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Monthly Review
F

Volume X X X n

V E

NOVEMBER, 1950

L O U I

Number 11

Increased, demand for American farm
products comes from abroad and at home.
It may be met in part by Mid-South farms
where diversification already is aiding pro
duction— although much more progress can
be made. Idle or under-used land costs a
community in lost income. Diversification
does not mean less cotton output.
Diversification requires capital and credit.
Bankers are aware of this and progressive
bankers are meeting financing needs.

BANK
CREDIT
AND
MID-SOUTH
AGRICULTURE

At present we are faced with inflation
which would be accentuated by over-exten
sion of credit, and the Federal Reserve Sys
tem thus is trying to restrain credit growth.
But this does not mean that no credit should
be used. It does, however, place more
responsibility on the banker.
Progressive bankers are exercising this
responsibility wisely as indicated by their
loan programs and their comments. They
are eager to contribute to greater resource
strength. They have changed credit policies
a lot since 1940. They are tailoring credit
more closely to needs. They would like to
make more credit available to tenants but
the problem of tenant instability makes this
difficult.
Sound development programs can be
financed and the Mid-South should take
advantage of its opportunity.

Increased demand fo r American farm products . . .
American agriculture is going into another period
in which capacity or close to capacity output will
be required. Calls for 16 million bales of cotton
and for 73 million acres of wheat plantings high
light the emphasis on abundant production for
1951. These have been our major surplus problem
crops — high requests for them underline the
strength of demand for farm output in general.
. . . com es from abroad . . .
The demand comes from two sources — from
abroad and from the domestic economy. A recent
article in this Review discussed the foreign demand
factor. It pointed out that higher American im
ports (particularly of strategic materials for our
expanded defense effort) would provide more dollar
earnings for foreign nations, Our broad foreign
aid program would add to the supply of foreignowned dollars. Some of these would be used to buy
American farm products. In addition we probably
would use some of our agricultural output as a
strategic weapon to strengthen the poorer nations
of the world to resist aggression.
. . . and at hom e.
The major portion of total demand for the pro
ducts of American farms, of course, is domestic. A
growing population and a high income strengthens
demand for farm output. And increased manpower
requirements for the military and for industry will
T H E COTTONBELT
OF T H E E I G H T H

PORTION
DISTRICT

put pressure on the farm labor force so that the
necessary farm output will be harder to obtain.
How long a period American agriculture will face
this kind of situation is not clear at present. Real
world agreement on peace would change the picture
appreciably, but this development seems so unlikely
as to be only a remote possibility for the near future.
A third global war is another possibility and this
would intensify the requirements for farm produc
tion. More likely than either of these developments
is a long period of recurrent international crises
like the present one—a strong defense effort by the
Western democracies and continuation of require
ments on about their present scale— or perhaps a
somewhat higher one.
It may be met in part by Mid-South farms where
diversification already is aiding production • . .
In such a situation the farm plant of the MidSouth can play a major role. And in carrying on
its work it can strengthen itself for the future. This
area already has shown a pronounced shift from
a one-crop (cotton) agriculture to a more diversified
farm region. It has done this, by and large, without
curtailing its cotton output—by better farm prac
tices it has grown as much cotton on less acres and
has used the released land for new products.
. . . although much m ore progress can be made.
While great progress toward diversification has
been made, the process can go much further. And
along with it can come more full utilization of land

The shaded portion of the Eighth District map shows the
major cotton producing areas of the Eighth District.
Reported in the article are the results of an informal survey
of lending attitudes and practices of eleven banks located in
this cotton section. The locations of the eleven banks are
indicated on the map.
The survey was intended to develop information on pro
gressive country bank experience in financing agriculture—
particularly in financing diversification programs. Its results
are not to be taken as representative of country banking in
general throughout the cotton belt or throughout the district.

COUNTIES WITH AN INCOME
OF OVER <500,000 FROM
COTTON IN 1944

Page 158

The eleven banks are about average in size for the region
but tend to be more active in promoting agricultural develop
ment than the average bank. In each bank the survey con
sisted of an interview with the banker and the review of a
sample of loans. In each bank the sample was drawn as
follows. In estimate of the total number of farm loans was
provided by the banker. From the farm liability ledger, loans
were pulled at regular intervals so that the total sample
would be about 40. Altogether data were obtained on 482
loans to 410 farmers. Difference between number of loans
and number of individual borrowers is accounted for by
some borrowers having more than one note on file.

resources in the Mid-South. Both developments
will enable Mid-South farming to contribute more
toward the common national goal of a stronger
United States and at the same time will provide
better-balanced economic strength within the area
itself.
Idle or under-used land . . .
The cotton belt has a considerable amount
of idle and waste land— a situation that has obtained
for a long time. It also has a lot of land (and farm
labor) that is under-employed and producing far
less than it should. For example, the Census of
Agriculture showed 12 per cent of all open (non
forested) land in Haywood County, Tennessee was
idle in 1944.
Fayette and Hardemon Counties
showed 19 per cent and 24 per cent of their open
land as idle or waste. In contrast, Macoupin and
Morgan Counties, Illinois, had less than 5 per cent
non-forested land idle in 1944 and Schuyler and
Scotland Counties, Missouri, showed idle land less
than 4 per cent of the total. There are, of course,
differences in soil types among these examples, but
the major factor seems to be differences in diversifi
cation. Where diversified farming is practiced, land
can be more fully utilized— and the average return
on all land can be greater.
. . . costs a community in lost income.
Under-utilization of the land resource costs a
community considerable in lost income. Over the
past few years this bank, in cooperation with the
extension services of the several state universities
in the Eighth Federal Reserve District, has made a
number of farm case studies which point up what
can be done with good farm practices. Good soils
management and proper utilization of land and capi
tal applied to it add considerably to farm productiv
ity. As just one example, a brown loam farm in
north-central Mississippi grossed only $1.54 per acre
in 1945 on 296 acres of open land not in row crops.
In 1947 the operator began a beef cattle program.
In 1949 he got $12.09 per acre from this tract and his
pasture program was still in its initial development

phase. The example is all the more striking since
the price factor was removed for the calculation—
both the 1945 and 1949 returns shown were com
puted in terms of constant prices (1938-44 average).
This one example may be compared with the re
turn on all Mississippi farmland in 1949. In that
year the state had 5 million acres of row cropland
and 8 million acres of other open land. In terms of
1938-44 average prices the row cropland yielded
$30.89 per acre; the other open land only $2.06
per acre.
Diversification does not mean less cotton output,
Greater diversification does not mean less cotton
production. As pointed out earlier, the experience
so far is that as much or more cotton can be pro
duced at the same time that diversification is pro
ceeding. On rolling farmland, grassland programs
are generally complementary to cotton. Crop rota
tions hold soil fertility and increase cotton yields
per acre enough to overcome acreage shifts to other
uses. Table I shows what was accomplished on nine
case study farms in West Tennessee and North
Mississippi. In each case cotton income increased
or held constant while other income was growing.
And while the experience recorded on these farms
was for different periods of time constant prices
are used throughout, making the results comparable.
Diversification requires capital and credit.
One problem that faces the farmer of the cotton
belt in moving toward greater diversification is the
financing problem. Capital shortage could limit
the contribution of the Mid-South to greater farm
output.
Diversification programs cost money— in most of
the case studies made by this bank the new pro
grams cost about as much to carry through as the
original cost of the farm. But the returns have far
exceeded the costs.
More and more banks and other financial institu
tions are recognizing the desirability of such devel
opments and are ready to offer financing for that
purpose.

TABLE I

Farm 2
A
B
C
D

F
G
H

T H E IN S T A L L A T IO N O F G O O D FA R M M A N A G E M E N T P R O G R AM S O N T H E S E
C O T T O N B E L T F A R M S B R O U G H T A B O U T B O T H A N IN C R E A S E IN C O T T O N IN C O M E
A N D IN C O M E F R O M O T H E R SO U R C E S 3
Before s
Cotton
Other
Cotton
Years
County
Income
Incom e
Income
Used
State
Shelby
1935-1947
$ 1,121
$
199
$ 5,760
Tennessee
5,578
Tate
1932-1947
4,575
1,664
Mississippi
W ashington
2,489
1938-1947
2,542
8,616
Mississippi
Henderson
1943-1949
369
2,004
Tennessee
901
Tipton
1936-1949
804
6,942
6,998
Tennessee
Sunflower
1941-1949
5,819
41,873
30,691
Mississippi
Monroe
Mississippi
1945-1949
563
4,003
7,445
H olm es
1946-1949
Mississippi
346
670
3,276
Calhoun
Mississippi
1941-1949
7,500
1,603
8 t625

After 8
Other
Income
$ 2,195
7,037
3,671
2,367
5,667
14,516
6,276
4,126
9,358

* Average 1938-1944 farm prices used for calculating income for both periods.
^ These farms were case studies used by the Federal Reserve Bank of St. Louis in banker-farm meetings.
This is gross return on an annual basis. Incom e figures refer to before new farm management program was initiated and after it was completed.

