.4--~~~' .,r , .,.......,u....,, ,,-rs ... ~ TEXAS Bu4':~:~~sREVIEW A Monthly Summary of Business a~a};~c ~~~· .,~t1ons in Texas and the Southwest \~-!f}..'\~..--~fi.,~;:j/ Bureau of~sResearch The University of Texas Entered as second-class matter on May 7, 1928, at the postoffice at Austin, Texas, under the Act of August 24, 1912. VOL. II AUSTIN, TEXAS, JANUARY 25, 1929 No. 12 FAVORABLE UNFAVORABLE 1. Increasing savings accounts 1. High interest rates 2. High bank debits 2. Weak credit situation 3. Expanding foreign trade 3. Further industrial expansion likely to be small 4. Sound financial conditions 4. Low wheat prices S. Improving textile industry 5. Overproduction of petroleum 6. Fav:orable outlook for livestock 6. Stock speculation 7. Heavy freigh.t movement 7. Slow securities market 8. Fairly high cotton prices 8. Low spinners margin 9. Lack of business inflation 9. Small return on invested capital 10. Very little unemployment 10. Declining price level 11. Many new corporations 11. Falling off in new monthly bond issues 12. Small number of commercial failures 12. Declining building permits THE MONTH In many respects, the year just passed was one of the best in the history of Texas. Production in many lines was above that in 1927 .and the volume of business transacted was satisfactory. Agriculture made good headway and the livestock industry enjoyed the best year since 1918-1919; the development of dairying was espe­ cially encouraging. Excellent progress was made in the building industry while engineering and construction projects were the highest on record. More new corpora­t.ions were chartered than in any past year and commer­cial failures were the fewest since 1920. Foreign trade was good, the value of exports being especially large. Financial conditions were sound and ample credit was available for all needs. Total State income was consid­erably increased over that in 1927 so that the purchasing rower of the people was greater. Wholesale prices aver­aged somewhat higher but the increase was rather small. On the other hand, wholesale trade was somewhat slow and the volume of retail trade fell a little below expec­tations. The year was none too favorable to the truck crop growers of the State even though production was increased more than 30 per cent; low prices obtained over most of the year for many of the smaller crops. Textile manufacturers experienced only a fair yeat, and the improvement in the petroleum industry fell short of what was hoped for. Interest rates were high all during the year and at times a rather severe credit strain threat­ened. Wild speculation in stocks was another weakening influence. However, considerable progress was made in both industry and agriculture and the outlook for the first part of 1929 is generally encouraging. Business and industrial conditions in Texas during December held up fairly well. Industry was operating at a little higher rate than in December a year ago, and business generally is on a higher level. It must be re­membered, however, that a slowing up movement was in evidence during the last part of 1927 and comparisons should be made from that point of view. Interest rates continued high during the month and further speculation was witnessed in the stock market. Labor conditions in the State are satisfactory despite the fact that some unemployment is reported. A decrease of .8 per cent is shown in the number of workers on the payrolls of 475 firms in nine of the larger cities in the State on January 15 as compared to December 15. A farther decline in the number of new corporations organ­ized was recorded during December but the capitalization was considerably higher. Commercial failures increased sharply and were the most numerous for any December in three years. Bank debits have been running consistently above those of 1927, indicating that business is on a little higher level. Interest rates continue high. Freight car movement made a large gain; the number of cars shipped was nearly 9 per cent above that in December, 1927. Moreover, load­ings in the first quarter are expected to exceed those of the same period in 1928 by 3.1 per cent. Foreign trade is expanding and coastal shipments are heavy for this season. Cement plants curtailed a little more than usual, while the lumber industry showed an early seasonal gain in operations. Textile mills were running on a reduced schedule and the petroleum situation remained about un­changed. At the present time, the favorable influences outweigh the unfavorable factors and so long as this situation continues, any serious business depression is unlikely. WHOLESALE PRICES Even though price changes for individual commodities varied widely during December, the composite price level of all commodities remained about unchanged to slightly lower. Dun's price index fell from 193.5 on December 1 to 102.4 on January 1 and the Annolist index averaged 147 for the first week of January compared to 148.l for the same week of De~ember. The index of the National Bank of Commerce in New York City fell but .1 of a point and stood at 87.ll against 8,1.G in December, Hl27. The Bureau <'l Labor Statistics all-commodity index based on 192G as equal to 100 remained unchanged at 96.7. In contrast to these indexes, Bradstreet's advanced from 13.15 on Decem­ber 1 to 13.57 on January 1. All grains, many farm products, meats, and