4


DEMAND and PRICE


SITUATION

DPS-56


Approved by the Outlook and Situation Board, Au .at 2, 1959..
SUMMARY
Total farm output in 1959 will likely be about the same as the
1958 record. Crop production prospects improved during July and
the Crop Reporting Board has announced that conditions as of Au-
gust 1 pointed to a total crop output about 24 percent smaller than
last year. Total wheat output is estimated at 1. 1 billion bushels,
nearly a fourth below 1958. But a 45 percent increase in the carry-
over from 1958-59 insures a record wheat supply -- about 2 per-
cent above the previous record last year. The soybean crop is in-
dicated to be 7 percent smaller than 1958 but 63 percent above "aver-
age" (1948-57). Hay production is down 10 percent from last year
and the fall potato crop is forecast at 8 percent smaller.
Feed grain production will be about the same. The corn crop
may reach a new record of 4.2 billion bushels, a little smaller than
was expected a month earlier but 10 percent up from 1958 and 28
percent higher than the 1948-57 average. The very large corn crop
just about offsets substantially smaller production prospects for
oats, barley, and sorghum grains. With the carryover of feed grains
up sharply from a year earlier, the total feed grain supply in 1959-60
will be about 4 percent larger than in 1958-59. The outlook for
cotton is for a crop 29 percent above last year's small outturn;
acreage is up more than 25 percent and yields appear to be a record.
Total production of livestock and livestock products this year
will be up about enough to offset the lower crop output. Production
of meat animals will likely be up around 5 percent. Broilers, tur-
keys and eggs will all probably be moderately higher than last year.
Output of dairy products may be down slightly.
(Continued on page 3)
VOEr'-LE L............


LNIV OF LL L',-
D jiCui JM jTS J r



LiU DEPOSITORY


Published monthly by
AGRICULTURAL MARKETING SERVICE
UNITED STATES DEPARTMENT OF AGRICULTURE


69a,


7Rt


r


.s(


August 1959
FOR RELEASE
AUG. 26, P.M.







2 -
NOMIC FACTORS AFFECTING AGRICUTU2-
EIONOMIC FACrTORS AFFETLTING AGRICUITURE


AUGUST 1959


Item :

Industrial production: Seasonally adj. / :


Total
All manufactures
Durable goods
Nondurable goods
Minerals


Construction:
Total outlays, seasonally adjusted 2
Public construction
Private residential
Housing starts

Manufacturers' sales and inventories:
Total sales, seasonally adjusted
Durable goods
Unfilled orders-sales ratio i/
Inventory-sales ratio 6/
Durable goods

Employment and ages: 7/
Total civilian employment
lionagricultural
Unemployment
Workweek in manufacturing
Hourly earnings in manufacturing

Income and spending:
Personal income payments 2 /
Consumer credit outstanding
Automobile


Total retail sales, seasonally adj. 2/
Durable goods
Inventory-sales ratio 6/

Prices:
Wholesale prices, all cRamodities /
Commodities other than farm and food
Farm products
Foods processed

Consumer price index, all items k/
Food

Prices received by farmers 8/
Crops
Livestock and products
Prices paid, interest, taxes and wage
rates 8
Family living items
Production items
Parity ratio /

Farm income and marketing: 8/
Volume of farm marketing
Cash receipts from farm marketing
Annual data for most of these items for
issue of The Demand and Price Situation.


1


2J:


the years 1929


1958 : 1959
Year July Apr. : May June July


Unit or
base
period

'947-49100 :
do.
do.
do.
do.


Iil. dol.
Mril. dol.
IMil. dol.
Thousands


1lil. dol.
Mil. dol.





ILillions
do.
do.
Hours
Dollars


Bil. dol.
Mil. dol. :
Mil. dol.

Mil. dol.
Mil. dol.



947-49=100 :
do.
do.
do.

1947-49=100
do.

1910-1=100 :
do.
do.

1910-14=100
do.
do.



1947-49=100
Mil. dol.


4,030
1,259
1,470
1,174


26,284
12,256
3.59
1.89
2.31


65.2
58.5
5.3
39.2
2.13


59.0 363.5
,065 42,923
,131 14,567

,682 16,721
,284 5,221
1.44 1.43


119 119
126 126
95 95
111 113

124 124
120 122


48,980
15,033
17,864
1,209


26,246
12,402
3.57
1.93
2.32


64.0
58.1
4.7
39.2
2.13


4,614
1,358
i, 37
1,370


30,742
15,515
3.01
1.68
1.92


66.0
59.6
3.4
40.5
2.23


381.3
45,790
14,991

18,223
6,100
1.35


120
128
91
108


4,582
1,333
1,897
1,370


31,256
15,766
2.95
1.67
1.91


67.3
60.1
4.0
40.7
2.24


383.8
46,716
15,419

18,189
6,162
1.36


120
128
90
108


4,583
1,337
1,881
1,350


4,654
1,411
1,936
1,434


30,266
15,166
3.12
1.69
1.94


65.0
59.2
3.6
40.3
2.23


379.0
44,916
14,686

17,953
6,137
1.36


120
128
92
107

124
118


124 124
118 119


250 250 244 245 242
223 222 223 230 229
273 274 261 258 252

293 293 299 299 298
287 287 287 288 288
264 265 269 268 267
85 85 82 82 81


ai


128 127 96
33,560 2,773 2,179
id 1939-58 appear on page


99
2,180
35 of


1 Federal Reserve Board. 2/ U. S. Department of Commerce. 3/ Seasonally adjusted annual rates.
JU. S. Department of Labor, Bureau of Labor Statistics. / Unfilled orders for durables divided by
monthly deliveries. 6/ Inventories, book value, end of month, divided by- sales. 7/ Bureau of the Census.
8/ U. S. Department of Agriculture, Agricultural -Marketing Service.


108 124
2,308 2,.600
the April 1959


DPS-56


67.6
60.8
3.7
40.4
2.23


384.1



18,248
6,140



120
128
88
108


3
-A.
45
14

16
5.


S:


:





DPS-56 3 AUGUST 1959
- - - - - - - - - - - - -
THE DEMAND AND PRICE SITUATION


Approved by the Outlook and Situation Board, August 20, 1959



CONTENTS

Page Page:

: Summary ..... ...... .......... 1 Feed ........................... 24 :
: General Business Conditions .... 4 Wheat .......................... 25
: Foreign Developments ........... 16 Fruit .......................... 26 :
: Farm Income .. ............... 19 Commercial Vegetables .......... 27
: Livestock and Meat ............. 19 Potatoes and Sweetpotatoes ..... 27 :
: Dairy Products ................. 20 Cotton ........................ 28 :
: Poultry and Eggs ............... 21 Wool ... .. ........... ......... 29 :
: Fats and Oils .................. 22 Tobacco ........................ 30 :

Continued from cover --

Prices received by farmers in the first seven months of this year have
averaged 3 percent below a year earlier. Most of the decline has centered in
hogs, eggs and broilers. Some further decline in average prices received may
be expected when marketing of this year's crops get underway. Even so, cash
receipts from farm marketing are likely to hold close to the 1958 record. A
larger volume of marketing this year, partly reflecting last year's record
crop, is nearly offsetting lower average prices. Cash receipts from farm
marketing during January-July totaled $16.6 billion, about 1 percent below
the same period last year. Prices paid by farmers, including interest, taxes
and wage rates, have shown no significant change since the beginning of this
year, averaging close to 2 percent higher than a year earlier.

Continued growth in consumer income is likely for the rest of this year
and demands for food and fiber will continue to expand. More than 67 million
people were at work during July, and all-time high. Personal income rose to a
record annual rate of $384.1 billion from $383.8 billion in June. Industrial
production dipped a bit more than seasonally in July with steel output down to
12 percent of capacity by the end of the month. Exports of U. S. farm prod-
ucts, excluding cotton, were 7 percent higher in the first six months of 1959
than a year earlier. Cotton exports were more than 50 percent lower. However,
the outlook is for some pickup in cotton shipments in coming months.

Commodity Highlights

Hog prices this fall and winter will continue to be the lowest in
several years. The increase in cattle numbers indicates that cattle prices will
begin a gradual cyclical downtrend in 1960. Slaughter lamb prices may continue
near last year's level,while feeder lamb prices may remain below.






AUGUST 1959


Although the average egg price probably will show some seasonal
increase, heavy production is expected to hold prices below those of last year
in the next few months.

Record supplies of edible fats, oils, and oilseeds are indicated for
the 1959-60 marketing year; domestic disappearance of food fats probably will
continue to increase because of the rise in population.

Feed grain production in 1959 is estimated at 158 million tons, approxi-
mately equal to last year's record crop. With an estimated carryover of
68 million tons, the 1959-60 domestic supply is about 226 million tons, 4 per-
cent larger than the 1958-59 supply.

The wheat supply for the 1959-60 marketing year is estimated at an all-
time high of 2,404 million bushels. It exceeds the previous peak last year by
about 53 million bushels or 2 percent. A 45 percent increase in the carryover
from 1957-58 more than offsets the smaller crop.

Present prospects indicate that grower prices during late summer for
most fresh market fruits probably will average no higher than those of last
year, while prices of fruit for processing likely will be somewhat below.

Aggregate supplies of late summer fresh vegetables are expected to be
moderately larger than last summer while production of vegetables for commer-
cial processing is expected to be somewhat smaller.

The August 1 report on the prospective cotton crop for 1959-60 indicates
a crop of 14.7 million running bales, 29 percent above last year.

