Agricultural prices

During the past fifty years, a number of people have set themselves to work to measure the shifting economic tides with index numbers. The more complete of these index numbers really undertake to measure the changing value of the dollar. In July of 1914, for instance, Dun’s index number was $119.71, which meant that it required $119.71 to buy a certain given amount of wheat, corn, oats, pork, beef, butter, eggs, wool, hides, pig iron, lumber, petroleum, etc. On September 1, 1919, it required $238.34 to buy these same goods. The dollar of July of 1914 had become worth about 50 cents in September of 1919, in its ability to buy wholesale products. The consumer, in his buying, has certain choices. The man who thinks pork is too high in price can shift to beef or mutton; or he can leave meat altogether out of his ration and secure the needed nutrients in dairy or poultry products.

The producers’ ratios, as described in preceding chapters, have to do fundamentally with supply conditions. They deal with the relation between a raw product and a more finished product. They are concerned, but not immediately, with demand conditions. The attempt in this chapter is to develop a ratio which gives more particular weight to demand conditions. Therefore, ratios are developed between a standard index number on the one hand and a given commodity on the other. However, because index numbers include some of the items of expense entering into the production of any commodity, such a ratio also represents to a considerable extent a producers’ ratio.

To understand the matter more definitely, we shall look into the ratio actually prevailing between Dun’s index number and Chicago hog prices. As an average of the ten-year period, 1907–1916, Dun’s index number in January has averaged $120.16, whereas hogs during the same period have averaged $6.99 per hundredweight. In other words, live hogs have sold per hundredweight for about one-seventeenth of the value of Dun’s index number. On this basis, in January of 1907, the index price of hogs was $6.24, whereas the actual price was $6.60, or 36 cents higher. In January of 1908, the index price of hogs was $6.59, whereas the actual price was $4.45, or $2.14 lower. And so it goes. For the period of a year or two, hogs will sell proportionately higher than other commodities, and then for a like length of time they will sell lower. This is graphically illustrated in the accompanying chart. This chart, it will be noted, is very similar in appearance to the corn-hog ratio chart. The chief point of difference is in 1917 and 1918, during which time hogs sold relatively higher than an average of other commodities, as indicated by Dun’s index number, whereas they were relatively lower than corn. War conditions, creating an unprecedented demand for breadstuffs, raised grain prices out of all proportion to other commodities. On studying this chart closely, it will be noticed that there is a tendency, generally speaking, for hogs to sell relatively cheap to other commodities a few months in advance of the time that they sell relatively cheap to corn, and vice versa. In other words, the variations shown on the chart as given in this chapter are often two or three months ahead of the chart as given in the chapter on corn-hog ratios.

A historical study of the ratio between index numbers and Chicago steer prices indicates that steer prices swing first above and then below their index number value in periods of from five to nine years each way, with an average of around seven years.

The 1907–1916 ratio between Dun’s index number and wholesale prices of certain farm products is given in the following table:

With Dun’s index number at $245 for December of 1919, the method of finding the index price of hogs is to multiply $245 by .0568, which gives $13.92.

It is not claimed that the ratio between Dun’s index number and hogs, for instance, is as constant as the ratio between hogs and corn. In the decade of the ’60’s, hogs sold for one-third lower in relation to Dun’s index number than in the decade ending in 1916. There has been a constant tendency for farm products to sell constantly higher in relation to Dun’s index number. And this tendency doubtless will continue until population becomes stationary, altho there may be several years at a time when the tendency is apparently halted because of improvements in agricultural efficiency. In the main, the possibility of improvements in industrial efficiency is so much greater than in agriculture that we may expect that agricultural prices will stand in constantly higher ratio to other prices, until finally the increase in population is checked.

Working out ratios between Dun’s index number and retail prices as reported by the Bureau of Labor Statistics, we find that as an average of the 1907–1916 period, .183 of Dun’s index number represented the price of sirloin steak in cents per pound. For other commodities sold at retail the ratio factors were:

TABLE 1.

It is interesting to note that in September of 1919, when there was a universal outcry against retail prices, an outcry vigorously encouraged by notoriety-seeking politicians, that retail prices were about as might have been expected from Dun’s index number. Dun’s index number was $238.34 on September 1, 1919, and the first column of Table 2 gives the retail price which we might expect by applying the standard ratios. The second column gives actual prices on September 15th, as reported by the Bureau of Labor Statistics:

TABLE 2.

