Volume Of Agricultural Production Research Articles

Food and Agriculture Organization

The annual report of the Food and Agriculture Organization (FAO) pointed out that estimates of the world total volume of agricultural production, excluding mainland China, showed an increase of only one percent in 1960–1961 over the previous year. This was less than the estimated normal population growth of 1.6 percent, although if the last two seasons were taken together, production would appear to have increased slightly faster than population. The main increases in production since 1958–1959 had been primarily in the more developed parts of the world, although in each of the less developed regions the prewar level of per capita output apparently had been reached or exceeded sometime during the postwar period. The Far East (excluding mainland China), where production per head has been the lowest in the world, was estimated to have reached the prewar level in i960. In Africa, in contrast, per capita food production returned to this prewar level soon after the war but appeared to have dropped below it in the year under review. Although Latin America had regained its prewar level between 1956 and 1959, its rapid population growth has caused a sharp drop in per capita output. In the Near East also, per capita production has deteriorated recently, although itremained much higher than before the war.

Biases in Certain Production Indexes

PROFESSOR COCHRANE has recently presented in the Journal of Farm Economics a revised version of his hypothesis concerning the irregular shifting of the aggregate agricultural supply function to the right as a result of the adoption of new technology.2 Briefly his thesis is that the function is almost perfectly inelastic; further, it holds steady for a period of years of constant technology, jumps sharply to the right during a period of improving technology, then repeats the process. To subject this hypothesis to empirical testing, some method is needed to identify periods of constant technology and those of changing technology. In his most recent article, Cochrane computed an of production efficiency as the ratio of the index of volume of farm marketings and home consumption to an index of total agricultural inputs.3 Professor Schultz performs a similar analysis. He computes two indexes of the physical volume of agricultural inputs and compares changes in the volume of inputs with changes in the volume of agricultural production for sale and home consumption.4 The computation and evaluation of these measures of inputs, outputs and technology is a problem in index numbers. The purpose here is to investigate the biases in these indexes. First, we need the following notations:

Measuring the Volume of Agricultural Production

Measuring the Volume of Agricultural Production

An Evaluation of the Wartime Farm Price-Support Programs

-3THIS paper presents an appraisal of the economic soundness of the I agricultural price-support programs during 1942-44. The primary purpose of the agricultural price-support measures employed in the war food programs was to stimulate farmers to maximum effort. The premise underlying minimum price guaranties is that price affects production-a premise commonplace in classical economic theory. In applying the theory of supply elasticity to crop production, it was assumed that, when prices before the planting season are above the short period normal supply price, producers will a larger output than they produced in the last crop year. Hence it was believed that announcing minimum price-support levels in advance of the planting season could influence the volume of agricultural production. The production plan adopted in the planting season depends, aside from prevailing prices, to a large extent on producers' expectation of prices at harvest-time (as they are related to total returns). The greater the certainty with which the future prices are expected, the greater their importance relative to the prevailing prices in affecting production. Precise price expectations are possible only under perfectly monopolistic conditions or in an economy completely controlled by the government. In the case of agriculture, however, even though guaranteed prices may be announced in advance, the variations in yields from year to year introduce an uncontrollable element of uncertainty as to anticipated total receipts. Thus, even with specific price guaranties announced in advance of the planting season, farmers still cannot anticipate their total returns with certainty. This is particularly true in the case of crops the yield of which varies with the vicissitudes of weather. To the extent that aggregate returns affect producers' operations, price supports lose much of their effectiveness in directing agricul-

The American Wheat Program

THE American wheat program has to be considered in the settings both of the national and the international wheat situation. After the depression began in I929, world agricultural prices, unless specially protected, tended to fall faster and farther than the general wholesale price level. Despite this tendency there was comparatively little contraction in the volume of agricultural production, in contrast to the situation in the secondary industries, and stocks of nonperishable and semi-perishable agricultural commodities piled up and in themselves became a depressing influence on prices. Speaking generally, prices of agricultural export products fell below the general agricultural average and wheat prices below the average of the export group. Of all agricultural products entering world trade, wheat is the most widely produced. The total world income from wheat is probably less than that for dairy products, but wheat is more important in world trade. The total value of the world cotton trade exceeds that of wheat, but the area under cotton is more localized. A large part of the wheat trade is highly organized through speculative exchanges in which the general public is interested and this gives an added significance to the wheat situation. The wheat industry is a foundation stone of defense in post-War Europe, and of settlement in the newer overseas countries, some of which also depend partly on their wheat exports to maintain their international credit standing. It is not surprising, therefore, that since the depression, in all major wheat producing countries whether on an import or export basis, wheat farmers have sought and received government aid in some form, either as part of a general agricultural relief program or as special relief to them as wheat growers.

