~$ KM! 10 mg 1r ABSTRACT EXPECTED PRICES FOR U.S. AGRICULTURAL COMMODITIES, 1917-62 by Milburn L. Lerohl There are two general objectives of this study. They are, first, to calculate series of expected prices for several horizons for each of thirteen agricultural commodities, for use individually and for aggregation into indices of prices expected by farmers. The second is to make a preliminary evaluation of these expected prices and indices. The series and indices of expected prices are designed to be estimates of the prices actually anticipated by reasonably well-informed farmers. The method used is a two-stage process. First, a regression equation is fitted, providing mechanical esti- mates of expected price as a function of actual prices in previous years. Second, the mechanical estimates are adjusted to ensure that they are consistent with outlook information. The result is a series of ex ante expected prices which rely heavily on and are compatible With the available outlook data. The thirteen commodities for which series of expect- ed prices are presented are apples, beef, chicken meat, corn, cotton, eggs, hogs, manufactured milk, oranges, potatoes, soybeans, tobacco and wheat. Three expected priCe series are presented for each commodity; expectations far one year, five years and ten years into the future. The information Milburn L. Lerohl from the thirteen commodity indices for each horizon is incorporated into three aggregate indices of expected price, representing the price expected for agricultural output for the following year, the following five years and the following ten years. Several means of evaluating the expected prices are employed. The first of these involves comparison of the expected prices of this study with those developed by U.S.D.A. personnel for Glenn L. Johnson's study for the Committee on Economic Development. The Johnson series and those of this study are compared for a post-war' period (the Johnson series are not available prior to 1946) for several commodities, and for both the one-year and five- year expected price series. Their similarity supports the hypothesis that, despite the difficulty of recording expec- ted prices, different investigators are capable of arriving at similar conclusions regarding the direction of shifts of expected price relative to actual price. An evaluation of the ten-year expected prices is conducted by comparing changes in each of three expected price series with changes in farm real estate values per acre. The evidence suggests that the expected prices of this study are more closely related to changes in farmers' price expectations (as measured by changes in farm real estate values per acre) than are either current-year expected prices or mechanically derived expected prices. Milburn L. Lerohl Further evidence suggests that the expected prices of this study are also superior to the other two models when an attempt is made to remove the influences of general infla- tion or deflation. Letters were sent to thirty prominent agricultural economists to determine their beliefs regarding the rela- tive position of actual versus expected price for several commodities, several time horizons and for the aggregate indices. However, the data from several respondents, in- cluding all data relating to the one-year expectations, were found to_be somewhat unsatisfactory because of mecha- nical expectation models employed by these respondents. These data were not used. Nevertheless, the data employed indicate substantial agreement between the relative position indicated in the returned questionnaires and that indicated in this study with respect to longer-term expected prices. An important way of testing expected price series is by their incorporation as exogenous variables in econo- metric models. Several such studies by fellow graduate students are underway, and one is complete. Michel Petit used earlier versions of several of these expected price series in his study of the feed-grain livestock economy. Petit was reasonably satisfied with the performance of the expected price series in his models. EXPECTED PRICES FOR U.S. AGRICULTURAL COMMODITIES, 1917-62 By‘,‘s L V Milburn LE Lerohl A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics 1965 ACKNOWLEDGEMENTS This thesis was written under the general supervision of Dr. Glenn L. Johnson, the author's major professor. The numerous comments and criticisms made by Professor Johnson during the course of this study, and his assistance throughout the author's studies at Michigan State University, are gratefully acknowledged. During Dr. Johnson's absence from the U.S., Dr. L. V. Manderscheid served as acting major professor for the author. His assistance in the author's graduate program, and his perceptive comments on several drafts of the thesis, are greatly appreciated. Dr. D. H. Boyne undertook a careful review of an earlier draft of this thesis, and made several valuable suggestions. Discussions with a number of fellow graduate students in the Department of Agricultural Economics have assisted in the development of this thesis. Assistance was also extended by twenty-two individuals, in the U.S.D.A. and elsewhere, who responded to a survey by sending completed questionnaires and/or comments to the author. The author is particularly grateful to the Department of Agricultural Economics and its Chairman, Dr. L. L. Boger, and to Resources for the Future, Inc., for the financial assistance which made possible the author's graduate study at Michigan State University. The author's wife, Adeline, was a fountain of assistance and encouragement during graduate studies. She also undertook to type all drafts of this thesis, including the final one. The author alone is responsible for any errors in the thesis. ii TABLE OF CONTENTS Chapter Page 1 INTRODUCTION o0000.00.00...coo-000000000000. 1 2 PRICE EXPECTATIONS AND ECONOMICS ........... 4 Single-Valued Expectations and Business Plans ....IOOCOOOOOOOCCCOO0.00.00.00.00... 5 Uncertainty and Business Plans ........... 6 States of Knowledge .................... lO EXPectation Horizons ..................... 12 3 PRICE EXPECTATIONS BY FARMERS .............. 14 Some Actual and Potential Expectation Medels 0000000000ooooocooeoooooooooooa...o 14 Futures Price Model .................... 19 A Study of Farmer Expectations ........... 22 Expectations and Distributed Lags ........ 24 Empirical Expected Price Series .......... 29 4 METHOD OF OBTAINING EXPECTED PRICES ........ 32 Selection of the Method .................. 32 Expected Price Series for Commodities .. 33 One-Year Expected Price Series ....... 36 Five-Year Expected Price Series ...... 39 Ten-Year Expected Price Series ....... 41 Aggregate Indices of Expected Prices ... 42 Some Suggestions for the Future .......... 46 5 TESTS OF THE SERIES OF EXPECTED PRICES ..... 50 G. L. Johnson's Expected Price Series .... 51 Land Values and Expected Prices .......... 56 The "Current-Year Model and Land Values 64 Deflation of Land Values ............... 70 A Survey Regarding Expected Prices ....... 73 The Returned Questionnaires ............ 77 Petit's Econometric Models ............... 82 Summary of the Tests ..................... 84 6 CONCLUSIONS AND IMPLICATIONS ............... 88 Summary Evaluation ....................... 88 Using the Expected Prices ................ 9O BIBLIOGRAPHY ooooooo00000000000000.0000oooooooo 93 APPENDIXA o.000000.0000000000000000000000000 10]- APPENDIXB 0.00.00.00.000000000000QOOOOOOOOOO 1-86 APPENDIXC 00.00....oOOOOOOOOOOOOOOOOOOOOOOOQ 253 APPENDIX D 00000000000000.0000...00.0.0000... 261 iii LIST OF TABLES Table Page 1 Average Annual Value of Agricultural Production by Commodity, 1935-39 and 1947-49 OOOOOOOOOOOOOOOOOOOOOOOO00000000000 44 2 Comparison of Direction of Change of Expected Prices With Previous Year Actual Prices, Johnson Study and This Study, Various Commodities, Post-War ............. 53 3 Comparison of Changes in the Index of Average Value Per Acre of Farm Real Estate, U.S., With Changes in the Aggregate Index of Ten-Year Expected Price ................ 6O 4 Comparison of Changes in the Index of Average Value Per Acre of Farm Real Estate, Michigan, With Changes in the Aggregate Index of Ten-Year Expectéd Price for MiChigan 0000000000000000000.000000000000.0 62 5 Comparison of Coefficients of Correlation (r) Between Changes in Farm Real Estate Values Per Acre and Changes in Four Other Indices, U.S. 0.0.00000.000000000900000... 65 6 Comparison of Coefficients of Correlation (r) Between Changes in Deflated Farm Real Estate Values Per Acre and Changes in Three Deflated Indices of Expected Price. U.S. .. 7l 7 Relationship Between Expected and Actual Prices of This Study Compared with Rela- tionship Between Expected and Actual Prices, Questionnaire Respondents ................. 78 8 Index of Prices Received by Farmers and Indices of Prices Expected by Farmers for Farm-Produced Commodities, by Years, 1917‘62 (1947-49 = 100) cocoooooooooooooooo 103 9 Summary of Regression Equations Used to Provide Mechanical Estimates of One-Year ExpeCted Prices 0.0 0000000... 000000000 0 .000 105 10 106 through through 22 One-Year Expected Prices for Commodities, U.S., 1917-62 0.00.00.00.00...00.00.0000... 131 iv Table 23 24 through 36 37 38 through 50 51 52 LIST OF TABLES - Continued Page Summary of Regression Equations Used to Provide Mechanical Estimates of Five-Year ExpeCted Prices 0.0000000000000000.0.000... 132 133 through Five-Year Expected Prices for Commodities, U.S., 1917-62 so...coco-cocoooooooooooooooo 158 Summary of Regression Equations Used to Provide Mechanical Estimates of Ten-Year . ExpeCted Prices 0000.0000000000000000000000 159 160 through Ten-Year Expected Prices for Commodities, U.S., 1917-62 coco-0.000000000000000.coocoo 185 Comparison of Estimates of Coefficient of Expectation, Nerlove and This Study .... 263 Comparison of Estimates of Coefficient of Expectation, Three Time Horizons and Three Commodities, This Study ............. 264 Figure LIST OF FIGURES Comparison Between Index of Prices Received and Three Expected Price Indices, U.S., 1917 t01962 000.00000000000000000000000... Comparison Between Index of Five-Year Expected Prices and Index of Actual Five- Year Average Prices, U.S., Mid-Year 1919 to Mid-Year 1962 .......................... Comparison Between Index of Ten-Year Expected Prices and Index of Actual Ten- Year Average Prices, U.S., 1923 to 1961 ... vi Page 67 68 69 LIST OF APPENDICES Appendix Page A THE EXPECTED PRICE SERIES ............... 101 One-Year Expected Prices .............. 105 Apples, Beef, Chicken Meat, Corn, Cotton, Eggs, Hogs, Manufactured Milk, Oranges, Potatoes, Soybeans, Tobacco, Wheat. Five-Year Expected Prices ............. 132 Apples, Beef, Chicken Meat, Corn, Cotton, Eggs, Hogs, Manufactured Milk, Oranges, Potatoes, Soybeans, Tobacco, Wheat. Ten-Year Expected Prices .............. 159 Apples, Beef, Chicken Meat, Corn, Cotton, Eggs, Hogs, Manufactured Milk, Oranges, Potatoes, Soybeans, Tobacco, Wheat. B COMMODITY NOTES FOR EXPECTED PRICES ..... 186 Beef 00.00000000000000000000000000000.. 187 Hogs 00000000000000000000000000.0000... 201 corn 0.0.0.0...00000000000000.000000000 226 Wheat 00000000000000.0000...0000009000o 240 References Cited ...................... 251 C QUESTIONNAIRES FROM SURVEY RESPONDENTS .. 253 D COMPARISON OF ESTIMATES OF COEFFICIENT OF EXPECTATION 0.0.00.000000000000000000.00. 261 vii CHA PTER l I NTRODUC TI ON This study is one of several which have been and currently are being carried out under the auspices of a grant from Resources for the Future, Inc. The overall objective is to evaluate certain U.S° agricultural policies and programs,l9l7-1962. The larger study is particularly concerned with the impact of government policy on resource flows into and out of agriculture. Product price expecta- tions are important ingredients of expected marginal value products for resources. Various of the contributing studies use expected marginal value products in studying the allocative impacts of government policies and programs, 1917 to 1962. Accordingly, this study reports on a project in which the EK.EE£S price anticipations of farmers are esti- mated. Expected price estimates are developed and presented for thirteen agricultural commodities important in the U.S. For each commodity, three series of expected prices are included, indicating, for each year 1917—62, the average price anticipated for that year, the average price antici- pated for that and the following four years and the average price anticipated for that and the following nine years. The commodity expected prices are combined into three indi- ces, reflecting the price levels anticipated for aggregate agricultural output for each of these three periods into the future. 2 The method selected for determining these expected prices involves fitting regression equations to provide mechanical estimates of expected price as a function of actual prices in previous years. The mechanical estimates are then examined to see if they are consistent with out- look information, and modified where necessary to reflect such information. The reasons for presenting these expected prices, and for using a method such as the above, are several. First, it is argued that expected price is the relevant price variable in farm planning, and that valid estimates are needed for use in empirical studies. Second, it is argued that expected price is not likely to be a simple function of present and/or past prices, although information about the present and past is likely to be one of the in- fluences on expected price. Third, it is argued that use- ful and interpersonally comparable estimates of the prices expected by farmers can be obtained, and that these esti- mates must give considerable weight to outlook information and other data relevant to farmers' anticipations of the future. Several tests of these expected price series are reported, the objective being a preliminary evaluation of whether or not these expected prices and indices are accurate reflections of the anticipations held by farmers. The series presented are not, however, to be interpreted as a test of the accuracy of prediction of the expectation model 3 used. The expected prices are designed to represent the prices actually anticipated by reasonably well-informed farmers. The only relevant test lies, therefore, in ascertaining whether the expected prices presented here are in fact similar to the ex ante beliefs of farmers regarding product prices. CHAPTER 2 PRICE EXPECTATIONS AND ECONOMICS Expectations have long been recognized by economists. The strategic positkm.of price expectations has drawn the attention of such eminent individuals as Marshall, Keynes and Hicks: The immediate effect of the expectation of a high price is to cause people to bring into active work all their: appliances of production, and to work them full time and perhaps overtime'i.. . The immediate effect of the expectation of a low price is to throw many appliances for production out of work ... .1/ All production is for the purpose of ultimately satisfying a consumer. Time usually elapses, however - and sometimes much time - between the incurring of the costs by the producers ... and the purchase of the output by the ultimate consumer. Meanwhile the entrepreneur ... has to form the best expectations he can as to what the consumers will be prepared to pay when he is ready to supply them (directly or indirectly) after the elapse of what may be a lengthy period; and he has no choice but to be guided by these expectations, ii hezis to produce at all by processes which occupy t me,_ It is only in the stationary state that actual prices do not need to be distinguished from expected prices ... . Further ... the actual state of any economy is in fact never stationary ... .3/ As these examples illustrate, the importance of price expectations is that of a variable in business 1/.Alfred Marshall Princi 1es of Economics (8th ed.; London: Macmillan, A , . 511. *rnls is p. 374 in the earlier type setting of the 8th edition. gy'J. M. Keynes, The General Theory gngmployment, Interest and Money (LondOn: ‘Macmillan, 1936), p. 46. 2/ J. R. Hicks, Value and Capital (2nd ed.; Oxford: Clarendon Press, 19467, p. II9. D5. 1" u r FD. vI' u. S... 0‘: ‘¢\ IQ: is. 1 5“ ,‘ "V “E! 5“ ... 'ul. It 1"? .~‘ 'fl . "I “v l (\J 5 planning. But when markets are in static equilibrium, the optimum plan can justifiably be phrased in terms of a pro- duction function and of given prices (or, in imperfect competition, schedules of prices) for inputs and outputs. It is only when change over time is permitted that expecta- tions become important. Single-Valued Expectations and Business Plans A single-valued expectation occurs when the entre- preneur has no doubt of the accuracy of his prediction. This does not imply that the expectation is in fact an - accurate one, only that the expectation is subjectively certain. The relevant business plan is conventionally considered to be the one which maximizes the present value of the expected net receipts. "Given the entrepreneur's anticipations, his optimum plan is that which offers the maximum present discounted value (as of the date of plan- ning ...) of anticipated net receipts ... ."l/ .As Hart points out, however, this need not imply that the operations of the firm are in equilibrium in the sense that a constant rate of flow of output is p1anned.3/ Because the single-value expectation is hEld with subjective certainty, the problem of alternative bases for choihe may not enter. Jensen and Halter note that, in the case of perfect knowledge, bases for choice which do not l/.A. G. Hart, "Anticipations, Business Planning and the Cycle" Quarterly‘Qournal of Economics, Vol. 51 (1936- 37), p. 278. _2_/ Ibid., p. 279. 6 involve the maximization of the discounted value of expected net returns have no advantage over such maximization.l/ Nevertheless, the entrepreneur formulates expectations with respect to several variables, price being only one of these. When the anticipations for any of these variables are other than single-valued, the possidfility of employing strategies other than the maximization of the discounted value of expected net returns must be considered.2/ In the received static theory,§/ the equilibrium of the firm can be stated in terms of marginal equivalences. Subject to certain non-marginal conditions, the equilibrium with single-valued expectations occurs when the "discounted marginal-cost-of—input equals discounted marginal-revenue- of-input equals marginal productivity multiplied by dis- counted marginal-revenue-of—output.Wfl/ Uncertainty and Business Plans As with single-valued expectations, the optimum business plan may be obtained by equating the marginal dis- counted present value of receipts and costs. The develop- ment of the plan is more complex, however, since the $7 Harald Jensen and Albert Halter, "Making of Decisions," in Glenn L. Johnson, et al., A Study of Managerial Pro- cesses of Midwestern Farmers (Ames: ’IOwa State University‘Press, 1961), p. 124. §/~For a summary of appropriate bases for choice other than the maximization of discounted expected net receipts, see ibid., pp. 124-125. 2/ For example, Hicks, op. cit., Chapter 6. 4/ Hart, op. cit., p. 280. 7 entrepreneur now considers that a range of future prices is possible. For example, he may, as some empirical evi- dence suggests, have a concept of a most likely price, and also of the possible range above and below this value through which actual price may vary. Some authors, gOing back to Irving Fisher in 1906,1/ have attempted to deal with problems such as price expectations by using a pro- bability distribution. Thus, an entrepreneur may anticipate that there is a 50 per cent chance of a price of X dollars, a 20 per cent chance of a price of Y dollars, and a 30 per cent chance of a price of 2 dollars. Boulding suggests, with reservations, that ”as a first approxima- tion"§/ the expected value of this distribution may be calculated, and used as a certainty equivalent,§/ Although the use of a certainty equivalent may be of value in certain theoretical or emprical problems, nevertheless the concept of a known probability distribution of future prices is not cogent. This is so because such a probability distribution cannot be said to represent price uncertainty. Hart's definition of risk, which is consis- tent with Knight's, is relevant. He defines risk as "the l/'Cited by Kenneth E. Boulding, "The Theory of the Firm in the Last Ten Years," American Economic Review, Vol. 32 (December 1942), p. 794. 3/ Ibid . §/.A certainty equivalent, for the purpose at hand, is a value of a variable which, though its occurremr is considered as less than certain, is treated in the analysis as likely to occur with probability one. . O n-chO‘ _,. I Q». fi'i‘fi j..v- 8 ‘0‘: L1" '1' (I («v-r ‘Itu‘y. ‘0: a: fotvy #- ~ 1!) i” "I . I ~‘ I I 1! 