textile and petroleum products show losses for the month against gains in the metals group, automobiles, lumber and building materials. Cotton aver­ap:ed a little higher in December than in November. FINANCIAL AND BANKING The outstanding change in the money rate situation over the past few weeks has been the widening in the spread between commercial loans and stock exchage loans. Not only has stock exchang·e time money been higher but rates on call money have also been trending upward. However, credit conditions are no weaker than was the Chse two months ago and a turn .for the better is unlikely before spring. Measured by bank debits, business in Texas has been running about 9 per cent above that of last year. While it is true that part of this gain has gone into the stock market, industry and trades have been expanding consid­ erably. For the four weeks ending December 28, checks cashed in the Eleventh Federal Reserve District, according to the Dallas Federal Reserve Bank, amounted to $909,545,000 compared to $909,000,000 in November and $823,590,000 for the same four weeks of 1927, a gain of !IA per cent. It will be noted that the December total is but .1 per cent above the November figure, an amoilj much less than the usual s.easonal gain. · _::ii!J Loans and discounts at member banks show a seas0Ji) g~1in from $336,000,000 at ~he ~lose of. _No".ember \0­$367,000,000 at the end of December. On the same date in 1927, borrowings at member banks amounted ~: ~;)34,000,000. Member banks further reduced their Joana' «t the Dallas Federal Reserve Bank, reflecting the deelin~­ing trend in the demand for credit. On the other hand, member banks purchased additional Government securitiea, bringing their holdings of these securities to a new_)\iih record. For the week ending December 28, member fia'nlis held $94,714,000 in Governments compared to $82,000;UOO in November and $71,000,000 in December a year ago. The high point occurred in the third week of December when holdings totaled $101,000,000. Demand deposits re­n•ained at $317,000,000, the same as November, but con­siderably above the figure of $305,000,000 in December, 1827. Time loans increased from $132,000,000 in Novem­ter to $140,000,000 in December, a new high. Time ·loans have been increasing steadily for about a year and a 'half,· indicating that part of the State income each month is going into savings accounts. This is a very desfrabl& practice. Interest rates were higher. This was to be expected in view of the facts that holiday trade was active, 'stock speculation was extended, and the year-end payments Wtre larger than usual. Call rates renewed during the f.rst half of December mostly at 7 per cent; but as the · year-end approached, rates advanced, reaching 12 per cent on the last two days. Since that time, rates have been downward and appear to be stabilizing around 6 per cent to 7 per cent. Rates on bankers acceptances in New York City advanced from 4% per cent in November to 4" per cent in December, and prime commercial paper was quoted at 5% to 51h per cent. Time money moved ~ to 71h-7 %. per cent. Interest rates are expected ·to hold firm over the next few months. No change w68 r.1ade in the 41h per cent rediscount rate at the Dal~ Federal Reserve Bank. FINANCIAL STATISTICS FOR THE DABank Debits (four weeks)---------------------------------------------­------$GovP.rnment securities owned, end of month______________________ Member bank borrowings, end of month -------------------------­Demand deposits, end of month__________________________________________ Time deposits, end of month. _______________________________________________ *From the F ederal Resene System. December 1928 909,545,000 94,714,000 13,492,000 317 ,000,000 140,000,000 LLAS FEDERA November 1928 $909,000,000 82,000,000 15,602,000 317,000,000 132,000,000 L RESERVE DISTRICT ~ December 1927 $823,590,000 71,000,000 3,800,000 305,000,000 115,000,000 TEXAS CHARTERS A further decline in the number of new eorporations 0n:o:anized was recorded in December. A downward trend has been in evidence since last ,January, when 25U charters wt-re granted, the highest for any month on record. The number of ]ll'rmits granted to outside corporations showed 11 similar downward course. However, capitalization has bel'n running above that of Hl27, indicating the growing tl-ndency of organizing larger companies. During Decem­ber, 12:1 corporations capitalized at S64,-H3,000 received charters from the Secretary of State, the smallest number for any December since 1924. This compares with 176 companies with capital of $16,040,000 in November and 1Gl corporations having capitalization of $33,268,000 in December a year ago. Two building and loan association• capitalized at S50,000,000 and $10,000,000, respectively, and a railroad at $1,000,000 were among the larger corpora­tions chartered. Twenty-three organizations increased thdr capitalization by $581,000 and permits were granted to 35 outside companies. New oil companies fell from 17 in November to 10 in December, while public service corporations increased from three to six. Manufacturing concerns remained at 18, t~e ~mme as in November, and financial institutions declbied sharply from 17 to 7. There were ten real estate firms chartered against 16 in November and 25 in December, 1927. The general list also shows a large decline. A feature for the month