Domestic mill consumption of carpet wool in the first 6 months of 1959
was 76 percent higher than last year and the highest since 1950 while mill
consumption of apparel wool was 36 percent higher. Total mill consumption for
1959 may be about 30 percent above that in 1958.

As of August 1 the flue-cured tobacco crop was indicated to be 7 percent
larger than last year's; for auction sales through mid-August, prices averaged
58.9 cents per pound, practically the same as in a comparable period of last
year.



GENERAL BUSINESS CONDITIONS

Rising Consumer
Income and Spending

Consumer purchases of goods and services have risen at an annual rate of
$24 billion since the recession low of $287 billion in the first quarter of
last year and have accounted for nearly half the advance in total gross


DPS-56






DPS-56 5 AUGUST 1959

national product. The latest data available on consumer spending, retail sales
in July, showed a fractional increase over June after adjusting for seasonal
changes and were about 9 percent above July of last year.

Rising incomes and the improving job outlook have supported the sharp
rise in personal expenditures. Consumer income after taxes declined only
slightly during the downturn and rose 8 percent from the trough of the
recession in the first quarter of 1958 to the second quarter of 1959. Since
consumer prices have advanced only fractionally since January-March 1958, the
"real" increase in income has been nearly as great--about 7 percent.

Consumer spending in retail food stores continued to trend slowly up-
ward throughout the 1957-58 recession. From April 1958, the low point, to
June of this year, sales in retail food stores rose 2 percent. The consumer
food price index during this period declined a little more than 2 percent
so that the uptrend reflects a real increase in the demand ior food and
services attached to the marketing of foods. Rapidly increasing population
and income have been the forces behind most of the rise in food store sales.
An additional factor has been growing sales of nonfood items in stores which
are primarily food distribution outlets.


Table 1.--Consumer income, spending and saving, second quarter 1958 to
second quarter 1959, seasonally adjusted annual rates

S1958 : 1959 :Change 2nd qtr.
Item : : 1959 from 2nd
II :III : IV : I II I : qtr. 1958

: Bil. Bil. Bil. Bil. Bil. Bil.
dol. dol. dol. dol. dol. dol.

Consumer expenditures
for goods and services : 290.9 294.4 299.1 303.9 311.2 20.3
Nondurables : 141.5 143.1 143.6 145.3 147.7 6.2
Food and beverages :77.0 76.6 77.0 77.8 79.0 2.0
Clothing and shoes : 25.7 26.7 26.6 26.7 27.8 2.1
Other :38.8 39.8 40.0 40.8 40.9 2.1

Durables :36.7 37.1 39.8 41.3 44.1 7.4
Autos and parts :13.6 13.2 15.7 17.2 18.8 5.2
Furniture and house- :
hold equipment : 17.0 17.6 17.8 17.7 18.8 1.8
Other : 6.1 6.3 6.3 6.4 6.5 .4

Services : 112.7 114.2 115.7 117.4 119.4 6.7

Personal saving :22.0 26.0 23.7 23.5 24.1 2.1

Department of Commerce.





AUGUST 1959


Greater Willingness
to Borrow

In addition to spending current income, consumers may borrow or draw
on assets. There was a small dip in the long-term uptrend in consumer credit
outstanding in the spring of 1958. While the decline in income was small,
consumers, on the average, were unwilling to go further into debt to sustain
the level of durables purchases. Reflecting the backlog of past borrowing,
the volume of installment repayments continued to rise after business turned
down in 1957 and then levelled out through the first half of 1958. By early
1958 new loan extensions began to run below repayments and installment credit
outstanding declined. Toward the end of the year, particularly after the new
model cars came on the market, credit extensions picked up. Since then con-
sumer credit has been rising rapidly along with purchases of durables. Total
consumer credit outstanding on July 1, 1959 amounted to $46.7 billion, close
to $500 million above June, after seasonal adjustment, and $3.6 billion higher
than in June 1958.


Table 2.--Consumer debt and mortgage debt in relation
to consumer income, 1941, 1952 to 1959

: Consumer debt :Nonfarm home
: outstanding 1/ : mortgage debt' 2/ :Disposable
Year :: Percentage : Percentage : personal
Total :of disposable: Total :of disposable: income 3/
: : income :: income
SBillion Billion Billion
Dollars Percent dollars Percent dollars

1941 : 9.2 9.1 31.2 31.0 100.6

1952 : 27.4 11.2 84.2 34.3 245.6
1953 : 31.2 12.3 93.6 36.9 253.8
1954 : 32.3 12.4 105.5 40.4 260.9
1955 : 38.7 13.7 120.9 42.7 283.0
1956 : 42.1 14.0 134.6 44.8 300.3

1957 : 44.8 14.5 146.1 47.1 309.9
1958 : 45.1 14.0 160.2 49.6 322.9
1st. qtr. : 43.1 13.9 148.5 47.9 310.3
2nd. qtr. : 42.9 13.7 151.7 48.5 312.9

1959
1st qtr. : 44.2 13.5 164.0 50.1 327.4
2nd qtr. : 45.8 13.7 --- --- 335.3


I/ Installment and other consumer debt outstanding at end of period r
to income for last quarter of year or corresponding quarter. 2/ Total a
of'period. 3/ Consumer disposable income is for the fourth quarter of e
year shown.
Derived from data of Federal Reserve Board and Department of Commerce.


elated
t end
ach


DPS-56


- 6 -






AUGUST 1959


Greater Use of Liquid Assets

Consumers have also displayed a willingness to draw down liquid assets
to support greater spending. During the first quarter of this year the flow
of funds into savings and loan association accounts was 15 percent above a
year earlier but withdrawals were up 19 percent. Desposits in mutual savings
banks were 6 percent higher but withdrawals were 17 percent larger than in the
first quarter of 1958.

Large Postwar Increase
in Food Marketing Charges

Expenditures by consumers for farm produced foods increased from an
average of $40.8 billion for 1947-49 to $57.7 billion in 1958, a gain of
41 percent. The farm value of these products increased from $18.3 billion to
$20.8 billion over the same period, a rise of 14 percent. Thus, the farm
value of farm food products was equal to 45 percent of the retail value in
1907-49 and 36 percent in 1958.

A recent study by the Agricultural Marketing Service has traced the long
uptrend in the "marketing bill for farm food products. The total marketing
bill is the difference between total civilian expenditures for domestically
produced farm foods and the payment received by farmers for the equivalent
farm products. It includes the total charges for the marketing services per-
formed from the time these products are sold by farmers until they are bought
by consumers. Growth in the volume of farm foods bought by consumers and in-
creases in marketing costs per unit have combined to raise the total marketing
bill 64 percent from the average for 1947-49 to 1958--from $2221 billion to
$37 billion. Most of the increase in unit marketing charges was the result
of rising wages and salaries, transportation charges, prices of containers,
packaging materials, machinery, and other items bought by marketing firms.
Profits per unit of product marketed also advanced over this period.

Receipts to farmers for these food products have risen much less than
the marketing bill. This increase has resulted entirely from the greater
volume of marketing; average prices received by farmers for these foods were
lower in 1958 than in 1941,-49.


Rapid Increase
in Inventories

Gross national product rose by $53- billion from the recession low to
the second quarter of 1959. A shift from liquidation to accumulation of
business inventories accounted for $17 billion or about 32 percent of this
gain, for more than any other type of investment. Business firms reduced
inventories at an annual rate of $7 billion January-March 1958. The rate of
liquidation slackened in the following two quarters and in the last quarter
of 1958 inventories increased by $0.8 billion. By the second quarter of this
year inventories were increasing at a rate of $102 billion a year. In June,
the last month for which data are available, inventories rose by $0.8 million.
Despite the sharp rise, inventories have not kept pace with sales, either at


DPS-56


- 7 -





AUGUST 1959


DPS-56


the manufacturing or retail levels. However, the rate of inventory accumula-
tion may slacken somewhat from the high levels of recent months and inventory
investment will provide less support to economic expansion in the months
ahead. Automobile stocks will be worked down to as the new model season
approaches and inventories of all types will get more in line with current
sales. In the immediate future, further stock accumulation will be affected
by the length of the steel strike.

Table 3.--Investment expenditures, second quarter 1958 to second
quarter 1959, seasonally adjusted annual rates

1958- : 1959 Change 2nd qtr.
Item 1959 from
II :III : IV I II :2nd qtr. 1958
: Bil. Bil. B. Bil. Bil. Bil.
: dol. dol. dol. dol. dol. dol.

Gross private domestic
investment ..................: 51.3 54.2 61.3 69.8 77.5 26.2
New construction, total ....: 34.6 35.4 37.3 39.7 41.0 6.4
Residential (nonfarm) .....: 16.9 18.0 19.9 21.9 23.1 6.2
Other ....................: 17.7 17.4 17.4 17.8 17.9 .2

Producers' durable equip-
ment ......................: 22.6 22.2 23.2 23.9 26.0 3.4

Change in business
inventories ............... -5.8 -3.4 .8 6.1 10.4 16.2

Net exports of goods and
services ..................: 1.2 1.6 .2 -.9 -1.8 -3.0

Department of Commerce


Home Building at High Rate;
Continues to Advance

Residential construction has been another bright spot in the economic
picture over the past year. The annual rate of new housing starts has aver-
aged about 1.4 million units for the past 9 months. This is the longest
period for which the number of new starts has remained this high. Housing
starts in the first 7 months of this year have averaged 2 percent higher than
in the same period in the boom year 1955j and a little under the comparable
months of 1950, the peak year for home construction. In those two earlier
housing booms virtually all the increase in starts was in FHA and VA financed
housing. The present uptrend has been among both conventionally mortgaged
houses and those financed with Government assistance.


