996 66.663 943.660 340.593 602.967 1 72.997 19.309 63.688 962.6811 349.699 612.986 1 M,177 Jalluary 1 to July 31 1949 1948 26,250 39.927 945.676 370.752 574,924 $ 427.481 144,508 282,973 5.411,236 1,965,302 3.445,844 1 472.072 157,451 314.1:12 1 5.729.490 2.173.268 3.51;6.222 ·37 states east ot the Rocky Mouutaiu.s. SOURCE: F. W. Dodge Corporation. BUILDING PERMITS Percentage change Percentage - valuation from- Jan. 1 toJu1.30, 1949 chan~e July June valuation Valuation 1948 1949 Number Valuation from 1948 July 1049 Ci~y N'umber Louisiana: Shreveport .. . Texas: Abilene .. ... . 369 1 7,270.568 685 525 121 284 226 315 277 1,786 294 640 154 508 216 128 1,215 146 89 437.968 1.636.946 1,261.970 558.458 1,171.717 7.980.013 1.293.511 2.014 .281 182.8111 5.361.911 720.327 196.0.\0 2.499 .634 493,000 489,640 60 47 - 33 - 13 28 254 - 2 -80 -38 -65 - 73 - 17 -41 91 -50 -36 -13 -42 16 - 18 188 38 -96 --47 -61 - 66 - 21 - 45 - 56 To!>t ........ , 6.767 $34.369,431 5 -19 AUULrillo .... . Austin ...... . Beaumont .. . Coreus Christi Dal as, •.... . EI Paso ..... , Fort Worth. Galveetoo .. .. Houston .... . I,ubbock .. .. . Port Arthur . . San Antonio. WACO •••...• Wichita Falls. - M 2.268 S 14.414.211 -35 756 1.769 1.676 2,373 1.826 9.256 1,634 4.170 1.121 4,231 1.246 1.129 7.765 1,()67 844 4.0B!l.065 9.417.595 12.182.399 5.493,330 7.320.810 44.607 .262 5.700.5R4 14,077.359 7.283 .974 46.760.588 6.290.095 2.278,146 18.695,970 4.761.570 2,977.989 45 -19 - 10 - 35 -25 -7 - 18 178 - 24 - 27 21 - 12 - 41 13 42.1132 1207,047,547 -19 23 ~ MONTHLY BUSINESS REVIEW COnstruction projects in the refinery, natural gas processing, and pipe -line sectors of the petroleum industry are numerous and will continue to account for large construction and equipment expenditures during the remainder of the year. The d esire for greater flexibility in product yield patterns has been an incentive for the construction of new projects and the moderniza tion of others. TIle volume of construction contracts awarded in the Eleventh District during July rose to nearly $98,000,000, which was the highest total since October 1942 when the war construction boom was in progress. The July figure is 48 percent higher than that for JWle and 34 percent above that for July of last year. Residential awards in July amounted to $31,000,000 and were the highest since May 1946. Awards for other types of construction were the highest since October 1942. Residential awards, which were 18 percent above the June figure and 61 percent higher than in July of last year, reflected a number of large housing projects, chiefly near military centers. Despite the increase of awards in July, the total value of awards for the first seven months of 1949 was 9 percent smaller than in the corresponding period of 1948, residential awards being 8 percent smaller and the other awards 10 percent smaller. These figures reflect the slow pace of the construction industry in the District earlier this year. NEW CONSTRUCTION EXPENDITURES IN UNITED STATES, 1948-49 (Amouots in millions of dollars) Type of construction Total new construclion ... Private construction . Residental blli1di~ (nonfarm) ... ... Nonremrtential bui ding (nonfarm) •.. ............. ....... .... . lndustrial. . . . . . . . ..... Warehouses, office and loft buildings .. Stores, restaurants, and garages . . . . . Other nonresidential . Farm construction .... . .... Public utility construction. Raihood . . ............ Telepbone and telegraph Other public utility. Local tran~it Petroleum pipe-line Electric light and power . Gas ..... ........ Public construction .. . Residential building ..... Nonreaidential building . ........... ...... ...... . Educational. . ... ............... ..... Hoopital and institutional . . Other nonresidential .. . . Military and naval facilities . . ..... ........ ..... Highways, streets, aod road!! .. ...... ..... ... ... Sewer and water ...................... Miscellaneous public service enterpri.\!cs . . COIl3ervation and development . .... All other public construction ...... e-Estimated. SOURCES: United States Department of Commerce. United St.ates Department of Labor. ............ .. .. ........ ......... ......... ... .. ... .... ............ .. .. ........ ........... ... ..... ..... .. ...... .. 194ge 119,000 13,825 6,500 3,350 1,000 325 800 1,225 450 3,525 375 725 2,425 40 150 1,435 800 5,175 200 1.575 800 425 350 100 1,700 550 126 750 m 1948 SIS,775 14,663 7,223 3,578 1,397 323 901 957 500 3,262 379 713 2,170 60 150 1,260 700 4,212 85 1.057 567 219 271 137 1,585 481 108 597 162 Percent change I - 5 -10 -6 -28 I -II 28 -10 8 -I 2 12 - 33 0 14 14 23 135 49 41 94 29 -27 7 14 16 26 8 In its midyear review, the Construction Division of the Department of Commerce reported that new construction with a value of nearly $8, 500,000,000 was put in place in the Nation during the first half of 1949, establishing a new record for construction activity 4 perccnt in excess of the previous high of $8,200,000,000 for the first half of last year. At midyear, an evaluation of prespects for the balance of 1949 indicated that the normal seasonal increase in mos t types of construction during the third quarter, coupled with the recent upsurge in homebuilding activity, would probably produce a record total of $19,000,000,000 of new construction in 1949, or 1 percent more than the 1948 total of $18,775,000,000. The physical volume of new construction this year is expected to show a somewhat larger increase over 1948 as a result of reduced construction costS, but physical volume in 1949 will still be considerably below the high level of the 1920's and the wartime peak in 1947. 