Page 159

Bankers are aware o f this . * .
The State Bankers Associations in Arkansas, Illi
nois, Indiana, Kentucky, Mississippi, Missouri and
Tennessee have been working for some time on
programs designed to acquaint their members with
the desirability of aiding in promotion of better
farming practices. In some cases, prizes are offered
for outstanding farm programs. In many cases
bankers are active in local groups supporting land
development and good farming; such for example as,
Friends of the Land, 4-H Clubs, Future Farmers
of America, and local and county fairs. A number of
cotton belt banks have on their staffs trained farm
technicians who can assist farmers to put in new
programs and use new techniques.
In addition to such developmental and educational
work, the farm community banks, of course, can
aid Mid-South agriculture directly in helping meet
its financing needs. Surveys reported in previous
issues of this Review have indicated how country
banks are serving agriculture in this area.
. . . and progressive banks are meeting financing
needs.
Recently the author of this article visited eleven
cotton belt banks in the Eighth District and dis
cussed in each case the question of financing further
agricultural development in the community served
by the bank. In each bank a sample of the farm
loans in the bank’s portfolio was examined for direct
evidence of what was being done to aid diversifica
tion programs. This was not a survey in the usual
sense— no conclusions are to be drawn that the
record of these eleven banks is representative of all
Eighth District banking. It does indicate, however,
how progressive bankers look at the financing prob
lem and what they are doing to meet it. The map
and note at the beginning of this article give more
detail about the techniques of the eleven-bank
survey.
At present we are faced with inflation . . .
Right here a parenthetical note of clarification
should be added. The American economy is now
in a serious inflationary situation. Very simply
expressed, inflation results from the fact that the
rate of flow of money (purchasing power) into the
economy runs ahead of the rate of flow of civilian
goods and services available. Production of goods
and services generates income to buy those goods
and services. When some of the goods are taken
for defense, as is the case now, they are not available
for civilian use— but the income from their produc
tion still is generated. That is the reason for recomPage 160

mendations for higher taxes (and for bond sales to
non-bank investors) that will absorb this excess
income.
. • . which would be accentuated by over-exten
sion o f credit . . .
Excess current income is not the only factor in
the problem. Use of past savings and use of future
income (credit) adds to purchasing power bidding
for current supplies of goods and services. And
when the commercial banking system expands its
loans and investments it creates new money which
adds to the inflationary pressure. It is in this area
— the money supply—that the Federal Reserve
System operates.
• • • and the Federal Reserve System thus is trying
to restrain credit, growth.
Right now— and in any inflationary situation—
the Federal Reserve System is working toward re
straining growth in bank credit which will result
in additions to the money supply. It does this
through making reserves less available and more
costly to the commercial banks. Unless the com
mercial banks can obtain additional reserves, they
cannot extend additional credit. Thus, in effect,
what the Federal Reserve System attempts to do is
set an over-all ceiling on bank credit. Under that
broad ceiling the commercial banking system (and
the individual bank) has freedom to extend credit
for whatever purpose and on whatever terms the
banks wish. Such selective credit controls (on
stock loans, consumer loans and real estate loans)
as exist do not limit the amount of credit the bank
ing system can extend— they limit the amounts a
borrower can borrow. But the broad System con
trol over reserves can limit the total amount of
bank credit that can be extended.
It is important to recognize why the Federal
Reserve has power to limit the total money supply
and why that power is used. When an individual
commercial bank, or the banking system, makes a
loan, it expands the money supply (unless the ex
pansion is offset by other factors). Good loans
expand the money supply as well as bad loans. It
is not a question of limiting credit expansion to
good loans. No banker deliberately makes bad
loans under either inflationary, deflationary or stable
conditions. As a matter of fact, in an inflationary
situation which is growing, more loans arc “ good” ,
in the sense of repayment possibility, than in a de
flationary situation. So merely asking banks to
confine their activities to “ good” loans does not
solve the problem— an over-all type of credit limita-

tion is necessary. Since it is broad and impersonal,
individual bank freedom of action is not impaired
within the limits set.
But this does not mean that no credit should he
used.
But the economy cannot function without ade
quate credit and this is the crux of the financing
problem in time of inflation. Here is where the
individual banker performs his traditional function
— he attempts to distribute credit in such a way that
the most useful purposes are fulfilled. He has to
“ screen” applications to determine that the most
essential activities are not curtailed through lack of
adequate credit. Here he can perform a major service
through his appraisal of developmental programs
that will strengthen the nation’s resources and assure
more needed output. And even here, it might be
noted, a worthy project that would require a long
time to bring results might well be dismissed in
favor of one that would produce results (more
output) in a shorter time.
It does9 however9 place m ore responsibility
on the banker.
With reference to diversified agricultural pro
grams for the cotton belt, this means that individual
bankers must exercise careful discretion in placing
loans with borrowers who will get maximum results
from a given amount of funds, in terms of output
and land improvement within a reasonable period
of time.
Here the responsibility of the local banker is a
heavy one with regard to credit extension. His
knowledge of local farms and farmers becomes
doubly important for he must not only decide the
soundness of developmental farm loans; he must
also decide the desirability of such loans in relation
to an inflationary economy.
Credit

supplied is more diverse than incom e

CR ED IT

INCOME

SUPPLIED

sources

SOURCE

T A B L E II
A BREAKDOW N
OF TH E
SAM PLED
BANK BORROW ERS
R E V E A L S T H A T A D IV E R S IF IE D T Y P E O F F A R M C R E D IT
IS F U R N IS H E D F A R M E R S B Y C O T T O N B E L T B A N K E R S
Actual
Num ber
Num ber Am ount
of
of
Total
Loans
A m ount Loans
Loans

Cash crop production loans (cotton
primary income source).......................
Livestock and livestock enterprise sup
porting loans .............................................
Partial livestock and livestock sup-

CASH CROP PROD. LOANS
(COTTON PRIMARY INCOME SOURCE) J

3 LIVESTOCK AND L.S. ENTERPRISE
3 SUPPORTING LOANS

COTTON PRODUCTION LOANS

[ . ’ . ’ . I PARTIAL LIVESTOCK
L * * * !* J SUPPORTING LOANS

FARM PURCHASE LOANS

FARM MACHINERY LOANS

□

OTHER

FARM

AND L.S.

LOANS

COMBINATION CROP
MACHINERY LOANS

AND

$1,370,774
135,218
129,943
383,887

8
20
33

427,369

129,378

10
10
28

6
85,530
4
2
32,979
4
3
Other farm loans 1..
4
46,470
$1,370,774
10 0 %
10 0 %
1 Farm improvements plus combination real estate and other loans not
classified above. A lso includes a number of rice production loans.
2 Seventy-two borrowers had more than one type of loan.
21
18
18
482«

TA B LE III
SAM PLED FARM ER BOR RO W ER S O PERATED LARGER
U N IT S T H A N T H E ST A T E A V E R A G E 1
Average
Proportion
Average
Average
of Cotton
Acres
Income
to Total
in Farm from Cotton
Income
Farm purchase loans............................................... 190
$ 4,547
62%
7,203
Farm machinery loans........................................ .... 186
65
Cotton production loans................................... .... 269
9,500
88
Cash crop production loans (cotton pri
mary income source).......................................... 480
23,987
70
Livestock and livestock enterprise sup
porting loans ................................................... ....440
11,586
44
Partial livestock and livestock support
ing loans ................................................................306
6,524
51
Combination crop and machinery loans.. 194
4,397
80
Other farm loans......................................................310
2,461
27
1 Estimates made by bankers from financial statements and personal
information.

Progressive bankers are exercising this
responsibility wisely . . .
In the eleven banks visited the loans studied
indicated that credit was being furnished for
diversification programs. In terms of crop or live
stock programs, the credit supplied was more
diversified than the income source pattern in the
county, as indicated in the chart. Table II breaks
down the loans into a purpose classification and
also indicates the diversification of the loans.
For each loan type, the average size of the bor
rower’s operating unit was larger than the state
average as given in Census data (Table III). This
reflects primarily the delta location of most banks
in the sample. Here plantation farming predomi
nates, and the plantation owner usually borrows
funds for all tenants and sharecroppers on the land
unit. Thus a unit classified as a farm in this study
may include two or more farms as classed by the
Census.
. . .