- 8 -







AUGUST 1959


Sharp Gain in FHA
and VA Applications

Applications for FHA commitments, requests for VA appraisals, and con-
struction contract awards each give some indication of future changes in the
level of construction activity. At present they point to a strong demand for
housing. Applications for FHA commitments rose sharply last spring to an
average of close to 40,000 applications per month and jumped to more than
60,000 in June. This compares with 33,000 applications in June of last year.
Requests for VA appraisals, after declining sharply last fall, have been
increasing since the beginning of this year. By June, appraisal requests had
risen to about the level of a year ago. Information on contracts awarded is
available up to April. According to reports of the F. W. Dodge Corporation,
contracts awarded for private residential construction rose 23 percent over
the 12 months ending April.

Vacancy Rate Up

Two factors of significance in the housing market may tend to limit home
construction in the near future. Vacancy rates showed a significant increase
in the second quarter of 1959. The Census Bureau has reported that 6.7 per-
cent of all rental units were vacant compared with 6.1 percent during January-
March and 6.0 percent in the same period last'year. Among homes for owner
occupancy, 1.2 percent were available for sale compared with 1.0 percent in
the previous quarter and 1.1 percent a year earlier. In addition to the
higher vacancy rate, competition from other sectors of the economy for funds,
as the economic upswing continues, may cause a growing tightness in money
flowing into mortgages, as occurred during the 1955 housing boom. If yields
on alternative long-term investments continue to advance, the interest rate
ceilings on VA and FHA mortgages will tend to reduce the supply of funds for
these loans. If prospective home purchasers must shift more to conventional
financing, the higher down payment and amortization requirements will reduce
the number of borrowers.

Steel Strike
Has Small Impact
On Economic Activity

The steel strike has lasted nearly 7 weeks. So far, it has failed to
seriously affect the uptrend in industrial production and employment. The
Federal Reserve Board's index of primary metals output (which includes steel)
declined a little more than one percent in June as mill operations slowed down
in anticipation of the end of the labor contract in the steel industry. How-
ever, steel output has a weight of less than 5 percent in the index of in-
dustrial production. Total industrial output rose a little more than 1 per-
cent in June. In July, steel output dropped sharply after the fifteenth and
operations were down to 12 percent of capacity by the beginning of August.
But industrial production declined only one percent. By the end of July, lay-
offs as a result of the strike were still confined almost entirely to workers
directly associated with steelmaking.


DPS-56


- 9 -






AUGUST 1959


Some idea of the impact that a prolonged steel strike would have on the
economy may be obtained from the effects of other lengthy strikes in the post-
war period. In July-August 1952 the steel industry was strike-bound for nearly
8 weeks. At that time,the number of employees in nonagricultural industries
declined fractionally and industrial output fell 5 percent in July of that year
but these lows were more than made up in the following month and economic
activity rose rapidly for the rest of the year. In 1956 the steel industry was
involved in a strike of approximately'a month's duration. Industrial pro-
duction then declined 3- percent and nonagricultural employment fell 2 percent.
These losses were quickly made up and the economy moved sharply upward in
succeeding months. The economy is even less vulnerable today. The steel
industry is becoming of relatively smaller importance in the total economy.
In addition, leading industries, particularly the auto industry, have built up
steel inventories.

Corporate Profits Equal
Previous High

Corporate earnings reached an annual rate of $45.5 billion during the
first quarter of 1959, $2 billion above the previous quarter and approximately
equal to the record high reached in the fall of 1955. Profits in the first
quarter of 1959 were almost 20 percent higher than the recession low of
$38.0 billion during the third quarter of 1958. Earnings after tax liabilities
and inventory adjustments totaled $22.9 billion compared with $19.2 billion for
the third quarter of 1958. The sharpest increase in profits was in the non-
durable goods manufacturing group, especially in the chemical industry. Profit
data for the quarter ending June 30 are not available, but trade reports, as
well as high corporate sales, indicate that further substantial gains occurred.


Automobile Output at High
Level Before Model Changeover

Among durable goods industries, gains in automobile production have been
the most significant factor contributing to economic expansion in 1959. Output
during the first 6 months of this year totaled 3,478 thousand units, about
50 percent above last year. Output during July amounted to 555 thousand cars,
slightly under the 558 thousand produced in June, but the highest total for
July since 1955. Production in August and September will fall sharply when
motor companies close down for model changeover.

Dealers' sales of new passenger automobiles amounted to 452,000 units
in July, 22 percent below the June level but 30 percent above July 1958. The
drop in automobile sales in July reflected, at least in part, reaction from an
unusually sharp increase in June sales because of dealers' sales contests.
Many of the sales that occurred in June may have been borrowed from the normal
July volume. The substantial gain in auto sales, as well as trucks, was
reflected in larger earnings for many automobile corporations in the first
half of 1959, compared with the previous year. However, earnings during the


- 10 -


DPS-56






AUGUST 1959


second half of 1959 are not expected to continue at the level of the first
6 months, principally because of lower production schedules and high non-
recurring expenses. The latter will result from the introduction of the new
1960 models, including the compact economy cars.

Inventories on hand have increased in recent months and in July they were
at a record 965,000 units, about 10 percent above June and about 45 percent
above a year ago. In addition to the usual seasonal increase in inventories
before the model changeover, the large inventories this year reflect an ac-
cumulation in response to the expected steel strike which began in mid-July.


Trends in Automobile Exports
and Imports

The value of United States passenger car exports amounted to ;258 million
in calendar 1958, almost 7 percent below the $276 million exported in 1953,
and 32 percent lower than the peak of ;382 million registered in 1955.
Between 1953 and 1958, automobile imports into the United States rose from
$42 million to $489 million (table 4). In 1958, these imports were equivalent
to approximately 6 percent of United States output. However, a portion of the
$447 million increase in auto imports represented revenue for American motor
companies with subsidiaries abroad.


Table 4.--United States imports of new automobiles and comparisons
with United States production and exports, 1953-1958
and January-June 1959

Impports sports Production
Year
: Value : Quantity : Value : Quantity : Value : Quantity

: Million Million Million
:dollars Thousands dollars Thousands dollars Thousands

1953 : 42.1 27.1 276.3 154.7 9,002.6 6,116.9
1954 45.0 34.6 300.9 173.3 8,218.1 5,558.9
1955 : 69.2 57.1 381.9 212.4 12,452.9 7,920.2
1956 : 126.6 107.7 333.6 175.1 9,755.0 5,816.1
1957 : 301.4 259.4 300.5 143.1 11,198.4 6,113.3
1958 : 488.6 432.4 258.3 121.8 8,010.0 4,257.8

Jan.-June: 371.6 334.2 126.9 59.4 6,244.2 3,478.3
1959

Bureau of the Census and the Automobile Manufacturers Association.


DPS-56


- 11 -






AUGUST 1959


In part, the upward trend in automobile imports into this country re-
flects greater ability of foreign producers to fulfill domestic needs, as well
as increase foreign deliveries. In 1958, foreign output accounted for 49 per-
cent of the estimated 8.5 million units produced in the world, compared with
25 percent of the estimated 8.1 million in 1953. Between 1953 and 1958 total
production of passenger cars rose about 140 percent in the United Kingdom,
Western Germany, France and Italy. American demand for foreign autos has been
rising in recent years. Although the generally lower price of European cars
has been a factor for some consumers, a shift in tastes from the large car to
the compact economy and sports car has occurred because of such things as
operation economies, parking advantages, and prestige. The introduction of a
compact car by the American motor industry in the fall of 1959 may diminish
the rate of increase.


Foreign passenger car production, 1953-58, monthly average

(Thousand units)

Year :United Kingdom : Western Germany: France : Italy


1953 : 50 31 31 13
1954 : 64 43 36 16

1955 : 75 59 46 20
1956 : 59 71 54 24
1957 : 72 80 60 27
1958 :88 98 77 32

Organization for European Economic Cooperation, General Statistics.



While exports of United States automobiles in 1958 fell by about 14 per-
cent, domestic production dropped by almost 30 percent. Both exports and do-
mestic production fell when demand eased because of the recession here and
abroad. United States factory output recovered during the first half of 1959,
but exports remained relatively low. In addition to substantially increased
foreign competition, many foreign countries limit imports of United States
automobiles with quantitative restrictions and tariffs in order to conserve
scarce dollar reserves or to protect home production. Heavy taxes placed on
luxury goods, including automobiles, also widens the price gap between American
and foreign cars. Fuel economy is more important in many foreign countries
because of the higher price of gasoline compared with that in the United States.
Many consumers abroad cannot afford to purchase the relatively more expensive
American cars because of the lower level of income.


- 12 -


DPS-56






AUGUST 1959


Manufacturers' Sales, New
Orders Rise in June

The rise in factory sales, which started from a recession low of $24.9
billion in March-April 1958, continued in June. Manufacturers' sales climbed
to $31.3 billion, seasonally adjusted, about 2 percent higher than in May. Both
durable and nondurable sales advanced by about $300 million because of larger
sales in a wide range of industries. New orders placed with manufacturers
totaled $31.1 billion in June compared with $30.5 billion in May and $24.7 bil-
lion in March-April 1958. In June, incoming business for nondurables industries
remained at the May level of $15.3 billion, while new orders for durables, after
a sharp dip in May to $15.1 billion, rose to the April level of $15.8 billion.