143 An expanded program of public construction is primarily responsible for sustaining 1949 new construction activity at record levels. Private construction put in place during the first six months of this year, with a value of $6,200,000,000, was 5 percent less than last year's first-half total. Public construction expenditures of nearly $2,300,000,000, on the other hand, were 37 percent larger than those of the corresponding period last year. After a relatively slow beginning in comparison to the early months of last year, the volume of new housing units put under construction spurted sharply upward during the later spring months and at midyear was near the postwar record level. Construction was started on 453,000 new permanent nonfarm housing units during the first half of 1949-24,000 less than were started during the equivalent period of last year, according to reports of the Bureau of Labor Statistics. It appears unlikely that the rate of housing starts will increase so that the total for the year will approach the ncar-record 1948 figure of 931,300 new permanent nonfarm dwelling unitsa total exceeded only by the 1925 record of 937,000 starts. For the present, the Departments of Commerce and Labor continue to forecast that construction will start on 875,000 new housing units this year. If attained, this total would rank the year as the fourth best in homebuilding history--exceeded only by 1924, 1925, and 1948. As an accompaniment to the lower levels of residential building this year, recordings of mortgages of $20 ,000 and under on both old and new houses for the first fi"e months of 1949 totaled $4,700,000,000, a decline of about 9 percent from the COrresponding period of 1948 . The number of mortgages recorded also declined, from 1,019,655 in 1948 to 927,133 in 1949 . Legislatively, an important recent development was the enactment of the National Housing Act of 1949. Designed to provide additional low-rent housing, the Act authorizes the construction of 810, 000 publicly financed housing units over the course of the n ext six years. In addition, the Act empowers the Federal Government to make loans and grants to localities for slum clearance purposes and to aid farm housing construction through an additional program of loans and grants. Although the Act became effective upon signature by the President, commencement of actual building operations must, of necessity, await the completion of a requisite amount of preliminary planning and individual project authorization. For this reason, the Act is not expected to have any appreciable effect on the number of housing units started in 1949. As the year opened, construction costs declined fractionally from the average cost level of the closing month of 1948. In each succeeding month through May, a continuous pattern of small declines was recorded in the average level of construction costs, As of May, construction cos t s-according to the Department of Commerce composite index-had dropped by about 2 percent from the end of last year and nearly 3 percent from the peak figure cf last September. D espite these drops, average costs were still nearly 1 percent above the level of last May. During most of the first half of 1949, employment on construction projects was at a slightly higher level than during the corresponding period of a year ago. According to the Bureau of Labor Statistics, the number of workers employed by construction can tractors averaged 1,9 0 J ,000 monthly during the first five months of this year, as contrasted with an initial 5-month J 948 average of 1, 878,00 0. In May, however, employment dropped below the 1948 monthly total for the first time; during that month construction employment, reported at 2,010,000, fell some 40,000 behind employment reported in May 1948. 144 MONTHLY BUSINESS REVIEW The first hal£. of 1949 was marked by the virtual disappearance of the widespread shortages of construction materials which had hampered the building industry since the end of the war. Production of building materials proceeded at a recordbreaking pace throughout most of 1948, and by the late fall months of that year output of most materials appeared adequate to meet all of the then-current construction requirements, as well as to permit the accumulation of inventories. As manufact~lrer .and distributor stocks accumulated, the pressure for maxlnllzmg output to meet both current-construction and in:en~ory -reb.uilding needs diminished. The almost general e1immatlOn of mventory requirements as a demand factor for building materials was reflected during the first half of this DOMESTIC CONSUMPTION AND STOCKS OF COTTON (Bales) July 1949 July 1948 June 1949 11.924 627.462 11.345 600.495 1,471.908 1,333,945 1.058.697 4,406,.138 August I to July 31 Thia IIC880D Last &ea8OU Couumptioo at: Texas mills ..... . ........... 10.436 Unitcd. States mills ...•....... 4SS.106 U. S. Stocks end of month: In consuming eatablishmenta . . 884,175 Public storage and compretSell 4.143,183 143.594 7.797.841 ISS.115 9.3S4.:li2 year by a rather sharp curtailment in over-all materials production. The production of Portland cement in Texas during June 1949 was 11 percent higher than a year earlier, while the corresponding increase for the Nation was 3 percent. Production during the first half of 1949 was up 9 percent in Texas and 5 percent in the Nation. Shipments of cement were also higher in Texas, but small declines were reported for the Nation. The considerable volume of construction of highways, dams, and other. public works, as well as other types of construction, contributed to the strength of the demand for cement in the Southwest. PRODUCTION, SHIPMENTS. AND STOCKS OF PORTLAND CEMENT (Amounts i. tbousands of ba=b) lune lanuary-Jun8 Jun. Percent Percent ,bang< 1949 change 1948 1949 1948 Production: Texas . . . ... .... .. .. . . . 1.262 1.142 11 7.099 6.48.1 9 United Stoles .. ... ..... 18.279 17.757 3 99.034 93.928 5 Shipments: 1.231 Texa:s ..... " ......... • 1.294 21.426 United Stot.. . ....... .. 20.667 Stoch, end of monLb: Texaa .. .. .. . ..... ,., .. 695 495 United States . ... ... . . . 19.782 12.422 SOURCE: United States Bureau of M iD~ 6 -4 40 59 6.833 90.301 6.608 91.517 5 -1 ~