Review of the Second Quarter of 1934

BUSINESS during the second quarter of I934 was more active than during the first. Dollar volumes continued to expand at a rate very like that of the first quarter, and Curve B of our Index of General Economic Conditions (page I53) rose in June above the previous high point reached in July a year ago. June, however, brought a greater-than-seasonal decline in manufacturing activity and employment, while during the quarter speculative activity decreased, with a moderate dedine in stock prices. The extreme ease in money conditions was unbroken. Despite fairly good business performance, business sentiment continued unsettled. Returns were being compared with those when business was showing rapid advance a year earlier, and the period of seasonal slackening after the spring peak was regarded with apprehension. Long discussion of the control of the stock exchanges, which involved many matters affecting business transactions generally, was disturbing. The unfavorable aspects of certain of the government measures concerning business were being increasingly brought to light, and some of the economic developments of the quarter increased the uncertainties under which business was operating. Of the unfavorable factors, severe drought in the farming regions was one of the most important. It was clearly recognized that preexisting surpluses of certain farm products did not counterbalance a loss in crops which meant the destruction of income for a great many individual farmers. The railroads and certain other industries dependent upon the volume of agricultural production to be marketed will obviously be adversely influenced, and an additional burden was .put upon the federal finances by the necessity of relief. A second disturbing element was the multiplication of strikes and threats to strike. This is a usual concomitant of business recovery, but was clearly aggravated by the extent to which relations between employer and employee had been affected by the recovery measures. A third element, to become of greater moment after the end of the quarter, was the evident deterioration in the situation abroad, particularly in its political aspects. Developments in important European countries are reviewed in a later section of this article. The only important further extension of federal control over economic processes came in the Securities Exchange Act, certain provisions of which went into force on July i. This act was the product of prolonged consideration; and whatever its merits or demerits may ultimately prove to be, there can be no doubt that the discussion exerted a depressing effect upon the market. Further attempts to expand credit were made in the housing act and the legislation adopted relating to loans by the Reconstruction Finance Corporation and the reserve banks. The so-called Frazier-Lemke act, on the other hand, providing for a moratorium of farm debts under certain conditions, seems sure to increase the difficulties of extension of private credit to agriculture. The Silver Purchase Act operates to expand the amount of silver certificates in circulation and thus to displace reserve notes with this form of currency. On the whole, developments during the quarter were in the direction of modifying certain governmental measures which were admittedly producing untoward results in business. The amendments to the Securities Act of I933 were the most important of such measures, and give promise of putting to an end the prolonged stagnation of security flotations which has had such serious effects upon activity and employment in the heavy industries. In the administration of the National Industrial Recovery Act, the suspension of the service codes, and the decision to abandon price-fixing in new codes and reconsider such provisions in those already operating, clearly look in the direction of less rigid control. Corporate statements for the second quarter reveal the increased costs attributable in large measure to the introduction of the codes, and suggest that such increased costs probably affect the bulk of goods now being produced. There appeared during the quarter, moreover, an increased tendency toward similarity in fluctuations of manufacture, employment, and pay rolls, indicating that changes in hours and wages attributable to the codes had probably produced their maximum result.

The Agricultural Depression and the Technical Revolution in Farming

The agricultural depression continues to hold the center of general attention. However, notwithstanding the abundant literature devoted to the subject, the general accepted explanations of the present depression are, it seems to me, of doubtful validity. The cause of the depression is sought primarily in the changing conditions of the demand for agricultural products, due to the decreased purchasing power of Europe, especially of Germany. An eminent German economist, Professor M. Sering, attributes the depression entirely to this factor. Such an explariation, however, is obviously inadequate. For, if it is true that post-war Europe is unable to pay a full price for agricultural products, then what compels the American farmers to sell their produce at the low price? After all, the agricultural production of the United States could have been curtailed, which would have been a natural consequence of the depression. Most American economists, although they consider the changing conditions of the European demand as the primary cause of the depression, nevertheless usually go further and try to explain why the farmers cannot rapidly reduce their output and adjust themselves to the changing market conditions. Here a number of reasons are usually given and some of them have a certain significance. In the final analysis, however, all these explanations of the depression will seem inadequate if we recall only this factthat the volume of agricultural production instead of remaining stationary, is actually rapidly increasing.