Dip in Industrial Production
Reflects Steel Strike

The Federal Reserve Board's seasonally adjusted index of industrial
production dropped 2 points in July to 153 percent of its 1947-49 average.
The decline is attributable to reduced output in durable manufactures and
mining. Production of durable manufactures dropped 3 points to 169, while
nondurables edged up a point to 146. In late July and early August, steel
production was operating at about 12 percent of capacity, compared with 90
percent in June when steel output was directed toward a build-up in stocks.
In addition to the decline in steel activity, the index of mineral production
fell to 119 (1947-49=100) in July from 125 in the previous month, primarily
reflecting related cuts in the production of coal and iron ore. A continued
strong demand for most major household goods and a final spurt in automobile
production before the model changeover pushed production of consumer durables
to 147, 29 percent above July last year.


Employment Rise in
July Less than Usual

Civilian employment totaled 67.6 million in July, a rise of one-quarter
million from the record high of 67.3 million registered in June. However, this
rise of 252,000 is less than the usual increase from June to July. Further
recovery of the job situation in finance, contract construction, wholesale and
retail trade, and most durable manufacturing offset a slight drop in employment
in the primary metal industries. The July employment figures do not fully re-
flect the decline in employment in the strike-bound steel industry and some
layoffs in steel-related industries because the strike began in the middle of
the week in which the monthly employment survey was taken. In early August,
an estimated 600,000 were on strike or had been laid off because of the work
stoppage; about 500,000 were workers in basic steel and approximately 100,000
in industries closely allied to steel production. Agricultural employment
amounted to 6.8 million, a greater than seasonal drop of about 406,000 from
June, primarily as a result of bad weather in the South.


DPS-56


- 13 -






AUGUST 1959


Table 5.--Employment and labor force, second quarter
second quarter 1959 with percentage change
(not seasonallv adirusted


1958 and


S2nd qtr. 2nd qtr. Percentage
Item 1958 : 1959 change

: Millions Millions Percent

Civilian labor force ...........: 69.1 69.8 1.0

Employment ................... 64.0 66.1 3.3
Nonagricultural ............: 57.7 59.6 3.3
Agricultural ............... 6.2 6.5 4.8

Unemployment .................: 5.2 3.7 -28.8

Census Bureau


Unemployment on a seasonally adjusted basis was estimated to be 3.5 mil-
lion or about 5.1 percent of the labor force, compared with 4.9 percent in June
and 7.3 percent in July 1958. The rise from June to July reflected temporary
factors resulting from the unusually large amount of agricultural unemployment
and the large number of students entering the labor market, rather than a
deterioration of the general employment situation. The steel workers on strike
are not considered to be unemployed until they seek other jobs.

Increased vacation time resulted in a drop of 0.3 hours in the factory
workweek to 40.4 hours in July. This seasonal decline in the length of the
workweek caused average weekly earnings to dip by $1.08 to $90.09.

Consumer Prices Rise
to Record Level

The Department of Labor's consumer price index for July 1959 rose to
a record high, 124.9 percent of the 1947-49 average. This compares with
124.5 percent in June and 123.9 percent in July a year ago. The advance was
primarily attributable to a 0.4 percent increase in food prices. However,
prices of all major groups of goods and services, except household furnish-
ings, were slightly higher. Most of the gain in food prices resulted from
a sharp jump in egg prices, which rose for the first time in 10 months. Meat,
poultry and fish prices were up fractionally; dairy prices were up 0.9 percent
while prices of fruits and vegetables dropped 2.8 percent.

Advancing prices for household furnishings and building materials
caused the index of prices paid by farmers for family living items to reach
an all-time high of 289 percent of the 1910-14 average in mid-July. This
was 1 point higher than in June and 2 points higher than in July 1958. Prices
paid for household operation, autos and auto supplies were down fractionally,
while food and clothing prices remained at the June level. The wholesale price


- 14 -


DPS-56






DPS-50


index declined fractionally in July for tile third cc-'ir;'-,utive month. Most ,f
the recent decline has been caused by fri ;li,; farm product prices. Wholesale
farm product prices in July were 7 percent below a yen r earl elr.

Farm Product Prices
Down Slightly
Prices Paid UnchanrIed

The index of prices received b farmers for all farm products in mid-
July was 240 percent of the 1910-16 average, 2 points below June and the
lowest since December 1957. A drop in prices for livestock, oranges and
watermelons offset higher prices for eCCs, milk and cotton. Hog prices were
down a -1.70 from mid-June and were the lowest since Iarch 1956. Prices
received for beef cattle were down 50 cents from the previous month, but


Table 6.--Indexes of prices received and paid by farmers,
July 15, 1959 with comparisons

(1910-14=100)
: : : Percentage change
: : July 15, 1959 from
Group :July 15, June 15, July 15,.
1959 1959 1958 .June 15, :July 15,
S: 1959 1958

Prices received:
All farm products ...........: 240 242 250 0.8 4.0
All crops .................: 226 229 222 1.3 1.8
Food ,grains .............: 200 199 192 .5 4.2
Feed grains and hay .....: 161 163 163 1.2 1.2
Cotton ..................: 287 266 260 7.9 10.4
Tobacco .................: 503 509 474 1.2 6.1
Oil bearing crops .......: 222 228 228 2.6 2.6
Fruit ...................: 206 223 274 7.6 24.8
Commercial vegetables ...: 215 213 192 .9 12.0
Potatoes, etc. / .......: 232 297 163 21.9 42.3

Livestock and products ....: 252 252 274 0 8.0
Meat animals ............: 314 329 348 4.6 9.8
Dairy products ..........: 239 229 238 4.4 .4
Poultry and eggs ........: 139 124 167 12.1 16.8
Wool ....................: 248 241 211 2.9 17.5

Prices paid, interest, taxes
and wage rates ...............: 298 298 293 0 1.7
Family living items .........: 289 288 287 .3 .7
Production items ............: 266 267 265 .4 .4

/ Includes sweetpotatoes and dry edible beans.
Agricultural Marketing Service.


- 15 -


AUi. UST 19., .,






AUGUST 1959


90 cents above July a year ago. Egg prices rose more thar seasonally from
24.1 cents in June (the lowest in'18 years) to 30.2 cents per dozen, while
milk showed a seasonal increase of 4 percent. Marketings in South Texas of
the high quality, new crop cotton pushed the price of upland cotton to 34.05
cents per pound, compared with 31.48 cents in June and 30.77 cents in July 1958.

The index of prices paid by farmers for commodities, interest, taxes
and wage rates, at 298, was unchanged from June but 5 points above a year
earlier. Although family living items increased by 1 point, prices paid for
wages were down 2 points and production items down 1 point The parity ratio
was 81, unchanged from June and 4 points below that on July 15, 1958-


FOREIGN DEVELOPMENTS

World Trade and
Financial Situation

Foreign demand for United States exports continues to remain relatively
low, even though economic activity abroad has been expanding in recent months.
United States exports totaled $17.3 billion in fiscal 1958-59, compared with
$18.7 billion last year. Almost 80 percent of the decline was attributable to
non-agricultural goods, primarily the crude and semimanufactured commodities:
petroleum, coal, and steel and steel mill products.

Merchandise imports rose to a peak of $13.9 billion during fiscal
1958-59, 9 percent higher than last year's record $12.7 billion. Iron and
steel mill products, petroleum, automobiles and wool were among the major
commodities to increase. United States demand for raw materials and manufactures
rose with the record level of general business activity. The high and increas-
ing level of personal income stimulated higher imports of consumer goods. In
addition, the special circumstances of the mid-July steel strike and the man-
datory import quotas imposed in April on foreign petroleum resulted in unusually
large imports of these commodities in the latter part of fiscal 1958-59. Prod-
ucts made by American companies abroad have shared in this spurt in imports.

The net outflow of private government capital, excluding military grant
aid, totaled $3.6 billion through March of fiscal 1958-59, about $300 million
below that of the corresponding period a year earlier. The drop primarily
resulted from a prepayment of $150 million made by Germany on a postwar debt
for economic assistance. Higher interest rates in the United States in early
1959, compared with easier credit conditions in some of the major financial
centers in Europe, reduced the net outflow of private capital. Industrial
recovery and, consequently, the demand for funds in many European countries
lagged behind that in the United States. However, interest rates have risen
in some European countries recently. United States remittances and pensions
to foreign countries totaled $5h6 million, $18 million above last year.


DPS-56


- 16 -






AUGUST 1959


Total foreign gold and dollar reserves, including international insti-
tutions, amounted to :'?6.2 billion on March 31, 1959, approximately ;;800 mil-
lion above the previous quarter and :'4.4 billion greater than on March 31, 1958.
Industrialized countries in general continued to strengthen their gold and
dollar holdings. Reserves in underdeveloped countries also increased somewhat
when prices of primary products rose with the pick-up in industrial production
throughout the world.


Agricultural Exports

Farm product exports totaled $3.7 billion in the fiscal year ending
June 30, 1959, a decrease of $300 million or 7 percent below the previous year.
Cotton accounted for virtually all of the decline in agricultural exports.
Farm product exports, excluding cotton, were about 5 percent higher than last
year (Table 6).

United States exports of feed grains reached a record high of 5'527 mil-
lion in fiscal 1958-59, 35 percent above the ,"392 million of a year ago. High
European demand for barley and sorghum grains was chiefly responsible for the
spurt in shipments of feed grains. Shipments of wheat and flourexcluding
foreign donations, amounted to i'726 million, 7 percent-higherThan last year.
While most of the gain resulted from Title I exports to India and Brazil, ship-
ments to the United Kingdom and Western Europe also increased. The latter are
principally dollar markets for United States agricultural products.