'v H b ‘1, .1 I! u ‘ . Id...) 8 holding of anticipations about the future which are not 'single valued' but constitute a probability distribution having known parameters."l/ .A probability distribution of prices, having known parameters, is thus a risk and not an uncertainty. "It is the position of this paper that 'risk' has comparatively little importance in economic analysis ... ."2/’ If the difficulty which the entrepreneur must surmount is only that of known probabilities of different prices, then an insurance scheme can solve this problem of price risk.§/ The uncertainty of price is not, however, the only problem introduced by relaxing the assumption of single- valued expectations. The way in which the individual views uncertainty is also an influence on the business plan. Risk averters react to uncertainty in a way different from that of risk preferrers. But there are still further sources of uncertainty for the business plan. Uncertainty may also arise with respect to output response, new technology, the actions ‘1/ "Risk, Uncertainty and the Unprofitability of Compound- ing Probabilities," in William Fellner and Bernard F. Haley (eds.), Readings in the Theory of Income Distribu- tion (Philadelphia: Blakisfon, {9517, p. 547. g/ Ibid., pp. 547-548. 2/ See Frank H. Knight, Risk, Uncertainty and Profit (New York: Kelley and Millman, 19577, pp. 231-232. "As we have repeatedly pointed out, an uncertainty which can by any method be reduced to an objective, quantitatively determinate probability, can be reduced to complete certainty by grouping cases." ,O‘ .u. 1'3; » I .- U-a' m“ u ‘0 -c «o‘. u. ' l 4.4) 1 Ac_ ,1... 9 and attitudes of people, institutions or input prices.l/ Neither these uncertainties, nor the relationships among the various kinds of uncertainty in the plan are easily susceptible of handling.§/ Nevertheless, Hicks recommends, at least implicitly, the use of single-valued expectations. "Thus, we shall formally assume that people expect parti- cular definite prices, that they have certain price expec- tations ... . By the device of definite expectations, we are enabled to use the same analysis as we used in statiCs to set out the equilibrium ... .3/ The foregoing paragraphs illustrate that a certainty equivalent has merit as a useful abstrmiion. There are other circumstances in which the use of single-valued expectations need no apology: 1/ Earl J. Partenheimer and Robert D. Bell, "Managerial Behavior of Farmers in Formulating Expectations of Future Events," in Glenn L. Johnson et al. (eds.), A Study of Managerial Processes of Midwestern Farmers (Ames: CIOWa SfafeIUniversify Press, I96I7, p. 86. 2/ Hicks, op. cit., p. 126. Ibid., pp. 126-127. scar Lange, Price Flexibility and Employment (San Antonio: Principia Press, 19457, pp. 31-32, states: Q "Thus we can substitute for the most probable prices actually expected with uncertainty equivalent prices expected with certainty. Let us call them the effective expected prices. This is the most probable price mifius the risk premium ... . By means of this device, uncertain price expectations can be reduced to certain ones." Lange rejects the case of risk preference, believing it to be unusual. If the possibility is included, however, Lange and Hicks hold very similar views on the useful- ness of a single-valued expectation. 10 An entrepreneur who expected no information that would enable him to improve his estimates between to, the time of planning, and a later date t1, assuming him to have no aversion to risk and no particular liking for it, would find it his best policy to lay out his plans as if his expectation-schedules of price were single-valued expectations. Similarly, an entre- preneur who was obliged to make all his decisions as to volume of operations in the present would be unable to use fuller information as it came in, and would have to act on what was available.l/ States of Knowledge Knight's discussion of certainty, risk and uncer- tainty implies a sharp distinction among these three states of knowledge. For example, Knight states: "It will appear that a measureable uncertainty, or 'risk' proper ... is so far different from an unmeasureable one that it is not in effect an uncertainty at all."§/ The consistency between Knight's and Hart's defini- tions of risk has been mentioned. But Hart goes on to argue that there may not be a clear difference between risk and uncertainty. Uncertainty may, he says, be interpreted as a probability distribution of probability distributions; for example, there may be probability distributions of price, and "likelihoods" of these distributions occurring.§/ The probabilities and likelihoods could be integrated or summed, converting the uncertainty upnfik. Hart asserts, 1/ Hart, "Anticipations, Business Planning and the Cyclej" o . cit., p. 286. ‘ g/ Knight, op. cit., p. 20. ‘3/ Hart, "Risk, Uncertainty and the Unprofitability of Compounding Probabilities," op. cit., p. 549. 11 however, that such a summation conceals relevant information because it neglects "two economic considerations: (a) the anticipation of a change in anticipations and (b) the possibility of deferring decisions.Wl/ Thus, the division of subjective uncertainty into only two categories, risk and uncertainty, oversimplifies because it rejects the possibility that it might "be worth spending additional time learning and acquiring more information before making a decision.“§/ As a result of studies conducted at Kentucky with L. A. Bradford and, on other occasions, C. B. Haver, Glenn L. Johnson has defined five states of knowledge. As a result of work by the Interstate Managerial Survey (IMS), the number of knowledge situations has been expanded to six. These six states of knowledge are subjective certainty and five subjectively uncertain categories; risk action, voluntary learning, involuntary learning, inaction and forced action.§/ Risk action corresponds to the situation y Ibid., p. 550. 2/ Glenn L. Johnson and Curtis F. Lard, "Knowledge Situations," in Glenn L. Johnson, et al. (eds.), A Study of Managerial Processes of Midwestern Farmers (Ames: Iowa State UniversityIPress, I96I), p. 43. g/ Diagrammatic illustrations of risk action, learning, in- action and forced action are presented in Curtis F. Lard, An Evaluation of the Interstate Managerial Study Clas- sification ofTKnowledge Sitfiations (Unpublished”M.S. thesis,‘MiCHigan State University, 1959), pp. 27-28. An additional knowledge situation, forced inaction, is suggested by Alan R. Bird and Curtis F. Lard, "Toward Effective Integration of Knowledge Situations in a Theory of Managerial Behavior," Journal of Farm Economics, Vol. 43 (February, 1961), pp. 137-14T. l2 inxsequential. analysiS“ where the specifications for a choice are fulfilled, and the cost of added knowledge is equal to its value. Voluntary learning is a situation in which the specifications for a decision have not yet been achieved, but the entrepreneur is attempting to achieve these specifications, since the cost of added information is less than its value. Involuntary learning, the new category added by the IMS, is one in which the cost of added information exceeds its value, but some outside force requires that the learning process continue. The inaction state exists when the cost of added knowledge exceeds its value and no further learning occurs. Finally, forced action occurs when the specifications for a deci- sion are not yet fulfilled, but some outside force makes it necessary to take action. Expectation Horizons Aside from a belief that different decisions regarding the business plan, and perhaps also similar decisions regarding different product outputs, are carried out with different time periods in view, there is little known of expectation horizons 'that can guide an empirical study. For example, Tinbergen suggests that those expec- tations pertaining to the near future are more important than those relating to a further periodml/ This is by no means obvious. It is not difficult to illustrate situations in which, say, important resource commitments take place at l/ J. Tinbergen, "The Notions of Horizon and Expectancy in Dynamic Economics," Econometrica, xol. 1 (1933), p. 247. 13 time to in response to expectations for a very distant time t1. Tinbergen does, however, make a suggestion which may be of value in empirical problems concerning expecta- tions: "As a first approximation it might be supposed that only the expectances relating to a certain time period (the "horizon") are of importance, and all of the same importance."l/ Tinbergen goes on to suggest that the entrepreneur can be visualized as forming an expectation at a moment t for the period t to t +vr} After realizing part of this plan, an expectation is formulated at a later date t + l for the period t + l to t +3’+ 1. If, as seems likely, different horizons are applicable to different types of entrepreneurial decisions, then a problem of empirical import will find it useful to deal with expectations for different periods in the future. This thesis attempts to derive expected price series which enable one to deal with horizons of different length. The manner in which these expected prices are developed is discussed in Chapter 4. y I-bid. Italics added. CHAPTER 3 PRICE EXPECTATIONS BY FARMERS The concept of an expectation has long been recognized. "But the introduction of expectations only really begins to be important when they are not implicitly or explicitly all assumed to be perfectly correct or in the main approximately correct.Wl/ Nevertheless, it is only in relatively recent years that economists have be- come interested in the models which entrepreneurs use to form expectations, and the variables which enter into these models. The following discussion attempts to indi- cate some of the important characteristics of expectation models used by farmers. Some Actual and Potential Expectation Models An early empirical study of price expectations is that of Coase and FowlerEQ/In an earlier studyrl/ they examined and rejected the assumption that farmers assume that present costs and prices will continue unchanged in the future. In their 1937 article, they report on a study which examined five different hypotheses regarding the relevant variables in the formation of expectations. The .l/ T. W. Hutchison,.A Review of Economic Doctrines 1870- 1929 (Oxford: ClarendOn‘Press, 1953), p. 81. 2/ R. H. Coase and R. F. Fowler, "The Pig-Cycle in Great Britain: An Explanation," Economica, Vol. 4 (1937), pp. 55-82. 2/’"Bacon Production and the Pig-Cycle in Great Britain," Economica, Vol. 2 (1935) cited by ibid. p. 55. 9 14 15 first four of these indicate several relatively simple relationships between future prices on the one hand and past or present prices on the other. The fifth assumption is that future prices and costs cannot "be determined in a simple form from existing or past prices and costs."l/b The conclusion at which they arrive is that the fifth assump- tion "seems to be the only view which, on the evidence available, can be held."3/ A more recent study is that of Darcovich and Headyag/ They report an investigation dealing with fourteen expectation models, of which eleven are possible means of developing price expectations. The latter are: (1) Average Price Model. The mean of the series is projected into the next year as the expected price. (2) Normal Price Model. This model is based on some past period. It implies that some constant price other than the mean is used as the estimate of expected price for the following year. (3) Random Price Model. A value is selected at random from past observed prices and used as the estimate of expected price for the following year. l/ Coase and Fowler,,"The Pig-Cycle in Great Britain: An Explanation," op..cit., p. 58. g/ Ibid., p. 73. §/'William Darcovich and Earl O. Heady, Application of Expectation Models to Livestock and Crop‘Prices and Products, Ia. Agr. Exp. Sta.7Res. Bul. 438, i956, p. 738. 16 (4) Current-Year Price Model. The current price is projected ahead as the expected price for the following year. (5) Moving-Average Price Model. A five-year moving average of the price series is projected ahead for the sixth year. (6) Weighted-Moving Average Price Model. This model uses a five-year average which weights the most recent year with a weight of four and each of the four earlier years with a weight of one to provide an estimate of expected price for the sixth year. (7) Trend Price Model. The linear trend between two consecutive years is added to the price of the second year to provide the expected price for the third year. (8) Reverse-Trend Price Model. The linear trend between two consecutive years is subtracted from the price of the second year to provide the expected price for the third year. (9) Parallel Price Model. The price expected in the following year is estimated from some past period of similar (parallel) circumstances. (10) Futures Price Model. The futures market is used to provide as estimate of the price expected next year. (11) Outlook Price Model. The expected price is estimated on the basis of available outlook information 17 issued by federal and/or state agencies.l/ Darcovich and Heady carry out an empirical evalua- tion of models (1), (3), (4), (5), (6), (7), (8), (9), (11) on five selected livestock products - steers, hogs, lambs, eggs and butterfat. The conclusion is that, for these livestock products, the outlook model performs better than any of the others for all commodities but one, using data from the 1917-50 period.2/ Using the absolute mean error criterion, Darcovich and Heady rank the nine models in the following order as price expectation models for livestock, from best to worst: (1) outlook, (2) current year, (3) parallel, (4) weighted moving average, (5) trend, (6) moving average, (7) reverse trend, (8) random, (9) average. They also test the models on two other criteria. One is the percentage of extreme errors (i.e., the percentage of years in which the price and the expectation differed by 35 per cent or more) and the other is the coefficient of the range. The latter is l/ Ibid., p. 739. Darcovich and Heady limit the outlook moaeI to using information having as its source a governmental body. In the study undertaken here and reported below, the source of information is not so restricted, although federal government agencies are found to be the most important information source. 2/ Ibid , Table 7, p. 745. The outlook model shows a Iower absolute mean error than any of the other ght models tested on the five commodities with the one exception that the absolute mean error for hogs is $2.19 for the current-year model and $2.24 for the outlook model. The range of absolute mean error for hogs is $2.19 to $5.00 for the nine models. v A 1 .wuo ~‘L‘u . uA4: “new .01- ‘v¢?, i... has P7." to... he... I. /2/ «It s I I-.. - fi/s .\ 18 "the range of the errors expressed as a percent of the mean of the series.Wl/ On both of these criteria, the outlook model is again ranked first among the models tested. The models achieving the first four ranks are the same as those achieving the first four ranks on the absolute mean error criterion, although the relative position of models ranked 2, 3, and 4, is altered in the case of the coefficient of the range criterion. The nine expectation models are also compared with respect to nine cropsré/ The weighted-moving average model ranks first among the nine on all three criteria; absolute mean error, percentage of extreme errors and coefficient of the range. The outlook model ranks 2, 2,and 4.5 respec- tively on these three criteria. On the absolute mean error criterion, the outlook model is ranked 1 or 2 for all crops except soybeans, for which it is ranked 3. On the percen- tage of extreme errors criterion, the outlook model is ranked 2 or 3 for all commodities except cotton and tobacco, for which it is ranked 4. Finally, on the coefficient of the range criterion, the outlook model is ranked 2, 3, 5, 6, or 8 for the nine crops compared. The empirical evalua- tion of the crop models also uses data for the 1917-50 period. _1_/ Ibid., p. 746. 2/ The crops used in the comparison are corn, oats, hay, wheat, potatoes, flax, cotton, soybeans and tobacco. ...,- 0‘! a... \ ‘ 1 'fi' ~.,1 i“ 5..- (I, " (x J .‘ \~ 15*- 19 The authors comment on the "favorable showing"l/ of the outlook model in providing expectations for live- stock products. To only a slightly lesser extent, the outlook model appears to be a relatively accurate mean of prediction also in the case of crop prices. Futures Price Model Despite the claim that ”a 'futures price model' is tested on several series of crop prices,"§/ Heady and Darcovich report no empirical evaluation of price predic- tion for a futures price model. Nevertheless, there is evidence that the futures market does not provide a parti- cularly efficient expectation model. Heady, for example, argues that futures prices may provide a basis for some farm production decisions, but only those of a short run nature: Futures provide the basis for short-run production decisions only. They are not available for prices extending over a period of several years ... . However trading in futures transactions does not exist for a large number of farm commodities. Where futures _ quotations are available they are closely tied to spot (current) prices ... . Accordingly, spot prices becomes nearly as efficient as the futures prices in forming expectations for productialhlfle year ahead.3/ Working makes a similar point, using wheat futures as an example. He points out that the May and July futures l/ Darcovich and Heady, op. cit., p. 747. g/Ibid., p. 738. 2/ Earl O. Heady, Economics of Agricultural Production and Resource Use (EngiewoodCIiffs, N.J.: Prentice-Hall, ,p. 3. 20 are, respectively, an old-crop futureanja new-crop future. The price of the former should be related to wheat available before harvest, and to conditions pertinent to the current crop-year. The price of the July future should be influenced by anticipations regarding the upcoming croph The difference between these two futures should, on this view, depend largely on the expected size of the approaching harvest. The difference should change also from week to week or from month to month with changes in crop prospects. Such opinions with respect to the behavior of the relations between the prices of the May and the July futures are belied by the facts. Whether the approach- ing harvest is expected to be large or ... small makes no statistically measureable difference in the relatio s between the prices of the May and of the July future.l Working goes on to state that it "is not true that futures prices afford forecasts of price changes in the sense in which one speaks of the price forecast of a market analyst."§/ He argues that conventional theory, which has assumed that futures prices provide a useful expectation, has erred in not realizing that spot prices are as much influenced by anticipations of the future as are futures prices.2/ D. Gale Johnson makes several important points l/ Holbrook Working, "Quotations on Commodity Futures as Price Forecasts," Econometrica, Vol. 10 (1942), p. 41. g/ Ibid., p. 49. g/ Ibid., p. 50. 21 regarding the uSe of the futures market to provide price expectations. Johnson states that, although some expecta- tion information can be obtained from futures markets, "This procedure ... is not as fruitful as might be supposed."l/ The first reason is that quoted above, namely that in commo- dities where stocks are held in important volume, both the cash price and the price on the futures market are futures prices.2/ Second, the usefulness of futures prices in forming expectations is further limited because "in many of the futures markets a futures is not active from planning time until harvest. The December corn futures is usually inactive until June, and the July wheat futures is usually not active until late October.W§/ A third factor limiting the applicability of futures prices to the formation of price expectations is that it "is difficult to imagine the functioning of a futures market for perishable crops or livestock.Wfl/ Johnson states that the presence of the high degree of l/ D. Gale Johnson, Forward Prices for Agriculture (Chicago: University of Chicago Press, I947), p. 82. 2/ Ibid, _3_/ Ibid., p. 128. 41 Ibid. Johnson recognizes, of course, the existence of futures markets for some livestock products. This third factor suggests, however, that the prices on such markets are not likely to be good approximations to farmers' expectations. 