.... %

410
37
97
158

as indicated by their loan programs . . .

About 10 per cent of the total volume of credit
supplied to sampled borrowers was livestock and
livestock supporting credit. An additional 6 per cent
of the credit volume was supplied partially for live
stock and livestock supporting enterprises. Assum
ing one-half of this actually went into livestock
use, the total for this purpose would be 13 per cent
of the loan volume. The 1945 Census of Agriculture
shows only 12 per cent of the income on farms in
Page 161

the area as coming from livestock and livestock
products. If farm real estate and farm machinery
loans are omitted from the totals, livestock loans
accounted for more than 15 per cent of volume.
. . . and their com m ents.
The bankers generally were eager to discuss cases
where their credit had helped farmers develop new
sources of income. More than half of the loan officers
said that the new loans (primarily livestock) paid
as well as cotton, although the production cycle
was a little longer. Another fourth of the bankers
said that the new type loans paid better than cotton
production loans. In every case loan officers were of
the opinion that the cost of servicing the new enter
prise loans was no greater than for cotton loans.
With better security, repayments just as certain as
cotton but perhaps slower, and profit potential as
good if not better than cotton, the bank officers were
well pleased with their livestock loans.
They are eager to contribute to greater
resource strength.
Most of them were willing to go further with
their loans for diversification programs. As shown
in Table II there were 158 borrowers in the sample
who had cotton production loans. In three-fourths
of these specific cases the bankers interviewed were
willing to extend credit to begin or expand an enter
prise other than cotton production. In more than
80 per cent of the cases where an owner-operator
was involved the banker would be willing to make
credit available for a new program. And when
borrowers have had experience in other fields,
bankers generally would go along on expanded or
other new programs in more than nine cases out of
ten. On the record, of farmers who since January,
1949 actually had requested credit for purposes other
than cotton production, only two out of each hun
dred were refused. Table IV summarizes the cases
cited above. It should be stressed that these are
specific cases gone over individually with the
banker concerned.
They have changed credit policies a lot since 1940.
During the discussion of each sample loan, the
loan officer was asked if similar loans were made
T A B L E IV
B A N K E R S W IL L IN G TO M A K E L O A N S TO M O ST FA R M E R S
TO E X P A N D E N T E R P R IS E O T H E R T H A N C O T T O N
Creditors
Creditors to
that could
whom bankers
borrow to
would not
expand other lend to expand
enterprise other enterprise
37
Farm purchase borrowers............................................
Farm machinery borrow ers1........................................
58
7
Cotton production borrowers......................................
112
46
Cash crop production borrowers (cotton pri
mary income source)......................................... ........
58
7
Combination crop and machinery borrowers......
12
O ther farm borrowers....................................................
14
1
Bankers had insufficient information on six in this group to give
credit standing.

Page 162

by his bank in 1940. Each of the eleven banks made
farm purchase and cotton production loans in 1940.
Two did not supply credit for farm machinery pur
chases in 1940, and two did not supply any credit
for combination cash crops where cotton was the
primary income source. Five who now supply credit
for livestock and livestock supporting enterprises
did not do so in 1940.
In some cases there was no particular demand for
credit for non-cotton projects in 1940, and the
present credit extension thus does not represent any
change in credit policy by these banks. In the ma
jority of cases, however, a definite change in policy
has occurred— especially for livestock and livestock
supporting loans.
They are tailoring credit m ore closely to needs.
In contrast to the seasonal cotton production loan,
the sampled banks are now supplying credit for
varying time periods. The average maturity of the
various loan types is shown in Table V. This
demonstrates the attempt by the banks to tailor
their advances to the particular purpose of the
credit.
v

BANK

TABLE
L O A N S H A D M A T U R I T I E S O F 12 M O N T H S O R M O R E
F O R N O N -C A S H C R O P S
Number
Average
of
Maturity
Loans
(in M onths)

Farm purchase loans...................................................................
Farm machinery loans................................................................
Cotton production loans...........................................................
Cash crop production loans (cotton primary income
source) ...........................................................................................
Livestock and livestock enterprise supporting loans..
Partial livestock and livestock supporting loans.........
Combination crop and machinery loans............................
Other farm loans..........................................................................

37
97
158

55
16
8

65
68
21
18
18

7
14
12
10
8

Farm purchase loans, with an average maturity of
55 months, usually require a high down payment
at the time of purchase. In some instances, where
the borrower needs terms beyond those that can
be granted by a bank, the loan officers act as agents
for insurance company loans for farm purchase.
Farm machinery loans usually go beyond a year
maturity. For the sampled group, these loans aver
aged 16 months maturity. A down payment of onethird or two-fifths was required, with half the
balance due the first Fall and the remainder the
second Fall. In many cases the banker had direct
contact with the dealer and dealer reserve funds
or dealer endorsements were used to partially secure
the loan.
Cotton and other cash crop loans follow the
seasonal pattern with seven or eight month matur
ities. The farmer’s machinery, livestock, and crops
were used to secure such loans by practically every
bank in the sample.
The average maturity of 14 months for livestock
loans masks a wide range of maturities of varying

types of loans. Of the 68 livestock loans in the
sample, the majority were for livestock purchases.
In some cases credit was supplied for pasture im
provements— such as fencing, fertilizer, seed—
and for farm buildings necessary for the livestock
program. Loans for the purchase of beef and dairy
herds usually were made for about two years, while
a number of loans for hogs matured within a few
months. Maturity dates on more than one-quarter
of the livestock loans were flexible with definite oral
agreements for renewals if necessary.
The partial livestock and livestock supporting
loans represent advances to farmers who borrow
on one note for both livestock and other purposes
(generally cotton). The banker cannot determine
the exact amount of money used for each purpose.
Like the livestock loan, this loan is usually for a
longer term than for cash crops. The 21 loans of
this type in the sample had an average maturity of
twelve months, and 43 per cent of them had definite
renewal understandings.
They would like to make m ore credit available
to tenants . . .
One problem brought to light in talking with
the bankers was that of unstable tenancy. The bulk
of the farmers found to be ineligible for credit
for non-cotton purposes are tenants. The tenant
entirely dependent on cotton income is regarded as
the poorest credit risk. One who has other
crops or livestock, even though cotton is his
major income source, is regarded as a far better
risk. And one who is obtaining machinery, even
though in debt for this purpose, is generally ac
ceptable for loans for other purposes also. In terms
of the specific cases discussed, the following data
highlight the tenancy problem as far as credit is con
cerned. Where the tenant was solely in cotton, six
out of ten cases were classed as not desirable for
credit for other purposes. Where tenants had other

income sources, five out of ten cases were not good
credit risks. And where machinery was involved
only two or three out of ten cases were poor risks.
. . . but the problem o f tenant instability
makes this difficult.
Within the tenancy problem is a credit problem
that slows the development of the area’s land re
sources. Tw o factors to be overcome are insufficient
collateral and instability. Both of these can be met,
in part, by some changes in the traditional manner
of handling tenant agreements. T o meet the prob
lem of instability, long-term leases in most cases
probably would make the tenant an eligible bor
rower. T o meet the problem of insufficient collateral,
most tenants need the help and endorsement of the
landlord.
Sound development programs can be financed . . .
The evidence of experience and opinion drawn
from the visits to eleven progressive cotton belt
banks would indicate that sound development pro
grams can be, and are being, financed in the MidSouth. While these eleven banks are more active
in this field than the average, more and more banks
in this region are doing a good job in meeting the
financing needs of agricultural diversification pro
grams. In fact, there is some reason to believe that
the financing institutions are more eager to finance
than farmers are to begin new programs.
. . • and the Mid-South should take advantage
o f its opportunity.
If the Mid-South is to play a growing part in
meeting the heavy demand for American farm prod
ucts progress toward greater diversification needs to
be accentuated. The resource base is there — it
should be utilized fully both in the interests of
meeting present demand and in providing for a
better balance in farming for the future.
Clifton B. Luttrell

