TllASBUSIWE'SS REVIEW =7;=-~~ *** Issued by BUREAU OF BUSHJESS RESEARCH THE UNIVERSITY CF TEXAS AUSTIN, TEXAS April 4, 1927 General Business conditions throughout Texas and the Southwest ex­ perienced a moderate recession in February as compared with January but a little improvement over Febn.iary a year ago. Increased bank de­ posits, rising livestock prices, and larger charges to depositors ac­ counts were among the important developments during the month. Although department store sales in the larger centres were 6% less than in F~bruary a year ago, the amount of credit sales was reduced by 12%, showing that more goods are being bought for cash. Trade at wholesale showed a further seasonal decline from the previous month and was con­ siderably below the same month last year. Building permits in 23 cities of Texas reporting to the Bureau show a loss of 5% from January, nost of the decrease occurring in t_h$ larger cities. Production and shipments of both cement and lum­ ber decreased during the month in response to the slackened building demand~ output of crude petroleum fell sharply, and field work was l~ss active. Livestock made further improvement in February, and the industry 1s in a better condition than it has been for several years. :ijog prices were lower than in January due to heavy shipments and lower feed costs. Cattle and sheep prices were higher. Wool and mohair were in steady d·3mand at unchar..ged prices. 4 large percentage of the citrus fruits and early vege­ tables have been marketed from the Rio Grande Valley at moderate prices. The remainder to be shipped is of poorer quality and will be in com­ petition with early produco from other sections of the country so that income from this source is quite likely to be smaller over the next few months. Cotton advanced on smaller final ginnings than ware expected by the trade, but most of the advance has since been lost; Grains were steady during most of the month with a downward trend at the beginning of March. Fann work is slightly behind last year's schedule due to heavy stonns in some parts of the district. l'ii.nt8r grains are in excel­lent condition and early planting of corn has made good progress. The planting of cotton is well under way in tho southern part of Texas and is extending northward as the season advances. ' Credit conditions re:ma'.in easy. Borrowings at t.~e Federal Resarvo BaJ1}c reflected a slight _decline from January, as did bank debits. Commercial failures declined sharply, while the number of new corpora­tions chartered increased. Fi nancial and Banking Due to seasonal influences and to the shorter month, de­bits to individual accounts in the Eleventh Feder~l Ticscrvo District were smaller than the January total by 8.4% but were 6.3% larger than those of February of last year. Cities in the Rio u:-ande Valley and in the Gulf Coast Area report the larger gains. The credit situation remains easy and th8 demand for cre­dit at the Federal Reserve Bank was rather light all during the month. Loans to member banks fluctuated within very narrow limits, and borrow­ings for conunercial purposes increased slightly. Savings accounts were greater in February than in January by 1.2%, while total deposits at member banks increased from $800,000,000 to $827,000,000 in the same period. Federal Reserve notes in circulation decreased further--which is to be expected at this tL~e of the year, and gol8 holdings made a .smal 1 gain. February witnessed an improvement in the business mortal­ity rate. Each month since August of last year the number of failures increased at an alarming rate until in January 134 insolvencies were reported, the largest number since the readjustment period of 1922. Although the business fatalit ies were 103 in February as against 62 in February a year ago, the condition is a marked improvement over January. Liabilities of the 103 failures in February amounted to $2,000,000, as against 134 failures with liabilities of $2,350,000 in January. February Chan§es , with Comparisons* I february January Fe"Qruary i , I (1926) i Bank Debi ts (16 cities) in $1 ,000-~fl26 ,134 i $792 ,849 $683 ,494**1 Reserve Bank loans to :member bsriks! 3 ,637 1 3, 763 5,96LJ Commercial Failures (number)-----! 103 134 62 Cormnercial Failures {liabilities)i 2 ,023 ! 2 ,348 670 **In thousands ' Stock Prices That industrial conditions in Texas e.nd the Southwest are tending upward is i~dicated by the advance in industrial stock prices. Using the average weekly high for the years 1923-24-25 as equal to 100, the Oniversity of Texas Bureau of Business Research index of seven in­dustrials listed on the New York Stock Exchange advanced 6 points dur­ing February. From 118 in December, the index fell to 117 in January and reacted upward to 123 in February. The advance continued in March, indicating that the improvement is quite likely to be permanent and not a temporary spurt as has been noted in many instances so far ttis year. The general trend of the stock market was upward in February, but the advance of the seven Southern industrial vvas greater than the rise of all stocks listed on the Exchange. In constructing this index, the Bureau aimed to select companies which are representative of industrial conditions in Texas and other Southern States a.ild at the same time listed on the New York Stock Exchange where quotations are available for a number of years, Included in thr.:; L1'.!ex are two sulphurR, one steel , one soft-drink company, 0ne cherr.ica::., and two oils. The weekly high of each stock was averaged for t~e month und the average of all seven stocks fer the years 1923-24-26 is the base equal to 100. The fol­,···" ·.