The factors as worked out in Table 1 are ratios between yearly average retail prices and yearly average Dun’s index numbers. Even retail prices, however, have some seasonal swing. For instance, meats tend to be cheaper in the winter than in the summer, whereas butter and eggs tend to be cheaper in the summer than in the winter. Because of the seasonal swing, the first column of Table 2 is not absolutely accurate. For instance, the retail price of sirloin steak in September is usually about 2 per cent higher than the yearly average, and, corrected for the month of September, the price should have been 44.5 cents, instead of 43.6 cents. On the same basis, the seasonally corrected price for butter for September, 1919, was 68.6 cents, instead of 70.1 cents.

In the main, however, Table 2 is fairly accurate as it stands. It will be noted that with the exception of hog products, wheat and potatoes, retail prices in September of 1919 tended to be lower than their normal ratio to Dun’s index number.

Possibly a consumers’ attack on the price of pork products, wheat and potatoes was warranted in September of 1919. It must be remembered, however, that there was supposedly a world need for hog products and wheat at that time, and that potatoes were unduly high on account of a short crop.

Consumers should be educated in the use of index numbers and to an understanding of normal ratios between index numbers and the various commodities which they buy. In times of violent price fluctuations they should know just what is the index price of the commodities whose prices are acting in a questionable way. At the same time they should realize that the index price is not necessarily the just price. However, the index price gives a basis upon which the consumer may work. He may then inquire why it is that the actual price departs from the index price. In May of 1918, for instance, the index price of corn in Chicago was $1.25, whereas the actual price was $1.60. The actual price was above the index price partly because of a poor quality corn crop in 1917, but particularly because of an unprecedented demand for breadstuffs. Nevertheless, everything considered, the consumer may have had some basis for resentment against the high price of corn and corn products, whereas if he had studied the milk and butter situation, he would have seen that the dairy products were being sold at a real bargain. Strange to say, consumers kicked vigorously against milk prices, but had nothing to say about corn prices. Consumers are always concerned with superficial appearances, never with fundamental causes. And this characteristic of city consumers, combined with an unscrupulous, ignorant city press, is a grave menace to our civilization.

The fundamental idea of the ratio method is that the price of every product is determined in the long run by the price of some other product or products. The price of hogs is determined in the long run by the price of corn. The price of corn is determined in the long run by the price of land, labor, farm machinery and horse feed.^[5]

In its simplest form, the ratio method deals with only two products, as for example, with hogs and corn. As an average of the ten Januarys extending from 1907 to 1916, No. 2 corn on the Chicago market sold for 59.9 cents a bushel, and heavy hogs on the same market sold for $7 per hundredweight. In other words, as an average of this ten-year period, it has required the value of 11.7 bushels of corn to equal in value one hundred pounds of heavy hog flesh. In the specific month of January, 1907, corn was 41.6 cents per bushel. The corn price of hogs was 11.7 times 41.6 cents, or $4.87. The actual price of hogs in January, 1907, was $6.60. Actual hogs sold for $1.73 above the customary corn-hog ratio. In January of 1908, with corn at 58.5 cents a bushel, the corn price of hogs would be 11.7 times 58.5, or $6.84. The actual price was $4.45, or $2.39 below the ratio price. The ratio for February is different from the ratio for January, but once a set of ratios is secured for each of the twelve months of the year, it is easily possible to work out charts showing month by month the periods of time when hogs were selling relatively higher than their customary ratio to corn, and when they were selling relatively lower.

It is absolutely necessary to work ratios month by month, or week by week, in the case of all products which have a seasonal swing. Nearly all agricultural products are cheap in the fall of the year. Some products begin weakening sooner than others; for instance, oats and wheat weaken sooner than corn or hogs.

A genuinely scientific method of applying the ratio method to hog prices would also take into consideration that hogs are to some extent made out of tankage, pasture and labor, as well as corn. Of course, these things vary in value in a rough way, in just about the same way as corn prices, and for practical purposes, the ratio between hogs and corn is probably exact enough.