22 price uncertainty associated with these products would lead processors to be wary of operating in such a futures market to any extent, because of the danger of incurring large capital losses. This could perhaps be overcome by the existence of a risk discount in the futures market, but the discount would have to be so large that a reduction in farmer participation would occur. A Study of Farm Expectations The Interstate Managerial Survey (IMS), a seven- state survey which grew out of the activities of the North Central Farm Management Research Committee (now NCR-4), deals with the expectation models used by farmers to develop their anticipations of future product and input prices, and to develop expectations with respect to other important variables in the operation of their farm busi- nesses. Pertinent data are reported by Partenheimer and by Partenheimer and Bell.l/ Partenheimer and Bell discuss their results regard- ing product price expectations in terms of "specific product expectations" and "general product expectations", the latter lacking reference to a particular commodity. They report that the most widely used expectation models can be classified as supply, government action or supply- demand models. The only other models as important as any l/anrl J. Partenheimer, Some Expectation Models Used by Selected Groups of Midwestern Farmers (Unpublished PHID. the§is,1«ichigan StateIUniverSity, 1959) and Earl J. Partenheimer and Robert D. Bell, op. cit., pp. 85-104. 23 of these three occur in the general product expectations, in which business activity and war models are found to be approximately as important as a government action model.l/ For the specific product expectations, the supply, govern- ment action and supply-demand models are indicated, by the IMS, as being used by 67.5, 31.0 and 17.0 per cent of the respondents, respectively. For the general product expec- tations, the respective percentages are 55.7, 19.6 and 28.0. In addition, the war model and the business activity model are attributed to 20.9 and 20.3 per cent of the farmers, respectively.3/ This is supported in a study by Kaldor and Heady, who note: "It became apparent at an early stage in the field work that no single procedure [for forming expectations] was used by all farmers. More- over, it was evident that the same farmer used more than one procedure ... ."2/ Pretests for the IMS, using eight expectation models presented by Heady.i/ reveal that the majority of farmers studied do not use these simple types of models.§/ l/ Partenheimer and Bell, op. cit., p. 89. 2/ Ibid. The percentages are over 100 in both cases since farmers tended to use more than one type of expectation model. No other expectation model was cited by as much as 10 per cent of the respondents. 9/ D. R. Kaldor and E. o. Heady, An Exploratog Study of ‘Ekpectations, Uncertainty and Farm‘Plans in Southern IOwa Agriculture,7Ia. Agr.‘EXp. Sta. Res.“Bul. 408, 1954. fi/'Heady, o . cit., pp. 479f. Similar models are presented in Darcovich and Heady, op. cit., pp. 738-740, and are discussed above. 2/ Partenheimer and Bell, op. cit., p. 88. 24 Even the outlook model appears not to be used, if we inter- pret this model to mean the adoption of expectations which are developed by the land-grant colleges and other institu- tions using similar prediction techniques. "IMS results do not indicate that farmers blindly accept price predictions by these organizations as a basis for planning."l/ At the same time, however, the IMS does provide evidence of a considerable measure of economic literacy among farmers: It would appear that Heady has underemphasized the effect of the economic education that has been carried on through the extension service, government programs, farm magazines, non-governmental fiarm organizations, and other such sources. The IMS gives evidence that farmers are more sophisticated economi- cally than he has presumed at the time he wrote his text on production economics ... Thus, farmers apparently make attempts to forecast the future, even though they may be unwilling to accept wholly the forecasts of the future prepared for them by academic or government organizations. Expectations and Distributed Lags In a number of publications, the earliestin 1956, Nerlove has been an exponent of the use of distributed lag models for various purposes, including the formation of price expectations. The use of distributed lags originated with Irving Fisher in 1925, and has since been l/ Partenheimer, op. cit., p. 26. 3/ Ibid . 25 adapted to a variety of problems.l/ In discussing the causes of distributed lags, Koyck cites what he calls objective reasons, which include technological and institutional factors, and subjective reasons, such as habit.§/ The technological influences are associated with the durability of investment goods or consumer durable goods. The relationship of, say, investment to salEs may not be a once-for-all increase in investment associated with an increase in sales. A sales increase may lead to a change in investment only after a period of operation at excess capacity, after the entrepreneur has become assured that the new sales level is permanent. Institutional factors in distributed lags arise as a result of legal and customary barriers to immediate change, such as the fact that some prices may be incapable of reacting immediately to changed market conditions be- cause Of contractual limitations to an immediate change in price. The factors most important in relating distributed lags to expected price are, however, influences of imperfect knowledge or psychological inertia. These subjective reasons arise because: "(1) Habit is a powerful source ... l/'MarC' Nerlove, "Distributed Lags and Estimation of Long- Run Supply and Demand Elasticities: Theoretical Considerations," ournal of Farm Economics, Vol. 40 (May 1958), p. 30 . g/ L. M. Koyck, Distributed Lags and Investment Analysis . (Amsterdam: NOrtHZHOIIand‘PublisHing COmpany, 1954), pp. 6-9. 26 [and] (2) Changes in economic variables may be considered only temporary.W$/ In any empirical problem dealing with distributed lags, however, there may well be both of what Koyck refers to as objective and subjective factors. The examples above illustrate that the "objective" versus "subjective" factors, whatever heuristic value they may have, need not provide separate reasons for distributed lags., The expected price model Nerlove proposes is as follows:§/ P}: = P’Ll + % (Pt_1 - P:_1) or. 8:: 1 (1) where P: a the price expected in period t.§/ l/'Marc Nerlove, Distributed Lags and Demand Analysis, U.S. Dept. of Agriculture‘HandBOOkINo.*l4l7(WasHington: U.S. Government Printing Office, 1958), p. 5. Nerlove lists the factors causing distributed lags as technological, institutional and psychological. Nevertheless, Koyck and Nerlove are conSistent since Nerlove's psychological factors are equivalent to Koyck's imperfect knowledge and psychological factors. 2/ For example, see Nerlove, The Dynamics of Supply: Estimation of Farmers' Response totPriCe CBaItimore: JOhnsFHOpkins, l9587 pp. 52—55. g/ In "Time Series Analysis of the Supply of Agricultural Products" in E. O. Heady et al., (eds.), Agricultural Supply Functions - Estimating Techniques and Interpreta- tiOn (Ames: IOWa State—University Press, 1961), p. 46, NerIove refers to Pf simply as "the price expected in period t." He consistently refers to it, in The Dynamics of Supply, as the expectation of "long-run" normal price. e n erpretation as the price expected in period t is preferable, since "long-run" normal price carries the connotation that the expected price is more appropriate to long- than short-run output adjustments. In fact, Nerlove uses his model to predict annual acreage plant- ings for-several crops. 27 Pt = actual price. The formulation of equation (1) is readily amenable to statement in terms of "variables which can be observed."l/ The following version relies only on observables:§/ 13’1"; =F>Pt_1 +fi(1-,8)Pt_2 +F(1-fi)2Pt-3 + (2) The reasons Nerlove chooses his formulation over a "general distributed lagWE/ model of the form 50 P: = E; ai Pt-i + ut (3) are likely twofold. First, the model he uses is derived from and consistent with his assumption of entrepreneurial behavior regarding expectations. This assumption, illustr- ated by equation (1), states that in each period entrepre- neurs revise their expectations of future price by a constant proportion, % , of the difference between last period's actual and last period's expected price. Thus, when F" 0, expected price is invariant with respect to actual price, and when.% =’l, expected price is last period's actual price. Second, the general form of the model may not be satisfactory if estimates of the coefficients of the successive Pt-i are desired, since intercorrelation among the Pt-i may decrease the reliability of the individual l/ Nerlove, The Dynamics of Supply: Estimation of Farmers' Response totPrice, 9p. cit., p. 24. 3/ Ibid., pp. 54-55. 2/ L. R. Klein, "The Estimation of Distributed Lags’n Econometrica, Vol. 26(1958), p. 55. 28 coefficients a1. If, however, the estimation of the ai in equation (3) is not a major concern, but the concern is with obtaining estimates of expected price, a general dis- tributed lag of the form of (3) may provide adequate estimates of Pé, since "sums or other functions of the parameters may be estimated with a fair degree of precision even though individual components [the a1] are quite un- reliable ... ."l/ A more important criticism of the Nerlove approach relates to the suitability of a model such as (l) for approximating farmers' price anticipations. Johnson asks the question: Do we really believe that the next year's expected price is this year's expected price plus some proportion (constant from year to year) of the difference between last year's actual and last year's expected normal price regardless of wars, price-support activities, inflations, economic collapse, changing foreign demand, strikes, and institutional adjustments - all of which were important in the 1909-32 period studied by Nerlove?2 Johnson goes on to state that "what is known and suspected about the formation of price expectations and production adjustments strongly indicates that Nerlove's % and 3' [the coefficient of adjustment] are oversimplifica- tions.fi§/ ;/ Ibid,, 2/ Glenn L. Johnson, Book Review of The Dynamics of Supply by Marc Nerlove, Agricultural Economics Research, Volume 12 (January,“l960), p. 26. 3/ Ibid., p. 27. 29 Johnson points to information from the IMSl/ which indicates a "more complex adjustment than can be handled by a simple ... [coefficient] which is constant from year to year.“3/ This receives support from Partenheimer, who notes that "the assumptions Nerlove makes still regard farmers to be quite naive.fi§/ Models such as Nerlove's emphasize the importance of past and present events on expected price, and to this extent are not inconsistent with results from the IMS. However, the above evidence suggests that an important step in making available estimates of farmers' expectations involves consideration of more information than that used by Nerlove. It also suggests that information about the future is unlikely to be a simple function of present or past prices. Empirical Expected Price Series In a study which he prepared for the Committee on Economic Development, Glenn L. Johhson presents expected ‘l/ Reported by D. H. Boyne and G. L. Johnson, "A Partial Evaluation of Static Theory from Results of the Inter- state Managerial Survey," Journal of Farm Economics, Vol. 40 (May 1958), pp. 458-469. ‘2/ Johnson, Book Review of The Dynamics of Supply, op. cit. Another interesting source of support for this view is D. B. Williams, "Price Expectations and Reactions to Uncertainty by Farmers in Illinois," Journal of Farm 'Economics, Vol. 33 (1951), p. 22. Williams quotes from a farmer interview, the latter illustrating that past and future considerations about the weather, biological conditions and government programs entered into his price expectation for corn. _3_/ Op. cit., p. 9. 30 price series for the U.S. for eleven commodities.l/ These expected price series were calculated for Johnson by U.S.D.A. Personnel, and illustrate the prices they believed were expected by reasonably well-informed farmers for a post-war period, usually 1946-60. The eleven commodities are wheat, corn, cotton, potatoes, burley tobacco, dairy, hogs, beef, oranges, grapefruit and apples. These estimates of expected price "are really quantified opinions based on ‘conferences with persons whose main business is to appraise the outlook and current situations for the commodities involved."§/ These expected price series are important because, first, they postulate a considerable degree of economic literacy on the part of farmers, a literacy attested to by the IMS and, second, they recognize the apparent variety of factors which influenke price expectations. Nevertheless, two major difficulties are associated with the use of these expected prices in empirical analyses. First, the period of time spanned by the series is relatively short, shorter than that which may be required by some researchers inter- ested in using the series of expected prices. Second, there is no assurance that different individuals appraise the future sufficiently similarly to ensure interpersonal comparability of the estimates of expected price drawn up l/’Glenn L. Johnson, An Evaluation of U.S. Agricultural Policies and ProgramsL 1956 to 1960’CEast7Lansing: mimeo., 19617, Chapter 5. 3/ Ibid., p. 71. 31 by various persons. By independently developing other series of expected prices, a task undertaken in this thesis, the Johnson estimates of expected price can be used as a check on the series calculated in this study. CHAPTER 4 METHOD OF OBTAINING EXPECTED PRICES There are two main objectives of this thesis project. The first is to calculate expected prices for several future time spans for each of thirteen agricultural commo- dities, for use individually and for aggregation into indices of prices expected by farmers. The second objective is to make a preliminary evaluation of these expected prices and indices. The method employed under the first objective is discussed in this chapter, leaving until later a discussion of the tests. The chapter also draws together some of the background for the particular method of calculation chosen. Most of this is, however, implicit in the preceding chapter. The chapter concludes with a number of suggestions for those who, at some later time, may wish to use, modify or up-date the expected price data. Selection of the Method Darcovich and Heady comment, with respect to the mechanical models which they discuss, that their models may depart from reality because they assume that farmers do not learn from experience.l/ The work of Darcovich and Heady, of Heady, and the work in the IMS, reported above, suggest that it would be rational for farmers to use outlook information. Given information from the IMS which indicates a considerable degree of economic sophistication among l/ Darcovich and Heady, op. cit., p. 738. 32 33 farmers, it is likely that farmers incorporate outlook information and less formal guesses about the future in forming their production plans. The work of the IMS and others strongly indicates that farmers do in fact make estimates of future variables which relate to price. In addition, Nerlove and others provide evidence that the present and past are relied upon in planning for the future. The objective of calculating the expected price series being to approximate the prices which farmers did in fact anticipate, rather than to indicate the expecta- tion model which they should use (or should have used), it is important to incorporate all of the relevant information. First, the information about the future which evidence indicates is being used by farmers must be employed. Fur- ther evidence for the incorporation into expected prices of more price information and data about the future derives from the testimony, in the IMS, of considerable economic sophistication on the part of farmers. Economi- cally literate farmers are less likely to reject any relevant information which is available. Second, the information above the past and present, which also appears to be used by farmers, must be incorporated into the estimates of expected price. Expected Price Series For Commodities The expectation models of farmers use the past as one of the guides to the future. An attempt to approximate 34 the expected prices of farmers must acknowledge, however, that such expectations are likely to be modified by anti- cipations about the future. One means of incorporating these types of information is to use a two-stage procedure: first,to develop mechanical estimates of expected price based on past and present prices'l/’ second, to be prepared to alter the mechanical estimates of expected price in order to ensure that they are consistent with outlook information and other estimates of relevant variables in the future. This is the method chosen in this thesis. The model chosen provides mechanical estimates of the expected price in year t (P4), as a function of prices in the preceding years: 'Pt = a0 + a1 Pt-1 + a2 Pt_2+ ... The variables Pt_1, Pf-2, ... indicate actual prices in the preceding years. This "general distributed lag" model, to use Kleinfs term, is different from the distributed lag model used by Nerlove and others. Since the interest here is in estimating a function of the independent variables, intercorrelation among the successive Pt-i may not seriously impair the reliability of the mechanical estimates of expected price (Pt). Further, the above equation provides a very general form of the relationship between expected price and past years' actual prices. l/ The term "meChanical" is used in this thesis to indicate expected prices relying solely on a constant term and on ‘wéighted.previous.year's prices of,the,oommodity-for.- whiChjeXpectations'are being estimated.. The meChanical estimates,might,be-described, more concisely but less briefly, as "weighted, previous year, own-price" estimates of expected price. .35 After developing the mechanical estimates of expected price (Pt), these estimates’Pt (t = 1917, ..., 1962) are modified, where appropriate, in the light of available outlook information, to indicate the E§.22£S expectations held by reasonably well-informed farmers (denoted EPt). The expected price series are calculated for thirteen commodities: corn, wheat, potatoes, apples, oranges, cotton, tobacco, soybeans, beef, pork,manufac- tured milk, eggs and chicken meat. For each commodity, three series of expected prices are developed, represen- ting, for each year 1917-62, (1) the price expected for * that year,l/i (2) the price expected for that year and the following four years, and (3) the price expected for that year and the following nine years. The above method is chosen for several reasons. First, the method allows a ready comparison of the expected prices developed in this study with those developed under a general form of an own-price, mechanical model. Second, the method indicates that the expected prices of this study are not a sharp departure from previous work. Rather, they represent a logical progression from past investigations, in the direction of incorporating more in- formation in the expected price estimates. Third, the method indicates a degree of suspicion regarding the use i/ In the case of hogs, the prices expected for both spring and fall pig crops are developed in lieu of a single price expectation for a one-year period. 36 of econometric models to approximate farmers' price expec- tations. In spite of the physical and intellectural resources available to it, the U.S.D.A. continues to sub- ject all of its "econometric" estimates of expected price to judgment by its Outlook and Situation Board. Perhaps an important reason for this procedure is that, in expected price, a non-observable variable is being estimated. As one develops models more accurate in predicting actual prices, one may simultaneously be developing models less accurate in approximating farmers' anticipations. Also, there is the problem that some events, significant for expectations, are observed with very few degrees of freedom. The method of this study is at least as capable of dealing with such occurrences as is an econometric model for estimating expected prices. One-Year Expected Price Series The one-year series of expected prices, calculated for each of the thirteen commodities, indicate the price anticipated for each year t (t = 1917, ..., 1962) as follows: (1) For livestock and livestock products except hogs, each expected price is the price anticipated for calendar year t at the beginning of calendar year t. For hogs, two expected price series for one year are derived, representing (a) the price expected for pigs farrowed December through May, as anticipated at the beginning of this period, and (b) the price expected for pigs farrowed June through November, as anticipated at the beginning of 37 this period. (2) For field crops, each expected price is the price anticipated in the spring of year t for the crop year commencing in the summer or fall or year t. (3) For tree fruits, each expected price is the price anticipated in the spring of year t for the crop year commencing at harvest in year t. In order to develop the mechanical estimates of expected price, the following notation can be used: Pt = actual price of a commodity in year t (t = 1917, ..., 1962). ‘P} = mechanical estimate of expected price for year t (t = 1917, .... 