~g are the companies inclu.C!ud in the list: Coco Cola, Freeport­ ·' i ·.· . ·-Texas, Gulf States 34::eel, Ten.nessae Cqlper and Chemical, T..exas Company, 'l'exas Pacific Coal and Oil, and Texne Gulf Sulphur. Building Reports to the Bureau of Business Research from 23 Cham­bers of Commerce throughout the State show ~1at there was a decrease of slightly more than 5% or almost a half-a-million dollars in build­ing permits for February as compared with those of January. Building permits as reported for January were $8,848,387, while those for February were only $8,402,600. Part of this decline is due to the drop in the cost of building materials. The most serious decrease oc­curred in Houston, where building permits in February were only $1,647,000, as compared with an average for November-December-January of slightly more than $3,000,000. · Bui l di ng Pe rmi ts February January Amarillo $ 741,334 $1,022 ,340 Ab ilene 321,627 188 ,215 Austin 40 ,825 27 ,150 Beaumont 882 ,084 l87 ,919 Corpus Ch r isti 59 ,425 lll , 755 Dallas 528 ,922 412 ,624 Del Ri o 19,ll7 8 ,505 El Paso 20 ,900 32 ,485 Fo rt Wor th 1 ,460 ,285 912 ,271 Gal veston 217 ,084 536 ,662 Houst on 1 , 647,048 3,213,316 Laredo 67 ,000 56 ,000 Lubbock 81 ,950 95 ,875 McAllen 311,180 294 ,900 Mar shal l 38 ,510 27 ,837 Par is 1,100 127 ,330 Por t Arthu.r 140 ,059 92 ,904 Se.n Angelo 171,855 220 ,798 San Ant onio 669,190 805 ,746 Sherman 70,130 30 ,790 Tyl er 25 ,455 40 ,848 7faco 75 , 985 109 ,035 Wichit a Falls 811 ,.555 220 ,177 TOTAL $8 ,402 ,600 $8 ,848 ,387 Texas Charters The number of new enterprises entering the State is greater than for some years. According to a report issued by the Secretary of State to the Bureau of Business Research, 173 new cor­porations with a capital stock of $7,309,000 were chartered in February. In addition to the number of new charters, 37 companies in­creased their capitalization a total of over a million dollars. ?pinnors' Margin Spinners: margin, as determined by t:1e 3ur,Jau, dropped only four points during the month. The ratio fell f:::-om 174 to 170 in February, compared with 186 in December and 160 in F:.:bruary a year ago. The Liverpool pricG of Ailerican middling cotton went up from 7.11-d in January to 7. 56-d in February, and 32 twist Am(3rican cotton yarn increased in price from 12.37-d to 12.81-d in the same period. February is the first month since September, 1925 that yarn prices have advanced. Prices continued the advance in March so that the ratio at the middle of tho month fell to 167, six points above the normal, 161. The ratio in early October rose sharply to nearly 200 when cotton prices were falling. Since that time, the trend has been gradually downward and should the ratio continue to fall the de­mand for cotton will slacken and prices are likely to drop. Spinners' margin refers to the ratio between the Liver­pool price of middling .American cotton and American 32 twist cotton yarn in Manchester. Normally, the price of 32 twist yarn should be 60% above the spot price of American middling. If prices change so that the ratio increases, the spinners' margin of profit is increased and thereby the demand for cotton is strengthened. On the oth8r hand, when the ratio decreases, the spinners' margin is relatively decreased, and the demand for cotton falls. The accompanying table shows the monthly ratio since 1925. Spi1me rs 1 Ma rgi n 192 5 1926 1927 January 174 150 174 Febru-ry 168 160 170 Ma rch 165 156 168*** Aoril 166 155 May 163 153 June 152 157 July 147 158 Au~ust 153 160 Septe;nber 153 166 Octobe r 16:Z 194 November 163 187 De cembe r 162 186 ***Prelimi nary Petroleurr~ Operations in the oil fields of Texas and North Louisiana were further curtailed during February for the third consecutive month. Widespread crude price reductions were effective in all fields during the month, to be followed by additional cuts in .March. Tank wagon TEXAS BUSINESS REVIEW prices of gasoline followed crude prices dovmward until the U.S. motor grade is selling at '7-1/ 2¢ to D~t' delivered in the 'l'exas Panhandle dis­trict. Mounting production in the West Texas district and in the Panhandle fields is creating a me.rketing probl·3rr f0r the prod11cers. Pipe lines from these districts are inaC.equate to bs.:r.G.Je the surplus output and mo st of the storage space is ove:rflowir,g. St ocks of crude in