As an example of a more complex application of the ratio method, assume that after thoro investigation by the farm management people, it is found that on typical farms 70 per cent of the cost of producing hogs is represented by corn, 5 per cent by tankage, 3 per cent by oats, 3 per cent by pasture, 2 per cent by middlings, 6 per cent by man labor, and 11 per cent by miscellaneous items, such as risk, interest, etc., all of which vary in about the same ratio as the other items already enumerated. Spreading the 11 per cent of miscellaneous items over the other items, we find that of the cost of producing hogs, 78 per cent is represented by corn, 3 per cent by oats, 6 per cent by tankage, 4 per cent by pasture, 2 per cent by middlings, and 7 per cent by man labor. Now, as an average of the ten-year period, 1907 to 1916, the value in the month of January, at Chicago, was 59.9 cents for corn and 43.4 cents for oats. The value of middlings on a Milwaukee basis was $22.77 per ton. The value of tankage (this is a rough estimate) was $46 per ton; the value of pasture land, $66 per acre, and the value of an hour of man labor 14.6 cents. Hogs averaged $7 per hundredweight.

According to the ratio theory, this ten-year average price of $7 per hundredweight for hogs must represent approximately cost of production. Seventy-eight per cent of $7 gives $5.46 as the share of corn in the production cost, and in like manner 21 cents is the value of the oats, 42 cents the value of the tankage, 28 cents the value of the pasture, 14 cents the value of the middlings, and 49 cents the value of the man labor. With corn at 79.9 cents a bushel, as it was during this ten-year period, and other feeds at prices as mentioned in the foregoing, it is obvious that it required, to equal one hundred pounds of hog weight, the value of 9.1 bushels of corn, one-half bushel of oats, one-two hundred and fiftieth of the value of an acre of ordinary rough pasture land, twelve pounds of middlings, eighteen pounds of tankage, and 3.4 hours of man labor. In the specific month of January, 1907, corn was worth 41.6 cents; oats, 35.4 cents; middlings, $18.37; ordinary rough pasture land, $51 per acre; tankage, $40 a ton, and man labor, 13 cents an hour. Nine bushels of corn at 41.6 cents gives $3.78; half a bushel of oats at 35.4 cents gives 18 cents; twelve pounds of middlings at $18.37 per ton gives 10 cents; one-two hundred and fiftieth of the value of an acre of ordinary pasture land, at $51 per acre, gives 20 cents; eighteen pounds of tankage at $40 per ton gives 36 cents, and 3.4 hours of man labor at 13 cents gives 44 cents. Adding, we get $5.06 as the cost of producing hogs in January, 1907. In January, 1908, with corn at 58.5 cents per bushel, oats at 49.9 cents, middlings at $22.62 per ton, tankage at $40 per ton, pasture at $51 per acre, and man labor at 13 cents an hour, we find, by applying the same formula, that the cost of producing one hundred pounds of hogs was $6.69. The straight corn ratio method gave $4.87 for January of 1907, and $6.84 for January of 1908, departing from the more complex ratio on the minus side by 19 cents in 1907 and on the plus side by 15 cents in 1908. The results are so nearly alike that in the case of hogs we think that it is ordinarily satisfactory to depend on corn ratios alone, altho in the case of such products as milk and butter it is well to include feeds other than corn and to use a method similar to that just outlined.

In order to allow the general public to judge of the merits of wage increases, strikes and price advances, it would be well if the ratio method might be applied to manufacturing and mining industries; for instance, in the case of coal, it might be shown (these figures are purely illustrative and possibly are wide of the facts) that 40 per cent of the cost of producing coal is labor, 20 per cent machinery charge, and 40 per cent risk, interest on investment and similar factors, which vary in just about the same ratio as the other two factors already mentioned. Distributing this 40 per cent miscellaneous charge, we get 67 per cent of the cost of producing coal represented by labor and 33 per cent by machinery charge. Now, assume that, in 1920 the labor charge has advanced over the ten-year base by 90 per cent, and the machinery charge by 110 per cent. Multiplying 67 by 190 and 33 by 210 and adding, we find that on this basis coal in 1920 should be about 94 per cent above the ten-year base. If the ten-year base is $3.50 per ton, the proper price for coal in 1920 should evidently be somewhere around $6.80 per ton.

Of course, it is obvious that anyone applying the ratio method must be thoroly familiar with the industry under consideration. There should be, however, competent experts in whom the public has confidence, to express for the benefit of the public, in ratio form, the cost-of-production price of all staple products, and possibly labor as well.