1962). Five models are then fitted to the actual annual prices for each commodity: (1) Pt = at. + d,Pt_1 + “t1. (2) Pt = a(. + K, Pt_1 + d, Pt-2 + utg (5) Pt 4, + A,Pt-1 + “<2. Pt-2 + H, + gab/P195 + ut5 These result in five possible equations for obtaining the mechanical estimates of expected price: A (6) Pt = 80 + a1 Pt-l A (7) Pt = a0 + a1 Pt—l + a2 Pt-Z /\ (10) Pt = a0 + a1 Pt-l + a2 Pt-2 +.-.+ as Pt-s. 38 One of the equations (6), ..., (10) is selected as the means for obtaining the mechanical estimates of expected price. The bases for selection are as follows: FirSt, consideration is given to the equation (among the five) which has the highest level of R2. Second, consideration is given to selecting an equation with a demonstrated ability to reflect changes which have occurred in the direction of the trend of price. Third, other things being equal, an equation in which all of the regression coefficients are significantly different from zero is chosen. The equation selected is then used to provide 35 2333 mechanical estimates of expected price for each year 1917 through 1962. Given these mechanical estimates (Pf), the appropriateness of each'Pt is judged in the light of outlook information. If any value‘P} is found to be incon- sistent with outlook information, that value is changed to reflect ’ such information. This procedure is employed for each of the thirteen commodities. Specific examples of the outlook data and informa- tion used in this study are included in the bibliography to this thesis. Generally, the data and information are from publications by the United States Department of Agriculture, particularly the Situation reports for commo- dities, the Demand and Price Situation, and various bulletins pertaining to each of the commodities. The outlook method used in this thesis is an attempt 39 to evaluate the outlook data and information in quantitative. terms. The outlook reports frequently discuss probable price changes in terms such as slight, moderate, or large. In some such instances, the predicted price change, in dollars or in percentage terms, is understandable from the context. In others, this is not so, and it is necessary to infer quantitative amounts by referring to other instances in which it is possible to establish the numerical meaning of slight, moderate or large. For slight or for large changes, the U.S.D.A. outlook statements are quite consis- tent. A "slight" change usually indicates one of about 5 per cent or less. A "large" change usually indicates one of 20 per cent or more.l/ The range of values between these extremes is, in this study, considered as follows: A moderate change is one of about 15 per cent, and a slight to moderate change is one of about 10 per cent. Five-Year Expected Price Series The five-year series of expected prices, calculated for each of the thirteen commodities, indicate the average price to producers anticipated for a five-year period t, t+l, ..., t+4 (t = 1917, ..., 1962) as follows: (1) For livestock and livestock products, each expected price for the following five-year period is the 1/ To this extent, these findings are consistent with usage by Darcovich and Heady, who report the following: slight - 5 per cent; fairly large - 15 per cent: large - 20 per cent or more. See Darcovich and Heady, op. cit., p. 739. 40 price anticipated, at the beginning of calendar year t, for the calendar years t, t+1, t+2, t+3 and t+4. (2) For field crops, each expected price for the following five-year period is the average price anticipated at planting time in year t for the crop years t, t+1, t+2, t+3 and t+4, the crop year t commencing in the summer or autumn of calendar year t. (3) For tree fruits, each expected price for the following five-year period is the average price anticipated in the spring of year t for the crop years t, t+1, t+2, t+3 and t+4, the crop year t similarly commencing in the summer or autumn of calendar year t. In order to develop the mechanical estimates of expected price, the following notation is introduced: P5t =Pt t Pt+l + Pt+2 t Pt+3 t Pt+4 = an equally 5 weighted average of undeflated prices to producers during a five-year period t, t+1, ..., t+4 (t = 1917, ..., 1958). ’th = mechanical estimate of P5t- Five equations are fitted to the actual price data for each commodity. These equations are similar to equations (6) through (10), the only difference being that the depen- dent variable heie is P5t. One of the five equations is selected to provide mechanical estimates of expected price (Pst). The values‘PBt for each commodity are then altered, where appropriate, to ensure consistency with outhok information. The result is a series of five-year expected 41 prices (EP5t) for each commodityhl/ Ten-Year Expected Price Series The ten-year series of expected prices, calculated for each of the thirteen commodities, indicate the average price to producers anticipated for a ten-year period t, t+1, ..., t+9 (t = 1917, .... 1962) as follows: (1) For livestock and liveStock products, each expected price for the following ten-year period is the price anticipated, at the beginning of the calendar year t, for the calendar years t, t+1, t+2, t+3, ..., t+8 and t+9. (2) For field crops, each expected price for the following ten-year period is the average price anticipated at planting time in year t for the crop years t, t+1, t+2, ..., t+8, and t+9, the crop year t commencing in the summer or autumn of calendar year t. (3) For tree fruits, each expected price for the following ten-year period is the average price anticipated in the spring of year t for the crop years t, t+l t+2 9 9 ..., t+8 and t+9, the crop year t similarly commencing in the summer or autumn of calendar year t. PIOt = Pt + Pt+1 + Pt+2firg ... + Pt+8 + Pt+9 = an equally weighted average of undeflated prices to producers during a ten-year period t, t+1, ..., t+9, (t = 1917, l... 1953). l/'The procedure is similar to that used to develop the one-year expected prices for each commodity. See supra, Pp. 37‘39. 42 {SIOt = mechanical estimate of Plot- As in the one-year and five-year expected price series, five equations are fitted to the actual price data for each commodity. These equations are similar to equa- tions (6) through (10), the only difference being that the dependent variable is P10t° One of the five equations is selected to provide mechanical estimates of expected price (Plot). The values’Plot are altered, where appropriate, to ensure consistency with outlook information. The result is a series of ten-year expected prices (Eplot) for each commodity.l/ Aggregate Indices of Expected Prices Three aggregate indices of expected prices are constructed, representing price expectations for the aggre- gate of agricultural output for that year, for that year and the following four years and for that year and the following nine years. These one-year, five-year and ten-year aggregate indices rely on the thirteen commodity indices for the one-year, five-year and ten-year periods, respectively. Each of the three aggregate indices illustrates the influ- ence of expected price on ten types of agricultural production. The thirteen commodity indices enter into the aggregate index in proportion to the value of the type classifications which they represent. The ten type $/'The procedure is similar to that used to develop the one- year expected prices (EPt) for each commodity. See supra, PP. 37-39. 43 classifications and the commodity index or indices repre- senting each are as follows: ‘ Commodity(-ies) Representing Type of Production Type of Production 1. Feed Grains Corn 2. Food Grains Wheat 3. Vegetables Potatoes 4. Fruits and Nuts Apples, Oranges 5. Cotton Cotton 6. Tobacco Tbbacco 7. Oil-bearing Crops Soybeans 8. Meat Animals Beef, Hogs 9. Dairy Products Manufactured Milk 10. Poultry, Eggs Eggs, Chicken Meat The weights used for the prices expected in years 1917-40 (and for the five-year and ten-year periods commen- cing 1917-40) are the value of sales of each type classifi- cation in the 1935-39 period. 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OOH /\ - - oaa mooa umownowz o» oaoa ummwuofiz ..m.D .moowum wmwum>< ummwnm>wm Hespo< mo Koocm new mwofium oovommxm.umm>nm>fim mo xmocH ammzpwm cowaueoeoo "N mHSMMm (001 = 6V'LV6I) XQPUI 69 and new» mm. . an. be. me. om. mm. . an. em. mmoa h P P 4 4 1 1 4 #0. 01m. .umaau¢mmumm> m ovumnfioapcm mm .6H .9 umm> co nonopomo nowuom umm>ncop on» 4' b t 1 F D p D mom mowua ompomaxm.llill .6m .9 umm> _ém so omumpcmo oo«umm umo>ncmp on» How :o¢ momma mmmuo>m Heapo< .dm 00a / /\ bHH .184 .Hoon 6“ mmofi ..m.: .mmufium mmmum> EP 1 .0t lOt lot 1955 1.79 1.85 1956 1.72 1.85 1957 1.77 1.85 1958 1.75 1.80 1959 1.63 1.70 1960 1.82 1.80 1961 1.74 1.70 1962 1.66 1.70 180 Table 48: Ten-Year Expected Prices For Soybeans, U.S., 1917-62 Average Price Regression Expected Received By Estimate of Price Year Farmers ($/bu.) Expected Price t P10t Plot EP10t 1916 1917 2.58 1.95 2.15 1918 2.45 2.31 2.35 1919 2.32 2.32 2.35 1920 2.15 2.44 2.35 1921 2.02 2.13 2,45 1922 1.85 1.94 2.25 1923 1.71 1.89 2.15 1924 1.57 1.99 2.15 1925 1.43 2.05 2.20 1926 1.26 2.01 2.15 1927 1.19 1.89 2.15 1928 1.10 1.82 1.95 1929 .97 1.84 1.90 1930 .87 1.84 1.75 1931 .82 1.66 1.66 1932 .92 1.34 1.10 1933 1.03 1.35 .95 1934 1.12 1.50 1.05 1935 1.22 1.52 1.10 1936 1.36 1.42 1.05 1937 1.49 1.62 1.25 1938 1.74 1.47 1.25 1939 1.90 1.40 1.15 1940 2.03 1.45 1.15 1941 2.19 1.48 1.25 1942 2.31 1.72 1.45 1943 2.42 1.74 1.55 1944 2.51 1.82 1.65 1945 2.55 1.90 1.80 1946 2.57 1.91 1.80 1947 2.53 2.09 2.09 1948 2.40 2.37 2.37 1949 2.37 1.98 2.25 1950 2.35 1.94 2.20 1951 2.32 2.06 2.40 1952 2.27 2.15 2.35 1953 2.24 2.15 2.30 1954 2.15 2.30 181 Table 48 - Continued Average Price Regression Expected Received By Estimate of Price Year Farmers ($/bu.) Expected Price t P10t 10t EPlot 1955 2.05 2.20 1956 1.96 2.20 1957 1.95 2.15 1958 1.91 2.10 1959 1.88 2.10 1960 1.87 2.05 1961 1.93 2.10 1962 1.99 2.10 182 Table 49: Ten-Year Expected Prices For Tobacco, U.S.. 1917-62 Average Price Regression Expected Received By Estimate of Price Year Farmers (¢/1b.) Expected Price t P101: 81m EPlOt 1916 1917 21.5 20.2 19.0 1918 21.2 29.0 24.5 1919 20.4 32.7 27.5 1920 19.1 35.8 27.5 1921 18.7 22.6 24.0 1922 17.6 24.7 22.0 1923 16.3 27.8 21.5 1924 15.7 24.2 19.0 1925 16.0 24.2 18.0 1926 16.1 22.1 18.0 1927 16.7' 23.2 18.5 1928 16.6 25.8 19.0 1929 16.6 25.2 19.0 1930 16.3 23.5 18.0 1931 16.6 18.3 15.0 1932 18.5 13.9 15.0 1933 21.1 16.1 13.0 1934 23.9 18.5 15.5 1935 25.9 26.4 17.0 1936 28.4 23.6 19.0 1937 30.5 28.6 20.0 1938 32.8 25.5 20.0 1939 35.7 24.8 19.0 1940 38.7 20.8 19.0 1941 42.3 21.4 20.0 1942 44. 31.2 31.2 1943 46.. 41.2 37.0 1944 47.2 44.6 39.0 1945 .48.2 46.1 36.0 1946 49.2 46.6 36.0 1947 50.1 49.0 40.0 1948 51.3 47.6 44.0 1949 52.5 52.0 45.0 1950 53.7 49.8 48.0 '1951 54.6 52.3 49.0 1952 55.9 54.7 49.0 1953 56.8 53.5 49.0 1954 55.8 50.0 183 Table 49 - Continued Average Price Regression Expected Received By Estimate of Price Year Farmers (c/lb.) Expected Price /\ t P10t Plot EP10t 1955 54.7 52.0 1956 56.7 53.0 1957 57.2 55.0 1958 59.4 56.5 1959 63.0 59.0 1960 61.5 59.0 1961 64.0 60.0 1962 66.8 60.0 184 Table 50: Ten-Year Expected Prices For Wheat, U.S., 1917-62 Average Price Regression Expected Received By Estimate of Price Year Farmers ($/bu.) Expected Price t P1Ot P10t EPlOt 1916 1917 1.49 1.51 1.51 1918 1.40 1.82 1.82 1919 1.29 1.66 1.90 1920 1.18 1.73 1.90 1921 1.07 1.46 1.46 1922 1.00 .98 .98 1923 .94 1.16 1.16 1924 .92 1.15 1.15 1925 .88 1.39 1.30 1926 .82 1.43 1.30 1927 .80 1.22 1.25 1928 .78 1.26 1.20 1929 .74 1.14 1.14 1930 .71 1.22 1.00 1931 .71 .94 .94 1932 .76 .84 .70 1933 .83 .92 .70 1934 .90 1.18 .85 1935 .95 1.15 .82 1936 1.02 1.12 .90 1937 1.11 1.25 .95 1938 1.24 1.16 .95 1939 1.38 .89 .89 1940 1.50 1.09 .90 1941 1.63 1.04 .90 1942 1.75 1.24 1.15 1943 1.85 1.27 1.27 1944 1.92 1.42 1.35 1945 1.99 1.39 1.30 1946 2.04 1.43 1.35 1947 2.05 1.70 1.60 1948 2.01 1.87 1.75 1949 1.99 1.54 1.75 1950 1.98 1.55 1.80 1951 1.95 1.66 1.95 1952 1.92 1.71 1.95 1953 1.66 1.95 1954 1.64 1.95 185 Table 50 - Continued Average Price fiRegression Expected Received By Estimate of Price Year Farmers ($/bu.) Expected Price t Plot ,_ 10t EPlOt 1955 1.71 2.05 1956 1.59 1.85 1957 1.61 1.90 1958 1.59 1.85 1959 1.47 1.75 1960 1.53 1.65 1961 1.52 1.62 1962 1.55 1.75 APPENDIX B COMMODITY NOTES FOR EXPECTED PRICES In order to develop the expected prices presented in this study, numerous publications have been examined in order to determine the actual position of each commodity with respect to relevant demand and supply variables. The procedure followed also attempts to guage prospective changes in these variables for each of the thirteen commodities dealt with in the study. In order to arrive at these expected values. and to facilitate checking them. some of the in- fluences on the expected price in each year were noted. The following pages present, for each of four commodities. a one—paragraph summary of information pertinent to the deve- lopment of the expected prices for each year. As noted in Chapter 4. it is on occasion necessary to interpret U.S.D.A. data given in such terms as "slight" or "large" rather than in quantitative terms. The conven- tion adopted is that "slight" indicates a change of five per cent or less. "slight to moderate" indicates a change of approximately ten per cent. "moderate" indicates a change of about fifteen per cent and "large" indicates a change of twenty per cent or more. The year-by-year notes for beef. hogs, corn and wheat, which follow, make a limited amount of use of this convention. The importance of the convention is much greater in establishing the approximate size of an expected change in price. and this can be seen by comparing the commodity notes which follow with the relevant expected prices, presented in Appendix A. 186 187 The numbers used in each paragraph refer to publi- cations listed at the end of this appendix under the title "References Cited." BEEF 1917 It is anticipated that the feeding of cattle during the winter 1916-17 will be less than usual, because of high feed costs [1, October 16, 1916, p. 4]. A high 1917 price is also supported by continued war demand for beef. and anticipation of a continued high level of industrial acti- vity [1, December 14, 1916, p. 4]. The prospect of a sharp decline in cattle prices following the war is discounted [1, September 11. 1916, p. 4]. 1918 A higher price is indicated by the need for higher meat production and a continued high level of demand [1. October 18. 1917]. probably more than offsetting the increas- ed cattle population at January 1, 1918 [13, p. 27]. 1919 A decline has occured in cattle population in the year prior to January 1. 1919 [13, p. 27]. 1920 It will be several years until European cattle population returns to its preawar level, but exports of meat products may thereafter decline [1. September 22, 1919, p. 2]. The longer-term expectation of price is further re- duced by the fact that late 1919 cattle shipments to farms 188 appear to have included a large proportion of cows and heifers[1, November 6, 1919. p. 2]. 1921 Late estimates indicate the 1920 corn crop may be- come the largest on record. Feed supplies will be ample and feeder prices are low [1. October 9. 1920]. The decline in cattle population at January 1. 1921 from the previous year indicates that the longer-term price may not decline sharply [13. p. 27]. 1922 Cattle inventory did not increase during 1921 [13, P. 27]. 1923 Substantial increases in sales of stocker and feeder cattle in the autumn of 1922 indicate that an increase in beef supply is likely for 1923. However. storage holdings of beef are lower than usual [2, November 1922, pp. 5. 11]. Partly due to decreased inventory of cattle on farms [14. p. 6]. the livestock outlook for 1923 is for a higher price [2. December 1922, p. 2]. 1924 The livestock population on farms at January 1, 1924 is below that of a year earlier [14. p. 6]. Urban demand is expected to continue strong [2, December 1923. p. 11]. 1925 Cattle numbers are again dom [14. p. 6]. It was also probable "that there will be a very considerable 189 decrease in the number of cattle fed for market this coming winter and this may result in higher prices for cattle dur- ing the first half of 1925." Pork marketings are also expected to be at'a slower rate [2, November 1924, p. 21]. The quantity of beef in storage has declined [2. December 1924. p. 7]. 1926 Cattle numbers at January 1, 1926 are below those' of a year earlier [14, p. 6]. Low corn prices and increased feeding will mitigate the likely price rise [2, December 1925. p. 21]. 1927 Cattle inventories at January 1, 1927 are more than two million head below a year earlier [14, p. 6]. Little change is anticipated in the level of aggregate demand [2, December 1926. p. 7]. The level of cattle feeding appears little different from the previous year [12. p. 31]. 1928 October 1. 1927. indications are for reduced cattle feeding during the winter 1927-28. although an expected drop in corn prices during the autumn of 1927 will likely limit the decline in cattle on feed [2, November 1927, p. 18]. Conditions about November 1 continue to bear out the pre- diction of less feeding [3. December 1927, p. 15]. The inventory of cattle on farms at January 1, 1928 is below that of a year earlier [14. p. 6]. 190 1929 Although early (July to September. 1928) movement of cattle to feeders was heavy, this is not expected to continue. Indications are for a slight increase in feeding in the Corn Belt and a decrease in the western feeding region [2, November 1928, pp. 14-15]. Livestock population at January 1, 1929 is above that of a year earlier by 1.5 million [14, p. 6]. 1930 Although possible impacts on employment are recog- nized. the crash in the securities market is not expected strongly to affect the cattle market. Nevertheless, there exists decreased industrial activity, above-average storage stocks of beef and other meats [2. November 1929. pp. 1-2, 22] and a substantial rise in cattle population on farms [14. p. 6]. 1931 The decline in farm prices has brought beef cattle to $6.41 per hundredweight at November, 1930. Due to drought. the 1930 corn crop is one-fifth below its average level [2, December 1930, PP. 14-15]. The drought is expected to re- duce feedingi/ and allow higher prices in 1931 (than those of November). particularly if range conditions improve sufficiently to prevent large forced marketings, and drought conditions have been alleviated in some sections of the country [2, November 1930. p. 6]. Cattle inventory has in- creased during the year by two million head [14. p. 6]. y It did not. See [12, p. 31]. 191 1932 Apparently in lange part due to financing difficulties, shipments of stocker and feeder cattle during early autumn, 1931. are below normal. An ample supply of low priced feed [2. November 1931, p. 12] is expected to lead to increased movement in later autumn [12, p. 31]. Cattle inventory has increased by 2.8 million during 1931 [14. p. 6]. 1933 Cattle inventory has increased each year since 1926. and increased slaughtering over the next few years (follow- ing 1932) is anticipated. "Prospects for an increased movement of stocker and feeder cattle this fall point to larger supplies of well-finished cattle during the spring and summer of 1933 than in the corresponding period this year" [2, September 1932. p. 2]. 1934 "Moderate improvement in the consumer demand for beef has been in evidence in recent months... [but] ... demand for beef during the remainder of 1933 will be adversely affected to some extent by the unusually large supplies of other meats available for consumption." Larger beef supplies are, how- ever, anticipated for early 1934, since fewer cattle are being put on feed [2, September 1933. p. 9]. Heavy slaughter is expected to continue for several years, enhanced by financial necessity and feed shortage in many areas [2, November 1933. p. 10]. 192 1935 Although the widespread drought of summer, 1934. was alleviated by autumn rains. feed supplies for winter 1934-35 are probably the smallest on record. Cattle population at the beginning of 1935 is below a year earlier. due to heavy marketings and large government purchases, the latter totalling 2.5 million by mid-September [2, October 1934, pp. 2-3]. "In view of the probable sharp curtail- ment in slaughter supplies of cattle and other meat animals during 1935. the general level of cattle prices is expected to be considerably higher than in 1934" [2, December 1934. P. 9]. 