Page 163

Survey of Current Conditions
Industrial and business activity in the Eighth
District continues to move upward in response to
the large volume of expenditures by consumers and
business and the inflow of an increasing amount of
Government orders. As the demand for goods ex
pands, employment and income climb higher. And
accompanying the general expansion in produc
tion, employment and income— and, to a significant
extent, stimulating it— is a continuation of the up
ward trend in credit.
It was noted in last month’s Review that the
increase in the supply of goods available to con
sumers is not proportionate to the increase in con
sumers’ income— and that the gap will widen as
defense requirements drain off a growing part of our
output. It will widen, too, as past savings, and bor
rowings against future income, are used to finance
purchases.
Last month additional steps were taken to curb
inflationary pressures resulting from the extension
of credit. Tighter restrictions on consumer instal
ment credit were established by the Board of Gov
ernors. And for the first time, limitations were
placed on the terms under which private capital can
be borrowed to finance new residential construction.
At the same time, comparable restrictions were ap
plied by public agencies engaged in insuring or
guaranteeing private mortgage loans.
These measures, of course, are intended to damp
en down inflationary forces— in part by curtailing
the effective demand for consumers’ durable goods
covered by Regulation W and for new construc
tion. Holding down demand tends to restrain the
pressure on prices of materials that go into these
items. But more important is that such action cur-

W H O L E S A L E P R IC E S IN T H E U N IT E D S T A T E S
Bureau of Labor
Sept.,’ SO
Statistics
compared with
(1 9 2 6 = 1 0 0 )
Sept.,’ 50 A u g .,’ 50 Sept.,’ 49
A u g .,’ 50 Sept.,’ 49
169.5
180.4
177.2
159.2

166.3
177.5
174.6
155.3

153.7
163.1
162.0
145.5

+
+
+
+

1 .9 %
1.6
1.5
2.5

+ 1 0 .3 %
+ 1 0 .6
+ 9.4
+ 9.4

R E T A IL F O O D
Bureau of Labor
Sept. 1 5 /5 0
Statistics
Sept. 15, A u g . 15, Sept. 15,
compared with
(1 9 3 5 -3 9 = 1 0 0 )
1950
1950
1949
A u g . 1 5 /5 0
Sept. 1 5 /4 9
U . S. (51 cities).....
208.5
209.0R
204.2
— 0 .2 %
+ 2 .1 %
St. Louis------------------220.5
221.9
211.6
— 0 .6
+ 4.2
L ittle R ock.................211.7
211.9
20 1 .4
— 0.1
+ 5.1
Louisville..... .............. 199.9
199.2
194.3
+ 0.4
+ 2.9
M em phis......................220 .6
220.2
2 13.0
+ 0 .2
+ 3.6
R — Revised.

Page 164

Personal income in the nation climbed to an
annual rate of $223 billion in August. This repre
sented an increase of $6 billion since June and $19
billion during the preceding twelve months. Larger
employment plus a broadening wave of wage in
creases and more overtime pay lifted wage and
salary receipts $4 billion in the first two months
of the Korean war. During the same period, con
sumers’ expenditures in retail stores alone were up
$1 billion on a seasonally adjusted basis.
Business expenditures also have been large in
recent months. Inventories that were reduced
sharply during the early weeks of the war in Korea
have been pretty well replaced. At the end of Au
gust the value of stocks of soft goods held by re
tailers and wholesalers was larger than at the end
of June. After allowing for price advances during
the period, it is likely that physical stocks at the
beginning of September were at least as large as
they were two months earlier. Inventories of dur
able goods—at the wholesale and retail levels—
were still down early in September. Manufacturers*
stocks also were below the June 30 levels— in both
durable and nondurable lines—despite the fact that
manufacturing output increased about 4 per cent
between June and August as measured by the
Board’s seasonally adjusted index.
W HO LESALIN G

PRICES

A ll Commodities........
Farm Products......
Foods..........................
Other..........................

tails the expansion of the total money supply— and
thereby strikes at the heart of the inflation potential.
In other words, the objective of these controls is
to reduce pressure that makes for higher prices.
In that respect they differ completely from direct
price controls which arbitrarily restrict prices but
do not restrain the underlying forces that cause
prices to rise.

Line of Commodities

N et Sales

Stocks

D ata furnished by
Bureau of Census
U . S. Dept, of Commerce*

September, 1950
compared with
A u g ., 1950 Sept., 1949

Sept. 30, 1950
compared with
Sept. 30, 1949

Autom otive Supplies...................... ..
D rugs and Chemicals..................... ..
,.
..
Tobacco and its Products.......... . ,
M iscellaneous.................................... ...

+ 3%
— 1
— 24
— 4
— 22
— 1
—

* * T otal A ll Lines........................ — 1 6 %
♦Preliminary.
**Includes certain items not listed above.

+ 13%
+ 4
+ 8
+ 1
+ 26

+ 30
+ 35
+ 1

+ 3
+ 11

—

+ 14%

+ 13%

+ 15
5

E M PLO YM E N T

The general economic expansion is shifting the
labor market again toward an employees’ market.
Viewed in the aggregate the labor supply still is
considered adequate but some occupational short
ages sere developing and some areas are feeling
more general tightness. The whole market is tighter
now than it was a few months ago. Hours of work
are stretching out. Quit rates are climbing higher;
workers tend to do more shifting in a tight market.
Unemployment declined between August and Sep
tember, and so did employment as the labor force
shrank seasonally. The Bureau of the Census re
ported that practically all of the decrease was in
the school-age workers. Nonagricultural employ
ment in September, however, was the second high
est on record, and was up 1.8 million from last
September.
In the St. Louis area employment climbed be
tween mid-August and mid-September, extending
the month-to-month rise for the ninth consecutive
month. Nonagricultural employment was at an alltime high, while manufacturing employment set a
new peacetime record. The major gains occurred
in manufacturing, where hirings were largest in the
nonelectrical machinery and transportation equip
ment industries, and in trade. Smaller gains were
reported in almost all other industries. The food
and leather groups were the only ones to show de
clines— and these were primarily seasonal.
Employment in the Louisville area exceeded the
1948 peak for the first time in September. Gains
occurred in all major industries between July and
September, with the largest increases in manufac
turing and Government. More than 20,000 additional
people have been hired in Louisville during the past
year, with more than two-thirds of the total hired
by manufacturing plants.
Employment in the Evansville area showed only
a slight upturn between July and September. Manu
facturing employment remained about the same,
while public utilities, trade and service employment
edged upward.
Unemployment nationally is no longer considered
a problem except in a few small and scattered areas
— including Crab Orchard and Mt. Vernon, Illinois.
The number of unemployed was lower in September
than at any time since December, 1948. In the
third quarter of this year the number of persons
looking for work averaged about a million less than
a year earlier.
In the seven district states, the volume of insured
unemployment in mid-September was only threefourths as large as in August and less than half of

the year ago volume. Since last September, insured
unemployment in the district states has declined
between 33 per cent (in Arkansas) and 75 per cent
(in Indiana). In St. Louis, the number of com
pensable claims in mid-September was one-fifth
smaller than in August and was only half as large
as in September, 1949.
INDUSTRY

The rate of industrial operations in the district
continued to advance during September. In some
cases total output for the month was off slightly
because there were fewer working days than in
August. Manufacturing plants in most of the in
dustrial centers stepped up their schedules. Gains
in coal and crude oil production were recorded. New
construction put under contract declined but actual
building activity remained at about the previous
high level. The amount of electric power consumed
by manufacturing plants in the major cities was off
7 per cent, due to the shorter work month, but daily
average consumption was up 7 per cent.
Manufacturing Activity Greater in September
The large demand for civilian goods continued to
furnish the principal impetus to the upward trend
in manufacturing operations. Business buying re
portedly has slowed down slightly since the July
and August rush to place orders with suppliers. But
new orders together with backlogs continued to
push manufacturers’ schedules upward.
Supplementing the heavy civilian demand is the
growing volume of Government contracts received
by producers in this area. So far, expansion in
Government spending has had little effect on the
economy of the district as a whole. In local areas
— particularly where Army camps or installations
have been reactivated or expanded— and in some
IN DU STRY
C O N S U M P T IO N
Sept.,
1950
K .W . H .

( K .W .H .
in thous.)

Evansville..........
Little Rock.......
Louisville...........
Memphis............
Pine Bluff..........
St. Louis............

A u g .,
1950
K .W . H .

Sept.,
1949
K .W . H .

Sept., 1950
compared with
A u g .,’ 50
Sept.,’ 49

13,534
16,733
12,443
4,780 4,661
5,439
73,993
76,863
70,317
25,321
28,205
26 ,018 r
7,348 7,463
4,647
95 , 5,68
102,797
77 ,597 r

Totals.............220,544

236,722

L O A D S IN T E R C H A N G E D
Sept., ’ 50

O F E L E C T R IC IT Y

A u g ., ’ 50

Sept., *49

— 1 9 .1 %
+ 2.6
— 3.7
— 10.2
— 1.6
— 7.0

—

196 ,461 r

+ 8 .8 %
— 12.1
+ 5.2
— 2.7
+ 5 8 .1
+ 23.2

6 .8 %

F O R 25 R A I L R O A D S A T S T . L O U I S
First Nine D ays
O ct., *50 O ct., ’ 49 9 mos. *50 9 mos. *49

118,541
126,713
101,093
35,407
31,459
1,002,317
Source: Terminal Railroad Association of St. Louis.
C R U D E O IL
Sept.,
1950

A u g .,
1950

Arkansas............
Illinois................
Indiana...............
Kentucky...........