Soybean exports, totaling a record $238 million, reflected greater
European demand resulting from smaller oil stocks in Northern Europe. Further-
more, substitution from copra to soybeansoccurred when copra prices rose sub-
stantially because of the short copra supplies in Asia. Larger Title I ship-
ments of soybean oil to Spain, Turkey and Yugoslavia stimulated exports to
$100 million in fiscal 1958-59, 7 percent above last year. Lard and tallow
exports amounted to .i148 million, slightly below those of a year ago. Exports
of these commodities rose late in the year when greater output and lower United
States prices began to prevail.

Shipments of cotton fell to a 3-year low of $413 million in 1958-59,
51 percent smaller than last year. Larger production in foreign exporting
countries, higher beginning stocks and lower consumption in foreign cotton
consuming countries, sizeable disparities between the price of United States
and comparable foreign growths, and trade concessions from foreign export-
competing countries were the main causes for the drop.

The substantial decline in exports of dairy products, from J114 million
in 1957-58 to :.,5 million in 1958-59, reflected a sharp drop in cheese ship-
ments. A lower rate of cattle slaughter curtailed domestic supplies of hides
and skins and exports fell by about 14 percent. Exports of rice and tobacco
were approximately the same as last year, shipments of fruits and preparations
fell, while foreign takings of vegetables and preparations rose.


- 17 -


DPS-56






AUGUST 1959


Table 6.--Agricultural exports, selected commodities
fiscal years 1957-58 and 1958-59


Commodity 1/


Unit


: Quantity :
S1957-58; 1958-59:


Value


1957-58 "


Million
dollars


Barley, grain
Corn, grain
Oats, grain
Grain sorghums

Total feed grain


SMil. bu. :
SMil. bu. :
SMil. bu. :
:Mil. bu. :

:Mil. sh.ton:


Wheat and wheat flour : Mil. bu. :
Rice, milled : Mil. cwt.:
Cotton, excl. linters :Mil. bales :
Tobacco, unmfd. Mil. lb. :
Soybeans : Mil. bu. :
Soybean oil : Mil. lb. :
Cottonseed oil : Mil. lb. :
Lard : il. lb.
Tallow, edible and
inedible Mil. lb.
Dairy products
Hides and skins
Meat and meat products:
Fruit and preparations:
Vegetables and
preparations
"Other" : :

Total Agricultural
exports

Total exports


86.9
181.5
25.6
42.3


8.8

384.2
1.1
5.7
472.8
87.9
627.4
298.3
4oo.o

1,096.1


112.7
202.7
29.8
94.7


11.5

423.1
1.3
3.1
473.3
102.8
793.9
285.0
463.6

1,116.2


87.4
244.2
14.4
45.6


391.6

681.0
91.1
841.0
343.0
213.8
92.9
47.7
55.2

96.6
113.5
64.4
81.9
262.1

120.4
505.7


4,001.9

18,741 .1


1958-59
Million
dollars

126.8
266.4
21.1
112.7


527.0

726.4
97.1
412.8
350.3
238.3
99.8
36.5
55.1

93.0
85.4
55.3
93.9
228.9

134.9
485.7


3,720.4

17,283.3


1/ Commodity totals exclude quantities and values exported "for
charity." These are included in totals and "other."


relief and


Compiled from Bureau of Census data.

Prospects for United States agricultural exports appear favorable.
Expansion of economic activity in Europe, together with larger gold and dollar
reserves, will strengthen many of the main commercial markets for United States
farm products. Furthermore, trade barriers, such as tariffs and quota re-
strictions, against United States commodities are being reduced by some foreign
countries. The outlook for a pick-up in cotton exports seems good. Demand


----~ ~


__~_ _. __


--- -- ___ ___


__


DPS-56






AUGUST l59)


for textiles and foreign textile mill consumption have risen in recent months.
Inventories of cotton have fallen to relatively low levels in many importing
countries. Lower cotton production is indicated in some cotton export-compet-
ing countries. Under the cotton program which began on August 1, United
States cotton will be kept competitively priced with corresponding qualities
of foreign growths.


FARM INCOME

Cash receipts from farm marketing totaled $16.6 billion during the
first 7 months of 1959, about 1 percent below the corresponding period in
1958. Prices received by farmers averaged 3 percent lower, while the volume
of marketing was up more than 2 percent. Receipts from livestock and
products of $10.5 billion in the January-July period were 3 percent lower
in 1959 than in 1958. Smaller receipts from hogs, eggs, broilers, and
dairy products more than offset larger receipts from cattle. January-July
receipts for crops totaled $6.1 billion in 1959, up about 3 percent from
1958, as substantial increases in receipts from oranges, wheat, corn, and
tobacco were partly offset by a sharp drop in receipts from sorghum grain and
potatoes.

Cash receipts in July are tentatively estimated at $2.6 billion, 5 per-
cent below July 1958. Smaller marketing of wheat and lower prices for hogs
accounted for most of the decline, although receipts from eggs, broilers,
and oats were also substantially lower. On the other hand, prices for cattle
and potatoes, and marketing of tobacco were up. July 1959 receipts from
livestock and products are estimated at $1.5 billion and from crops at
$1.1 billion.


LIVESTOCK AND MEAT

Livestock production continues upward. Hog prices have been declining
for a year and the increase in cattle numbers indicates that cattle prices
will begin a gradual cyclical downtrend in 1960.

Hog prices will remain below a year earlier this fall and winter. Even
though extreme price lows are unlikely, the general level will be the lowest
for a number of years. The seasonal low point this fall may occur earlier
than it has in most years, and recovery afterward will be slow. The range of
price fluctuations throughout the next 8 or 9 months will be much narrower
than usual.

Any sizable increase in farrowings next spring would result in prices
in the fall of 1960 as low or lower than this fall. The outlook does not
justify any material expansion by producers next year.

Prices of cattle have been unusually stable this year. This is in
contrast with the almost uninterrupted advance during the previous two years.
It suggests that prices may be at or near their cyclical high. The chief


DPS-56


- 19 -






AUGUST 1959


factor pointing to the beginning of a price decline in 1960 is the big inven-
tory of slaughter steers and heifers being built up. By the end of 1959,
steer and beef heifer numbers on farms may be around 25 percent greater than
three years before. Even at a slow rate of marketing, slaughter supplies in
1960 would be appreciably above this year. On the other hand, as the cow herd
and annual calf crop have not been expanded a great deal, a really sharp in-
crease in slaughter is not likely. And any reduction from the record heavy
slaughter weights of 1959 would temper the effect of greater numbers slaughtered.

In the coming feeding year, cattle producers and feeders will likely
begin to face a slowly declining price level. Prices of feed probably will not
change much. Hence, possibilities of earning normal profits in feeding will be
linked closely to price trends for feeder cattle this fall. Feeder prices
declined seasonally this summer but in early August were still above a year be-
fore. Prices are likely to decline somewhat further. By mid-fall they may be
below a year ago, thus improving profit prospects in feeding of cattle compared
with earlier prices.

Prices of sheep and lambs, after fluctuating erratically last winter,
have traced their customary seasonal decline this summer. In early August
prices of slaughter lambs were not much different from a year before, but
prices of feeder lambs were lower. As the 1959 lamb crop was only 2 percent
larger than the 1958 crop, slaughter lamb prices until October may remain in
the vicinity of last year's prices but not above them. .After that month, how-
ever, prices could be higher than last year. Feeder lamb prices may continue
below last year.

DAIRY PRODUCTS

The seasonal suspension of sales of butter to the Government for price
support apparently occurred about a month earlier this year than last. The
suspension of butter sales reflects an increase in consumption of fluid milk
and ice cream and a reduction in milk output; in June and July milk flow was
down 2 percent from a year earlier. However, cheese sales to CCC are running
above the very low level of a year earlier. In the last few weeks butter pro-
duction has been down 12 percent from a year earlier and American cheese out-
put down 7 percent. Butter prices have advanced a little over a cent per
pound from spring and early summer levels, but only fractional advances have
occurred so far for a few other products.

The number of milk cows on farms declined 2.4 percent in the year
ended June 1959. This was a little greater than the average of recent years
though short of the 3.4 percent drop which occurred from June 1957 to June 1958.
The continued downtrend is largely the result of adjustments by farmers to a
declining demand for some dairy products and to new technology which resulted
in increased productivity of milk cows. The increase in scale of farms has been
insufficient to offset the reduction in number of farms with milk cows. The
significant let-up in rate of decline in numbers from last year's comparatively
high rate indicates the influence of declining hog prices and comparatively
stable beef prices in contrast to sharply rising prices last year.


DPS-56


- 20 -






AUGU3T 1959


The decline in annual rate of total milk flow, particularly in June and
July, reflects primarily the reduction in annual rate of milk production per
cow from late in 1958 and earlier this year. The condition of pastures is the
main factor that differs from 1958, though the effort by farmers to shift
calving periods among their herds could also have had some influence. The
index of pasture conditions was 77 on August 1 compared with the comparatively
high 88 a year earlier. Farmers increased the rate of concentrate feeding to
a new record high for August 1. No particular indication is evident that a
ceiling in rate of milk production per cow has been approached. The relatively
smaller increase in the U. S. figure for August 1 over 1958 reflects the drop
in pasture conditions in important dairy states of the Northeast and North
Central States. Most other states showed further substantial increases in
production per cow. With large supplies of both feed concentrate and roughages
available it is likely that the annual rate of milk production will rise in
coming months.