1936 Although total cattle population at January 1. 1936 is expected to be about the same as a year earlier, sales of grain fed cattle during 1936 are expected to be larger. This moderates the price rise due to the anticipated in- crease in consumer demand. Longer term price expectations are somewhat higher, but the rise is tempered by the pros- pect that 1936 slaughter will include relatively more steers and relatively fewer cows, heifers, and calves than in 1935 [2, November 1935, DP. 8-9]. 1937 The widespread drought of 1936 markedly reduced feed supplies. The probable rise in beef prflce is moderated. however. by the fact that there appear to be a larger than usual number of cattle ready for market in the spring and summer of 1937 [2, September 1936, pp. 4-5]. A decrease is 193 evident both in livestock feeding in late 1936 and early 1937, and in total numbers of cattle at January 1. 1937 (1.8 million below a year earlier) [14, p. 6], [12. p. 31]. 1938 A substantial increase in cattle feeding during the 1937-38 winter is anticipated. In combination with reduced consumer demand (which is expected, however. to improve in late 19380. some price reduction for the year 1938 is anti- cipated [2, December 1937. pp. 2, 6]. Cattle population declined during 1937 [14, p. 6]. 1939 A reduction in slaughter of cattle is forecast for 1939 [2, November 1938. p. 5]. The outlook for additional improvement in consumer demand for agricultural products in 1939 also supports a rise in price, although an anticipated increase in feeding might lead to as much or greater total beef slaughter (in spite of the expected decrease in the number of cattle slaughtered) [2. December 1938, pp. 2. 4-5]. [12. p. 31]. 1940 Stronger domestic demand and anticipated slightly lower total live weight of cattle marketed indicate that cattle prices will average slightly higher in 1940 than in 1939. The preference of importing countries engaged in the war is for "concentrated" products such as meat. A moderating factor on any gprice rise is the larger January 1, 1940 inventory of cattle [4, November 1939. pp. 4, 8. 15]. 194 Another moderating factor is the anticipated large slaughter of livestock, although most of the increase is expected to be in hogs [10. November 1939. p. 6]. 1941 There will be approximately the same slaughter in 1941 as in 1940. but stronger consumer demand for meats in 1941. The build-up in cattle numbers is forecast to con— tinue for several years, probably reaching new highs. Con- siderable improvement in consumer demand will be necessary if a downward trend is subsequently to be avoided [4, October 1940. p. 11]. There appears to be little change in the number of cattle being fed in the winter of 1940—41 compared to a year earlier. It is probable that "prices of better grades of slaughter cattle ... [will be] substan- tially higher than a year earlier in the late winter and spring of ... [1940], while they may not be greatly diffe- rent from a year earlier in the late summer and fall." The uptrend in cattle numbers will continue for at least two or three more years [10, October 1940, DD. 10. 14]. 1942 Indications are that a smaller number of cattle will be fed during the winter and spring of 1942 than during the 1940-41 winter feeding season [4, November 1941, p. 9]. Earlier reports [eg. 10, August 1941, pP. 14-15] were some- what pessimistic regarding price prospects, but were based on larger feeding operations than that supported by later evidence (quoted above). The number of cattle on farms at the beginning of 1942 is above that of a year earlier. but 195 the increase during 1942 is expected to be less than that during 1941. The long-time outlook for the industry de- pends much on holding numbers approximately to the level of early 1942. A continuing rise of consumer incomes will then lead to higher prices to producers over the longer period [10. August 1941. p. 16]. 1943 Sharply enlarged military and lend-lease purchases of food in 1943 "are expected to be equivalent to about 20 per cent of current domestic production. compared with about 13 per cent this year [1942] and 4 per cent in 1941." Although cattle inventory at January 1, 1943 is expected to be up by about one million head, the increased military needs plus strong consumer demand will support cattle prices during 1943 at or near 1942 levels. The total number of cattle fed in 1942-43 is expected again to be large [4. October 1942, pp. 7. 12-13]. Price ceilings will come into play, preventing much, if any. rise in cattle prices above current levels. Cattle numbers at January 1. 1943 will be about one million head above a year earlier [9, October, 1942, pp. 11, 13-14]. ' 1944 Military demand will again be substantially higher in 1944 than in 1943. and some increase is expected in domestic civilian demand. The amount of meat allocated to civilians in 1944 will be less than that of 1943, although total output is forecast to be as large as the record 196 production of 1943. Although cattle inventory is up from a year ago. the movement of cattle into feedlots as of September 1943 is smaller than usual [4, September 1943. pp. 2, 9]. Although cattle prices appear high in relation to OPA ceilings. a price decline is unlikely in view of the very strong demand conditions. There will likely be an increase of 2 to 3 million cattle on farms in 1943 [9, September 1943, PD. 10, 12]. 1945 Reductions in military purchases of meat, mainly beef, and some decline in civilian demand are forecast. With total cattle and calf slaughter about 10 per cent above a year earlier, a decline in price in 1945 is probable [4, October 1944. pp. 6-7]. The number of cattle on farms at January 1, 1944 was a record 82 million, a level which will be slightly reduced by the beginning of 1945. Never- theless. record or near-record levels of cattle slaughter are in prospect during 1945 and 1946 [9, October 1944, p. 9]. 1946 A decline in returns to cattle producers in 1946 is forecast as is a cattle population decrease over the follow- ing two or three years [4, October 1945, p. 7]. 1947 "[Present] ceilings will permit prices of cattle around ten per cent higher than in the first half of 1946" [4. September 1946. p. 13]. Beef prices from January 15 - June 15. 1946 rose by months from $11.80 to $14.10 per hundredweight [9, November 1946, p. 21]. 197 1948 Considerable inflation is being experienced, with indications of a further rise in the general price level. The beef population has declined during 1947. and a smaller slaughter is anticipated. Employment and income are rising [4, September 1947, pp. 10, ll, 16]. 1949 The 1948 feed grain harvest is large [4, September 1948, p. 15] and larger numbers of cattle are on feed at January 1. 1949. Nevertheless, the likely price decline will be cushioned by a lower cattle population and less cattle slaughtered than in 1948. [8, September 1948. pp. 15. 16]. 1950 Meat prices are expected to be lower with a larger total output (most of the increase is expected to be in porkD and high, if slightly lower than 1948. consumer in- comes[8. October 1949. p. 6]. Large corn supplies will also influence 1949 price. "This (1948 and expected 1949) uptrend in numbers promises more beef and veal for years farther in the future" [4. October 1949. p. 22]. 1951 An increase in cattle slaughter is anticipated. as is an increase in numbers on farms [4, October 1950. p. 20]. "It is likely ... that (meat) prices will trend higher des- pite larger supplies." However, the increases indicated are expected to be moderate. Cattle and calf numbers in- creased by two million in 1949 and two to three million in 198 1950 [8. October 1950, pp. 7, 17]. 1952 An increase in meat output. largely beef and veal, is expected in 1952. Substantial price decreases are un- 1ike1y. however [4. October 1951, p. 19]. The longer period (1953-55) outlook for beef supplies is for sub- stantial increases [8. October 1951. pp. 6, 7, 11]. 1953 The number of cattle slaughtered in 1953 will pro- bably rise sharply over that of 1952. Cattle population has increased from 88 million (January, 1952) to an expected level of 93 million in January 1953. It was expected that. despite heavier slaughter, cattle popula- tion will again increase in 1953 [4, October 1952. pp. 22. 23]. 1954 Cattle slaughter is forecast to continue heavy in 1954. but prices will become more stable. The upswing in cattle production has. however. been halted [4, October 1953, p. 27].' Nevertheless. "data on the kind of cattle and calves being slaughtered in 1953 indicate the pro- ductive capacity of the cattle industry is not being reduced" [8, October-November 1953, p. 11]. 1955 Cattle prices in 1955 will probably remain near the level which has prevailed since mid-1953 [4, October 1954. p. 29]. A gradual reduction in livestock numbers is 199 anticipated through 1955. and possibly following. as the liquidation part of the beef cycle progresses [8, October 1954, p. 9]. 1956 The strong consumer demand for meat and increased supplies and lower prices of feed indicate record produc- tion of meat in 1955 and will allow production very nearly as high during 1956 [4, November 1955, p. 33]. The 1955 harvest yielded six per cent more feed grains and five per cent more hay than the previous year [8. November 1955. pp. 12. 15]. 1957 Little change is likely in the 1957 cattle inven- tory. Although slaughter would be aslarge as in 1956, lower average weights will lead to a decline in beef out- put. The five year price outlook is bright for cattle, with inventory expected to remain around 97.5 million for a year or two following 1956 [4. November 1956. pp. 5, 38- 39]. It is anticipated that when the production uptrend recommences, it will be more slowly than in the recent (pre-l956) past [8. NOvember 1956, p. 29]. 1958 Cattle prices will likely be higher in 1958 than in 1957. However. "abundant feed will encourage a high volume of cattle feeding ... As another consequence, it may help to slow down the present downswing in cattle numbers on farms ..." [4. November 1957, p. 36]. Cattle and calf 200 inventory, which was down at January 1, 1957 from the pre- vious year. will be down further at January 1, 1958, to approximately 93 million head [8, November 1957, p. 12]. 1959 Feed crops were large in 1958, and "feed prices are almost certain to remain relatively low." Slaughter of beef is likely to increase slightly in 1959 from the 1958 low [8, November 1958, pp. 7. 14]. "Prices of cattle will likely hold up well [in 1959] but prices of hogs will de- cline considerably." Demand for feeder cattle will be high, with total slaughter in 1959 probably not much above that of 1958 [4, November 1958. p. 27]. 1960 "Meat output ... will probably set a new high in 1960l/ ... with the largest increase in beef ... [A] price rise next spring [1960] comparable to that of last [1959] spring is not likely." Inventory increases are expected to continue [4, November 1959. p. 28]. "Imports of live animals and meats will likely continue high in 1960 ... . Increased domestic production and lower prices will be the principal restraints ... ." [8. November 1959, p. 5]. 1961 With hog production and prices in 1961 not greatly different from 1960, and with increases slaughter of fed cattle. beef prices are expected to average slightly lower .1/ This applies to total. rather than per capita, meat production [8, November 1959. p. 4]. 201 than in 1960. The longer run prospect is for further price depression, since there was a possibility of pork production increases coinciding with larger beef marketings within about two years [4, November 1960. p. 30]. Cattle inventory will likely increase during 1961. but largely in slaughter stock rather than breeding stock [8. November 1960. p. 7]. 1962 A slight increase is anticipated in beef slaughter, but it is expected that it will include more cows and fewer fed heifers. This is expected to lead to reduced processing beef imports and slightly lower per capita beef consumption. Although cow prices will decline. some im- provement is likely in fed cattle prices over those of 1961 [4, November 1961, p. 26]. The longer-term indication is that cattle population increases have been approximately "in line with the rate of population growth and gain in per capita income." Although an increase in marketing of over- age cows is expected to take place in the next three or four years, due to an excessive proportion of this class of animals. decreased imports over the period will cushion the price influence of such slaughter [8, November 1961, P. 16]. HOGS 1917 Spring Cattle numbers have increased by about one million during 1916. Nevertheless. demand conditions continue strong 202 [19, March 7, 1917. p. 3]. Efforts are continuing on the part of the U.S.D.A. to increase meat production [19, January 10, 1917, p. 2]. 1917 Fall "The livestock holdings of the farmers of the United States are already too low" [19, April 25, 1917. p. 2]. At April 1. 1917, the Bureau of Crop Estimates reports appro- ximately three per cent less sows on farms than a year earlier [19. May 9, 1917. p. 1]. 1918'Spring Corn production in 1917 is up about 23 per cent over the relatively short 1916 crop, and slightly above the 1915 crop [16. December 1917, p. 120]. Cattle and hogs numbers have increased slightly during 1917 [16, February 1918, p. l]. _.L-1a 1918 Fall Corn acreage is down five per cent from 1917 [16. July 1918, p. l]. The number of breeding sows at March 21, 1917 is up 10 per cent from a year earlier [16, April 1918. P. 35]. 1919 Spring Corn production in 1918 is moderately below that of 1917 [16, December 1918. p. l]. The U.S. swine population increased six per cent during 1918, but there was almost no change in cattle population [16, February 1919, p. l]. 1919 Fall The acreage devoted to corn in 1919 is down four per 203 cent from a year earlier. but the crop will likely yet exceed that of 1918 [16, July 1919, p. l]. 1920 Spring Corn production in 1919 is moderately above that of 1918 [16, December 1919, p. l]. Cattle population has re- amined about constant during 1919, but swine numbers declined about two per cent [16. February 1920, p. 9]. 1920 Fall A one per cent greater area devoted to corn may nvertheless produce slightly less output than in 1919 [16, July 1920, p. l]. 1921 Spring Corn production in 1920 is moderately above that of 1919 [16. December 1920. p. l]. The swine population has declined in 1920 by seven per cent, with slight declines also occurring in cattle population [16, February 1921, p. 1]. 1921 Fall Corn acreage in 1921, although up four per cent from 1920. may produce about the 1920 output [16, July 1921. p. l]. The estimated number of hogs on farms in March is up slightly from a year earlier [15, May 7. 1921. p. 293]. 1922 Spring Corn production in 1921 is down slightly from a year earlier [16. December 1921, p. 147]. The number of hogs on farms November 1, 1921 is up slightly from a year ear- lier. Cattle population is marginally down over the same 3 o 204 period [18, January 21, 1922, p. 52], 1922 Fall The number of cattle on farms has increased slightly from January 1 to March 1. but hog population has declined moderately during this period [18, April 1, 1922. p. 268]. 1923 Spring The 1922 corn crop was down about 10 per cent from 1921. October 1 holdings of pork are up slightly from a year earlier [2. November 1922, pp. 6 11]. The number of sows on farms at January 1, 1923 is 14.1 million, up from 12.8 million a year earlier [14. p. 34]. 1953 Fall Corn acreage may be slightly up in 1923 from 1922. "Beyond next fall. nobody has much idea what may happen to the hog market," but there is a larger hog population than a year earlier. However, industrial prosperity will likely continue [2, April 1923, PD. 16, 18]. 1924 Spring Sow population at January 1. 1924 has declined by 2.0 million, to 12.1 million, from a year earliert[l4. p. 34]. The 1923 corn crop is up slightly from 1922. Pork stocks at October are above a year earlier [2. December 1923. pp. 3. 12-14]. 1924 Fall The number of brood sows is down by at least 13 per cent in the corn belt area as compared with a year ago [2. May 1924. p. l]. Acreage of corn for 1924 will likely be 205 up three per cent from 1923 [2, April 1924. p. 3]. 19925 Spring It appears that "there are ... fewer hogs in sight for next year than for any time since 1920." In addition. the 1924 corn crop is moderately below that of 1923 [2. November 1924. pp. 1. 3]. The number of sows and gilts on farms at January 1, 1925 is down to 10.1 million: [14 P. 34] . 1925 Fall "Extent of liquidation in hogs suggests possible sharp reversal of corn-hog price situation this year ... ." [2. March 1925, p. 2]. Corn acreage in 1925 will be up 2.3 per cent from 1924 [2. April 1925, p. l]. 1926 Spring The population of sows and gilts on farms at January 1, 1926 is up marginally from 1925 at 10.5 million head [14. p. 34]. The 1925 corn crop is up moderately from the short 1924 crop. The movement of cattle onto feed is lighter than usual [2, December 1925, PD. 2, 3]. 1926 Fall The acreage sown to corn in 1926 will be almost un- changed from that of 1925. Nevertheless. the production of feed crops may be more than can be disposed of with available livestock [2. April 1926, p. 3]. There will likely be an increase in hog numbers [2, May 1926, p. 2]. 1927 Spring The number of sows and gilts over six months of age 206 on U.S. farms has increased to 11.2 million at January 1. 1927 [14, p. 34]. Hog producers are making considerable effort to expand production. Corn is low—priced relative to hogs. The presence of hog cholera may tend to damp the increase in hog numbers [2, November 1926, pp. 2. 3]. 1927 Fall Farmers intend to plant two per cent more corn in 1927 than in 1926 [3, March 1927. p. 82]. The June hog survey indicates that 30 per cent more sows are expected to farrow in 1927 than in 1926. However, the poor corn prospects and the unfavorable corn-hog ratio may lead to a decline in hog farrowings in the corn belt. but perhaps an increase elsewhere. "Hence little change in hog supp- lies in the summer and fall of 1928. from supplies last year and this. is indicated" [3, July 1927, p. 235]. 1928 Spring It is expected that three to five per cent less sows will farrow in spring, 1928 than a year earlier. Part of the reason is the short 1927 corn crop [3. December 1927. p. 451]. The cattle population declined two per cent dur- ing 1927. and the hog population increased eight per cent [3, February 1928. pp. 39. 41]. 1928 Fall Farmers plan to plant three per cent more corn than in 1927 [3. March 1928. p. 74]. A mod(3ate decline is forecast in farrowings in fall, 1928. The demand situation for hogs for the next 18 months is likely to be better than 207 for the 1927-28 season. The prediction is that prices will rise "considerably" above the average of the first half of 1928 [3. July 1928, pp. 236. 237]. 1929 Spring A decrease of 4 - 7 per cent is expected in the spring pig crop. The 1928 corn crop was about equal to that of 1927 [3, January 1929, pp. 2, 3]. The cattle population has stayed almost constant during 1928. but there was a nine per cent drop in the hog population [3. February 1929, pp. 39, 40. 42]. 1929 Fall Intention reports indicate farmers may plant one per cent less corn in 1929, but total feed grain acreage will likely be equal to that of 1928 [3, April 1929, p. 116]. "No marked change in either domestic or foreign demand is likely during the next 18 months." (It) A fall pig crop of about 1928 size in the corn belt, and slightly less in other areas is likely [3. July 1929, p. 246]. 1930 Spring It is likely there will be a small decrease in the number of sows farrowing in spring. 1930. The general commodity price index is continuing to move downward [3. January 1930, pp. 7. 30]. The population of cattle and calves increased three per cent, that of hogs declined eight per cent [3, February 1930, pp. 38, 39, 41]. 1930 Fall Corn acreage will increase three per cent in 1930 208 [2. April 1930, p. l]. The hog market appears the most satisfactory of any livestock product, but demand conditions are highly unsure [2, March 1930, pp. 10-11]. 1931 Spring The number of sows and gilts over six months increased only marginally in the past year to 9.8 million at January 1. 1931 [14. p. 34]. The 1930 crop of feed grains is "the smallest on record." Cattle feeding will likely decline sharply over winter [2, November 1930, p. l]. 1931 Fall Acreage of feed-grains is due to increase for 1931, that of corn climbing by five per cent. "The market for hogs ... is still having to contend with an unusually weak demand condition ... ." Pork exports in 1930 were the lowest in the century [2. April 1931, pp. 1, 5. 6]. 1932 Spring The number of sows and gilts over six months at January 1. 1932 is unchanged from a year earlier at 9.8 million [14, p. 34]. The 1931 corn crop was about equal to the 1925-29 average, but well above the small 1930 crop [2. December 1931, p. 13]. 