81.7
177.3
31.1
27.9

82.0
174.8
31.4
27.9

318.0

939,077

P R O D U C T IO N — D A IL Y

(In thousands
o fb b ls.)

Total...............

12 .3 %

316.1

Sept.,
1949
71.6
179.2
28.1
23.3
302.2

AVERAGE
Sept., 1950
compared with
A u g ., 1950 Sept., 1949
-0 -%
+ 1
— 1
- 0+

+14%
— 1
+11
+20
+

Page 165

specific industries the effects of the program are
observable. But in terms of districtwide develop
ments, the main impact of the program is yet to
come.
Nonclassified contracts (those for items classed
as “ nonsecret” ) awarded to district manufacturers
so far add up to a relatively small total dollar value.
Since mid-July, when the figures first became avail
able, nonclassified prime contracts valued at only
$7.5 million have been awarded to companies in the
district. This total is small relative to the value
of all production in this region. The volume is grow
ing, however; in late September and early October
such contracts were running about $1 million a
week.
Orders placed so far largely represent house
keeping” expenditures of the Defense Department,
although some commitments for ordnance, elec
tronics, engineering, and aircraft supplies also have
been made. Most of the contracts are with firms
located in St. Louis, Louisville and Memphis.
Activity in most of the district’s durable goods
industries was at a higher level in September. The
basic steel industry in St. Louis scheduled opera
tions at 85 per cent of capacity during October.
This was the highest rate in any month since Au
gust, 1944. In September production was scheduled
at 76 per cent of capacity. The demand for steel is
heavy and the market generally is getting tighter.
Lumber production— southern pine and hardwood
— was up during the month. Output of nonelectrical
machinery dropped in September as a result of
strikes in some of the major plants in the district.
In the transportation equipment and fabricated
metals industries, operations moved up during the
month.
Meat packing operations increased slightly in the
St. Louis area. Marketings in September were
rather light, receipts at the National Stockyards in
East St. Louis dropping 5 per cent from August
and 10 per cent below receipts last September. The
total number of animals slaughtered under Federal
inspection was up 8 per cent relative to that in
August.
In the shoe industry price increases recently were
announced by the largest producers— the second
advances since the beginning of the Korean con
flict. W age increases in the industry also were
agreed on at some of the companies during the past
month. Shoe production in the district in July
totaled 7.7 million pairs. In the previous month
output amounted to 7.6 million pairs and in July
last year was 6.8 million.
Page 166

Kentucky’s whiskey industry continued to oper
ate at a high level in September. At the end of the
month 50 distilleries were producing— three more
than at the close of August and 24 more than in
September last year. Production has been increased
sharply in recent months, reportedly in anticipation
of the diversion of part of the capacity to production
for defense needs. It is estimated, however, that as
much as 50 per cent of output could be diverted to
such uses without seriously affecting whiskey inven
tories.
Coal and Oil Output Up
More coal was mined in the district in September
than in August. Production totaled 9.6 million tons
or 2 per cent more than in the previous month.
Nationally, output was down 2 per cent. The dis
trict’s production usually increases in September,
and the increase in output brought the season
ally adjusted index to 142 per cent of 1935-39 as
against 121 per cent in August. A reduction
occurred in the Kentucky fields while production
rose slightly in Arkansas, Illinois, Indiana and
Missouri.
Crude petroleum output was up 1 per cent on
a daily average basis in September over August.
Production per day was at a rate of 318,000 barrels
as against 316,000 in August— and 302,000 a year
ago. This was the third consecutive month of
larger output and the September increase lifted pro
duction to the highest level since the first quarter of
1946.
CONSTRUCTION

Expenditures for new construction in the nation
climbed to a new peak of $2.8 billion in September.
Most of the increase was in nonresidential building
although estimated outlays for both private and
public housing moved up slightly. But these in
creases were less significant, in terms of the outlook
for construction in the coming months, than the
action taken early in October to curb inflationary
pressures that result from the expansion of credit
in the construction field.
Construction Credit Controls
Inflationary pressures were building up in the
nation’s economy before the start of the Korean
conflict and the enlarged program for defense ex
penditures. A major source of this pressure was
the rapid expansion in credit extended for new real
PRODUCTION IN D E X
C O A L P R O D U C T IO N IN D E X
1 9 3 5 -3 9 = 1 0 0
_______________ Unadjusted_____________
_______________ Adjusted_______________
Sept.,’ 50
A u g .,’ 50
Sept.,*49 Sept.,’ 50
A u g .,’ 50
Sept.,*49
154*
140
71
147*
142
67
* Preliminary.

estate construction—particularly in the residential
field. Easy credit added to the inflationary pressures
in two ways: (1) it stimulated building activity,
which increased the demand for construction materi
als and helped push prices higher; and (2) a large
part of the borrowed funds originated in the banking
system and thus helped form the basis for further
expansion in the total money supply.
Recognizing that contemplated defense expendi
tures would provide further fuel for the inflationary
fires, Congress, in the Defense Production Act of
1950, provided several checks. Among these is pro
vision for control of real estate construction credit.
The Board of Governors of the Federal Reserve
System is charged with the responsibility of regu
lating the extension of private credit in this field.
Requirements established by the Board, including
among others those with respect to down payments
and maximum maturities, became effective October
12 and are contained in the Board’s Regulation X .
The Home and Housing Finance Administration
has applied similar restrictions to the terms of
private mortgage loans insured or guaranteed by
the principal public agencies involved. These steps
followed, by about three months, a tightening of
some requirements by public agencies shortly after
the Korean war began.
Effect of Credit Controls
It is too early, of course, to tell just how much
these anti-inflationary actions will affect residential
construction volume in the future. Already there
is some indication that the tighter requirements put
into effect in July were beginning to take hold in
September. Nationally, the number of new residen
tial units started dropped last month, according to
tentative Bureau of Labor Statistics estimates. This
dip did not result in smaller expenditures, however,
because of the large backlog of work that was
started earlier.
Construction Contracts in the District
The total value of work contracted for in the
district in September amounted to $87 million. In
August it totaled $103 million. Residential volume
CONSTRUCTION
B U IL D IN G P E R M IT S
M onth of September
N ew Construction
Repairs, etc.
(C o st in
Num ber
Cost
Number
Cost
1949
thousands) 1950
1949
1950
1949
1949 1950
1950
Evansville.... .
85 $
158
64
83
$ 130
96
112 $ 135 $
Little Rock.. .
79
61
1,380
471
118
224
345
773
Louisville..... . 227
199
1,585
1,015
70
93
51
108
M em phis...... .2,436 2,321
4,643
3,112
197
196
221
128
St. Louis...... .. 347
342
3,126
676
2,800
280
256
1,002
Sept. To ta ls.,3,172
3,008 $10,892 ! 7,528
1,002 $2,182 $1,094
$
867
A u g . T o ta ls..J,470
3,080 $11,537 : 9,374
$
931
971
$1,258 $1,094

— including new as well as additions to existing
structures—was up 10 per cent. Nonresidential
and heavy engineering awards declined.
The increase in residential volume principally
reflected contracts for new apartment building con
struction. The number of new single-family dwell
ing units put under contract for owner occupancy
in the St. Louis territory dropped more than onefourth to the lowest level since April. Speculative
builders also put fewer units under contract in
September— cutting back by about the same per
centage.
In the nonresidential field there were declines in
commercial, manufacturing and most other classifi
cations.
TRADE
Consumer spending during September was heavy
but the rush to buy that characterized July and
early August was not so evident. There were mild
to sharp flurries of spending in some major durable
goods lines near the middle of the month and just
prior to the reimposition of consumer credit con
trols after a 15-month lapse. But in general, buy
ing remained on a more orderly basis than prevailed
in July and early August.
Department Stores— At the district’s department
stores, sales in September were 8 per cent larger
than in August. Consumers usually increase their
buying in September, but the gain this year was
not as large as might be expected. As a result,
daily average sales were smaller than in August,
after allowing for seasonal factors, and the adjusted
index dropped to 360 per cent of 1935-39 as against
370 per cent in the previous month.
For the fifth consecutive month department store
sales were larger than in the corresponding month a
year ago. In September, dollar volume was up 10
per cent from September, 1949. The margin over
last year was not as large as in the previous month,
however, when a districtwide gain of 14 per cent
was reported, or in July when sales soared 29 per
cent ahead of last year’s volume.
All major district cities shared in the gain from
last year. In several smaller centers, and in Spring
field, Fort Smith and St. Louis, the percentage
increase did not measure up to that for the entire
district, however.
The relatively large volume in September helped
hold sales for the year at a level 5 per cent above
that in the same period in 1949. Judging by pre
liminary reports, this rate of gain probably was
maintained through October.
Furniture Stores— District furniture store sales
during September reflected purchases in anticipaPage 167