is the large number of amusement companies organized. · The year 1928 as a whole was generally favorable for business. That such is the case is indicated by the large increase in the number of new corporations. During the year 2,488 companies capitalized at $390,388,000 were or­ganized. This is a new high record for both the number of new enterprises and the amount of capital involved. In 1927 2,044 charters were granted to corporations having capitalization of $269,244,000. Moreover, the number of outside companies receiving permits was greater than for any other year in the past. It is interesting to note that the average company shows a further increase in size, the average corporation in 1928 being capitalized at $157,000. In 1927, capitalization per company averaged $132,000, and in 1926 $74,000. The decrease in the number of new oil companies in 1()28 reflects the rather poor conditions obtaining in the industry over the year, and the smaller number of real estate and building firms indicates a slowing--up in real estate developments. On the other hand, the sharp gain In public service corporations ~hows the enormous growth i11 electric power production; a large majority of the enterprises in this group were organized for the pro­duction of electricity. The large gain in new manufacturing concerns is an encouraging development and emphasizes the importance of Texas as an industrial state. Banking and financial institutions were but slightly increased, as might be expected in a year of well-sustained business activity. Many air ports and aviation companies organized during the year point to the growth of air transportation in the State. December 1928 Number ---------------------­123 Capitalization.___________$ 64,413,000 Foreign Permits _____ 35 Classification of new corporations : Oil ------------­-------------­10 Public Service_______ 6 Manufacturing __ :_ 18 Banking-Finance__ 7 Real estate-Building -------·---­10General____________________ 72 $ TEXAS CHARTERS November 1928 176 16,040,000 36 17 3 18 17 16 105 December 1927 161 $ 33,268,000 32i 17 4 10 8 25 87 Year 1928 2,488 $ 390,388,000 454 174 72 213 156 243 1,630 Year 1927 2,044 $ 269,244,000 335 195 48 158 152 262 1,229 COMMERCIAL FAILURES Commercial failures in Texas during December were more than double those of November and 25 per cent greater than those in December, 1927. While an increase from November to December is the usual trend, the sharp gain this year is the greatest on record. During Decem­ber, 54 firms with liabilities of $1,085,000 went into bank­ruptcy, compared to 24 failures having liabilities of $701,000 in November. Last year in December, there were 42 insolvencies with liabilities totaling $503,000. Even though the failure record in December was rather unfavorable in comparison with November, the showing for the year is rather encouraging. Moreover, the rela­tively small number of failures in 1928 indicates that busi­ness generally was good most of the time. During the year, 547 commercial defaults were reported, whereas there were 691 in 1927, or a decrease of 21 per cent. This is the smallest number of failures in any year since 1920 when 475 were reported. Liabilities of defaulting companies involved $11,858,000 compared to $11,575,000 in 1927, an increase of $283,000. Possibly this situation is the least hopeful of the failure record, for the larger com­panies are having difficulty in making profits. Average liabilities per insolvency increased from $16,800 during 1927 to $21,700 in 1928. Many of the smaller companies have been forced out of business over the past year or two as a result of keen competition ; the tendency for fewer but larger companies to fail will likely continue for some time to come. Profits in 1()28 as a whole are above those in 1927, but a very large percentage of the gain has been enjoyed by the larger organizations. Commercial failures for the entire United States as re­ported by R. G. Dun & Co. totaled 23,842, or the high­est on record. Liabilities of the:;e defaulting companies amounted to S489,560,000. This compares with 23,146 in­solvencies having liabilities of $520,104,000 in 1927. The increase in the number of failures and the decrease in the liabilities indicates that a large part of the bankruptcies ·were small concerns. December 1928 Number -----------------------­54 Liabilities ---------------------$ 1,805,000 Assets ----------------------------­4 72,000 •From R. G. Dun & Co. COMMERCIAL FAILURES* November 1928 24 $ 701,000 281,000 December 1927 42 $ 503,000 Year 1928 547 $11,858,000 Year 1927 691 $11,575,000 STOCK PRICES Earlv in Dcrrmbcr, the stock markd; c•x1wricnced the first sl~arp tc•C'hnieal rc:tl'tion since last !