1932 Fall A slight increase in feed grain acreage is likely for 1932. but corn acreage will be unchanged from a year earlier [2. April 1932. p. 1]. Hog slaughter in the near future (i.e., spring 1933) will be up from a year earlier. Nevertheless, cattle supplies should be down [2, May l932,p.l]. 209 1933 Spring The population of sows and gilts climbed during the year from 9.8 to 10.0 million [14, p. 34]. The 1932 corn crop was slightly larger than that of 1931. There is a possibility - due to well-distributed feed supplies - of a larger pig crop in spring, 1933 [2. October 1932. pp. 1, 12] . 1933 Fall A decrease of 3.5 per cent in corn acreage is likely for 1933 [2. April 1933. p. l]. The passage of the AAA took place during May. 1933. and hogs are designated as a "basic agricultural commodity." Hog prices rose sharply in the first three weeks of May to over $5.00 per hundred- weight [2, June 1933, pp. 1, 5, 11]. 1934 Spring The population of sows and gilts declined from 10.0 million to 8.7 million during 1933 [14. p. 34]. Hogs are expected to "make a somewhat stronger market showing after the turn of the year." Prospects indicate expansion of agricultural exports, but for livestock products these will very likely be well below the levels of the 1920's [2. December 1933, DP. 1, 7]. 1934 Fall A corn acreage decrease of 10 per cent is likely for 1934 [2, April 1934. p. l]. Prospects for a 1934 drought are increasing [2, June 1934, p. l]. 210 1935 Spring The population of sows and gilts over six months of age has declined from 8.7 to 6.1 million during 1934 [14. p. 34]. The short feed situation has resulted in both hogs and cattle being sent to market in heavy volume [2, December 1934. p. 1]. The 1935 spring pig crop is likely to be even smaller than that of 1934. Only in the event of conditions highly favorable to hog production will it take as little as several years for hog slaughter to rise to the level of the past five years [2. November 1934, p. 5]. 1935 Fall The indicated 1935 corn acreage of 95 million acres is about equal to 1934, but well above the harvested acre- age of 87 million in 1934 [2, April 1935, p. 3]. The pro- bable tendency will be to increase hog production next fall. since production is now at a very low level. "Meanwhile, the only things that stand in the way of still higher hog prices are the bad export situation and the low buying power of domestic consumers." [2, June 1935. p. l]. 1936 Spring The population of sows and gilts over six months in- creased from 6.1 to 7.7 million during 1935 [14, p. 34]. The spring pig crop is likely to show an increase from a year earlier. More cattle will likely be fed out thiS' winter than last [2. December 1935. p. 1]. Although some increase in hog marketing is probable for fall, 1936, the major impact of the hog expansion likely will occur after 211 next autumn [2, November 1935. p. 1]. 1936 Fall \ The 1936 corn crop will likely be slightly below average, but feed supplies will likely be ample in view of anticipated five per cent less-than-average livestock popu- lation [2, April 1936. p. l]. Losses of early pigs during spring 1936 were very heavy [2, May 1936, p. 1]. 1937 Spring Although the population of all pigs and hogs re- mained about constant during 1936. the number of sows and gilts over 6 months of age decreased from 7.7 to 7.1 million [14, p. 34]. The recent heavier runs of cattle and hogs have been absorbed at sustained prices, indicating im- proved demand conditions [2, December 1936. p. 1]. 1937 Fall Acreage planted to feed-grains in 1937 will decline from 1936. Nevertheless. the harvested acreage will likely exceed the low level of 1936. Storage holdings of pork are the largest on record. Nevertheless, demand con- ditions continue strong, and hog prices will likely depend on the 1937 corn crop [2. April 1937, DP. 6, 7]. 1938 Spring The number of sows and gilts has increased from 7.1 to 7.6 million head during 1937 [14. p. 34]. Some indica- tion. of weakening consumer demand has appeared. The spring pig crop is certain to be larger than a year earlier [2. November 1937, pp. 2. 7]. 212 1938 Fall The AAA. 1938 has been enacted. and includes corn in its basic commodities [2, March 1938, p. 9]. Large feed supplies are likely in spite of a slightly reduced corn crop from 1937. Farrowings this autumn may be above those of last autumn. Spring farrowings were up from a year earlier [2, April 1938, pp. 4. 5], [17, pp. 12, 13]. 1939 Spring The number of sows and gilts has increased to 9.5 from 7.6 million during the year [14. p. 34]. The total supply of feed grains is "probably the second largest since 1921." This increase in hogs may put sufficient pressure on the hog-corn ratio, however. to prevent fur- ther increases in the near future [2, November 1938, pp. 11-12]. 1939 Fall An improvement in demand conditions is foreseen. The number of sows farrowing in spring. 1939 is substan- tially larger than a year earlier, so heavier fall farrow- ings are a distinct possibility [2, May 1939, pp. 2. 4, 5]. 1940 Spring The fall pig crop is up sharply from a year earlier [17, p. 13]. The seasonal reduction in hog marketings in late winter and early spring may be less than average. How- ever, expansion in hog exports in 1940 may occur as a result of the war. Increasing domestic demand will also be a supports factor [2. December 1939. pp. 2, 6]. 213 1940 Fall Corn plantings for 1940 are expected to be below those of 1939 by four per cent. The 1940 spring pig crop was slightly smaller than that of 1939. This decline may continue due to an unfavorable hog-feed price ratio [2, April 1940, pp. 4, 5, o], [17, p. 12]. 1941 Spring The fall, 1940 pig crop was down about 10 per cent from a year earlier [17. p. 13]. The 1940 corn crop was up three per cent, leading to the second largest supply of corn since 1932. The 1941 spring pig crop will likely be moderately smaller than the spring crop of 1940 [2, December 1940, pp. 5, 6]. 1941 Fall The purchasing program under lend-lease will add substantially to the demand for agricultural products. Corn plantings are likely to be down less than one per cent from a year earlier. Hog production will increase in fall. 1941 and spring. 1942. Conditions point "un- mistakably to higher prices" for hogs [2. April 1941, pp. 1. 2, 4. 6]. . 1942 Spring The spring pig crop is likely to be up 10 to 15 per cent from 1941. This will be required to meet the Govern- ment hog-slaughter goals for 1942 [2. December 1941. p. 6]. The fall corn crop was moderately larger than that of pre- vious years. Supplies available to consumers in 1942 will 214 not be greatly different from those of 1941, but consumer demand has increased [10, December 1941, pp. 11. 12]. 1942 Fall Sharp increases are expected in lend-lease purchases of pork. Storage holdingshave been reduced, contrary to the usual pattern in April. Nevertheless, maximum prices on pork products have been set by the OPA [10. April 1942, pp. 6. 7. 8. 9]. Corn acreage will increase by five per cent [2, April 1942. p. 3]. 1943 Spring The 1943 goal calls for a 15 per cent increase over 1942 in both spring and fall pig crops, and a 10 pound in- crease in average market weight. HOg prices will be sup- ported at $13.25, basis Chicago for Good and Choice [10, December 1942. p. 3]. 1943 Fall Corn acreage in 1943 will likely increase by six per cent from 1942 [2. April 1943, p. 21]. Nevertheless. the 1943 corn crop may be less than that of 1942. Hog price supports have been raised to $13.75 from $13.25. The number of livestock being fed in 1943 may be up 11 per cent from 1942 [9, April 1943, pp. 2. 6. 7]. 1944 Spring A 16 per cent decrease from a year earlier is ex- pected in spring hog farrowings. The number of cattle on feed is also below a year earlier. Civilians will receive approximately the same per capita quantities of meat as in 215 1943 [9. January 1944. pp. 1. 2. 6, 7]. 1944 Fall Corn acreage will increase 2.5 per cent. but is still marginally below the 1944 goal [2. April 1944, p. 2]. The support price for hogs will be reduced to $12.50 (from $13.75) effective October 1, 1944 [9, May 1944, p. 6]. The fall pig crop is indicated to be 33 per cent below the record crop of 1943 [9. June 1944. p. 3]. 1945 Spring The 1945 spring pig crop is likely to be about six per cent smaller than that of 1944. The total hog slaughter in 1945 may, however. be down 20 to 25 per cent from 1944, mostly during the early part of the year and reflecting the sharp decline in pig crops in 1944 as compared with 1943. Ceiling prices on barrows and gilts (over 270 pounds) has been increased to $14.75 per hundredweight at Chicago [9, December 1944, pp. 7, 8]. Demand for most farm pro- ducts will likely continue at wartime levels through most of 1945. The sharp declines in pork output will not be offset by expected increases in beef and veal [4, January 1945. pp. 2. 5. 6]. 1945 Fall Farmers intend to farrow 12 per cent more sows in fall. 1944 than a'yfar earlier. Although this may yield the fourth largest fall crop on record. it will fall short of the goal for fall pigs by two million (35 million ex- pected). Cattle slaughter at the time these hogs come to I 216 market is likely to be about as large as in 1945 [9, June 1945, pP. 3. 8, 9]. 1946 Spring On the basis of farmbrs' intentions at December 1. 1945, the spring. 1946 pig crop may be up two per cent from the 1945 spring crop. With large supplies of soft and wet corn available, cattle feeding will be at a higher level than in winter 1945 [9, December 1945. pp. 3, 10]. 1946 Fall The fall pig crop is to be reduced from the level of 1945 [4. June 1946. p. 7]. Corn acreage in 1946 will be almost unchanged from 1945, and about equal to the 1946 goal [2, April 1946, p. 2]. 1947 Spring The number of sows farrowed in spring, l?47 will likely be up six per cent. compared with a 13 per cent in- crease suggested in the 1947 goals. The favorable hog- corn ratio will likely lead to further expansion later in 1947. Nevertheless. consumer demand is currently strong. and will hold meat prices at high levels through most of 1947 [9. December 1946, pp. 6. 10]. Meat animal prices rose sharply after the lapse of price control on July 1, 1946 [9. July 1946, p. 3]. 1947 Fall The spring pig crop was only one per cent above a year earlier, due to a decrease in the number of hogs per litter saved. The fall pig crop is expected to be up by 217 six per cent from 1946. The number of livestock on farms - except hogs and chickens - is declining. and further declines are expected this year [8, JUne 1947. pp. 4, 8]. Acreage of corn in 1947 will be below that of 1946, and also below the 1947 goal [2. April 1947, p. 2]. 1948 Spring A decrease of nine per cent from 1947 is expected for the 1948 spring pig crop. Beef supplies will also be smaller in 1948 than in 1947 [8. December 1947. pp. 4. 6]. Feed prices are expected to remain high, at least until summer, 1948 [4. January 1948. p. 8]. The population of pigs. cattle and sheep on farms declined during 1947 [11. pp. 2. 3]. 1948 Fall The 1948 fall pig crop is likely to be only one per cent below that of 1947 [8. June 1948, p. 9]. The corn acreage in 1948 will be about the same as in 1947. This is. nevertheless. below the 1938-47 average [2. March- April 1948, p. 4]. 1949 Spring Demand prospects, while good for the first half of 1949. are more uncertain for the latter half of the year. Total meat supply will be about equal to that of 1948, but will consist of more pork and less beef than in 1948. The bumper feed grain harvest of 1948 is likely to be an impor- tant factor. Pork prices will likely drop more than season- ally under heavy marketings in late 1949 [4, September 1948, 218 pp. 3. 14, 15]. There occurred a slight increase in hog population and a slight decrease in cattle population during 1948 [11. p. 2]. Intention reports indicate a 10 per cent greater spring pig crop than in 1948 [8, December 1948. p. 3]. 1949 Fall Corn acreage in 1949 will decline almost two per cent from 1948 [2, April 1949. p. 9]. The 1949 spring pig crop was up 15 per cent from 1948. and the fall pig crop will likely be up nine per cent from 1948 [8. June 1949. p. 3]. 1950 Spring The spring pig crop in 1950 will likely be six per cent larger than in 1949. Prices will likely be lower than in 1949. particularly for the latter part of 1950. In addition. price supports have not been announced for dates after March 31. 1950. Support after this date is permissive, at anything up to 90 per cent of parity [8, December 1949. pp. 3. 9. 11].l/ Parity price of hogs at November 15. 1959 was $17.40 per hundredweight [2, December 1949, p. 14]. The number of both hogs and cattle on farms increased slightly during 1949 [11, p. 2]. 1950 Fall Acreage planted to corn is likely to decline by six per cent due to allotment restrictions [2, April 1950, p. 4]. An increase in the fall pig crop of five per cent over .g/ Hog prices were previouSly'supported at'90 per cent of“ parity under an extension of the Steagall Amendment [8. July 1949, p. 12]. 219 the level of a year earlier is anticipated. Demand condi- tions are strong. and may improve [8. June 1950, pp. 4, 10]. 1951 Spring The spring pig crop will likely increase by six per cent from a year earlier [8. December 1950, p. 4] In spite of increased meat supplies, "stronger demand is expected to raise prices of each class of meat animals moderately above 1950." Any general inflation would likely carry hog prices to even higher levels [2. December 1950. pp. 8, 14]. Both the cattle and hog population have increased during 1950 [11. p. 2]. 1951 Fall A fall pig crop up three per cent from last year is indicated by farmers' intention reports [8, June 1951, p. 3]. Corn acreage will increase by almost two per cent. but still remain five per cent below acreage guides of the U.S.D.A. [2, April 1951. p. 3. 4]. 1952 Spring The 1952 spring pig crop will likely be down nine per cent from a year earlier. An important factor is the smaller supply of corn [8. November-December, 1951. p. 4]. Hog population stayed relatively constant during 1951, but cattle population climbed from 82.0 to 88.0 million [11. p. 2]. "The defense program will continue to be the dominant influence in the outlook for 1952" with respect to demand conditions [2, December 1951. p. 3]. 220 1952 Fall The 1952 corn acreage will likely be about equal to that of 1951 [2, April 1952, p. 3]. It is expected that nine per cent less sows will farrow in fall. 1952 than a year earlier. "Prices of hogs next winter could be con- siderably higher than last winter." [8, May-June 1952, PP. 6. 7]. 1953 Spring Hog population has decreased sharply during 1952. but there has been a slight to moderate increase in cattle population [11, P. 2]. Farmers intend to farrow 13 per cent fewer sows in the spring of 1953 than a year earlier. The increase in beef and veal production will tend to off- set the pork decline. however, providing meat supplies in 1953 approximately as large as in 1952 [8. November- December 1952. p. 3]. 1953 Fall Corn acreage will likely be down one per cent from the below-average 1952 acreage [5, March-April 1953,pn'4]. A five per cent reduction in the fall pig crop as compared with a year earlier is anticipated [8. May-July 1953. p.11]. 1954 Spring Hog population declined moderately during 1953. while there was a slight increase in cattle numbers [11, p. 2]. "Hog production appears to be starting a new ex- pansion." The spring pig crop will probably be up by five to ten per cent from a year earlier. Hog production will 221 likely continue to increase for at least a year or more, in spite of continuing relatively high production of beef [8. October-November 1953, pp. 21, 24]. 1954 Fall Farmers plan to plant about the same corn acreage as in 1953 [2. April 1954. p. 2]. Farmers intend to farrow 10 per cent more pigs in fall, 1954 than a year earlier [8, July 1954, p. 6]. 1955 Spring There was a slight increase in cattle numbers during 1954. and a moderate increase in hog population [11. p. 2]. "The supply of meat for consumers (in 1955) will remain large ... . Prices of hogs will stay below their hflfls of last spring but will likely average close to the summer- fall prices of this year (1954)." Hog production appears to be increasing. whife.cattle population appears to be on a slow decline [2. November 1954. p. 9]. The 1955 spring pig crop will be only two to five per cent above that of 1954 [8. October 1954, p. 3]. 1955 Fall Corn acreage in 1955 will be about the same as that of 1954. but total feed grain acreage will be up slightly [2. April 1955, p. 2]. The fall pig crop will likely be a little larger than a year earlier [8, May 1955, p. 10]. 1956 Spring Meat output in 1956 will be about equal to that of 1955. with hogs probably accounting for a larger proportion 222 than in 1955. The 1956 spring pig crop is expected to be about equal to that of 1955, but prices during the early part of 1956 will be held down by the larger-than-expected (up 10 per cent) fall pig crop [8, November 1955, pp. 5, 7]. Cattle population declined slightly during 1955, while hog population climbed about 10 per cent [11, p. 2]. 1956 Fall Producers plan to farrow seven per cent less sows in fall, 1956 than a year earlier [8, June 1956, pp. 2, 4]. Corn acreage in 1956 will likely decline 3.5 per cent from 1955 [4, April 1956, p. 30]. 1957 Spring Hog slaughter in 1957 will decline and "prices for hogs will be higher than in 1956." The longer-period out- look for hogs is not as bright as for cattle. Afgradual increase in meat animal population is forecast [4, November 1956, pp. 37, 38]. The cattle population declined slightly during 1956, as did the number of hogs [11, pp. 4, 5]. Producers plan a decrease of two per cent in spring farrow- ings as compared with a year earlier [8, January 1957, p. 3]. 1957 Fall The total acreage of feed grains in 1957 will likely be up slightly from 1956, but corn acreage will decline by four million acres [4, April 1957, p. 21]. A two per cent decrease in fall farrowings, as compared with a year ear- lier, is expected [8, July 1957, p. 3]. 223 1958 Spring There was a slight decline in cattle numbers during 1957, and also a slight decline in hog population, although the number of sows remained approximately stable [11, pp. 4, 5]. Prices for hogs will be appreciably lower in the last half of 1958. Abundant feed supplies will likely lead to increased output of pork in 1958, but total meat sup- plies will likely be about the same as in 1957. The spring pig crop may be up by 8 to 10 per cent [4, November 1957, pp. 36, 37]. 1958 Fall The total supply of feed grains produced in 1958 will be only slightly below that of 1957. Corn acreage will increase by two per cent [4, April 1958, p. 24]. "A sizable uptrend in hog production apparently is beginning with this fall's farrowings." A 13 per cent increase is expected in the number of sows to farrow in fall, 1958 [8, July 1958, p. 4], 1959 Spring The hog and cattle populations each increased during 1958, the former moderately and the latter slightly [11, pp. 4, 5]. The spring pig crop prospect is for a 13 per cent increase. Cattle slaughter for the year as a whole is likely to be only slightly above that of 1958 [8, January 1959, p. 3]. Prices of hogs will "decline considerably" in 1959 [4, November 1958, p. 27]. 224 1959 Fall The total supply of feed-grains in 1959—60, including carryover, is likely to be at least as large as that of a year earlier [4, April 1959, p. 26]. Producers plan for eight per cent more fall pigs than a year earlier [8, July 1959, p. 3]. 1960 Spring The population of both hogs and cattle increased slightly during 1959. However, there was a moderate re- duction in the sow population [11, p. 4, 5]. It is expected that the 1960 spring pig crop will be down slightly from 1959 [8, November 1959, p. 17]. Feed supplies continue at a high level [4, October 1959, p. 15]. 1960 Fall Corn acreage in 1960 will be about equal to that of 1959, but total feed-grain acreage will likely be up one per cent [4, March 1960, p. 21]. A four per cent cut in fall farrowings is likely but an upturn in farrowings is likely for 1961 [8, July 1960, p. 3]. 1961 Spring The number of sows on farms increased marginally in 1960, but there was a slight decline in cattle numbers and a slight to moderate decline in total hog population [11, pp. 4, 5]. An increase in total meat production is likely in 1961, with most of the increase occurring in beef. Producers are apparently increasing the late fall, 1960 and spring, 1961 pig crops. Prices during the last half 225 of 1961 may drop below the same period in 1960, but average price for the year will not likely differ greatly from 1960 [8, November 1960, pp. 5 15]. 