storage in the three rtates of Texas, Arkars':is, a!ld Louisiana on February l were estir.v-:.ted at 89 million bari·els. Application of new methodr: in oil field engineering is partly respo!lsible for the increased output. By applying air and gas under-p1·essure to the ;"iells. the f}. oirr is held constant, whe:·eas heret ofore the "gusher type" scon sul:sided, thereby reduging the amount gathered. Better rn.et}1ods are also being used in the discovery of new wr:i1ls by t he int1-oduction of a rne0ha:1ica.l i:istn..1u mt of recent invention. The nmnber of failures have been gre.a-tly reduced in sections where this instrument has been used, and engineers are optimistic for future drilling. During the month, 702 wells were completed as against 706 completions in January. Of the we lls completed in February, 427 were producers, as compared with 448 in January. Total production declined from 21, 670 ,000 barrels in ,J<;tr:iuary to 19 , 2. 80 ,000 barrels in February. Daily average production was only 22 ,000 barrels under the January out·­put so that most of the r0duction i,.vas due to the shorter month~ Lumber Both production and shipments of lumber in the Southwest declined further in February, part of the decrease being due to the shorter month. A curtailment in the lumber industry is to be expected at this season of the year, but the recession has been greater than usual this season due :i.n a larga measure to the slowing up movernant in the building indnstry whir,h beg~n in the fall months. Although February orders exc8t1de-:l shipments , they we re below those of January but above the December total. Unfilled orders on the books of 53 lumber mills in Texas reporting to the Dalle.s Federal Peser-re Eflnk increased from 59 ,000 ,OOO feet in January to 64,000,000 fee t in Februa ry, the same as for Febru­ary of last year. Stocks on hand at the beginning of March increased 4-1/2% over the previous month anct except for October, 1922 are the gree,test on record. Preliminary reports for March show a slight im­provement, and a more hopeful sentiment is prevalent throughout the trade. The following table shows the February activity with compari­son~.. Fifty-three mil1,s , reported. The Lumber Si tuation* February J anuary Feb rua ry,1926 Pr oduction (M feet) 98 . 00 98 . 04 '7.3 . 00 Stock on Hand (11 :'oet) 308 . 43 295 . 28 228 . (;4 Unfilled Orde r s (M f eet ) 64 . 00 58.63 64.00 TEXAS BUSINESS REVIEW Ce'Yllent The ce.ir;e~t industry in Texe.s made a further moderate im­provement in the month. The rate of production was siightly above the output of February last year, while shipments decreased 5%. During the month, 396 ,000 barrels were produced, as agains~ .383 ,000 barrels in January, and 393,000 bar~els in February, 1926. Shipffients fell from 400,000 barrels in JanLarJ to 382,000 barrels in February, thereby in­creasing stocks on hand from 461,000 barrels on Jam;.ary 1 to 479,000 barrels on February l. Except for February of last year, this is the largest amount for any February on record. Total production for the two months is 8fo above production during the same period last ~rear. Agricul_~ure The agricultural situatiop improved further in February; although prices of all fann produce fell slightly during the month, the decline was much smaller than in earlier months. The composite price of all commodities according to the Bureau of Labor Statistics fell from 148 in January to 147 in February, whereas the index of farm produce fell only .3 of a point, or from 137.2 to 136.9. The decline was due largely to the drop in grain prices all during the month. The average price o·.f cott:m i;:~. F0br.u..:..1~:r. vvas a half a cent higher t:han for January and nearly 3fi a pound abov3 the Dece!"lber average. Early reports indicate that farmers intend to diversify in spring plancing ar'.d FJ.re adding many milk cows to their farms and raising more po~ltry. Tje number of hogs has also increased material­ ly over the St~te. According to a report issued recently by the United States Departme~t of Agriculture, the Texas farmers' intentions to plant ex­ pr~sse~ in percentages of 1926 a.creag8 gro:m for harvest are as follows: Corn, 135fo; oats, 115%; barley, 200%; rice, 86/S; grain sorghums, 90%; hay, 101%; peanuts, 200%; potatoes, 155%; sweet potatoes, 200%. No in­tentions to plant. repo1·t is given for cott.on because it is prohibited by Federal Statute. If given, it would certainly show a decline. Pri­vate estimates place t11e probable cotton acreage reduction at from 10% to llfo. Winter g;.~ains have made g'Joci growth. The acreae;e sovm to fall grain is the largast since 1819, and pr~sent conditions point to a large crop. The amount of winter loss is very small, but sane damage is reported by green bugs. Cottor; plants are coming through the ground to a good stand in southern Texas. Planting is progressing in other . parts of the State as the season advances. Livestock The livestock industry made further improvement and is now in better conditi