•'pliruary. Dur­ing the lirsl thi1·d of' the month, a flood of' Fl·liing (>rder~ poun•d into the markl'l, carrying stoc·ks to lc·vP]s far unc~(~r the peaks of lhc' sl'ason. Many of the more spccuhll1vc isSU('S lost practic·ally all the gain that had been made over the Jll'C'\·ious four or five months, and a large number of' the in.Y<' ,;~ 111cnt ,;lol'b; lost from 5 to 25 points. Trad­i11g· \\'as any, Texu Pacific Coal and, Oil, and Texas Gulf Sulphur. The railroad• uaed in the index are the Atchison, Topeka & Santa Fe; Chicago, Rock Island & Pacific; Gulf, Mobile & Northern; Missouri, Kansas Ii Texas; Missouri Pacific; New Orleans, Texas & Mexico; St. Loui1 Ii Southwestern; Southern Pacific; and Texas Pacific. BUILDING Measured by building permits, the building industry in Texas made a -fairly good record in December. After reaching a peak last March, the trend was downward until October; since that time, permits have showed a gain. The dollar value in December was not only above that in November but also nearly $1,000,000 more than the total in the previous December. Even though exceptional in­ creases were recorded in two of the larger cities, gains over the entire State were more numerous than losses. Permits granted during December in the 33 cities reporting to th e Bureau of Business Research were $11,108,849 compared to $9,496,060 in November and $10,311,736 in December, 1927. Nineteen cities recorded increases against losses in 13. Austin, Beaumont, Hous­ ton, Laredo, and Waco show very large gains over De­cembcr a year ago. On the other hand, Abilene, Amarillo, Fort Worth, and Wichita Falls report losses. The State building record for the year is a little less cheerful. This is especially true of the last half. For the year, permits totaled $126,107,152, compared to $127.­610,544 in 1927, a decrease of 1.1 per cent. This situation is due largely to the high interest rates obtaining over the past year and to the slightly higher building costs. Then, too, Texas has had a very extensive building pro­gram over the past few years and a temporary slackening is to be expected. In the first half of 1928, permits were far ahead of those of the same period of 1927, but as the year progTessed, the gain was changed to a small loss. The upward trend over the past two months is more en­couraging, however, and possibly indicates that the low point has been passed for the time being·. Engineering and construction projects let during De­cember in Texas, according to the F. W. Dodge Corpora­tion, amounted to $17,000,000. Compared to December, 1927, this is an increase of 28 per cent, but a decrease of 12 per cent from the November projects awarded. The December contract total brought the amount of new con­struction actually started in the State to $231,409,000 the year, an increase of 6 per cent over awards in 1927. BUILDING PERMITS Abilene -----------------------$ Amarillo --------------------­Austin -----------------------­Beaumont ------------------··­Brownsville ---------------­Brownwood ----------------­Cleburne ---------------------­Corpus Christi Corsicana -----------------­Dallas ____ ·------------------­Del Rio --------------------­Denison --------------------­El Paso ----------------------­Fort Worth ---------------­Galveston ------------------­ Houston --------------~------­Laredo ------------------------­Lubbock --------------------­McAllen -------------------­Marshall --------------------­Paris -------------------------­Plainview -----------------­Port Arthur --------------­Ranger ----------------------­San Angelo ------------­San Antonio ------------­Sherman --------------------­Snyder -----------------------­Sweetwater --------------­Temple --------------------­Tyler -----------------------­Waco ------------------------­ Wichita Falls _________ December 1928 61,795 45,990 1,811,280 918,352 34,250 121,250 7,425 97,085 24,550 446,630 25,727 4,128 362,774 498,576 250,796 4,265,517 116,000 109,475 58,300 6,675 26,000 154,350 57,727 41,150 400,292 644,8JW 6,761 8,600 40,100 71,175 36,344 224,152 130,793 Total -----------------------$ 11,108,849 November 1928 $ 222,370 101,922 126,749 198,315 36,340 144,000 14,381 188,725 8,275 717,617 77,143 8,750 251,961 515,935 129,771 3,682,074 28,000 151,000 14,300 9,24!7 54,779 50,900 63,854 20,250 220,410 1,705,877 14,075 5,600 63,780 137,740 38,438 176,860 316,622 $ 9,496,060 December 1927 $ 212,650 143,768 38,271 189,449 117,280 80,770 8,300 97,760 7,850 352,525 63,530 106,419 3,891,744 172,485 2,195,119 6,000 77,126 28,490 10,131;> 38,000 142,800 44,035 6,700 633,863 740,970 28,625 84,860 22,850 20,257 43,300 705,805 $ 10,311,736 Yea1· 1928 $ 2,031,442 2,896,432 4,213,425 4,346,406 1,031,424 2,475,975 228,623 5,194,350 229,504 8,408,080 1,042,735 103,293 2,050,183 12,815,992 2,631,517 39,730,966 649,000 3,158,410 499,385 276,353 285,654 1,395,314 1,889,860 142,395 4,704,321 15,420,354 760,288 261,215 771,865 1,785,275 568,853 2,291,340 1,906,923 . $ 126,197,152 Year 1927 $ 3,222,253 12,797,438 1,379,566 4,946,487 2,144,688 2,054,650 153,884 2,629,060 539,143 9,774,523 305,278 1,308,991 17,110,050 2,973,531 30,889,713 976,110 1,580,549 1,811,410 510,029 382,012 760,739 1,739,056 193,165 4,014,903 13,902,961 544;798 546,161 2,139,590 649,314 1,573,641 4,056,851 $ 127,610,54,4 slowly in others. ·sales of 83 department stores located DEPARTMENT STORE SALES in 26 cities of the State reporting to the Bureau of Busi­ Trade at wholesale and retail during ,December in ness Research amounted to $9,554,834 compared to Texas fell a little short of expectations. While holiday $fJ,804,941 in December, 1927, a decline of 2.G per cent. business was brisk in some lines, goods moved rather Thirteen of the cities showed gains and 13 reported losses, the losses in most cases occurring in the smaller towns. Sales held up remarkably well during the first half of the year, but as the fall and winter months approached business declined in comparison to the same months of 1!127. As a result, total sales for the year of the 83 department stores