1961 Fall Feed—grain output is expected to decline in 1961, but the extent of the reduction is difficult to estimate since farmers indicated their intentions before the feed grain program was announced [4, April 1961, p. 31]. Pro- ducers plan two per cent more sows to farrow fall pigs. Production of both hogs and cattle appears to be expanding [8. July 1961, p. 3]. 1962 Spring Both cattle and hog numbers increases slightly dur- ing 1961, but the sow population remained almost constant [11, pp. 4, 5]. The spring, 1962 pig crop will be up by three to five per cent. Total beef production in 1962 will be up only about two per cent above 1961 [4, November 1961, pp. 26, 27]. The outlook for 1962 is that hog prices may average slightly below those of 1961 [8, November 1961, p.3]. 1962 Fall Feed grain acreage in 1962 will be about equal to that of 1961 [4, April 1962, p. 26]. An increase of two per cent is expected for fall farrowings. Nevertheless, such a crop would yield total 1962 production below that of 1961 [8, July 1962, p. 6]. 226 CORN 1917 "Peace in Europe, coming before a new crop of grains, would mean a severe shrinkage in values" [1, December 16, 1916, p. 2]. Farm reserves of corn are expected to be low at the end of the present crop year [1, March 5, 1917, p. 4]. The supply on farms at March 1, 1917 is 780 million bushels, down from 1,117 million bushels a year earlier [1, March 8, 1917, p. 1]. Entry of the U.S. into the war is expected at the special congressional session scheduleifor April 2, 1917. 1918 The prospects are for a larger supply of meat avail- able to consumers, and the "voluntary restrictions" on food consumption are being eased by the food administration [1, March 4, 1918, p. 4]. At the same time, corn acreage may decline because of shortage of seed and shortage of labor [1, March 6, 1918, p. 2]. Corn reserves on farms at March 1 are 1,293 million bushels, up from 782 million bushels a year earlier (stocks of oats and barley are also up over the same period) [1, March 8, 1918, p. l]. 1919 The stocks of corn on farms at March 1, 1919 are 884 million bushels, down 6.7 per cent from the level of a year earlier [1, March 7, 1919, p. l]. 227 1920 Reduced corn acreage in 1920 is likely [1, March ll, 1920, p. 4]. Corn prices up to $1.50 per bushel were re- ported in March [1, March 19, 1920, p. 5]. 1921 Corn stocks are up 500 million bushels from a year earlier. The outlook as well is for "an undersupply" of meat animals [1, March 9, 1921, p. 4J. 1922 Any aprice changes are dependent on reversal of the current depression. 1923 The markets for cattle and hogs are expected to remain strong at least for 1923. Although corn acreage may be slightly higher than in 1922, corn prices will be influenced more by conditions in the hog market [2, April 1923, p. 16]. A survey indicates that the number of sows bred to farrow in the first six months of 1923 is up 13 per cent [2, March 1923, p. 11]. 1924 January 1 estimates indicate moderate decrease in hog numbers compared with a year ago. The December hog survey shows a definite downward trend in hog production. At the same time, corn growers intend to plant as much or more corn as was planted in 1923 [2, February 1924, pp. 1 2 14], I 9 228 1925 Twenty per cent fewer sows will farrow this spring than last, and last year's total pig crop was down by 19 per cent. The general tendency in the corn belt this spring will be toward more corn and fewer hogs [2, February 1925, p. 1]. However, the short 1924 corn crop has resulted in all stocks of old grain having been used up [2, March 1925, p. 1]. Corn planting intentions show a rise of 2.3 per cent in anticipated acreage. Hog prices have begun to rise, however, which may influence corn prices over the crop year [2, April 1925, p. l]. 1926 Farmers reported intentions to seed about the same acreage of corn as last year [2, April 1926, p. l]. Indi- cations are "that hog producers are now making considerable effort to increase production ..." [2, March 1926, p. l]. 1927 Market supplies of hogs in 1927 will be about the same as in 1926, with prices also near the 1926 level [2, February 1927, p. l]. A reduction in corn output of about seven per cent is expected, assuming average yields [2, April 1927, p. 3]. 1928 An increase of three per cent is expected in the 1928 corn crop as compared with 1927. Some reduction in the pig crop in 1928 is probable. These downward influences on price are offset, to some extent, by expected lower stocks 229 of old corn at the beginning of the 1928 crop year [2, April 1928, DP. 2, 3, 15]. 1929 The estimated number of hogs on farms at January 1, 1929 is 55 million head, down five million from a year earlier. A reduction in the spring, 1929, pig crop is in- dicated, and may be about four to nine per cent in the Corn Belt region. Such a reduction would mean that the supply of hogs during the winter of 1929-30 will be less than a year earlier [2, February 1929, p. 8]. Farmers' ihtentions show that corn plantings will probably be slightly below those of 1928, producing a crop probably one per cent below a year ago [2, April 1929, p. 20]. 1930 The U.S. swine population at January 1, 1930 is down 7.5 per cent from a year earlier, and down six per cent in the corn belt [2, February 1930, p. 1]. Farmers report intentions to seed three percent more acreage to corn than a year earlier. In addition, there have been declining commodity markets and uncertainty regarding the future trend of the general price level [2, April 1930, PP. 1. 2]. 1931 The total number of hogs in the country declined during 1930, though there was a slight increase in the Corn Belt region. However, the prospect of not more than a slight decline during 1931 will be a stabilizing influence 230 on longer-term corn price expectations [2, February 1931, p. 1]. Farmers indicate intentions to plant five per cent more corn than a year earlier, although the effect on corn supplies will be mitigated by the very low stocks of corn on farms [2, April 1931, p. l]. 1932 The supply of corn on farms at March 1 is up signi- ficantly from 1931, and slightly above the 5-year (1925-29) average. Intention reports indicate about 1.5 per cent more acreage may be harvested in 1932 than in 1931 [2, April 1932, pp. 2, 5]. The year 1931 saw a decline in pork demand in the U.S., and increased supplies of pork in Europe [2, February l932,pP. 4-5]. 1933 The number of hogs on farms at January 1, 1933 is up three per cent from a year earlier, although the increase in the Corn Belt region was not as great [2, March 1955, p. 1]. Farmers' intentions indicate 3.5 per cent less area will be seeded to born this year than last [2, April 1933, P. 1]. 1934 Swine population at January 1, 1934 is down nine per cent from a year earlier, due in large part to AAA purchases since the autumn of 1933 [2, March 1934, p. 11]. Farmers' intentions are to plan 10 per cent less corn. Farm stocks of corn are relatively small, with 260,000,000 bushels under Government seal for loans on the basis of 45 cents 231 per bushel. The corn loan will be 55 cents per bushel for 1934 [2, April 1934]. 1935 The decline in hog population in the Corn Belt region during 1934 was in excess of 40 per cent [2, March 1935, p. 1]. Corn acreage harvested in 1935 will likely be 96 million acres as compared with 87 million acres in 1934 [2, April 1935, p. l]. The corn loan will be 45 cents per bushel. 1936 Corn acreage, as indicated by farmers' intentions, will be slightly below average in 1936. Ample feed for livestock will be available in view of the probable five per cent less than average number of livestock on farms [2, April 1936, p. 1]. However, hog numbers are increasing from the very low level of a year ago [2, March 1936, p. l]. 1937 Indications are that there may be considerable hog feeding in the fall of 1937 [2, March 1937, p. 6]. Although feed grain acreage will be smaller than a year ago, the harvest will likely exceed that of 1936 (because of abandon- ment due to drought). A moderating influence on the ex- pected price decline is that carry-over at the beginning of harvest will be smaller than usual [2, April 1937, p. 6]. 1938 A decrease of two per cent in corn plantings is expected. Nevertheless, supplies on hand are large relative 232 to numbers of livestock on feed. It is expected that "prices in 1938-39 may not average very different from prices in the 1937-38 marketing year" [2, April 1938, pp. 3, 4-5]. 1 1939 A decline in corn acreage of about one per cent compared with actual 1938 acreage is forecast. A large increase in the spring pig crop over that of 1938 is also likely [2, April 1939, p. 5]. 1940 "The outlook for feed grains (in 194p) has been materially improved by the continued increase in livestock numbers ..." [2, November 1939, p. 11]. Later information indicates that prospective corn acreage is four million below 1939. Nevertheless, the spring and fall, 1940 pig crops will likely be smaller than a year earlier [2, April 1940, pp. 5-6]. 1941 Administrators of the Lend-Lease Act are now pur- chasing hogs for export to Great Britain. Indications are that the fall pig crop will be larger than in 1940 [2, April 1941, pp. 4, 5]. 1942 Purchases under lend-lease are expected to be sub- stantially above those of 1941 [2, October 1941, p. 3]. "With an average growing season this year, supplies of feed grains for 1942-43 are expected to be about five per cent 233 smaller than for 1941-42 and 10 to 12 per cent smaller per animal unit" [4, April 1942, p. 4]. 1943 "The 'hold-the-line' executive order against infla- tion, issued April 8, 1943, goes further in establishing limits on prices and wage increases than any previous order." The production of the four feed grains is ex- pected to be about 11 per cent below 1942, while livestock numbers will increase. Cash and future prices of corn are at ceiling levels - currently $1.07 at Chicago for cash No. 2 Yellow Corn [4, April 1943, pp. 4, 8-9]. 1944 It is estimated that the stock of feed grains on hand in the U.S. at July 1, 1944 will be the smallest since 1937. There are record numbers of livestock and poultry on farms [5, April 1944, pp. 4-5]. However, an increase of two per cent is forecast in area planted to feed grains, and the spring pig crop in 1944 is "materially" below that of 1943 [8, April 1944, p. 8]. 1945 March 1 intentions indicate that acreage of the four principal feed grains will decline by about 1.5 per cent from that of 1944. In order to encourage hog farrowings, an increase in the support price for hogs has been announ- ced [8, April 1945, pp. 7, 11]. 1946 Supplies of feed grains for the 1946-47 season will 234 probably be down from a year earlier, but livestock numbers will also be down, leaving the supply of feed grain per animal unit in 1946-47 about the same as in 1945-46 [4, April 1946, p. 10]. 1947 Average yields on the acreage farmers intend to seed will yield an output of the four feed grains eight per cent below the record 1946 crop. An increase in hog production will occur in late 1947 and 1948 [4, March 1947, pp. 6, 7]. Nevertheless, the corn carry-over at October 1, 1947 is expected to be about 350 million bushels, compared with 158 million bushels a year earlier [4, April 1947, p. 6]. 1948 The planned corn acreage in 1948 is about the same as 1947, which was the smallest acreage in 50 years. How- ever, larger feed supplies are in prospect as oats, barley and sorghum increases are likely [5, March 1948, p. 3]. The 1948 fall pig crop is likely to be the smallest in 10 years [4, April 1948, p. 7]. 1949 Prospects plantingSfof corn for 1949 are two per cent below the levels of 1948, while acreage of the four principal feed grains will be down three per cent. At average yields, this will produce one-fifth less feed grains than in 1948. With carry-over, however, the supply will be only seven per cent smaller than in 1948-49. It 235 is expected that feed prices will be near or below support rates in 1949-50. Loans on corn will be based on 90 per cent of parity. The parity price of corn on March 15, 1949 is $1.58 per bushel [5, March 1949, pp. 3, 8]. There has been a substantial rise in corn stocks [7, p. 17]. 1950 March 1 farmers' iintentions indicated a reduction of corn acreage by six per cent from the 1949 level. At average yields, total production will be about 10 per cent below the larger output of feed grains of 1949. The price in 1950 will probably be near the loan rate, but only farmers in the commercial areas who plant within their allotmentswill be eligible for the loan, which will be 90 per cent of parity [4, March 1950, p. 13]. At spring, 1950 prices, the support level for corn would be about $1.44 per bushel. 1951 The prospective corn acreage is only 1.6 per cent above the low level of 1950, and total feed grain acreage will likely be down by four per cent. "Demand for feed grain is expected to continue strong ... in the 1951-52 feeding year. Prices of all feed grains ... probably will remain above ... supports in 1951-52." The price support for corn will be at a minimum $1.54 per bushel [5, March 1951, pp. 4, 11, 12]. Corn stocks have decreased [7, p.17]. 1952 The intended corn acreage in 1952 is about the same 236 as 1951, with acreage of the four feed grains totalling slightly under last year. Reductions in hog numbers are expected for 1952-53 [5, Marchquril 1952, p. 3]. The support price for the 1952 crop has been set at not less than $1.60 per bushel. "Unless the growing season is un- usually favorable, feed grain prices probably will remain generally above supports in 1952-53" [4, April 1952, p. 28]. 1953 Total acreage in feed grains will likely increase slightly in 1953, as a prospective slight decrease in corn acreage is more than offset by more oats and sorghum. In- cluding carry-over, this would provide a supply of feed grains about equal to that of 1952-53. "The number of hogs to be fed from 1953-54 feed supplies probably will be a little smaller than in 1952-53, as a result of the pros- pective 15 per cent reduction in the 1953 spring pig crop." The 1953 corn crop will be supported at a minimum of $1.53 per bushel [5, MarcheApril 1953, pp. 3, 8, 9]. 1954 The acreage planted to feed grains in 1954 will likely increase over 1953, in spite of slightly smaller corn plantings. At 1948-52 average yields, the total feed concentrate supply in 1954-55 (including carry-overD will be about five per cent higher than that of 1953-54, and about equal to the 1950-51 record. The minimum price support for 1954 will be $1.62 per bushel. In the commer- cial area, producers must comply with acreage allotments 237 to be eligible. In the non-commercial area, support will be at 75 per cent of the commercial support rate, but no allotments will be in effect. An expansion of sow farrow- ings in spring, 1954 over 1953 by 6 per cent or perhaps slightly more is indicated. Nevertheless, the number of hogs on farms has declined sharply over the past two years [5, April 1954, DP. 3, 9, 16]. 1955 The acreage of corn planted in 1955 will likely be about the same as 1954, although acreage of the four feed grains will likely be up two per cent. This will, at average yields, produce a slightly larger output than last year. The 1955 price support will be not less than $1.58 per bushel. A five per cent increase in spring, 1955 farrowings is planned, but a narrowing of the hog-corn price ratio has made further increases unbertain [5, March 1955, pp. 3, 16]. 1956 Area planted to corn, oats, and barley will decline in 1956, with little change expected for sorghum. However, including carry-over, these acreages will still provide with two or three per cent of the record 1955-56 supply of feed concentrates. The support level will be at least $1.40 per bushel, and will require acreage allotment com- pliance in the commercial area. Although hog population on farms at January 1, 1956 is up nine per cent from a year earlier, farmers indicate intentions to reduce the 1956 ‘ 238 spring pig crop. 1957 Although a slightly larger total acreage of the four major feed grains is likely, a sizable cut in corn plantings from 1956 may result in smaller total production by 8 - 9 per cent. The prospective corn acreage decline reflects, in part, the sign-up under the Soil Bank Program. However, carry-over in 1957 will likely make the supply of concen- trates in 1957-58 only a little below the record level of the previous year. The minimum national average support price for 1957 for farmers complying with their acreage allotments is $1.36 per bushel. Although December reports indicated spring farrowings would be down two per cent, a March report indicated that farrowings may exceed slightly the December expectations [5, April 1957, pp. 3, 5, 7, 8, 14] . 1958 Corn acreage in 1958 is likely to increase by two per cent, although total feed grain production will likely decline from the 1957 levels. Nevertheless, total feed concentrate supply in 1958-59 will probably be only a little below 1957-58. Farmers also indicate intentions to in- crease their spring and fall, 1958, farrowings [5, March 1958, pp. 3, 7, 9]. The minimum support price in 1958 will be $1.36 per bushel [5, May 1958, p. 27]. 1959 Discontinuance of the acreage allotmentsand the Corn 239 Acreage Reserve Program will likely push corn acreage up 12 per cent in 1959. Total corn output in 1959 may therefore be a record, with total feed grain supply in 1959-60 at least equal to 1958-59. An offsetting factor is an expected 13 per cent rise in spring, 1959, farrowings, and some further expansion in the fall crop. The minimum national average support for corn for 1959 is $1.12 per bushel [5, April 1959, pp. 4, 6, 7, 9]. 1960 Farmers plan about the same acreage of corn, but a slightly smaller acreage of all feed grains than in 1959. Nevertheless, total supplies (including carry-over) may set a new record high. The minimum national average support for 1960 corn is $1.06 per bushel. As in 1959, corn produced anywhere in the U.S.; that meets the quality and storage requirement will be eligible for price support. A reduction of 13 per cent is forecast in spring 1960 hog farrowings in the Corn Belt region [5, April 1960, pp. 3, 8 13]. 1961 A special feed grain program was signed into law March 22, 1961 which requires farmers to take 20 per cent of their corn and grain sorghum acreage out of production in order to be eligible for price supports. The base is 1959 and 1960 acreage. The national average support rate for corn is $1.20 per bushel. Acreage of corn will decline in 1961 from 1960. Although there is considerable uncertainty 240 regarding 1961 production, a slight decline in total feed concentrate supplies is likely for the 1961-62 season. An eight per cent increase in spring farrowings is likely, with some fall increase as well [5, April 1961, pp. 3, 6, 8]. 1962 A three per cent decline is expected in 1962 corn acreage, although total feed grain supplies will likely be near 1961-62 levels. March 1 intentions showed a five per cent increase in hog farrowings anticipated for June- August. The 1962 feed grain program, essentially unchanged finm 1961, maintains the corn support rate at $1.20 per bushel [5, April 1962, pp. 3, 8]. WHEAT 1917 "Peace in Europe, coming before a new crop of grains, would mean a severe shrinkage in values" [1, December 16, 1916, p. 2]. The amount of wheat on farms at March 1, 1917 is 101 million bushels, down from 244 million bushels a year earlier [1, March 8, 1917, p. l]. 1918 Government buyers have entered the wheat market, purchasing at a basic price of $2.20 per bushel at Chicago. All wheat will now be channeled through the ($50,000,000) United States Grain Corporation [1, September 5, 1917, p. 3]. 1919 In March, the purchase price for wheat was raised to 241 $2.50 per bushel [1, March 22, 1918, p. 4]. This is equi- valent to $2.75 per bushel at Chicago, basis No. 2 wheat [1, March 25, 1918, p. 3].l/ 1920 March 1, 1919 stocks of wheat on farms are 129 million bushels, as compared with 108 million bushels on hand a year earlier [1, March 7, 1919, p. 1]. Conditions for seeding fall wheat were favorable [1, September 25, 1919, p. 6] . 1921 Wheat futures dropped below $2.00 per bushel for the first time in three years [1, October 5, 1920, p. 4]. Wheat price has declined during September and October, 1920. 1922 Wheat stocks on farms and mills at March 1, 1921 are estimated at 320 million bushels, down slightly from 338 million a year earlier [1, March 11, 1921, p. 5]. Condi- tions for planting fall wheat appear to be near ideal [1, September 15, 1921, p. 5]. Visible supplies of wheat in the U.S. , in September are up from a year earlier [1, September 27, 1921, p. 5]. 1923 Argentina and Australia have sown 12 per cent and 10 per cent more wheat, respectively, this year than last, and crop prospects are good. Uncertainty ”regarding the .1/ This was later reduced to $2.26 per bushel [1, March 7, 19.19, p. 1]. 