TRAD E
DEPARTM ENT

STORES

Stocks
___________ N et Sales_____________ on Hand

Stock
Turnover

Sept., 1950
9 m os.’ 50 Sept. 3 0 /5 0 Jan. 1, to
compared with
to same comp, with
Sept. 30
A u g .,’ 50 Sept.,’49 period ’ 49 Sept. 3 0 /4 9 1950
1949
8 th F . R . District...
+ 7%
Ft. Smith, A rk ..............+ 5
kittle R ock, A rk ....
+12
Q uincy, 111................ ......+ 8
Evansville, In d ....... ..... + 6
Louisville, K y ............... + 4
St. Louis A r e a 1........... + 8
St. Louis, M o ..... ......+ 7
Springfield, M o ............ — 2
Memphis, Tenn............ + 9
*A11 other cities......
-0 -

+10%
+ 9
+12
+ 7
+14
+14
+ 9
+10
+ 6
+ 9
+ 7

+ 5%
+ 4
+ 6
+ 4
+10
+ 9
+ 4
+ 4
+ 7
+ 5
+ 6

+14%
+14
+28
+ 6
+ 6
+23
+12
+13
+11
+ 8
+13

2.92
2.89
2.83
2.64
2.86
3.22
2.90
2.92
2.69
2.97
2.43

2.89
2.98
3.04
2.49
2.65
3.14
2.87
2 .88
2.47
2.95
2.33

*E1 D orado, Fayetteville, Pine B luff, A r k .; Harrisburg, M t. Vernon,
111.; N ew A lbany, Vincennes, I n d .; Danville, Hopkinsville, Mayfield,
Paducah, K y . ; Chillicothe, M o . ; Greenville, M is s .; and Jackson, Tenn.
1
Includes St. Louis, M o . ; A lton , Belleville, and East St. Louis, 111.
Outstanding orders of reporting stores at the end of September, 1950,
were 21 per cent greater than on the corresponding date a year ago.
Percentage of accounts and notes receivable outstanding Sept. 1, 1950,
collected during September, by cities:
Instalment Excl. Instal.
Accounts
Accounts
Fort Sm ith..............%
Little R ock...... 16
Louisville ......... 18
Memphis ......... 17

IN D E X E S

Instalment Excl. Instal.
Accounts
Accounts

47%
42
50
45

Quincy .............
St. Louis...........
Other Cities....
8 th F .R . Dist.

DEPARTM ENT

STORE

17%
19
13
18

SALES

63%
52
60
49

AND

STO C K S

8th Federal Reserve District
Sept., A u g ., July, Sept.,
1950 1950 1950 1949
Sales (daily average), unadjusted 2....................... ............ 363
Sales (daily average), seasonally ad ju sted2..................360
Stocks, unadjusted8.................................................................. 361
Stocks, seasonally adjusted 8................................................. 325
2 D aily average 1 9 3 5 -3 9 = 1 0 0 .
3 End of month Average 1 9 3 5 -3 9 = 1 0 0 .

318

370
322
295

S P E C IA L T Y STO R ES
Stocks
____________N et Sales_______________ on Hand

326
418
295
283

335
332
311
280

Stock
Turnover

Sept., 1950
9 mos. 1950 Sept. 3 0 /5 0 Jan. 1, to
compared with
to same
comp, with
Sept. 30
A u g ./5 0 S e p t./4 9 period 1949 Sept. 3 0 /4 9 1950 1949
M en’ s Furnishings.... + 2 4 % ' r+ 1 0 %
— 1%
+16%
L75
L79
Boots and Shoes......... + 2 9
+10
+ 1
— 1
3.31 3.21
Percentage of accounts and notes receivable outstanding Sept. 1, 1950,
collected during Septem ber:
M en’ s Furnishings ................ 4 5 %
B oots and Shoes....................... 4 2 %
Trading da ys: September, 1950— 2 5 ; A ugust, 1950— 2 7 ; September,
1949— 25.
R E T A IL F U R N IT U R E S T O R E S**
N et Sales

Inventories

Ratio

Sept., 1950
compared with

of
Collections

A u g ./5 0 S e p t./4 9
8th D ist. Total1... — 7 %
St. Louis Area2... — 11
St. Louis........... ...— 12
Louisville Area3.. + 3
Louisville............ + 1
M em phis...................— 9
Little R ock...... ....... + 8
Springfield............ ...— 3
Fort Sm ith............ — 9 +

+23%
+22
+22
+40
+36
+13
+25
+28
2 9

A u g ./5 0 S e p t./49 S e p t./5 0 S e p t./49
+ 8%
+ 6
+ 6
+14
+ 4
+ 4
+ 3
+ 4
*

+29%
+35
+35
+36
+39
— 3
+14
+32
*

21%
28
27
15
14
15
17
17
*

23%
32
32
15
14
14
16
19
*

*N o t shown separately due to insufficient coverage, but included in
Eighth District totals.
1 In addition to following cities, includes stores in Blytheville, and Pine
Bluff, A rkansas; Hopkinsville, Owensboro, K entucky; Greenwood, M is
sissippi ; Hannibal, M issou ri; and Evansville, Indiana.
2 Includes St. Louis, M issou ri; and Alton , Illinois.
8 Includes Louisville, K en tu c k y ; and N ew Albany, Indiana.
**41 stores reporting.
PERCENTAGE

D IS T R IB U T IO N

F U R N IT U R E

SALES

September, 1950 August, 1950 September, 1949
Cash Sales.........................................
Credit Sales..................................

13%
87

Total Sales...................................

100%

Page 168

12%
88_________
100%

tion of credit controls and in fear of future short
ages. Through mid-September consumer buying
was concentrated on items that were under credit
regulations when controls were in effect last year.
But even though consumers stepped up their buying
somewhat just before credit restrictions were an
nounced, the month’s sales were below the August
level.
Reporting stores in the district did 9 per cent less
business in September than in the previous month—
but 19 per cent more than in September last year.
Cash sales were up 19 per cent from those a year
ago—the third month in a row that cash transac
tions were larger than last year. Credit volume
also was up, as it has been every month this year
except in April. The increase in September
amounted to 21 per cent.
The Effect of Regulation W — As a part of its
program aimed at dampening down the inflationary
pressures in the economy, the Board of Governors
reimposed controls over down payment and
maturity requirements of instalment sales and loans,
effective September 18. The initial standards that
were established were not particularly restrictive
judged by the trend of sales of covered items and the
continued rise in instalment credit during late Sep
tember and early October. Effective October 16,
more stringent terms were imposed.
In this district, the initial restrictions seemed to
have their largest effect on the used automobile
market, somewhat less impact on demand for appli
ances and similar household equipment, and least
effect on the new car market. In the used car field,
it should be noted, the market in several parts of
the district had begun to weaken late in August
(prior to Regulation W ). Demand for new cars
remained strong in most of the major district cities
after the initial credit requirements were an
nounced. The principal exception was in Memphis,
where sales dropped sharply.
Sales of major appliances and other major durable
items in department stores were up somewhat in the
week prior to September 18. During the remainder
of the month and in the first two weeks in October
sales dropped back— in some cases to a level not
much different from that which prevailed in June.
Volume remained larger than a year ago except for
major appliances.
Instalment credit sales in department stores in
August represented 12 per cent of total sales. In
September they accounted for 10 per cent of the
total. The ratio also declined during the same
period in the two previous years—but not quite as
sharply as this year. In 1949 the decline was from

10 per cent to 9 per cent, and in 1948, from 9 per
cent to 8 per cent. In 1947 there was no change
between August and September.
Open credit sales represented a larger proportion
of total sales in September than in August, but a
rising ratio is customary for the period. This year
the ratio moved from 42 per cent in August to 46
per cent in September. Last year and in 1948 the
increase was from 41 per cent to 45 per cent— and
in 1947, from 41 per cent to 43 per cent.
Inventories— Outstanding Orders— Inventories at
department and furniture stores were a little larger
at the end of September than they were a month
earlier, in terms of retail value. At department
stores the value of stocks was up 10 per cent and
was 14 per cent higher than at the end of September
last year. Furniture stores reported an 8 per cent
increase during September— to a level that was 21
per cent above that of a year ago.
Department store buyers currently report that
advance orders are being placed with somewhat
more caution now than in July and August when
consumer scare-buying was at its peak. Outstand
ing orders on September 3Q were 10 per cent less
than on August 31 and totaled 21 per cent more than
at the end of September last year.
AGRICULTURE