Our grade schools and our high schools should train their students to have an appreciation of the ratio method of determining prices. An appreciation of this sort developed in the minds of the bulk of our people would do much to stabilize the price system, preventing undue excesses, and yet allowing prices which cover in a fair way cost of production.

The ratio method, while astonishingly accurate as a method for ascertaining production costs, is not infallible. In the case of hogs and corn, for example, the ratio has remained constant, decade by decade, for sixty years. It is always conceivable, however, that a change in production methods will come which will enable farmers to produce hogs for less than the 11.5-bushel ratio. It is also conceivable that as population increases, there will be a smaller premium put on meat and a greater premium put on grain, with the result that the standard ratio will fall below eleven bushels. But in any event the change will be slow, and in all probability the ratio of the fifty years from 1925 to 1975 will not fall below 11 bushels.

In the case of such products as butter, where improvements in method count for more than in the case of hogs, there is more likelihood of the standard ratio changing as time goes on. In the case of such standard crops as corn and wheat, there is small probability of great change in the standard ratios. Any undue and prolonged profit will be promptly absorbed by land values and labor wages.

About the only technological improvement which would throw the standard ratios altogether out of line would be the discovery of how to make food out of air and water by manufacturing processes.

The ratio method, when used in price fixing, rather than in price judging, is open to several objections. Under a laissez faire system it may be necessary for months at a time to cater to the consumers by selling food at below the ratio or cost-of-production price. And again it is possible for months at a time to gouge the consumer by selling food above the ratio or cost-of-production price. It is only as farmers, consumers and business men become educated to the desirability of prices more nearly approximating cost of production that the ratio system can be used extensively in actual price fixing. When it is so used, there will be less likelihood of over-production on the one hand and under-production on the other hand.

Wherever the ratio system comes to be used in actual price fixing, it will be open to the criticism that prices will start pyramiding. For example, in the case of hogs and corn, a guaranteed ratio may increase the price of corn, and this in turn the price of hogs, and so on in a never-ending climb. The reverse is also imaginable. In the case of fixing crop prices by ratio, it is imaginable that land values would constantly increase, and this would increase the price of crops, which again will be reflected back into land, and so on in a never-ending cycle. Economists like to dwell on situations of this kind. They are to a large extent purely imaginary. To stop a vicious rise under the ratio system, a rise which would bring about an over-production, all that would be necessary would be to very slightly lower the standard ratio. In the case of hogs, for example, it might be necessary to lower the ratio from 11.5 bushels to 11.2 bushels.

However, in all that is said concerning the ratio method of judging prices, there is no intention to prescribe any definite method of using the system. The chief function of ratios will doubtless continue to be educational. It is hoped that a knowledge of standard ratios by large numbers of people will suffice to stabilize prices at more nearly cost of production and to stabilize production at a point more nearly identical with normal demand.

There has been much outcry in recent years against the retailer. Unquestionably, the retailer is working under a cumbersome distributive system which burdens the consumer with prices fully 20 per cent too high. It is commonly recognized that this extra 20 per cent does not represent retailers’ profits, but that it is used simply to perpetuate a system which will cater most effectively to the whims of indolent housewives. The cure for the system is for consumers to organize themselves into co-operative buying associations. When consumers are willing to band themselves together in such associations, to anticipate their needs of staple products by ordering ahead, it will be possible to furnish such products at very little above wholesale prices. In fact, it is conceivable that under such a regime co-operative consumers might buy of co-operative producers. All this, however, involves infinitely more foresight than the average citizen or his wife cares to exercise. Also it involves putting a vast number of small grocerymen out of business. In the long run, this will be a good thing for every one, but the immediate effect will be a great outcry against interfering with legitimate business, and the issue will be obscured by the customary smoke screen used by scared business men.