242 size of European purchases is indicated, but gradual im- provement in European ability to purchase wheat is fore- seen [2, November 1922, pp. 4, 17-18]. 1924 Indications are of smaller acreage being sown than a year ago [2, October 1923, p. 2]. Wheat growing areas, particularly the spring wheat areas, are giving attention to diversifying because of low returns in wheat relative to other farm commodities [2, November 1923, p. 2]. 1925 There are indications of an increase in acreage, but this probably will mean production at a level not ex- ceeding 1924, since 1924 yields have been the highest in six years [2, September 1924, p. 2]. Wheat crops are expected to be down in Argentina and about the same in Australia, as compared with a year earlier [2, December 1924, p. 20]. 1926 The high 1925 prices were in part due to a shorter crop than usual [2, October 1925, pp. 22-23]. 1927 Wheat stocks on hand are low, and 1926 production in the Northern Hemisphere is about the same as last year, with likelihood of only a modest increase, if any, in Southern Hemisphere production [2, November 1926, p. 23]. 1928 August 1 reports indicate that U.S. farmers will 243 increase winter wheat plantings by 13.7 per cent. World wheat output in 1928 will probably be up [2, September 1927, p. 16]. 1929 Low 1928 prices for wheat are partly the result of a record 1928 wheat crop in Canada. The shortage of feed grains in Europe, leading to an increase in the use of wheat for feed, is a stabilizing influence on price, how- ever [2, December 1928, pp. 10, 15]. 1930 August 1, 1929 carry-over of wheat shows an increase of 100,000,000 bushels over 1928 [6, p. 56], with total August 1 carry-over in principal exporting countries up by twice this amount [2, December 1929, p. 2]. 1931 The Smoot-Hawley Tariff Act of 1930 will make it more difficult for other countries to obtain foreign exchange, and is therefore likely to have a downward in- fluence on wheat prices. Although the low 1930 wheat prices are partly a result of large supplies and distress sales, the uncertain economic situation and the downward trend of business conditions provide no indication that 1931 prices will be higher [2, December 1930, pp. 16, 22]. 1932 A The possibility exists of a smaller 1932 crop as compared with 1931. In Kansas, for example, August farmers' intentions are to plant wheat at a level 15 per cent below 244 a year earlier [2, October 1931, p. 4]. Poor weather con- ditions exist in some wheat-growing areas [2, November 1931, p. 2], and wheat stocks continue large [6, p. 56]. 1933 Farmers' intentions are to sow about one per cent less wheat than last fall [2, September 1932, p. 1]. An improvement in business conditions is likely [2, NOvember 1932, p. 24]. 1934 "The Agricultural Adjustment Administration will pay farmers who cooperate in its acreage reduction campaign 28 to 30 cents per bushel on 54 per cent of their 3-year aver- age production of wheat in 1930-32 ..." [2, September 1933, p. 6]. The London Wheat Agreement (IWA) indicates prices will improve over 1932, and likely over 1933. However, it is believed that "[domestic] governmental action will be a prime factor in determining the level of wheat prices in the United States during the coming year" [2, November 1933, p. 3]. 1935 An increase in wheat acreage in the fall of 1934 [2, January 1935, p. 7] [7, p. 55] is one reaction to the small (due to drought) wheat crop harvested in 1934. Stocks will, however, be reduced prior to the 1935 harvest. 1936 "For the 1936 crop contract, signers may plant 95 per cent of their base acreage ... [which] may be expected 245 to be somewhat larger than that sown for the current [1935 crop] year ... . Only in the event of unusual circumstances ... is it likely that the 1936-37 average Liverpool price will be greatly above last year's level" [2, September 1, 1935, pp. 4-5]. 1937 The severe drought of 1936 has induced larger wheat plantings for the 1937 crop ybar [7, p. 55]. 1938 A slackening of demand has occurred during late 1937, and brought a decline in wheat prices [2, November 1937, p. 3]. However, slightly less wheat was planted [7, p. 55]. 1939 Loan rates (59 to 60 cents per bushel) were announced in July for the 1938 crop. Indications are that the world crop in 1938 will be of record size [2, August 1938, p. 4]. A large carry-over into 1939 is likely [2, September 1938, p. 4]. The wheat allotment, at average yields, will produce slightly less wheat than domestic disappearance [2, November 1938, p. 4]. 1940 "BAE looks for someWhat larger seeded acreage of wheat for 1940 than for 1939." [2, September 1939, p. 4]. "Increases in foreign demand due to the war may be relatively slow in materializing'[4, October 1939, p. 2]. 1941 The U.S. and world wheat crops are unlikely to be 246 very different from those of 1940. "Wheat prices in the United States, on the other hand, are expected to remain independent, to a considerable extent, of prices in other countries" [2, October 1940, p. 14]. 1942 Total U.S. supplies for 1942 will be about average in spite of a large carry-over [4, September 1941, p. 14]. Price increases are expected in most commodities, due to higher levels of income, larger food-for-defense needs and a rising general price level. The national goal for 1942 is 50 to 55 million acres [2, October 1941, pp. 2, 19]. 1943 Growing military and lend-lease needs will absorb about 20 per cent of total domestic food production in 1943, as compared with 13 per cent in 1942. "Wheat prices ... are expected to average ... higher than in 1942-43" [4, October 1942, pp. 7, 11]. 1944 Continued price inflation and large quantities of wheat going to nonfood uses indicate price increases in spite of heavy wheat plantings [4, September l943,p. 7] [7. P. 55]. 1945 "The 1945 wheat goal of 68.6 million acres is an increase of about 1.9 million acres above the acreage seeded for the 1944 crop" [2, November 1944, p. 10]. Con- tinuation of the price support loans of 90 per cent of 24H parity for two calendar years following the cessation of hostilities is guaranteed by present legislation. With the support program, 1945-46 wheat prices are expected to be about the same as those of 1944-45 [4, October 1944, p.10]. 1946 U.S. acreage will be at least as great as for the 1945 crop, but large export demand is likely to hold prices for the 1946 crop very close to ceiling levels. The large wheat acreage currently planted, if maintained beyond several years, could lead to difficult disposal problems [4, October 1945, p. 12]. 1947 Growers will seed about the same wheat acreage as was done for the 1946 crop. Carry-over on JUly l, 1948 will be about equal to that on July 1, 1947. However, it is uncertain that exports in succeeding years can be main- tained at the present high levels [20, August 1946, pp. 3, 9]. ' 1948 "Demand for very large exports of United States wheat is very likely to continue through 1948-49. The quantity of wheat the United States has to export, however, will not be sufficient to meet demands unless yields are again (as in 1942-48) unusually large" [20, August 1947, p. 3]. 1949 The recommended wheat goal for 1949 is 71.5 million 248 acres, down 6.2 million from the 1948 seeded acreage. Prospects for exports are much below the 1948 crop. Prices for the 1949 crop will be close to loan level for the year. As provided in The Agricultural Act of 1948, loan rates for 1949 will be 90 per cent of parity. There has been a marked recovery in world wheat production [20, August 1948, pp. 3, 4, 9]. 1950 I.W.A. came into force July 1, 1949 setting a U.S. price equivalent of $1.80 per bushel for No. 1 Manitoba Northern at Fort William or Port Arthur, Canada. An export subsidy is necessary to reimburse exporters who fulfull U.S. obligations under this agreement. Acreage in the U.S. will be about 73 million for the 1950 crop [20, August 1949, PD. 3, 14-15]. 1951 National average support price for the 1951 wheat crop will be not less than $1.99 per bushel [7, p. 61] [20, August 1950, p. 3]. The support level will probably be about 10 cents higher, however. The national acreage allotment is 72.8 million acres, and ample supplies are in prospect. \ 1952 The price for the 1952 crop will be supported at not less than $2.17 per bushel. This will likely provide enough wheat for an increased carry-over at the end of the 1952-53 marketing year [4, October 1951, p. 24]. The 249 question of extending I.W.A. beyond 1952-53 is uncertain at seeding time. 1953 The support level for the 1953 crop will not likely be below $2.20 per bushel, with neither acreage allotments nor marketing controls. With expected reduced exports dur- ing 1953-54, the carry-over at the end of the 1953 market- ing.year will probably increase [20, August-September 1952, p. (my 1954 The loan rate will likely not differ greatly from the $2.21 applicable to the 1953 crop. Marketing quotas will be in effect on all farms planting more than 15 acres of wheat. With a national allotment of 62 million acres, it is expected that not much change in carry~over will occur during the 1954 marketing} year [20, July-September 1953 pp. 3, 11-12]. 1955 A 12 per cent reduction in acreage for the 1955 crop is expected as a result of the approval of marketing quotas by farmers in a July referendum. The national average support level for 1955 will be not less than $2.06 per bushel and $2.24 in commercial areas [4, October 1954, p. 34]. Production on such a scale may lead to some reduc- tion in inventories following the 1955 marketing year [20, August 1954, p. 3]. ‘l/ The increase which actually occurred was from 6.27 to 14.99 million bushels [7, p. 63]. 250 1956 A further decline in output in 1956 is anticipated if average yields prevail [4, November 1955, p. 38]. The support rate will be not less than $1.81 per bushel [20, August 1955, p. 4]. 1957 Of importance is "thht the 1957 crop is going to be considerably less than total disappearance." The minimum average support rate in commercial areas for those who comply with farm allotments will be $2.00 per bushel [20, August 1956, pp. 4, 5]. 1958 The minimum national average support price for the 1958 wheat crop is $1.78 per bushel. It is likely that carry-over on July 1, 1959 will show further reduction from a year earlier [20, August 1957, p. 4]. 1959 The minimum support level for the 1959 crop is $1.81, as compared with a level of $1.82 as the national average for the 1958 crop. Carry-over at the end of the l958~59 crop will be the largest in history, however, and a further increase may occur in 1959-60 [4, November 1958, pp. 34-35]. 1960 The minimum support level for the 1960 crop is $1.77, down $.04 [20, August 1959, p. 28]. It is likely that the 1960 crop will be larger, by perhaps eight per cent, than the 1959 crop, and this may result in a further increase 251 in carry-over at the end of the 1959-60 marketing year [4, November 1959, p. 36]. 1961 The minimum support level for 1961 crop wheat is $1.78. A further increase in carryover following the 1961-62 marketing year is likely [4, November 1960, p. 37]. 1962 The support level in the 39 commercial states will be at $2.00 per bushel. There is a mandatory 10 per cent cut in the 55 million acre wheat allotment [4, November 1961, pp. 31-32]. REFERENCES CITED 1. The Chicago Daily Drovers Journal. December 1916 - June 1922. 2. U.S.D.A., Agricultural Situation. 3. U.S. Dept. of Agriculture. Crops and Markets. Vols. 4 - 7 (1927-1930). 4. U.S. Dept. of Agriculture. The Demand and Price Situation. 5. U.S. Dept. of Agriculture. The Feed Situation. 6. U.S. Dept. of Agriculture. Grain and Feed Statistics Through 1957. Statistical Bulletin—No. 159, I955. 7. U.S. Dept. of Agriculture. Grain and Feed Statistics Through 1961. Statistical Bulletin No. 159, June, 1962. 8. U.S. Dept. of Agriculture. The Livestock and Meat Situation. 9. U.S. Dept. of Agriculture. The Livestock and Wool Situation. 10. U.S. Dept. of Agriculture. The Livestock Situation. ll. U.S. Dept. of Agriculture. Livestock and Meat Statistics 1962. Statistical Bulletin No. 333, 1963. 12. 13. 14. 15. 16. 17. 18. 19. 20. 252 U.S. Dept. of Agriculture. Livestock-Feed Relation- ships 1909-63. Statistical Bulletin No. 337, 1963. U.S. Dept. of Agriculture. BAE,_Livestock on Farms, January 1, 1867-1935. 1938. U.S. Dept. of Agriculture. Livestock on Farms and Ranches on January 1. Number,TVaIue and Classes, 1920-39, by States. Statistical“BuIletin‘No. 88, 1950. U.S. Dept. of Agriculture. The Market Reporter. Vols. 1 - 4 (1920-1921). U.S. Dept. of Agriculture. Monthly Crop Report. Vols. 2 - 7 (1916-1921). U.S. Dept. of Agriculture. Pi Crops B States 1930-1954. Statistical Bulletin No. T87, I956. U.S. Dept. of Agriculture. Weather, Crops and Markets. Vols. 1 - 4 (1922-1923). U.S. Dept. of Agriculture. Weekly News Letter. Vols. 4 — 9 (1916-1921). U.S. Dept. of Agriculture. The Wheat Situation. APPENDIX C QUESTIONNAIRES FROM SURVEY RESPONDENTS This appendix reproduces seven questionnaires received from respondents to the writer's query with respect to the relative position of actual versus expected prices. Six of the questionnaires were used in this study. The seventh, that relating to tobacco, is included because it contains relevant information, but at a more disaggregated level than that at which tobacco is treated in this study. Three other questionnaires were received, but are not reproduced here for reasons indicated in the text. In addition, a number of individuals wrote letters with their question- naires, or sent letters in lieu of returning completed questionnaires. Although none of these letters are included in this appendix, relevant portions of several of them are included in Chapter 5. The name of each person who provided information is listed on the questionnaire which he completed. 253 254 INDEX OF PRICES EXPECTED BY FARMERS FOR FARM-PRODUCED COMMODITIES YEAR PRICE EXPECTED AT JANUARY 1 FOR THE NEXT FIVE YEARS WAS ABOVE PRICE'i WHICH OCCURRED WHICH OCCURRED BELOW‘PRICE WASLTHE‘ DIFFERENCE TEN PER CENT OR MORE OF THE INDEX OF PRICES RECEIVED? 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 XX ><><>< ><><><><>< >< ><><>< ><><>< ><>< ><>< ><><><>< ><><>< Source: w. I. MyerS. INDEX OF PRICES EXPECTED BY FARMERS 255 FOR FARM-PRODUCED COMMODITIES YEAR PRICE EXPECTED AT JANUARY 1 FOR THE NEXT FIVE YEARS WAS ABOVE PRICE WHICH OCCURRED BELOW PRICE WHICH OCCURRED WAS THE DIFFERENCE TEN PER CENT OR MORE OF THE INDEX OF PRICES RECEIVED? 1940 _ 1941 1942 1943 1944 _ 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 a £4 ><><><>< >< >< ><><>< >4 ><><>< ><><><>< ><><>< >< l/.Expected and actual equal. 2/ Relationship not indicated. Source: C. Kyle Randall 256 INDEX OF PRICES EXPECTED BY FARMERS FOR FARM-PRODUCED COMMODITIES PRICE EXPECTED AT jANUARY 1 FOR WAS THE THE NEXT FIVE YEARS-WAS DIFFERENCE TEN ABOVE PRICE“ BELOW PRICE PER CENT OR MORE YEAR - OF THE INDEX OF WHICH OCCURRED WHICH OCCURRED PRICES RECEIVED? 1928 X NO 1929 X YES 1930 x YES 1931 X NO 1932 X NO 1933 X NO 1934 X NO 1935 X NO 1936 x NO 1937 x NO 1938 X YES 1939 X YES 1940 X YES 1941 X YES 1942 X YES 1943 X YES 1944 X NO 1945 X NO 1946 X NO 1947 x NO 1948 X NO 1949 X NO 1950 X NO Source: F. V. Waugh 257 INDEX OF PRICES EXPECTED BY FARMERS FOR FARM-PRODUCED COMMODITIES PRICE EXPECTED AT JANUARY 1 FOR THE NEXT TEN YEARS WAS WAS THE DIFFERENCE TEN PER CENT OR MORE ABOVE PRICE BELOW PR CE YEAR OF THE INDEX OF WHICH OCCURRED WHICH OC URRED PRICES RECEIVED? 1940 X YES 1941 X YES 1942 X YES 1943 X YES 1944 X YES 1945 X YES 1946 X YES, probably 1947 X NO, probably not 1948 X YES 1949 X NO, probably not 1950 X YES 1951 X YES 1952 X YES 1953 X YES, probably 1954 X NO 1955 X NO Source: E. W. Grove 258 COMMODITY: TOBACCO PRICE EXPECTED AT PLANTING TIME WAS THE .FOR THE CROP YEAR WAS DIFFERENCE TEN ABOVE PRICE BELOW PRICE PER CENT 0R YEAR A MORE OF WHICH OCCURRED ‘WHICH OCCURRED ACTUAL PRICE? Flue- Flue- Flue- Cured Burley Cured Burley Cured Burley 1940 X X 1941 1942 1943 1944 1945 ><><>< ><>< XX X ><><><><>< 1946 X 1947 X 1948 1949 1950 ><><><>< 1951 1952 X 1953 1954 1955 ><>< 1956 1957 1958 1959 1960 ><><><><>< ><><>< >< ><><>< >< ><><><><>< >4 >¢><><><>< ><><>< ><><>< X 1961 l/ 1962 x X .3/ Not indicated for flue-cured. Source: A. G. Conover 259 COMMODITY: BEEF YEAR PRICE EXPECTED AT JANUARY FOR THE NEXT FIVE YEARS WAS ABOVE PRICE BELOW PRICE WHICH OCCURRED WHICH OCCURRED WAS THE DIFFERENCE TEN' PER CENT OR MORE OF ACTUAL PRICE? 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 ><><><>< ><>< ><><><><>< ><>< ><>< >< ><><>< >< ><><>< ><><><>< XX XX X ><>< Source: H. F. Breimyer 260 COMMODITY: CORN YEAR PRICE EXPECTED AT PLANTING TIME FOR THE NEXT FIVE CROP YEARS WAS BELOW PRICE WHICH OCCURRED ABOVE PRICE WHICH OCCURRED WAS THE DIFFERENCE TEN PER CENT OR MORE OF ACTUAL PRICE? 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 ><><><>< ><><><><>< ><><><><>< XNNNN >< ><>< >< ><><><><>< >< Source: M. Clough APPENDIX D COMPARISON OF ESTIMATES OF COEFFICIENT OF EXPECTATION This appendix reports an attempt to ascertain whether the expected price series of this study are comparable with some of the empirical relationships postulated by Nerlove. The pertinent data are reported in Table 51 and 52. Where P: is expected price for period t, Pt is the actual price in period t and fi is the coefficient of expectation, Nerlove poses an equation of the form: P35 - P¥-1 = %(Pt_1 - P¥-1) O< (6‘: 1 (D1) Nerlove develops estimates of 6 by two techniques, thereby arriving at two estimates of_p for each of corn, cotton and wheat. He states: "All analyses rested on the assum- ption that the difference between long- and short-run equilibrium acreage was negligible."$/ In the terminology of this thesis, the assumption is being made that g is invariant with respect to the time horizon. Tables 51 and 52 provide the result of fitting equations similar to (D1) to data Of this study. These tables illustrate the results from fitting three equations to each of the three commodities discussed by Nerlove:§/ .l/ The Dynamics of Supply: Estimation of Farmers' Response to Price, op. cit., p. 199. 2/,EPt is used here in place of Nerlove's P: to indicate expected prices as estimated in this study. 261 262 EPt - EPt..1 = %,(Pt_1 - EPt_1) (D2) EPSt - EPSt-I = [919191 - EPSt-I) (D3) EPIOt - EPIOt-I = (55(Pt-1 - EPIOt—I) (D4) EPt = expected price for year t. EPt_1 = expected price for year t-l. EP5t = expected price for year t and the succeeding four years. EP5t_1 = expected price for year t-l and the succeéding four years. BPlOt = expected price for year t and the succeeding nine years. EP10t_1 = expected price for year t-l and the succeding nine years. Several observations are possible on the basis Of data in these two tables. First, Table 51 suggests a possibility of "over-adjustment" (i.e.,fi’l) for wheat. Second, Table 52 shows that, in the data of this study, the coefficient Of expectation is not invariant with respect to the time horizon. Third, Table 52 suggests, for corn and wheat, that the coefficient of expectation has not been constant over the period 1917-62. That the coefficient has changed over the period is not obvious for cotton, however. Nevertheless, the data of Table 52 indicate that Johnson's concern,regarding the constancy of the coefficient of expectation over time, is deserving Of further study.l/ l/ Supra, p. 28. 263 Table 51: Comparison of Estimates of Coefficient of Expectation, Nerlove and This Study Nerlove Estimatesl/ This Study Commodity Iterative Non-Iterative One-Yearg Corn .25 .54, .60 0.772 (.08) Cotton .04 .41 0.887 (.07) Wheat .37 .52 1.145 (.08) Y 1/ Source: Nerlove, The Dynamics of Supply: Estimation of Farmers' Response to Price, op. cit., pp. 201, 202, 204. 2/ The numbers in parentheses are standard errors. These _ coefficients are estimates of $\ (see equation DZ) and are based on expected and actual price data for the period 1917-62. 264 Table 52: Comparison of Estimates of Coefficient of Expectation, Three Time Horizon and Three Commodities, This Study1 Commodity A One-Year Entire Periodg/ .Early PeriodE/ Late Periodfl/ Corn 0.772 0.984 0.532 (.08) (.08) (.12) Cotton 0.887 0.930 0.820 (.07) (.12) (.09) Wheat 1.145 1.232 1.029 (.08) (.12) (.12) Five-Year ; T 1 Corn 0.321 0.578 0.142 (.06) (.06) (.07) Cotton 0.500 0.491 0.537 (.06) (.09) (.08) Wheat 0.580 0.730 0.451 (.07) (.12) (.09) Ten-Year Corn P 0.264 : .486 ' 0.115 (.05) .06) (.05) Cotton 0.333 0.330 0.351 (.05) (.09) (.07) Wheat 0.264 .534 0.262 (.05) . .14) (.08) ‘l/ One-year, fiv -year coefficients El) 1, (D2), (DB) and (D4). 2/ The coefficients in expected and actual ‘3/ The coefficients in expected and actual 4/ The coefficients in expected and actual and and tin-year indicate, respectively, this column are price data from this column are price data from this column are price data from calculated the period calculated the period calculated the period ‘3calculated from equations from 1917-62. from 1917-32. from 1933-62. 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