increased only 1.5 per cent, or from $G7,0ll,844 in 1927 to $G7,994,984 in 1928. The outlook for spring sales is rather bright in view of the fact that purchasing power is above that of last year and the business and industrial outlook is favorable. DECEMBER TENDENCIES IN DEPARTMENT STORE SALES Percentage change from December November Number 1927 to 1928 to Year of December December 1927 to Stores 1928 1928 1928 Abilene ________ 4 -5.5 +21.5 -0.7 Austin __________ 4 +6.5 +42.1 + 4.1 Beaumont ____ 6 -5.2 +48.0 -6.4 Dallas __________ 6 + 0.1 +37.5 + 3.7 El Paso ._______ 4 -1.5 + 49.9 + 4.4 Fort Worth__ 7 -5.6 +57.8 + 1.6 Galveston ____ 4 + LO +52.5 -5.4 Houston 8 -4.1 +45.1 + 2.1 Laredo __________ 3 + 0.9 + 11.6 + 11.8 Paris ___________ 3 +5.9 +33.9 + 4.1 San Antonio__ 10 -3.2 +44.3 0.5 Tyler ____________ 3 -3.6 +42.6 + 6.0 Others* ______ -7.1 + 38.9 2.7 State ______ 83 -2.6 +43.5 + 1.5 Sales of 83 Department 1928 1927 Stores- December --------------------$ 9,554,834 $ 9,804,941 November -------------------6,659,779 Year ---------------------------67,994,984 67,011,844 *Others includes Amarillo, Brownwood, Cleburne, Corpus 1 Christi, Corsicana, Del Rio, Denison, Marshall, Port Arthur, San Angelo, Sherman, '"£emple, Waco, and Wichita Fa1ls. CEMENT Further curtailment is reflected in the Portland cement industry of the State in December. During the month, only 472,000 barrels were produced compared to 529,000 barrels in November and 514,000 barrels in December, 1927. While some curtailment in output is to be expected from November to December, the decrease this year is considerably above the usual seasonal trend. The decline in production in the two months amounted to 47,000 bar­rels whereas a decrease of 11,000 barrels was recorded in 1927 and a drop of 23,000 barrels between the two months in 1926. Shipments also fell off but the decline was about in line with the seasonal decrease. A total of 375,000 barrels was shipped in December against 451,000 in November and 3!)8,000 in December, 1927. Stocks show a large increase as was to be expected at this time of the year. Ordinarily, stocks begin to accumulate in September and October and reach the high point in April and May-this year stocks were lowest in August. Stocks on hand at the end of De­cember were 522,000 barrels compared to 424,000 in No-1 vcmber and 407,000 in December, 1927. The increase from November to December is about normal or possibly slightly aLove. Total production for the year amounted to 6,345,000 bar­rels compared to 5,656,000 barrels in 1927, or an increase of 12.2 per cent. Cement manufacturing in Texas is one of the basic industries which has shown remarkable ex­pansion over the past eight or nine years. In 1922, pro­duction amounted to 3,627 ,000 barrels; in 1926, 5,000,000 barrels were turned out, and in 1928, output totaled 6,346,­000 barrels, a new high record. Over the seven-year period, the industry has almost doubled. Moreover, an­other plant which is expected to be in operation within a 1 few months is under construction in Waco. Demand is a iittle slow, as is to be expected at this sea­son. However, large building permits coupled with ex­tensive construction and engineering contracts under way indicate that large quantities of cement will be needed later on. Prices remained unchanged. The basic price on January 1 was $2.25* per barrel in Dallas and $2.35* at Houston, 10 cents a barrel being allowed for cash and . 40 cents for cloth sacks where retumable. ( ,.~Prices quoted through the courtesy of Lune Star Cement Compan)' Texas. CEMENT SITUATION* December 1928 I roduction ------------------------­472,000 Shipments ----------------------­375,000 Stocks --------------------------------­522,000 November 1928 ' 529,000 451,000 424,000 December 1927 514,000 358,000 407,000 Year 1928 6,345,000 6,282,000 Year 1927 5,656,000 5,892,000 Percentage change from year 1927 + 12.2 + 6.6 •From the United States Department of Commerce. LUMBER One of the mosl important developments in the lumber industry over the past year has been a closer adjustment of production to demand. In past years, overproduction coupled with large stocks have been the chief fac;tors of weakness. Then loo, wood has been replaced to a certain extent by other materials in some industries. It appears now, howe\·ei-, that output each month is adjusted very closely to consumption, resulting in a much stronger ~ta­ tistieal position for the industry. During December, 33 mills of the State reporting to · the Southern Pine Association produced a total of 59,· 852,000 feet of lumber. Average output per mill was 1,814,000 feet, compared to 1,686,000 feet in November, an increase of 7.6 per cent. Average shipments gained 2.9 per cent, or from 1,780,000 feet in November to 1,831,000 feet in December. Average stocks on January 1 were reduced to 4,933,000 feet, compared to 6,472,000 feet on December 1, or a decline of 23.8 per cent. Aver­age stocks on January 1 are the smallest for any month since the Bureau of Business Research began keeping ================================================================~--============== records nearly two years ago. Unfilled orders gained from an average of 708,000 feet per mill in November to 1,149,000 feet in December, an increase of 62.4 per cent. This is a very encouraging feature and indicates that spring demand is developing earlier than usual this year. Lumber prices advanced during December, according to the United States Bureau of Labor Statistics, but quo­tations are still a little low in comparison to the general wholesale price level. Demand is improving and a good spring business is expected. THE LUMBER SITUATION* (In Thousands of F eet) Per cent Change from Dec. Nov. November 1928 1928 192~ Preliminary report of 130 104 Mills mills in the Southwest-A v. production __________ 1,346 1,900 -29.1 Av. shipments __________ 1,285 1,868 ·-31.2 Av. unfilled orders.