As long as we cling to our present retail system, it is worth while to know the standard differential between retail prices on the one hand and wholesale prices and farmers’ prices on the other hand. For instance, in 1913, ham quite customarily retailed at around 26 or 27 cents a pound, whereas the wholesale price at the same time was around 16 or 17 cents a pound, and farmers were selling their hogs at around 8 cents a pound. It was a fairly normal state of affairs, previous to the war, for ham to sell retail at 10 cents a pound above the wholesale price, or 18 cents or 19 cents a pound above the price of hogs. Just what the normal differential will be, now that the war is over, can not be foretold with accuracy. As long as we are on a price level twice as high as in 1914, it is obvious that the differential between retail and wholesale prices will be just about twice as great. The retailer may not pay quite twice as much to his labor, and he may not pay quite twice as much rent, but he will have to have twice as much operating capital, and his bad debts will probably be twice as great. At this writing, early in 1920, it seems obvious that the retailers should be allowed to have a differential fully 80 per cent larger than before the war, if they are to fare as well as most other classes. As a matter of fact, the retailers now seem to be selling ham at a differential of about 18 cents a pound over the wholesale price and about 36 cents a pound over the price of hogs. In the case of ham, the retailers began demanding an increased margin in May of 1917, the month after the war broke out. They kept increasing the margin as opportunity presented itself, but not till the summer of 1919 were the retailers able to widen out the differential between retail and wholesale prices sufficiently to cover the cost of doing business on a price level twice as high as in 1914.

The facts concerning the retail price of ham, wholesale price of ham, and price of hogs, are presented in the accompanying chart. Other retail prices are given in the appendix, and it is possible from the figures there presented to work out normal differentials for such products as wheat and wheat flour, corn and corn meal, sirloin steak and cattle, etc.

For years we have exported from the United States more corn in the form of pork than in the form of shelled corn or corn meal. In recent years we have been exporting an average of about 40,000,000 bushels of corn in the form of corn and corn meal, whereas we have been exporting the equivalent of about 130,000,000 bushels of corn in the form of pork products. And for the year 1919 we exported the equivalent of about 350,000,000 bushels of corn in the form of pork.

There is an extraordinary sympathy between the corn and hog industries. True it is that we feed almost as much corn to our horses as we do to our hogs, but the corn which we feed to horses is for the purpose of keeping the farm plant running. The corn fed to horses does not bring in direct cash returns in the same way as the corn fed to hogs. Nearly one-third of all our corn is fed to hogs, and from the standpoint of market strategy, this third which is fed to hogs counts more than the other two-thirds. The demand for the other two-thirds by horses and cattle and by the grist mills of the towns and cities is practically stationary from one year to the next. It is the corn which is fed to hogs that varies so greatly from one year to the next.

For the first ten months of 1919, the value of the pork products exported from the United States was $778,000,000, or about one-eighth of the value of all the exports from the United States for this period. The only other product of practically equal magnitude with pork products was cotton, with a total value of $775,000,000 for the first ten months of 1919. Wheat and wheat flour, which most people think rank decidedly above the value of pork products, totaled during this period $556,000,000. Corn and corn meal exports during this period were worth an insignificant $15,000,000. Of course we are now exporting more pork products than ever before in history, but even before the war the corn belt expressed itself in international trade pre-eminently thru its exports of pork products. The ham, bacon and lard of the corn belt are comparable with the wheat of the northwest and the cotton of the south.

Before the war, we exported every year the equivalent of about five or six million hogs. Last year we exported the equivalent of thirteen or fourteen million hogs, nearly one-fifth of our total production. Exports dropped off during September, October and November, but this is a customary seasonal occurrence, and there is now the prospect of a resumption of a tremendous exportation of hog products during the winter and early summer.

The two charts printed herewith indicate the very close connection between pork exports and profits in corn raising. The chart giving the profits and losses on the average acre of corn for the past forty-five years is re-published from Wallaces’ Farmer of May 17, 1918, the profits for the years 1918 and 1919 having been added since. It will be noted that the other chart gives the exports of hog products in pounds from the United States year by year. The exports are in fiscal years, ending on June 30th. It will be noted that in a broad, general way, there is a considerable relationship between the two charts. When pork exports have been less than normal for a year or two, there is a decided tendency for corn to become unprofitable, and vice versa. Note how the big hog exports, starting in 1877 and continuing thru 1881, were accompanied by a period of unusual corn profits. Note how the falling off in hog exports, starting with 1882 and continuing until 1890, was also accompanied by unprofitable corn crops. Then there was a temporary turn for the better in both corn and hog exports in 1890 and 1891, and a sag in both until 1897, when hog exports picked up and continued to pick up to a very marked degree for several years, the change in hog exports being slowly reflected in corn profits. Generally speaking, pork exports seem to lead the way, and corn tags along behind. During the war years, however, corn seemed to move just about as fast as hog exports. The first year of really heavy hog exports was the year ending June 30, 1916, and the first corn crop to sell unusually high was that harvested in the fall of 1916. The corn crops of 1916, 1917, 1918 and 1919 have all been extraordinarily profitable, and the pork exports during these same years have been unusually heavy. Unquestionably, there is a very close relationship between hog exports and the general level of corn prices. We do not mean to say that there is a month-by-month relationship, or even a year-by-year relationship. We do mean to say, however, that it is impossible for the United States to export an unusual volume of hog products without sooner or later raising corn prices. It may take a year or two for the effect to be felt by corn, but sooner or later the influence seems to be inevitable.

