TEXAS BUSINESS REVIEW Bureau of Business Research The University of Texas Vol. X, No. 10 November 28, 1936 TOTAL CROP LAND IN TEXAS 1929 ONE DOT= 20,000 ACRES · U S BUiltEAU OF" TME CENSUS ONE DOLLAR PER YEAR TEN CENTS PER COPY TEXAS BUSINESS REVIEW A Monthly Summary of Business and Economic Conditions in Texas and the Southwest Bureau of Business Research, The lJniversity of Texas, Austin, Texas Entered as ~econd clus matter on May 7, 1928, at the post office at Austin, Texas, under Act of August 24, 1912 Vol. X, No. 10 November 28, 1936 CONTENTS PAGE Announcements -------------------------------------------------------------------------------------------------------------11 Business Review and Prospect, F. A. Buechel _ ___ ·--------------------------------------------3 Cotton, A. B. Cox_____ ____ _______________________ ·-····---------. _______---------------------------------------------6 Financial, James C. Dolley______________________ -------------------------------------------------------------------5 Texas-In Perspective, Elmer H. Johnson ________ --------------·----------------------------------------7 LIST OF CHARTS Indexes of Business Activity.__ ------------------__________ . __________ -----------------·---------------4 Total Crop Lands in Texas, 1929 --------------------------------------------------------------------1 LIST OF TABLES Banking Statistics ----------------··-------------------------------------------------------------------------------15 Building Permits ------------------------------. ---------------------------------------------------------------------14 Carload Movement of Poultry and Eggs..... ------------------------------------------------------13 Cement __ --------------------------------------------------------------------------------------------------------------------14 Charters ------------------------------------------------------------------------------------------------·-------------------13 Commercial Failures_________ __ ___ __ __ __ . ___--------------------------------------------------------------12 Commodity Prices________________ .. ------···___ __ _______ . _ __ ___· ·------------------------------------------------14 Consumption of Electric Power_ _ _ ______ --------·----------------------------------------------------13 Cotton Balance Sheet._ _ ______ _ _______ _ __________ _ _________________ _ ______ _ __________________________________ 15 Cotton Manufacturing·------------------------·-----------------------------------------------------------------13 Credit Ratios of Retail Stores -------------------------------------------------------------------------------13 Employment and Pay Rolls Classified by Cities and Employment Groups________ 16 Lumber ----------------------------------··-·_____ __ ------------------------------------------------------------------------13 Petroleum ____ ·---------------------------------------_ ------------------------------------------------------------------14 Postal Receipts_ ___________________ ________________________ _____________________________ _ _________________________ 14 Retail Sales of Independent Stores ______ ____ ______ ______________ __________________________ ____ ll, 12 Shipments of Live Stock Converted to a Rail-Car Basis________ _ . ------------------------15 Stock Prices·----·-··-··----__ _ ________________ ·-·..___.····-· _________--------------------------------------------------14 Partial List of Publications Issued by the Bureau of Business Research PRICE What Place Has the Advertising Agency in Market Research______________ _____ __ $1.00 William J. Reilly Methods for the Study of Retail Relationships .. _ ·-·. 1.00 William J. Reilly A System of Accounting Procedure for livestock Ranches__ _____ -·-----------------1.50 Frederick W. Woodbridge The Natural Regions of Texas . .. 1.00 Elmer H. Johnson The Basis of the Commercial and Industrial Development of Texas ··--------------2.00 Elmer H. Johnson Eight Years of Livestock Shipments in Texas______ _____ __ ---------------------------·-------LOO F. A. Buechel Directory of Texas Manufacturers as of January 1,1936 -------------------------------LOO F. A. Buechel and Clara H. Lewis Recent Mimeographed Studies Studies of Employment Problems in Texas___ ______ ·---------------------------------------------LOO A. B. Cox Possibilities of Industrial Expansion in Texas__________________ ________________________________ 1.00 Elmer H. Johnson Dairy Manufacturing in Texas ____ ·-------------___. ------------------------------------------··--------1.00 F. A. Buechel Farm Cash Income in Texas, 1927-1936....