___ 1,386 1,286 + 7.8 Final report of 33 Texas Mills-26 Mills Av. production ---·----­1,814 1,686 + 7.6 Av. shipments ---------­1,831 1,780 + 2.9 Av. stocks --------·-------4,933 6,472 -23.8 Av. unfilled orders ____ 1,149 708 +62.4 •From the Southern Pine Association. PETROLEUM The petroleum industry enters the new year under rather unfavorable conditions. Possibly the most dis­couraging feature confronting the industry is overpro­duction. For a time last spring, proration of output in the larger fields and increased consumption materially improved the situation. Then, too, field work declined sharply. As a result, crude prices strengthened and the industry generally showed improvement. But as the fall months approached, many new fields were opened and old ones extended; production mounted. Daily average flow in Texas reached the low point in Jun:?; since that time, output has been steadily increasing. Total production in the United States has followed the same course. In l!J27, daily average 1l.ow fell off sharply from Aup:ust on, whereas in 1928 production gained steadily from the middle of May. Daily average flow in Texas amounted to 739,000 bar­ rels in December, a new high record. This compares with 721,000 ba1Tels in November and 670,000 barrels in December, 1927. During the month, a total of 22,909,­ 000 barrels was gathered against 20,775,000 barrels in December a year earlier. For the entire year, 259,279,­ 000 barrels were gathered whereas 227,843,000 barrels were produced during 1927. · Possibly the most interesting development during the year was the discovery of many new fields and the ex­ tension of old ones. The new areas in West Texas are likely to be the largest fields ever brought in. Potential production from these fields assures ample crude oil ·for many years in the future. In December, 5G8 new wells were drilled in Texas, of which 349 were producers against 489 completions in November, 257 being successful. This compares with 496 wells completed in December, 1927, of which 251 were successful. During the entire year just passed, 6,744 wells were drilled in Texas, among which were 3,773 pro­ducers, or 55.4 per cent, while in 1927, 6,594 wells were completed and 3,865, or 58.6 per cent, struck oil. In 1926, 63 per cent of the completions were producers, in 1925, 65 per cent, and in 1921, 70 per cent. Prices for Texas crude were about unchanged to slightly higher during December. Some small advances were put into effect for the heavier Pennsylvania grades, and it was hoped that the advance would be extended to the lighter Texas oils, but so far no changes of conse­quence have been made. Gasoline prices showed a fur­ther seasonal decline of about 14 cent a gallon. Stocks of crude in the three states of Texas, Oklahoma, and Arkansas were estimated at about 127,000,000 bar­rels at the first of the year. . . THE PETROLEUM SIT UATION':' (Production in Thousands of Barrels) Production-Total -----­--------------­-------------------------------­Daily average __:________________________________________ Wells completed ---------------------------------------­Producers ----------­---------------------­-----­--­ December 1928 22,909 739 568 349 November 1928 21,619 721 489 257 December 1927 20,775 670 496 251 Year 1928 259,279 6,744 3,774 -Year 1927 227,843 6,594 3,865 •F rom the Oil Weekly. COTTON MANUFACTURING The textile industry of the State is developing into a much better position. Despite the fact that production was curtailed during December, sales of goods were al­most equal to those in November and unfilled orders were nearly a third larger. Moreover, curtailed output will add strength rather than weakness by offering mills an opportunity to reduce stocks. This situation coupled with early spring expansion makes a brighter outlook for the industry over the next few months. During the month, 21 mills reporting to the Bureau of Business Research manufactured 7,277 bales of cotton into G,136,000 yards of goods, whereas 19 mills used 8,505 bales of cotton and produced 7,587,000 yards of cloth in December, 1927. Cotton goods sales amounted to 3,961,000 yards against 3,157,000 yards for December a year ago. Unfilled orders totaled 10,032,000 yards compared to 7,572,000 in November and 8,344,000 in December last year. At the present rate of output, book­ings are equal to nearly seven weeks' run. The upward trend in unfilled orders indicates that mills are likely to be very active over the next few months. At this time, some improvement in the spinners margin would be a most, desirable feature. For the entire year, the 21 mills reporting used 89,679 bales of cotton compared to the consumption of 98,421 bales by 19 mills in 1927, a decline of 8.9 per cent. Pro­duction of cloth fell from 83,450,000 yards in 1927 to 76,106,000 in 1928. Likewise, cotton goods sales dropped from 64,468,000 yards to 53,701,000 yards. Balancing production and sales in 1928 against those in 1927, it appears that stocks have been accumulated. In addition to the 89,679 bales of cotton used by the 21 mills reporting to the Bureau, the 16 mattress factories also reporting used about 15,000 bales, bringing total consumption of cotton in the State well above 100,000 bales. TEXAS COTTON MANUFACTURERS REPORT Mills reporting -------­·---·­----­Bales of cotton used___________ Yards of cloth-Produced --------·---------------­Sales ---·-------­---­----­-------­---­Unfilled orders (end of p riod) --------·-----·-------­Active spindles ------­------------­S"!)indle hours ----·····­--------·-­December 1928 21 7,277 6,136,000 3,961,000 10,032,000 196,000 85,680,000 November 1928 21 . 