Heavy hog exports make for higher corn prices, and higher corn prices make for higher values in corn belt farm land. Without much question, the fundamental cause of corn land rising so much more rapidly than land in other sections is the unusual volume of pork products starting with the year 1916. It would have been impossible for the corn market to have reached or sustained its high altitude without the prop of such tremendous hog exports. In view of the evidence presented, we make bold to say that hog exports furnish a most delicate barometer of corn belt prosperity. The huge volume of pork exports during the past three years is the explanation of corn belt land rising faster than in other sections. Iowa raises twice as many hogs as any other state, and this doubtless is the reason why land in Iowa has risen faster than in any other state.

What of the future? Is there any chance that pork exports will maintain their present volume? We may as well face the issue squarely and come to the conclusion that in all probability pork exports, within three or four years, will decline to about one-third their present volume. For four or five years previous to the war, the tendency of pork exports was somewhat downward. It is reported that at that time Great Britain was buying less and less of her hog products from the United States, and that she was thinking of buying more and more of her coarser quality of hog products from China. At the present time there is considerable Chinese bacon on the English market. It is also worth while to note in this connection that the English consumption of meat is now 1,200,000 tons, which is 600,000 tons less than her pre-war consumption of meat. If England has cut down on her meat consumption one-third, the probabilities are that the continent of Europe has cut down on its meat consumption one-half. Probably never again will the world eat as much meat per capita as it did before the war. Whether we like it or not, we may as well face the probability that our pork exports are on the decline, and will not stop declining until they are down to about one-third of the 1919 volume.

And we may expect that this decline in pork exports will have some influence on corn prices, and therefore on corn land prices. The future situation is of course considerably different than that which has existed at any time during the past forty-five years. The volume of money in circulation may be such that there will be no actual decline in corn prices or in corn land prices. Just the same, we may expect that the unusually favorable position which has been enjoyed by the corn belt during the past three years will disappear with the decline in pork exports.

Previous to the war, Great Britain and Germany absorbed more of our pork exports than any other nations. Great Britain took 73 per cent of our pork exports, 86 per cent of our exports of hams and shoulders, and 36 per cent of our lard exports. Germany took 30 per cent of our lard exports and practically nothing in the way of bacon, hams or shoulders. Cuba, Holland and Belgium were the other large importers of American hog products, but these three nations together required only about one-tenth as much as Great Britain. If Great Britain cuts down her consumption of meat to two-thirds what it was before the war, she will be much more nearly self-supporting from a meat standpoint than she is now, and probably will not import from the United States more than one-half as much meat as she did before the war. Great Britain owes considerable money to the United States, and, moreover, in the future she will not get from the United States in such large measure ocean freight charges on the British merchant marine. In the old days, Great Britain had a considerable credit balance coming to her every year from the United States, and she took a large part of this in the form of pork products. Now that the situation is reversed, it is difficult to see how Great Britain can import as much in the way of hog products from the United States as she did before the war. True it is that for the year 1919 she has imported about three times as much from the United States as before the war, but once the present emergency is past, it seems obvious that Great Britain will cut her pork imports down to the minimum.

In the case of Germany, the situation is even worse. Germany, which normally took 150,000,000 pounds of lard from us every year before the war, must now pay the allied nations an indemnity every year of at least $600,000,000. In order to pay this huge sum, Germany must cut her imports down to the absolute minimum, and become extraordinarily efficient in exporting. For the next two or three years, Germany may perhaps import more lard from us than she did before the war, but, as rapidly as possible, Germany will re-establish her swine industry and reduce the imports of American lard.