___ __ ------------------------------------------------1.00 F. A. Buechel Business Review and Prospect . A well known analyst is of the opinion that we are m a recovery movement which has gained strong momentum and which promises to continue for many months to come. It is still predominantly a consumer's goods recovery; and in keeping with that characteristic it promises to produce, in this month and next, the best holiday trade since that of the prosperity years. It is a recovery strongly supported by large governmental expenditures, and that condition is likely to be main· tained. There are three parts of our business economv which are still operating at levels that are far below. normal and which account for most of our unemployment. These are construction, the making of capital goods, and our export trade. We are making gradual progress in all of them, and it does not appear probable that the election results will either accelerate or retard the rate of improvement. Construction is increasing in volume, but it is held back by high costs. A vast amount of governmental money and effort has been devoted to its stimulation, but without availing much to speed up private expendi­ture. The production of capital goods is largely dependent on new financing by corporations. The volume of new financing depends on the degree of willingness that business leaders may have to assume new risks in the hope of making greater profits. It depends on long· range confidence in the future, and the continuing de· velopment of this recovery depends on the rate at which that kind of confidence increases. World conditions largely beyond our control will probably determine the near-future of our foreign trade. TEXAS BUSINESS The October business index for Texas, computed from employment, pay rolls, miscellaneous carloadings, crude nms to stills, department store sales, and electric power c0nsumption is 91.8, compared with 91.7 in September and 77.6 in October 1935. The gain over a year ago is 18 per cent, and all of the factors contained in the index contributed to the increase. Beyond doubt this well rounded improvement in Texas industry and trade helps to explain the remark· able increase in retail sales during October compared with last year as shown later in the REVIEW, in spite of the moderate decline in the index of farm cash income. Additional factors contributing to the marked rise in retail sales are Federal expenditures, both in rural and urban centers, and the credit agencies which the government has prom~ted, which have materially lightened morto-age and mterest burdens and thus have released funds"' for the purchase of merchandise. On top of all these influenc~s is. the g~eater opt!mism which already prevails and which 1s rapidly growmg. STATE INDEX OF FARM CASH INCOME ment "·as made for seasonal ,-ariation. but it was more than three points below that of October 1935. This drop in the State index wa~ to he experted because of the earlier than usual marketings of cotton. which raised the September farm cash index sharph-aboYe that of a year ago. A brief explanation should perhaps be made of whY it is that although the actual farm cash income for Texas during October was less than in September, the index should have risen about fonr points. As was pointed out in the October issue of the RHIEW, the awrage monthly farm cash income during the base period I1928-32 l was $41.000,000. But normally dur­ing this period 280.7 per cent of this a\'erage monthly income was received in September, and 248.6 per cent was received in October, or Sll5,000.000 and $102,000,. 000, respectively. In September this year the farm cash income was a little over $87,000,000, or 75.9 per cent; and in October, a little over S82,000,000, or 79.8 per cent. DISTRICT INDEXES OF FARM CASH INCOME District 1-N. the northern Panhandle, receives the bulk of its far~ cash income from wheat and liYe stock, only a small portion coming from cotton. The index of income in this district for October is 56.4, which is slightly below the 58.6 in September but well above that of October 1935, when it was 49.4. These figures show the extent to which farm cash income must still increase in this district to reach the level attained during the base period 11928-32) . In district 1-S the index rose to 162.6 in October from 67.8 in September. The index for October 1935 was 81.9. The increase in farm cash income in this district during October is largely the result of three factors: a substantial increase in cotton production in comparison with last year: the earlier marketing of the cotton: and a sharp increase in shipments of hogs and sheep, . together with a moderate incr:ase in ~hip~ei:ts of r.ah·es. It is note,\·orthy that retail sales m district 1-S during October showed the greatest increase over the corresponding month last year of any district in the State. The index for district 2 fell from 76.0 in September to 62.6 in October. The index for October 1935 was 8.3.9. Cotton plays the dominant part in farm cash in· come in this district, and the crop this year w~s only t1rn-thirds of that a year ago. :\foreo\'er, marketmgs of cotton beo-an in this district earlier than a year ago. thu~ helpi~g to raise the index in Sept~mber.. An addi­tional factor contributing to the drop m the mdex 'ms the decline in marketings of cattle, cah-es, and she:P· Retail sales in this district made the poorest showmg in comparison with last year of any district in the State. Income in district 3 is influenced less by cotton and more bY live stock than is either of the adjacent dis· tricts o~ the west and east. Yet the decline in cotton The October index of farm cash income for Texas (Co1tti'ltued 01t page 5) rose four points above that of September after adjust­ INOE.XE.S OF BUSINE.