8,129 6,985,000 3,903,000 7,582,000 201,00il 96,136,000 December Year 1927 1928 19 -----------··------­8,505 89,679 7,587,000 76,106,000 3,157,000 53,701,000 8,344,000 ----------------­174,000 -----------------­60,044,000 807,152,000 ¥ear 1927 -------------------­98,421 83,450,000 64,468,000 ----------------­--------------­821,391,000 SPINNERS MARGIN The decline in spinners margin in December indicates that the cotton spinning industry has not fully recovered from the unfavorable conditions obtaining in that in­dustry over the past year and a half. While it is true that considerable improvement has been made, spinners have been faced with slow yarn markets and relatively low yarn prices in comparison to raw cotton. Spinners margin fell below normal (160) in September of 1927 and has remained below ever since, averaging 10 points under for the year 1928, against 163 in 1927 and 165 in 1926. In the past six years, the index has averaged below normal three times, above twice, and exactly normal once. American middling cotton in Liverpool averaged 10.62d in December and 32-twist yarn in Manchester averaged 16.07d compared to 10.56d for cotton and 16.08d for yarn in November. The increase in the price of cotton and the slight decline in yarn caused the spinners ratio to decline 1 point. The index averaged 151 in December against 152 in November and 147 in December, 1927. At present prices, yarn is too low in comparison with cotton. Both in the United States and in Europe, demand for yarn continued rather spotty in December. On several occasions the market was rather active and definite signs of improvement were in evidence; but supplies were more than sufficient to meet all needs and the improvement failed to hold. The prospects for industrial exp"iiiiSIOii over the next few months and the better ou.tlook for ex­ports should be reflected in a more favorable position for the spinners before the present year is past. Spinners Margin refers to the ratio between the price of American 82-twist cotton yarn in Manchester and the LiYerpool price of mlddll111 American cotton. Normally, the price of 32-twist should be 60% abon the spot price of American middling cotton. If prices chanire 10 that the ratio increases, the spinners· margin of profit Is increased and thereby the demand for cotton is strengthened. On the other hand. when the ratio decreases, the spinners margin is also relatinb' d• creMed, end then the demand for cotton falls. SPINNERS MARGIN 1928 1927 1926 1925 January __________ 149 174 150 174 February __ __ 151 179 160 168 March______________ 150 173 156 165 April ---------------149 168 155 166 May ----------------149 165 153 163 June -------------·-· 148 172 157 152 July ---------------147 167 158 147 August ------------154 164 160 163 September __ __ 152 156 166 153 October ------------148 156 194 157 November _______ 152 148 187 163 December -·------151 147 186 162 Normal=160. SPINNERS llARGIN Normal z 160 COTTON The last ginnings report issued on January 23 showing that 13,892,000 bales of the present crop have been ginned to date gives further assurance that the Government estimate of 14,373,000 500-pound bales will be gathered. Last year's crop totaled 12,955,000 500-pound bales. Ex­ports so far this season are nearly 1,000,000 bales ahead of those for the same period a year ago and consumption is almost as great. Moreover, the carry-over last August was considerably reduced so that the total indicated supply is reduced. A large part of the Texas crop has already been gathered. Ginnings for the State to date are 4,807,000 bales against a harvest of 4,353,000 bales last year. This leaves· but 343,000 bales to equal the Govern­ment estimate of 5,150,000 500-pound bales. During December, 534,000 bales were used in the United States, compared to 611,000 in November and 538,000 in December, 1927. The decline from November is due largely to the fewer working days in the month. Prices were downward during the first part of the month but most of the loss was recovered. New York May futures closed on January 15 at 20.22 cents against 20.20 cents a month earlier. COTTON BALANCE SHEET The indicated supply of cotton in the United States on January 1 totaled 9,495,000* bales compared to 9,833,000 on January 1, 1928, and an average of 9,384,000 on that date over the past eight years. The large disappearance during December is due not only to the rapid rate of consumption in the United States but also particularly to the unusually heavy exports. Exports were 1,059,000 bales for the month and consumption amounted to 534,000 bales, making