Total consumption of fluid milk products except cream continues above
a year earlier. Butter consumption is down from last year's comparatively low
level, and cheese consumption is running a little below last year's record
high level. The increased use of fluid milk in the face of the 2 percent re-
duction in milk output accounts for the sharp decline in output of both butter
and cheese.

The increase over last year in cheese sales to CCC since April 1 is of
only minor significance in view of the relatively small volume purchased in
1958. In the first 4 months of this marketing year, sales of butter to CCC
totaled 76.5 million pounds compared with 94.7 million a year earlier. Cheese
on the other hand, totaled 34.8 million this year compared with 22.8 million last
year and 103.3 million in April-July 1957. The milk equivalent of these is
1.9 billion pounds this marketing year compared with 2.1 billion a year earlier.
Deliveries of nonfat dry milk to USDA since April 1 of this marketing year
have been about equal to a year earlier.


POULTRY AND EGGS

Egg and broiler prices were about steady throughout most of July,
despite smaller production of each than in the preceding month. Turkey prices
were mostly down. At their mid-month levels, prices of each of these commo-
dities were lower than last year.

In mid-July, the U. S. average egg price received by farmers was 30.2
cents per dozen, up more than 5 cents from mid-June. The increase between the
dates of these 2 prices primarily occurred in late June, and during July most
prices showed only small changes. In the Northeast, July prices for brown
eggs were especially firm; in New york they generally exceeded prices for
comparable white eggs by several cents per dozen. This may be a reflection
of the slightly smaller production than last year in New England, while U. S.
production was up 2 an 1 percent respectively in June and July.


- 21 -


DPS-56






AUGUST 1959


By mid-August large eggs in leading markets had advanced about 1 to
3 cents per dozen above a month earlier but these gains were largely offset
by declines in the price of medium sized eggs. During the next few months
average egg prices are expected to show some seasonal increase but continued
heavy production is likely to hold U. S. average prices at levels lower than
a year earlier.

Reported commercial slaughter'in July of young chickens--mostly broilers--
continued slightly larger than last July, although the total for the month
was slightly lower than the June total. The July figure was higher than had
been expected on the basis of earlier chick placements. Although the July
slaughter did not decline as much as expected, the facts that (a) it was
below June, and (b) July is considered to be the month of peak demand for
young chickens, led to the expectation of a higher July broiler price than
actually occurred. In mid-July the average price to producers was 16.1 cents
per pound; in mid-June it had been 15.8 cents, and in mid-July 1958, 19.3
cents. In mid-August, broiler prices in the major producing areas were
about the same as in mid-July, despite the expectation that August slaughter--
as indicated by earlier placements-will be lower than both the month pre-
ceding, and the corresponding month in the preceding year. On a seasonal
basis, August demand is almost up to the July peak. Lower pork prices may
be a partial explanation for the weakness in broiler prices.

Although rising seasonally, turkey slaughter is still at a relatively
low level. The net into-storage movement began a week earlier this year than
in either 1958 or 1957, but the margin by which 1959 stocks fall below 1958
has held steady. On August 1, stocks were about 18 million pounds less than
last year, the same as in April and May. Prices for the heaviest frozen toms,
which at this season still come mostly from storage, were almost 10 cents
per pound above last year in mid-August. Prices of other types are below
those in 1958. The price at the farm level in mid-July averaged 22.4 cents
per pound, live compared with 24.5 cents a year earlier.


OILSEEDS, FATS AID OILS

Early August indications point to new record large supplies of edible
fats, oils, and oilseeds in the 1959-60 marketing year beginning October 1,
1959. Prospects are that they may exceed the current year's record 13.0 bil-
lion pounds (oil equivalent) by about 10 percent.

Beginning stocks of food fats (including the oil equivalent of soybean
stocks) are likely to be up about one-third from October 1, 1958. Most of
the increase in starting stocks will be in soybeans, although more lard also
will be carried over. Little change from the year earlier stock position is
in prospect for edible oils but less butter will be on hand.

Output of lard in the 1959-60 marketing year likely will increase
around 11 percent and cottonseed oil over 25 percent. Soybean supplies are
expected to be nearly as large as last year, as the increase in prospective
carryover stocks nearly offsets the decline in output.


- 22 -


DPS-56






AUGUJT 1959


Domestic disappearance of food fats probably will continue to rise in
1959-60 with growth in population accounting for most of the increase. With
the sharp increase in domestic supplies, it appears that the quantity of food
fats available for export in 1959-60 would be up sharply from the 3.2 billion
pounds estimated for the year just ending.

While it is too early to estimate the 1959-60 season exports, sales for
dollars plus a large P. L. 480 program for edible oils and lard is expected to
result in a peak outward movement. Soybean exports are expected to continue
to rise in 1959-60, as factors generating the expansion during the current
year are likely to continue to operate. The cumulative effect of 2 years
drought in the far East is expected to continue to reduce world copra and
coconut oil availabilities at least through June 1960. Reduced supports on
soybeans and increased supplies of cottonseed oil should enhance our competi-
tive position in world markets.

U. S. supplies of soybeans during 1959-60 are estimated at 581 million
bushels, about 2.5 percent less than a year earlier. However, approximately
35-40 million bushels of old crop beans likely will be in the hands of CCC
compared with 14 million held by the Corporation a year earlier. Based on
August 1 indications, the 1959 soybean crop is placed at 531 million bushels,
44 million below last year's record crop. While a crop this size would bring
supplies closer in balance with probable demand, it nevertheless would be
sufficiently large to cause soybean farm prices during the heavy harvesting
season to dip toward the national support level of $1.85 per bushel, which is
24 cents below the 1958 level.

If the ratio of lint to cottonseed yield is the same as the average for
the past 5 years, production of cottonseed as estimated August 1 would total
6,149,000 tons, 28 percent more than in 1958. Cotton acreage for harvest this
year is up sharply, mainly because most of the 5 million acres placed in the
Acreage Reserve in 1958 is back in production. Farm prices for cottonseed are
likely to average somewhat below the $43.80 per ton received for the 1958 crop,
but above the CCC purchase price of $34.00 per ton, basis grade (100).

Lard output in the marketing year beginning October 1, 1959 is expected
to increase around 11 percent from the 2,675 million pounds now estimated for
the current marketing year. The increase mainly would reflect a rise in hog
slaughter. A relatively low level of lard prices is expected during the 1959-
60 marketing year. On August 3, the USDA announced it will offer lard for
export under Title I of P. L. 480 in order to stimulate exports.

Production of peanuts is forecast at 1,727 million pounds, about 6 percent
below last year's large crop. Prospective supplies are well above domestic
needs for food and farm uses and CCC probably will acquire a substantial
portion of the crop. As the case for most recent years, farm prices for 1959
crop peanuts are likely to average at about the support program loan value,
which is nearly 10 percent lower than for 1958.
Flaxseed output in 1959 is forecast at 23 million bushels, about
16 million less than last year. A flax crop this size would be somewhat less
than domestic requirements but carryover stocks were up more than enough to


DPS-56


- 23 -







AUGUST 1959


make up the deficit in output. Prices to farmers will average well above the
support price of $2.38 per bushel, but much depends upon the quality of the
seed.


FEED

The total 1959 production of feed grains, based on August 1 conditions,
is estimated at 158 million tons, about equal to last year's record output.
The August estimate of the corn crop is 4,173 million bushels, down 51 million
bushels from July, but 10 percent above last year. The increase in corn off-
sets smaller production of other feed grains. The sorghums grain crop was
estimated at 508 million bushels, 107 million below the record 1958 crop. The
oats crop is down 26 percent from last year and the barley crop 13 percent.
The carryover of feed grains into 1959-60 is expected to total about 68 mil-
lion tons, giving a total domestic feed grain supply of 226'million tons,
4 percent larger than in 1958-59.

The total tonnage of all feed concentrates is expected to increase to
around 255 million tons in 1959-60, 9 million more than in 1958-59. In
addition to the record feed grain supply, the total tonnage of byproduct feeds is
expected to at least equal the big tonnage in the 1958-59 feeding year and
wheat and rye feeding probably will continue near the 1958-59 rate. An
increase in grain-consuming livestock also is expected and the 1959-60 supply
per animal unit is now estimated to about equal last year's record.

Pastures and forage crops are not furnishing as much feed for livestock
this year as in 1958, although they are near average. On August 1, pastures
were 78 percent of "normal" compared with 89 percent last year and 77 percent
for the 1948-57 average. The hay crop is down 10 percent from last year, but
slightly above the 10 year average.

Prices received by farmers for feed grains declined in July and early
August, after rising more than seasonally from November to June. The mid-July
index was down 2' percent from June and 3 percent below a year earlier. Prices
of high-protein feeds also have dropped a little from June to July, continuing
the downward trend that began last January. In July, they averaged 13 percent
lower than in July, 1958.

Corn prices have been firm in recent weeks, while other feed grains
have declined. The price of No. 3 Yellow corn at Chicago averaged $1.26 per
bushel for the week ended August 14, nearly 20 cents above the seasonal low
last fall, but 10 cents below a year earlier. Barley prices declined at mid-
western markets in late July and early August with the harvesting of the new
crop. The price of No.3 barley at Minneapolis dropped from $1.21 per bushel
in early July to $1.12 for the first hall' of August. This was about 3 cents
lower than a year earlier, but still above the terminal support rate. Oat
prices, influenced by the short 1959 crop, continue well above the 1959
support rate and also are higher than a year ago. Sorghum grain prices have
declined since July to somewhat below last year's level.