~S ACTIVITY IN (Continued frorn page 3) pro~uction compared with last year helped to cause a declme from 119.4 last year to 72.8 during October of the current year. In September the index was 57. Ship­ments of cattle and calves during October were only about _half ~hos~ o~ the similar month last year. Retail sales m _this dis_tnct.' as in those already cited, reflect the relative declme m farm cash income. Next to dis­trict 2, this district made the poorest comparison with October 1935. Th~ reader z:nay wish to make comparisons of farm c~s~ mcome with retail sales in the remaining districts snmlar to those already pointed out in districts 1-S, 2, and 3. Comparisons of retail sales by crop reporting districts will be found on page 12 of the REVIEW. Although farm cash income is the principal source of income in a number of Texas crop reporting dis­tricts and thus promptly influences retail trade, in other districts it is far less dominant, although important. It will therefore not be surprising to find that while the index of farm cash income in districts 4, 8, and 9 was below that of a year ago, in each case retail sales in these districts were above the State aYerage. To a gro_wi?g extent, vari_ous regions of Texas are JeriYing their mcomes from mdustry, trade, service occupations. and natural resources other than agricultural. In the following table the index numbers for October 1936, September 1936, and October 1935 are listed for each district and for the entire State. Index of Agricultural Cash Income District October 1936 September 1936 Oc tober 1935 1-N________ 56.4 58.6 49.4 1-S____________ 162.6 67.8 84.9 2 -· 62.6 76.0 83.9 3 ·····-·· 4____________ 72.8 85.8 57.0 92.9 119.4 86.4 5 ----·------­ 66.0 76.2 91.1 6 -·····-·--------· 104.7 59.6 62.3 7 ---··-----· 78.7 51.6 76.7 8 -·---------··-··· 79.9 55.1 84.7 9 -------····­ 86.8 64.4 93.l 10 74.5 77.8 78.7 State ... __________ 79.8 75.9 83.2 F. A. BUECHEL. For Other Texas Data, See Statistical Tables at the End of This Publication Financial The national elections and their inevitable post­mortems largely crowded business news from the spotlight during the past month. The period, however, has witnessed several significant financial developments, among which can be mentioned: the provisional stabil­ization of the gold bloc currencies, the pronounced shift in corporation year-end dividend policies, the continued expansion of bank credit, and some further evidence of official administration concern over the possibility of an unhealthy business boom. Following the French departure from the gold standard late in September, the gold bloc currencies have been more or less definitely stabilized at 70 to 80 per cent of their old gold weights. Temporary stabiliza­tion has been accomplished, not by the free conversion of currency into gold, but through the use of stabiliza­tion funds to support the foreign exchange rates. The external values of these currencies, therefore, are largely artificial at the present time. Tentative stabilization of the franc has been followed by a marked easing of interest rates in the Paris market and by the dehoarding of a considerable quantity of gold held by French citizens. Thus far, however, there has been no wholesale repatriation of French capital although there has been some return flow, largely from London. Gold has continued to flow into New York, but on a greatly reduced scale, the bu~k of the metal representing dehoarded gold bought m the London market. The federal corporation income tax law of 1936 u_n­questionably is producing its expected. r.esults. ~t will be recalled that this law imposed pumtive taxatwn on all corporate net income not d!stributed. as di~idends. To avoid this taxation, corporatwns are mcreasmg ma­terially their disbursements to employees and to share­holders. Within the past few weeks dozens of corpora­tions have increased their wage rates, the average ad­vance amounting to ten per cent. In addition, numerous year-end bonuses have been voted to employees. For example, the General Foods Corporation on December 17 will pay to each employee a bonus of two weeks' extra salary. Payments of this sort obviously have the effect of reducing corporate net income. Even more significant, however, has been the tre­mendous increase in dividend disbursements. Hundreds of corporations have authorized extra dividend payments of one sort or another in order to cut down the amount of undistributed net profits. Thus the Chesapeake and Ohio will pay to its stockholders Sl.00 in an extra cash dividend and $2.00 in preferred stock; the Pere Mar­quette will pay $20.00 per share on prior preferred accumulations; and the American Smelting and Refining Company will pay an extra cash dividend of S2.25 per share. For the time being, these extra dividend pay­ments will undoubtedly increase consumer purchasing power and stimulate retail sales. In the long run the policy will result in stripping corporations of a large part or all of their net earnings, thus compelling them to finance expansion through security sales and prevent­ing the accumulation of needed reserves to tide over the next depression period. Bank credit continues to expand. Adjusted demand deposits for the reporting member banks stood at an all time high of $15,206,000,000 on November 4, an increase of S90,000,000 since September 30, and of Sl,648,000,000 since November 6. 