Emphasis in 1951 from the U. S. Department of
Agriculture will be on promotion of abundant pro
duction. This has become evident in recent days
with the announcement that no curbs will be im
posed on cotton production. A crop of 16 million
bales is requested, about the size of the 1949 crop,
but more than 6 million bales larger than the 1950
crop. The wheat crop has been set for 73 million
acres which on the average should produce 1.2 bil
lion bushels of wheat. A high price for wheat has
been assured farmers— equivalent to the 1950 sup
port price, or 90 per cent of the July, 1951 parity,
whichever is higher. Oats, rye and barley will be
supported in the same relation to corn as in 1950.
Good weather in most district states during the
first half of October speeded crop maturity and
harvesting. Weather conditions during September
were not favorable, but the October 1 crop prospects
for the natibn on the whole were not much different
than the September forecast. Corn production esti
mates were lowered 45 million to 3,117 million
bushels, a drop of 1.5 per cent. This decrease was
largely in the northern areas of the Corn Belt where
there was frost damage. The bulk of the crop
apparently has escaped serious damage that would
have resulted from an early frost. Small increases

were forecast for oats, barley, peanuts and soybeans
production. Although the total tobacco production
estimate is virtually unchanged from a month
earlier, the burley and dark estimates were lower.
The declines in district types of tobacco were offset
by expected increases in flue-cured types.
Indicated cotton production in district states was
off further in September. The declines were 20,000
bales in Mississippi, Missouri and Tennessee, and
10,000 bales in Arkansas. The crop of 3,230,000
bales indicated for these four states is 960,000 bales
less than in 1949.
Prices received by farmers increased 5 points to
an index of 272 on September 15 (1910-14=100).
Record high cotton prices were important contribu
tors to this price rise. Prices of citrus fruits and
many other farm products also were higher. At
the same time prices paid by farmers increased
1 point to 269 as a result of higher prices for lum
ber, feeder livestock, and other items. The parity
ratio widened to 105, the highest since October,
1948.
Cash farm income for the first three quarters of
1950 is estimated at $18.7 billion, 4 per cent less
than in 1949. The drop is due to a slightly smaller
volume of marketings since prices thus far in 1950
average about the same as in 1949. In district
states cash farm receipts for the first seven months
were 7 per cent less than a year earlier. However,
receipts nationally in August were 7 per cent above
August, 1949, and in September were slightly
above September, 1949. Crop prices in September
were 15 per cent higher than a year earlier, but
marketings were much lower.

AGRICULTURE
CASH

( I n thousands A u g .,
of dollars)
1950
..$ 17,919
..1 3 7 ,3 6 1
Kentucky........
Mississippi.. ..
M issouri...... ..
..

30,243
13,777
87,288
27,134

...$398,450
R E C E IP T S A N D

FARM

A u g ., 1950
compared with
July,
A u g .,
1950
1949
— 14%
— 20%
— 13
— 15
—
0—
— 5
— 13
— 18
— 2
+ 4
— 12
— 14
— 1
+ 5
— 10%
— 10%

S H IP M E N T S

IN C O M E
8 month total Jan. to A u g .
1950
compared with
1950
1949
1948
— 24%
$ 165,246
— 27%
— 13
1,046,533
— 2
— 3
— 15
559,924
— 8
— 2
300,447
— 50
— 50
112,157
— 4
574,336
— 10
— 7
— 22
215,280
$2,973,923
— 16%
— 8%
N A T IO N A L

Receipts
Sept., 1950
Sept.,
compared with
1950 A u g .,r50 Sept.,’49
Cattle and calves.... 131,684
+ 6%
— 20%
H o g s ............................ 209,040 — 4
— 1
Sheep..........................
61,641 — 24
— 16
H orses........................
Totals..................... 402,365

—

STO C K

YARDS

Shipments

— 10%

Sept.,
1950
51,303
56,393
24,264
131,960

Sept., 1950
compared with
A u g .,'50 Sept.,'49
+36%
— 33%
— 23
— 15
—43
— 9
— 14%

— 22% '

Page 169

BANKING

BANKING
P R IN C IP A L A S SE T S A N D
FED ER AL R ESERVE B AN K

(I n thousands of dollars)
Industrial advances under Sec. 13b..
Other advances and rediscounts.........
U . S. securities...........................................

L IA B IL IT IE S
O F ST. L O U IS

11.
O ct. 11,
1950
.$
6,520
.. 1,076,012
..$1,082,532

...........

Change from
Sept. 13, Sei O ct. 12,
1949
1950
$ ................
— 10,639
+ 24,402
$ + 13,763

$ ..................
+
1,483
+ 115,219
$ + 1 1 6 ,7 0 2

658,283
686,489
1,050,253

$ + 23,616
+ 24,380
+ 8,834

$— 125,631
— 33,610
— 27,082

Industrial commitments under Sec. 13b.. $ ................

$ ................

$ ..................

Total earning assets............................
Total reserves.............................................
Total deposits.............................................
F . R . notes in circulation......................

P R IN C IP A L A S SE T S A N D L IA B IL IT IE S
W E E K L Y R E P O R T IN G M E M B E R
BANKS
E I G H T H F E D E R A L R E S E R V E D IS T R IC T
(I n thousands of dollars)
34 banks reporting
Change from
O ct. 11,
Sept. 13,
Oct. 12,
ASSETS
1950
1950
1949
Gross commercial, industrial and agri
cultural loans and open market paper.. $ 613,771 $ + 67,627 $ + 96,125
Gross loans to brokers and dealers in
securities ............................................................
5,651 —
13 —
428
Gross loans to others to purchase and
carry securities ...............................................
25,692
+ 1,323
+
4,837
Gross real estate lqans......................................
230,448 + 5,689
4* 47,751
Gross loans to banks........................................
20,121 + 1 5 ,1 4 4
+ 18,785
Gross other loans (largely consumer
credit loans) ....................................................
265,761 +
36
+ 54,143
Total .............................................................. $1,161,444 $ + 89,806 $ + 221,213
Less reserve for losses.......................
12,233 +
90
+
2,670
N et total loans.......................................... $1,149,211 $ + 89,716 $ + 218,543
Treasury bills .......................................................
49,105 — 7,192 —
6,050
Certificates of indebtedness............................
25,188 — 10,786 — 226,731
Treasury notes ..................................................
269,692 — 38,923
+ 2 2 9 ,1 1 6
U . S. bonds and guaranteed obligations..
619,412 + 8,927 — 160,867
Other securities ..................................................
186,107 — 8,549
+ 18,355
Total investments ................................... $1,149,504 $— 56,523 $— 146,177
Cash assets ............................................................
806,422 + 4,071
+ 11,017
Other assets............................................................
27,077 — 2,834
+
2,584
Total assets ................................ ................. $3,132,214 $ + 34,430 $ + 85,967
L IA B IL IT IE S
Demand deposits of individuals, partnerships, and corporations.......................... $1,630,473 $— 6,619 $ +
Interbank deposits ...........................................
608,803 + 6 7 ,4 6 1 —
U . S. Government deposits............................
64,979 — 6,940
+
Other deposits ....................................................
107,690 — 9,261 —
Total demand deposits............................ $2,411,945 $ + 4 4 ,6 4 1 $ +
Time deposits ....................... ..............................
490,524 +
98
+
Borrowings .......................................................... .
8,300 — 14,545
+
Other liabilities ..................................................
30,492 + 2,283
+
Total capital accounts......................................
190,953 + 1,953
+
Total liabilities and capital accounts $3,132,214 ^ + 34,430 $ +
Demand deposits, adjusted*.......................... $1,467,650 $—

5,502 $ +

109,619
54,410
11,026
13,681
52,554
4,988
6,800
11,340
10,285
85,967
70,954

Other than interbank and government demand deposits, less cash items
on hand or in process of collection.

