Full text of Review (Federal Reserve Bank of Dallas) : September 1, 1949

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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.
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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

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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.

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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.

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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

~