DPS-56


- 24 -






AIJGUST ,1)


Prices of soybean meal, tankage and meat meal hlave' led the ricee d~,c, ine
in high-protein feeds. In the first half of August, soybean meal was sell :ing
for ;$5.00 per ton bulk at Decatur, -abLi,'t 15 percent lo.er thazI a .year
earlier. Tankage and meat meal prices were about a third lower. Prices of
most of the other byproduct feeds were near or a little below August I)6%
levels. Major exceptions were alfalfa meal and linseed meal, which were
substantially higher in August this year than last year.

'.F- 1 AT

The total wheat supply for the marketing year which began July 1, 1959,
estimated at 2,404 million bushels, is a record high. It exceeded the pre-
vious peak of last year by 53 million bushels, or 2 percent, and 1957-58 by
533 million bushels, or 28 percent. A 45 percent increase in the carryover
from last year more than offsets the reduction in the crop.

Supply this year consists of the carryover July 1, 1959 of 1,277 mil-
lion bushels, the crop estimated as of August 1 at 1,119 million and an
allowance for imports of about 8 million bushels, mostly of feeding quality
wheat.

Domestic disappearance in 1959-60 is estimated at about 626 million
bushels, slightly below last year, leaving about 1,778 million bushels for
export during the marketing year and carryover July 1, 1960.. Assuming exports
of about 410 million bushels, which is moderately smaller than the 443 million
exported in 1958-59, the carryover July 1, 1960 would total about 1,370 mil-
lion bushels. This compares with 1,277 million bushels this year and 881 mil-
lion on July 1, 1958. The prospective carryover in 1960 would be over 5 times
the 256 million bushels in 1952, before our present large stocks began to
accumulate.

Of the total carryover stocks on July 1, 1959, the CCC owned 1,134.6
million bushels, 299.7 million above a year earlier and 310.7 million above
two years ago. There were also 39.1 million bushels of the crop resealed and
32.8 million still outstanding under the 1958-crop price support program,
5.8 million 1957-crop wheat under extended reseal and 1.3 million of 1956-crop
under re-extended reseal. The net result was that "free" supplies of old
crop wheat on July 1, 1959 amounted to 63.1 million bushels, well above the
28 million bushels a year earlier and slightly below the 72 million two
years ago.

Wheat prices have not declined relative to the support as much as usual
for thio time of the year. The relative strength reflects the withholding
of wheat from market made possible by the adequate storage space available as
a resul\ of new construction, and reduced production from the record level of
last year. Moreover, quantities not eligible for price support, because of
seedings in excess of allotments, are much less than for the 1958 crop when
they were above any previous year. Ia-iy farmers are probably withholding
their wheat from market until the new tax year begins because of large sales
from the 1958 record production.


- 25 -


DPS-56






AUGUST 1959


As in recent years, prices in general are expected to strengthen after
the heavy movement slackens following harvest. Reflecting the early season
strength in market prices, the U. S. price to farmers in 1959-60 may average
slightly higher than the $1.72 for last year, even though the support price
of $1.81 is down 1 cent.


FRUIT

During late summer, supplies of fresh deciduous fruits will be seasonal-
ly heavy as harvest of the generally larger 1959 crops continues. In con-
trast, supplies of fresh citrus will be seasonally light, though supplies of
California Valencia oranges will remain much heavier than a year ago. Grower
prices for most fresh market fruits probably will average no higher than a
year ago, and prices for fruit for processing somewhat below because of
increased production.

During July and early August, prospects for 1959 crop deciduous fruits
continued favorable, except mainly for a decline in California caused by hot
weather. Total U. S. production, based on August 1 conditions, is expected
to be about 3 percent above 1958 and 7 percent above average. Most crops
marketed in heavy volume during late summer are expected to be larger than
in 1958, mainly because of increased production in western States. Among these
fruits, however, production of peaches, pears and grapes is smaller in the
eastern States. The apple crop is smaller than in 1958 in the western States
and much the same as in 1958 in the eastern and central States.

Total production of almonds, filberts, walnuts and pecans in 1959 is
expected to be about 7 percent larger than in 1959 and 10 percent above aver-
age. Heavy decreases in walnuts and pecans are more than offset by a
tremendous increase in almonds, of which the crop is record large. The
filbert crop also is larger this year.

Remaining supplies of California Valencia oranges from the heavier
1958-59 crop are- considerably larger than a year ago, and those of lemons are
not greatly different from this time last summer. Supplies of grapefruit,
now mostly from California, continue seasonally light. Stocks of canned
citrus sections and juices and frozen orange concentrate are larger than the
relatively light stocks last summer. In early August, prospects for the
1959-60 citrus crops were generally favorable.

A large increase in output of dried fruits and a moderate increase in
the pack of canned fruits are expected in 1959 because of the generally
heavier deciduous crops in the western States, especially California. A
small increase seems likely in the 1959 pack of frozen deciduous fruits and
berries (excluding juices). An increase in frozen sour cherries and other
items probably will more than offset a decrease in strawberries.


- 26 -


DPS-56







COMMERCIAL VEGETABLES
For Fresh Market
During early summer most fresh vegetable items were in steady, ample
supply. In general there was less overlap of harvest from spring crops than
last year, and prices to growers for the majority of fresh vegetables averaged
somewhat above the relatively low levels of a year earlier.
Supplies of fresh vegetables for late summer harvest, excluding melons,
are expected to be moderately larger than last year. A materially larger crop
of late summer onions, a large portion of which goes into storage, accounts for
about half of the total expected increase. However, indicated production is
moderately to substantially larger for late summer celery, cucumbers, green
peppers and tomatoes, and for summer snap beans, escarole, lettuce and spinach.
But prospective tonnage is down materially for late summer carrots, and for
summer lima beans and cauliflower. Output is also expected to be down moder-
ately for late summer cabbage and for summer beets. Prices in late summer are
likely to be at least moderately above the low average levels of a year earlier.

Supplies of watermelons in late summer are expected to be somewhat
lighter than a year earlier, and prices are likely to average somewhat higher
than in late summer last year.

First production estimates indicate materially less early fall cabbage
and carrots than in 1958 and a little less early fall celery.

For Commercial Processing

Early reports indicate smaller production of vegetables for commercial
processing this year than last. August estimates for 6 vegetables, which
typically make up 85 to 90 percent of total tonnage for the 10 crops regularly
reported, indicate an aggregate production of these vegetables about 5 percent
smaller than last year, but still materially above the 1949-57 average. Pro-
duction of spinach for winter and spring processing, which typically accounts
for about 80 percent of the annual total, was about 45 percent above last year's
short crop; sweet corn is expected to be up 22 percent; snap beans up 7 per-
cent; and contract cabbage for kraut up 1 percent. Prospective tonnage of
green peas is down 5 percent, and tomatoes down 15 percent.

Although stocks of canned vegetables at the beginning of the current
marketing season were moderately larger than a year earlier, current production
prospects point to total supplies in the current season below those of the
past season. However, some items will again be in heavy supply, and total
supplies will remain above the 1949-57 average. Supplies of frozen vegetables
are expected to be moderately above last season and materially above average.

POTATOES AND SWEETPOTATOES

Production of potatoes for late summer harvest is estimated at 33.7 mil-
lion hundredweight, 2 percent below a year ago, but slightly above average.
Prices so far this summer have averaged substantially above the low levels of


- 27 -


DPS-56


AUGUST 1959






AUGUST 1959


a year earlier. For the week ended August 8, f.o.b. shipping point prices of
unwashed Cobblers at Riverhead, Long Island, New York and nearby points, aver-
aged $1,08 per 50-pound sack, compared with $.68 for the corresponding week of
1958.
First production estimates indicate a crop of potatoes for fall harvest
a tenth larger than the 1949-57 average, but 8 percent smaller than last year.
However,. 1958 fall crop potatoes were in surplus supply and large quantities
were directed to starch and livestock feed.
Prospective production of sweetpotatoes at 17.9 million hundredweight is
slightly larger than last year, but almost a tenth below the 1949-57 average.
Prices received by growers are expected to decline seasonally into the fall,
but are likely to average about the same as a year earlier.

COTTON

Prices received by farmers rose more than 2$ cents between mid-June and
mid-July. The July price of 34.05 cents per pound reflects the high quality of
the new crop being marketed in the Lower Rio Grande Valley. The average 14
spot market price for Middling 1-inch cotton was 33.55 cents per pound in July.
Since then the price has declined and on August 20 was 31.82 cents per pound.
These prices compare with 34.81 and 34.83 cents per pound a year earlier.

Mill consumption during the 5-week period May 31-July 4 totaled 819,538
bales, 224,000 more than in the 4-week period, June 1-June 28, 1958. On a
calendar month basis, consumption for the 11 months of the 1958-59 season to-
taled 7.9 million bales, compared with 7.4 million during the corresponding
period last season. According to the Bureau of the Census, the daily rate of
consumption in June 1959 was 32,782 bales. While this was the highest daily
rate for June since 1955, it showed a considerable decline from the approxi-
mately 35,000-bale average of the previous 2 months. However, the June daily
rate was calculated on the basis of 25 working days. Later trade data indicate
that there were fewer working days than this in June so that the actual daily
rate of mill consumption in June was above the previous 2 months. If the daily
rate of consumption during July should average at least 35,000 bales for the 20
working days in that month, a total of 700,000 bales is indicated. This would
confirm earlier estimates of total consumption of close to 8.7 million bales for
the 1958-59 season.
Factors favorable to continued high level of mill use of cotton include:
(1) the further improvement in mill margins in June and (2) the decline in the
ratio of inventories of cotton broadwoven goods to unfilled orders to the low-
est level in 31 years. Mill margins in June at 28.20 cents were the highest
since November 1956 and about 30 percent above a year ago. A further improve-
ment is indicated by the firmness in forward quotations for fabrics during a
period when cotton futures indicate lower prices than last year. The inventory-
unfilled orders ratio in June at .22 was the lowest since January-February
1956. However, the level of unfilled orders in June, equal to 16.8 weeks'
production, was 4.5 weeks above January 1956, while inventories equal to
3.7 weeks' output, were higher by only the equivalent of 1 week's production.