DEBITS TO DEPO SIT ACCOUNTS
(I n thousands
of dollars

September,
1950

E l Dorado, A r k .............. .$
24,645
Fort Smith, A r k ............
45,809
H elena, A rk .....................
7,518
Little R ock, A r k ........... .
144,415
Pine Bluff, A r k ..............
29,869
Texarkana, A r k .* .........
11,790
Alton, 111...........................
26,035
125,791
E .S t.L .-N a t.S . Y ., 111...
Quincy, ill........................
31,449
133,782
Evansville, ln d ..............
568,454
Louisville, K y ................
42,659
Owensboro, K y ..............
15,756
Paducah, K y ...................
22,679
Greenville, M iss.............
12,856
Cape Girardeau, M o ....
9,195
Hannibal, M o .................
Jefferson City, M o ........
61,659
St. Louis, M o ................. , 1,659,331
11,946
Sedalia, M o ......................
69,362
Springfield, M o ..............
19,345
Jackson, Tenn................
764,709
Memphis, Tenn........... . .
T otals............................ $3,839,054

September, 1950
A u gust, September, compared with
A u g .,’ 50 Sept.,*49
1949
1950
+ 19%
20,766
$
24,117 $
+ 2%
+ 17
39,206
41,905
+ 9
— 8
+ 23
6,131
8,191
+ 26
+ 10
130,844
114,708
—. 7
31,966
+ 19
25,167
+ 12
10,572
+ 9
10,796
+ 16
25,871
22,351
+ 1
+ 9
126,890
115,301 — 1
31,767
28,768 — 1
+ 9
124,797
+ 7
144,305
7
637,109
468,238
+ 21
11
40,935
31,196
+ 37
+ 4
16,555
13,139
+ 20
5
18,362
21,560
+ 24
+ 5
11,242
12,514
+ 14
+ 3
8,069
9,099
+ 1
+ 14
47,354
53,209
+ 16
+ 30
1,718,468
1,422,609
3
+ 17
9,491
10,979
+ 9
+ 26
68,889
55,500
+ 1
*1-25
19,106
19,475
+ 1
— 1
538,294
646,815
+ :18
+ 42
$3,813,978 $3,168,648
+ 1%
+ 21%

—
—

—

* These figures are for Texarkana, Arkansas only.
Total debits for
banks in Texarkana, Texas-Arkansas, including banks in the Eleventh
District, amounted to $31,177.

Page 170

The Federal Reserve System in September and
early October continued to attempt to slow general
bank credit expansion and instituted two selective
credit controls limiting the amount of consumer and
real estate construction credit borrowers could
obtain.
In the Eighth District, as in the nation, however,
bank loans continued to rise. Total district bank
credit expanded with loans increasing at more than
double the normal rate. Deposits increased more
than bank credit expanded as funds flowed into the
district— partly as a result of interest payments and
cash redemptions by the Treasury. And debits to
deposit accounts at the 22 reporting centers increased 21 per cent over the September, 1949 level
—an indication, in view of the much more modest
percentage growth (5 per cent) in the volume of
these deposits, of an increased rate of turnover of
these deposits, compared with a year ago.
Loans at all member banks in the Eighth Dis
trict rose $91 million in September. Part of this
expansion was offset by a reduction in investments.
Large city banks, accounting for $78 million of the
loan growth, expanded all types of loans. Business
loans accounted for nearly three-fourths of the
dollar growth in the month and showed the sharp
est percentage growth. Though loans at smaller
banks increased only $13 million in September, this
gain was larger than the typical increase for this
period.
For the entire third quarter, the loan expansion
at all district member banks amounted to $210
million. This was slightly more than four times
the third quarter increase in 1949— also a period of
expanding business and banking activity.
The following table gives selected items of assets
and liabilities for the weekly reporting banks as of
October 11 and dollar changes from mid-September
and a year ago. The chart shows the sharp expan
sion in business and agricultural loans at these
banks since midyear.
S E L E C T E D IT E M S O F A S S E T S A N D L IA B IL IT IE S
E IG H T H D IS T R IC T W E E K L Y R E P O R T IN G M E M B E R B A N K S .
(Millions of dollars)
O ct. 11,
Business and agricultural loans.........
Real Estate L oans...................................
Loans on securities.................................
Loans to banks..........................................
O ther Loans (largely consum er)....

1950
$ 613.8
230.4
31.3
20.1
265.8

T O T A L L O A N S (G r o s s )........
Total Investments ...................................
Tim e Deposits ..........................................
Dem and Deposits Adjusted................

$1,161.4
1,149.5
490.5
1,467.7

Dollar Change in
4 Weeks
Year
+
+
+
+

67.6
5.7
1.3
15.2
- 0-

+
—
+
—

89.8
56.5
0.1
5.5

+ 96.1
+ 47.8+
4.4
+ 18.8
+ 54.1
+ 221 .2
— 146.2
+
5.0’
+ 71.0

Real estate loans outstanding at the weekly
reporting member banks at mid-October were $6
million over the level four weeks previously. They

increased 10 per cent during the third quarter after
climbing 25 per cent during the twelve months to
June 30. Last April real estate loans represented
20 per cent of the 34 banks’ total loans and 8.8 per
cent of their earning assets. In October the ratio
to total loans was the same as in April, but the ratio
to earning assets was up to 10 per cent.

than in the corresponding period in 1949. In
August, these sales dropped 24 per cent below the
volume of a year ago. Monthly average sales
dropped from $17 million in the first seven months
to $12 million in August. Sales of F and G bonds
also declined more— relative to their year ago vol
umes—in August than during the previous months
of the year.

Trends in Savings—Accompanying the districtwide growth in bank credit and its more rapid use,
there is some evidence of a declining volume of
individuals’ liquid savings in the third quarter of
the year. Sales of E bonds in all district counties
from January through July were 12 per cent less

Time deposits in all district member banks con
tinued to decline in September. These deposits
have decreased since the end of June, 1950, revers
ing the upward trend that prevailed in the previous
twelve months.

E IG H T H D IS T R IC T
B A N K ASSE TS A N D L IA B IL IT IE S
B Y SELECTED GROUPS

MEMBER

Assets
1. Loans

and

Investm ents...................................

a. Loans ...................................................................
b. U .S . Government Obligations................
c. O ther Securities ...........................................
2. Reserves and Other Cash Balances...........
a. Reserves with the F .R . B ank..................
b. Other Cash Balances 8.................................
3. Other A ssets .........................................................
4. Total A ssets ...........................................................

Liabilities and Capital
5. Gross Demand Deposits...................................
a. Deposits of Banks........................................
b. Other Demand Deposits............................
6. Time Deposits .......................................................
7. Borrowings and Other Liabilities................
8. Total Capital Accounts......................................
9. Total Liabilities and Capital Accounts....

Change fro m :

$+
+
—
—
+
+

3
91
84
4
37
3

620
43

+
—

34
5

$5,166

$3,797
555
3,242
980
55
334
$5,166

Change fro m :

Change fr o m :

A u g ., 1950 Sept., 1949
to
to
Sept., 1950 Sept., 1950 Sept., 1950
$3,929
1,708
1,846
375
1,194
574

Smaller Banks 2

Large City Banks 1

A ll Member
(I n Millions of Dollars)

$ + 146
+ 282
— 170
+ 34
+ 27

A u g ., 1950 Sept., 1949
to
to
Sept., 1950 Sept., 1950 Sept., 1950
$2,288
1,131
968
189

$+
9
+ 78
— 63
—
6
+ 29
+
2
+ 27
—
1

$ + 79
+ 211
— 158
+ 26
+ 55

A u g ., 1950 Sept., 1949
to
to
Sept., 1950 Sept., 1950 Sept., 1950
$—

186
443
202
241
16

+
—
+
+
+
+
—

13
21
2
8
1
7
4
2

$1,641
577
878

+
+

17
2

751
372
379
27

$ + 175

$3,066

$+134

$2,100

$—

$ 4 - 46
+ 19
+ 27
—
5
—
9
+
3

$ + 123
— 41
+ 164

$+
+
+
—

46
18
28
3

—
+

8
2

$ + 101
— 38
+ 139
+
4
+ 19
+ 10

$1,467
32

10
20
22

$2,330
523
1,807
494
49
193

$+175

$3,066

$+134

+
+
+

+
+

17
38
—
0—

- 0-

1,435
486
6
141

+
—
—
—
+

1
1
2
1
1

$2,100

$—

$+
+
—

67
71
12

+
—
—
—
+

8
28
7
21
2

$+
—

22
3

+
+
+
+

25
6
1
12

1 Includes IS St. Louis, 6 Louisville, 3 Memphis, 3 Evansville, 4 Little Rock and 4 East St. Louis-N ational Stock Yards, Illinois, banks.
2 Includes all other Eighth District member banks.
Some of these banks are located in smaller urban centers, but the majority are rural area banks.
8 Includes vault cash, balances with other banks in the United States, and cash items reported in process of collection.

Page 171

Full text of Review (Federal Reserve Bank of St. Louis) : November 1950

FRASER