We may be painting the situation too black, but we can not see how our pork exports, by the year 1925, can total to more than 800,000,000 or possibly 900,000,000 pounds, which is less than one-third the 1919 volume of exports. Of course, another war may break out in the meantime, or some other extraordinary thing may happen, but in the ordinary course of events, it would seem that our pork exports must inevitably decrease until they are considerably less than the pre-war normal. And it would seem that this decrease in pork exports will have a very considerable bearing on corn prices, which will in turn have a bearing on corn land prices. Again, we wish to say, however, that we do not necessarily believe that corn land in 1925 or 1930 will be selling cheaper than it is today. Prices of all kinds doubtless will continue to be high in 1925 and 1930, for the simple reason that inflated currency the world over will still continue. The point we are trying to make is that once hog exports decline to the pre-war normal, or less, corn belt farming will cease to enjoy the unusual advantage which it had during the war. It may for a time be relatively less profitable than farming in certain other sections of the United States.

There are many curious paradoxes in the hog export trade in the United States. While a heavy export of hog products sooner or later means high corn prices, high hog prices and corn belt prosperity generally, yet as a usual proposition, heavy hog exports do not start except in times of unusually low hog prices. The heavy exports of 1877–1881 did not start till hogs had declined below $5 a hundred, and reached their height while hogs were $3 to $4 a hundred. In 1882, when hog prices climbed to over $8 per hundred on the Chicago market, hog exports promptly fell off, and did not climb again until hog prices again went below $4 a hundred, in 1890. In early 1893, when hog prices on the Chicago market climbed up to nearly $8 a hundred again, hog exports dropped off very suddenly. They did not pick up at once in 1896, when hog prices went under $4 again, but did pick up very rapidly in 1897 and 1898, during both of which years hog prices on the Chicago market were under $4 a hundred most of the time. In 1902, there were heavy exports, in spite of the fact that hog prices were relatively high, but by 1903 the British apparently had had enough of buying high-priced pork on the American market, and they curtailed their importations very decidedly. Again, in 1910, the exceedingly high prices stopped the export demand. During the past three years there have been unprecedented exports in spite of unusually high prices. But as a matter of fact, hog prices in the United States have been cheaper during the past three years than any place else in the world. We have been selling hogs at a great bargain, or Great Britain would not have bought such tremendous quantities from us.

A thoro study of the exports of the United States month by month from January, 1903, thru the year 1914, indicates that there is a continual tendency for hog exports to be large when hog prices are low, and vice versa. The correlation coefficient between hog prices and hog exports is minus .52. There seems to be a closer correlation between hog exports and hog prices than between receipts of hogs at central markets and hog prices. The tendency has been for hog exports to be 40 per cent above normal when hog prices are 15 per cent below normal; for hog exports to be 20 per cent above normal when hog prices are 8 per cent below normal, etc. In November of 1919, when hog exports were about 40 per cent above normal, it would have appeared, therefore, that hog prices were about 15 per cent below normal. This is a long-swing tendency, and of course there are occasional exceptions. This part of the problem may be summed up to the effect that big exports start in times of low hog prices, and that these exports after a time stimulate both corn and hog prices, with the result that after a time both corn and hogs become so high in price that exports dry up, and then corn and hog prices weaken, and the whole thing starts over again. There was a continuous series of these cycles previous to the war, and it is to be expected, now that the war is over, that the phenomena will repeat themselves, altho with some added variations.

One thing we must remember is that very possibly the export trade of the United States will not count so big in the future as it has in the past. The United States has loaned something like $10,000,000,000 to foreign countries, and every year she will have hundreds of millions of dollars in interest coming her way, instead of owing hundreds of millions of dollars to countries across the water, as was the case before the war. And as long as the United States has so much money coming to her in interest charges, we must expect that eventually the United States must import more goods than she exports. This does not necessarily mean the destruction of the hog industry in the corn belt, but it may mean that it will have to shift onto a somewhat different basis. It may be that in the future we must plan on growing enough hogs only to satisfy the needs of the United States, carefully avoiding a glut which will make it essential to export any large quantity. Or it may be that the American farmer is so exceedingly efficient in the business of producing hogs that the United States will always export large quantities of pork products, even tho the balance of trade otherwise is against the United States. If we approach the problem from the standpoint of going after a large trade in hog products with foreign countries, we must put ourselves in position to produce with the utmost economy possible. “Price” talks in the export business, and we shall export large quantities of hog products whenever we are selling hogs decidedly cheaper than the rest of the world.

Just what kind of a whistle do we want, and what price are we willing to pay for it? Here is a problem which we commend to the earnest study of the research department which the National Farm Bureau Federation may some day possess.