- 28 -


DPS-56








Purchases nr the 14 spot markets during July averaged about 17T,O.0 ial1's
per day. Because of the limitedd number of transactions, prices on these mar-
kets took on nominal characteristics.
Nearly a half million bales from CCC's inventory of 1957 and prior-crop
upland cotton were sold for unrestricted use by the New Orleans CSS office on
bids opened July 27, l'5'. This was the first sale under IJO-C-12. Acceptable
bids had to be at the higher of 110 percent of the choice (B) loan rate or mar-
ket price. Bids covered about 1i million bales, of which less than half were
accepted. The substantial volume of bids reflects the strong current demand
for 1959-60 season domestic consumption and export. As of August 7, export
registrations under the 1959-60 payment-in-kind program totaled o-.er 1.1 mil-
lion bales. This compares with CCC sales for exports of about 708,000 bales as
of August 4, 1958 under the previous year's program. It is anticipated that a
large part of the cotton registered for export under the 1959-60 program will
be exported during August and September.
The 1959-60 cotton crop was estimated at 14.7 million running bales
(14.8 million bales of 500 pounds each) as of August 1, 1959. The crop is ex-
pected to be harvested from about 15 million acres and the harvested yield is
estimated to be the highest on record of 474 pounds per acre. This compares
with the previous high of 466 pounds in 1958. The only State with a record
high yield was California which showed a yield of 1,086 pounds per acre. This
compares with the previous high of 1,049 pounds in 1958. Although the other
cotton producing States had high yields, none of them showed record highs.

WOOL
Prices received for shorn wool by United States growers during July 1959
were 16 percent above a year ago. This reflects the general improvement in
world wool demand and prices which began in the closing months of 1958, and has
continued during the first half of 1959. A further expansion in world supplies
and disappearance appears likely in coming months.
The Foreign Agricultural Service estimates the 1959 world sheep numbers
at 966.6 million head, 1.6 percent more than 1958. This is the twelfth conse-
cutive year that the numbers have risen. United States sheep numbers are esti-
mated at 32.6 million head in 1959, 4 percent more than 1958, and the highest
since 1948.
The first Foreign Agricultural Service estimate of 1959-60 world wool
production is a record 5,445 million pounds, grease basis, up 135 million
pounds or 2.5 percent from the revised estimate for the season just ended. In-
cluded in this estimate for 1959-60 are the clips of the Southern Hemisphere.
Higher outputs this season will continue the upward trend in world wool produc-
tion following a slight decline in 1957-58. The revised estimate of world raw
wool production in 1958-59 set a new record high of 5,310 million pounds, grease
basis, 260 million or 5 percent above 1957-58.

The estimated 1959 shorn wool production for the United States is
251.9 million pounds, grease basis, 5 percent more than the 240.8 million


DPS-56


- 29 -







pounds produced in 1958 and the highest since 1946. The number of sheep and
lambs shorn is estimated at 30.5 million head, 3 percent more than 1958.
In importing countries commercial stocks were drawn down during 1958
as imports were curtailed more than consumption. As a counterpart of this,
stocks in major exporting countries increased more than 50 percent. During the
current season exports from all 5 major surplus producing countries are above
last season and by mid-1959 exporters had disposed of the bulk of the increase
in their stocks.
The firm demand in recent months has been reflected in both world and
domestic prices. The Australian auctions closed with better grades 19 to 23
cents above January but still slightly below a year ago. The coarser grades,
however, were selling at or above year-earlier prices. Indications are for
continued strong prices when the Australian auctions reopen the end of this
month. Prices for domestic shorn wool at Boston for the week ending August 14
were 16 to 22 cents a pound higher than January 1959 and 8 to 21 cents higher
than those of July 1958. The average price received by domestic growers for
shorn wool during July 1959 was 44.1 cents per pound, grease basis, compared
with 42.9 cents in June 1959 and 38.0 cents in July 1958.
United States mill consumption of apparel wool during January-June
totaled 138.4 million pounds, scoured basis, 36 percent more than last year.
Carpet wool consumption during these same months totaled 86.2 million pounds,
scoured basis, 76 percent more than a year ago. This is the highest first six
months' use of carpet wool since 1950. The total raw wool consumption during
January-June 1959 was 224.6 million pounds,scoured basis, almost 49 percent
more than a year ago.
Reflecting the greatly increased rate of mill use, total imports for
consumption during the first six months of 1959 were 172.1 million pounds,
clean content, or almost double those of the same period last year. Duty-free
imports totaled 112.6 million pounds, dutiable, 59.5 million pounds.
Based on consumption to date, adjusted for normal seasonal variations,
a.total domestic mill consumption of close to 435 million pounds is indicated
for 1959. This assumes that 127 million pounds of apparel wool and 84 million
pounds of carpet'wool will be used during July-December 1959. If carryover
stocks were to be at approximately the same level as on January 1, 1959, the
projected rate of consumption would call for imports of apparel wool at a rate
about 3 times as high as actual imports during July-December 1958. Imports of
carpet wool at approximately three-fourths the rates in July-December 1958
would appear adequate to meet indicated needs.
TOBACCO
Marketing of this year's crop of flue-cured have been under way in the
Georgia-Florida (type 14) and South Carolina-border North Carolina (type 13)
Belts since late July. Through mid-August 156 million pounds were sold in the
type 14 markets at an average 58.1 cents per pound, up almost 1 cent from a
year earlier. In the type 13 area where auction markets opened a week later,
about 85 million pounds were sold by mid-August at an average of 60.4 cents
per pound, nearly equal with the comparable figure of last season. Auctions
in the Eastern North Carolina Belt (type 12) began August 18 and those for the


DPS-56


- 30 -


AUGUST 1959






DPS-56


AI ;:I'-;T 1959


Middle Belt (type 11-b) and oil Belt (type 11-a) will begin Au r,, 31 a'.
September 8, respectively. Flue-cured stnli.2n *,1:.tion hns received for price
support thro':;h mid-August 6.4 million po'.1'in of tobacco or 3' percent of gross
sales compared with 22.6 r:l! ion po!nr.s or ...) per'.nit of 'ross sales through
the comparable period of last year.

As of August 1 the flue-cured crop was indicated to be 7 percent larLer
than Inst year's crop but the third smallest since 19.9. This year's crop plus
the carryover on July 1, which is down 4 percent from a year earlier, will pro-
vide a total supply for 1959-".-,, only 1 percent lower than for 195`-59.

Flue-cured is the leading domestic cigarette tobacco and also the major
export tobacco, In the year ended June 30, domestic use of flue-cured was
practically the same as in the preceding year despite a (7) percent gain in
cigarette output. The increased proportion of filter tips and technological
changes such as processed shot tobacco have enabled manufacturers to increase
the cigarette outturn per pound of domestic farm-sales-weight tobacco. The use
of imported cigarette leaf which is blended with domestic leaf in the typical
American cigarette showed a sizeable increase in the past year. The July 1958-
Junc 1'590 e:-p.lrts of flue-cured tobacco barely exceeded those of a year earlier
and were one percent below the recent 10 year average.

The August indication for the burley crop--the second ranking cigarette
tobacco--was 5 percent larger than last year's harvesting. According to pre-
lininary estimates,there has been little change in the domestic use of burley
compared with a year earlier. The August 1 indication for NIaryland tobacco was
for a 3 percent larger crop than the current estimate for the 1958 crop.
Indicated production of fire-cured and dark air-cured (including sun-
cured) tobacco as of August 1 was up 21, and 28 percent, respectively. The prin-
cipal domestic use for these types is in snuff and chewing tobacco.

The August 1 indicated crops of the cigar filler and the Wiscons;.n binder
types are about an eighth larger than last year's harvesting. This year's
production of the Connecticut cigar binder types will be sharply higher than
last year's very low outturn but well below most other years. The August 1
figures for the cigar wrapper types indicate an increase of about a tenth over
last year's production.
In the fiscal year ended June 30, 1959,cigarette output totaled 479 bil-
lion--30 billion greater than in 1957-58 and a new high. Cigar output in
domestic factories totaled 6,494 million, 542 million more than in 1957-58.
The July 1953-June 1959 output of smoking tobacco was 14.8 million pounds,
nearly equal with a year earlier, while output of chewing tobacco, at 68- mil-
lion pounds, was down 1- million pounds from 1957-58. Output of snuff in 1958-
59, at 34.6 million pounds, was slightly below 1957-58.
In the last fiscal year, exports of all types combined, at 529 million
pounds (farm sales weight), were practically the same as in 1957-58. E:-ports of
burley, One Sucker and cigar filler increased, and exports of flue-cured, cigar
wrapper and Maryland tobacco held about even, but exports of fire-cured, cigar
binder and Green River tobacco declined.


- 31 -




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