a decrease of 1,593,000 bales in the 30-day period-an exceptionally large decrease rela­ tive to the present supply. The indicated supply on January 1 in the United States is 338,000 bales.under that on January 1 a year ago. In the past seven years, changes in supply on that date have totaled 17,006,000 bales and deflated price changes have been 4,928 points, or a change of 29 points for each change of 100,000 bales in the supply. At the same ratio, with a decrease in the supply of 338,000 bales, there should be an increase of 98 deflated points in the price. Based on •This balance is obtained by adding the sum of the Census carry­ over on August 1 and the imports since that time to the final ginnings as reported by ~he Census Bureau, and subtracting the exports p]us con8umption~ Linters are not included. the supply in the United States alone, New Orleans spots should be about 2014 cents. If the European supply is considered, however, the large decrease in the United States has meant a relative increase of stocks in Europe and not final disappearance. The world's available supply of American cotton is not decreased to the same extent as United States supplies, and the calculated price probably should be reduced ac­cordingly. Stocks in·and cotton afloat to Europe on Janu­ary 1 were 2,266,000 bales against 2,149,000 bales on January 1, 1928, an increase of 117,000 bales. The sup­ply, therefore, in the United States and Europe com­bined is 221,000 bales under that of a year ago. Apply­ing the ratio of 29 points to this decrease, the price should be increased 64 deflated points, making the New Orleans price 19.90 cents. Based on present supplies in the United States and Europe, New Orleans spots should be about 20 cents a pound, or over ~·2 cent above present quotations (January 14). Last month's prices were too high relative to the supply but the subsequent decline was carried a little farther than justified. It must be remem­bered that the balance sheet as now calculated does not take into consideration European consumption, since authentic monthly data are not available. Mill activity in Europe is an important influence in world price mak­ing. Beginning with this issue, a slight change was made in the method of calculating the balance. Some of the carryover figures for past years included ]inters and in a few cases the item "cotton on farms and elsewhere partly estimated" as reported by the Census Bureau was not included. As presently used, all figures in the can-y­ over column are those reported by the Census Bureau at the beginning of the cotton year, August 1, and do not include !inters. Statistics compiled by the Cotton Textile Merchants of New York City for December are less favorable than reports covering the previous four or five months. Pro­ duction totaled 279,000,000 yards and sales were 225,000,­ 000 yards, or 80.7 per cent of output, whereas in Novem­ ber sales were 109.7 per cent of production. Shipments were 276,000,000 yards, or 98.9 per cent of output. Stocks increased .8 per cent, or from 389,000,000 yards on December 1 to 392,000,000 on January 1. Unfilled orders on January 1 amounted to 469,000,000 yard,,_, a decrease of 9.8 per cent from the month previous. At the present rate of production, bookings are equal to less than six weeks ago. COTTON BALANCE SHEET AS OF J ANUARY 1 IN THE UNITED STATES (In Thousands of Running Bales) Year 1922-1923 1923-1924 1924-1925 1925-1926 1926-1927 1927-1928 1928-1929 Carry-over August 1 2,832 2,325 1,556 1,610 3,543 3,762 2,532 Imports since August 1 * 166 70 99 97 134 145 151 December Estimate 9,964 10,081 13,153 15,603 18,618 12,789 14,373 Total 12,962 12,476 14,808 17,310 22,295 16,696 17 ,056 Consumpt10n since August 1 2,662 2,518 2,358 2,593 2,830 3,044 2,783 Exports since August 1 2,892 3,291 4,293 4,648 5,512 3,819 4,778 Total 5,554 5,809 6,651 7,241 8,342 6,863 7,561 Balance 7,408 6,667 8,157 10,069 13,953 9,833 9,495 •In 600-pound bales. The cotton year begins on August 1. - AGRICULTURE The situation in agriculture made fow changes from the December outlook. There is considerable discussion at this time rC'garding some kind of farm relid by the Fed­eral Government. Just how much actual relief will result remains to be seen, but there is at least a more optimistic feeling regarding the future. This is reflected in the recent rise in grain prices. ACREAGE, PRODUCTION AND VALUE OF TEXAS CROPS, 1927-1928 (In Thousands) Year Acreage Production Total Farm Harvested Value Cotton, bales­1928 17,766 5,150 450,625 1927 16,176 4,352 419,968 Corn, bushels­1928 4,722 99,162 77,346 1927 5,189 119,347 77,576 Wheat, bushels­1928 2,016 22,176 24,394 1927 1,850 17,945 21,713 Oats, bushels­1928 1,402 35,751 18,233 1927 2,003 42,063 19,770 Barley, bushels­1928 156 3,276 2,391 1927 195 3,120 2,184 Grain Sorghums, bushels­1928 2,760 69,000 41,400 1927 2,654 55,734 36,227 Rice, bushels­1928 174 7,308 6,431' 1927 174 8,039 6,914 Tame Hay, tons­1928 637 733 9,676 1927 629 749 8,838 Wild Hay, tons­1928 219 208 2,205 1927 219 219 2,015 Potatoes, bushels­1928 39 2,691 2,691 1927 35 2,310 3,812 Sweet Potatoes, bushels­1928 109 8,284 8,284 1927 133 11,970 8,978 Peanuts, pounds­1928 168 109,200 5,460 1927 170 102,000 3,570 Cowpeas, bushels­1928 162 1,782 3,386 1927 174 2,088 3,967 *Fl'Om the United States Department of Agriculture. A \'alt!(' of' $ 78:l,000,000 was estimate