1935. On November 4, these banks reported holdings of government obliga­tions amounting to $10,503,000,000, a slight decrease from the preceding month, but $1,129,000,000 above the figure for a year ago. On the same date, holdings of "other securities" were reported at $3,218,000,000, up $134,000,000 from a year ago. Expansion of short term loans has been more gradual but is fully as significant. Total loans on securities of the reporting member banks aggregated $3,192,000,000 on November 4, a decline of $50,000,000 from the pre­ceding month but an increase of $160,000,000 over the November 6, 1935, figure. This relatively small increase during a year of almost continuously rising stock prices suggests that bank credit as yet is not being used ex­tensively to finance security speculation. "Other loans" of the reporting member banks con­tinue the gradual expansion which has been in evidence for more than a year. These loans represent largely commercial lending to finance the working capital needs of business enterprises. As of November 4, such loans were reported at $4,019,000,000, an increase of $400,­000,000 since July 1 and of $640,000,000 in twelve months. This expansion reflects definitely the improved level of business activity and the long awaited develop­ment of an effective demand for commercial credit. Further support for such optimism is found in the volume of new security flotations. For the first nine months of this year, total corporation security issues for new capital aggregated $770,000,000, which is a better record than for any year since 1931. Despite the improving demand for credit, the supply of loanable funds remains enormous, as a result of which interest rates and bond yields continue to rule at record low levels. Excess reserves of the member banks in mid-November were reported at $2,260,000,000. With existing reserve requirements, this sum could support an expansion of bank deposits of at least $11,300,000,­ 000. A vastly larger expansion is possible on the basis of gold reserves held by the Federal Reserve Banks. Past experience indicates that bank credit, once the business trend turns upward, tends to expand to the full limit of the existing reserves. Should such ex­pansion devefop at the present time, it would un­doubtedly result in fantastic price inflation and an un­sound business boom followed by collapse. It appears that the administration is beginning to worry some­what over this possibility of bank credit inflation for which it has so thoroughly laid the base. Last August the Federal Reserve Board raised the legal reserve re­quirements of member banks by 50 per cent in order to cut down the credit base. Several weeks ago the President expressed concern over the huge volume of foreign capital which continues to flow into the United States. More recently, the Federal Reserve Board an­nounced that another increase in legal reserve require­ments is being considered as well as the possibility of some open market selling. It is to be hoped that the Board will have the courage to act decisively before the situation gets out of hand. J. C. DOLLEY. Cotton Cotton is grown primarily for the cash received for the lint, though the by-product, cotton seed, constitutes the surest and in many ways the most valuable food and feed crop grown in the State. Prior to the depres­sion the sale of cotton lint accounted for about 50 per cent' of the total cash income on all farms and ranches in Texas and about 80 per cent of the total cash income from crops. Certainly cotton is the hub of agricultural prosperity in Texas. The October TEXAS Busr'.'ESS H.EVIEW presented United States Department of Agricul­ture figures which showed a decline in the total cash income received from the sale of lint cotton in Texas from a three-year pre-depression average of $407,000,­000 to $156,000,000 during the past two years, a decline of $251,000,000 or nearly 60 per cent. It is proposed now to make a further analysis of these figures to see what has happened to indiv~dual farme.rs. Certainly the cotton growers of Texas did not receive an undue portion of the national income prior to the depression. Let us see what has happened. According to the United States Census of Agriculture, 1925, cotton growers in Texas received an avera~e . of $1,371 per farm in that year from the sale of hnt cotton. In 1930 that income had dropped to $843 per farm, ac­cording to the Census. The Census for 1935 shows the average income to cotton growers in Texas fro~ the sale of lint cotton to be only $401 per farm. These figures, startling as they are, do not carry the full import of the situation in so far as Texas is concerned; for during the ten years from 1925 to 1935 there was a decrease in the number of farms reporting the sale of lint cotton from 410,144 in 1925 to 364,249 in 1935, or a decrease of 45,895 farms. It is significant to note also that during that same period the total number of farms in the State increased 35,370, or from 465,64 7 in 1925 to 501,017 in 1935. To what extent do Government rental and benefit pay­ments make up for this loss? During 1935 Texas cotton growers received $47,000,000 from the Federal Government in rental and benefit payments and bonuses under the 12 cents guaranteed price. This is an average of $129 for each cotton farm, thus raising the cash income in 1935 from lint cotton from $401 to $530 per farm. Cotton growers were dissatisfied in 1928, 1929, and 1930 because of low income; yet their income from the sale of lint cotton averaged nearly twice as much during those three pre-depression years as in 1935, even after Government bonuses are included. Can the cotton grow­ers be expected to accept without strong protest a long continuance of the present low income? A. B. Cox. Indicated supplies of cotton in theCOTTON United States November 1 were 14,365,­BALANCE 000 bales, compared with an indicatedSHEET supply of 15,451,000 bales November .1 last year. This is the smallest supply of cotton on this date in the United States since 1929, when it was 13,444,000 bales. The indicated supply in the United States November 1 was thus 1,086,000 bales less than last year, although stocks of American cotton in European ports and afloat to Europe were 117,000 bales greater than last year. The net decrease in the above items of supply amounts to 969,000 bales. During the past seven years the average points change in the adjusted price of New Orleans spot cotton for each change of 100,000 bales in supply has been 13.33 points. If these figures hold good for this year, the adjusted price of American cotton is due to advance about 128 points over the price at this time last year, or to an index price of 16.56 cents. When the index price is adjusted by the Bureau of Labor Statistics Wholesale Price Index and the spinners margin index of 1.1019, the indicated price for middling %-inch spot cotton in New Orleans is 14.87 cents. When the cal­culations are based on percentages, the indicated price is 13.75 cents. Why are calculated prices of American cotton based on supplies of American cotton more than a cent a pound above the actual prices'? :\Iany factors are in­volved, but the most outstanding one is the very large increase in foreign production of cotton. If C nited States Department of Agriculture estimates are approxi­mately correct, the world supply of all cotton is greater than last year. As a result, prices of foreign cotton are such that these growths are being substituted freeh for American cotton. SPI:\l'iERS Spinners weekly ratio margins on Amer-MARGI:\' ican cotton based on the price of 32 twist yarn in l\fanchester and the price of mid­dling % -inch cotton in Li\·erpool averaged 173 during October, compared with 164 for September and 165 for October last year. The pence margin for October was 4.90 d compared with 4.4-7 d for September and -J..18 d for October last year. These figures indicate increasing consumption of cotton. Texas-In Perspective In the nature of a country lies the destiny of its people. THE TRANS-PECOS1 The casual tourist perhaps considers the Trans-Pecos country as a stretch of highway to be covered as rap~dly as possible, for too generally the Trans-Pecos has mamly been regarded as on the road to somewhere else; ~ut even the hurried tourist cannot fail to catch somethmg more than a mere impression of this country which appears to be and is "altogether different." The live­stock man knows much of this interesting region of little rain, and that little rather erratic in its distribu­tion where widely dispersed water holes and the better ran~e lands have long been of primary importance. Hard rock prospectors have thoroughly explored the formerly bandit-infested Big Bend country, where natu~e often appears so harsh and inho~pitable, and .on t~eir heels has followed the archaeologist who looks m pams­taking manner for keys to the life of the pre-historic peoples who long ago occupied these la?ds. A land of complicated geographic geolol?y, of diverse and co?­trasted physiography, the ~eetmg_ place of extremes i_n vegetation in a region of httle ram, the Trans-Pecos is not for a moment to be considered as an annex to . the rest of the State. Instead the Trans-Pecos country is _a major item in, perhaps the major key to, the geograph_1c geology of much of the American Southwest. Dr. Hill has stated that "Trans-Pecos Texas pre~ents one of th~ most wondrous displays of earth architecture extant. And again, "The Trans-Pecos is a land of queer ear.th It is the playground of the gods or devils forms.. . . ~writer again takes pleasure in acknowledging the great cl b ef ratitude he owes Dr. R. T. Hill. Texas should be :rt\c~arTy grateful that Dr.. Hill's penetrating and compre­hensive observations and studies of Texas and the So~thwest · thou h they were begun nearly 65 years ago. The co~tmue,I gk owledges his debt in particular to Dr. Hill's wnter a so ac n series of articles in The Dallas News. just as one wishes to call it, where extremes come to­gether; where realms meet realms; where mountain sys­tems crossed out mountain systems and where bolsom and graben valley plains vie with gigantic cuestas and laccolithic highlands. The mountains are not the high­est nor the most beautiful, but they are decidedly as interesting in point of architecture and history as any elsewhere to be found. Neither are the valleys the largest, the vegetation is not the queerest, nor are the waters the most abundant; but in many other respects the Texas portion of the Trans-Pecos is one of the [most distinctivej locations of numerous and interesting types of earth forms to be found in the world. . . . The Trans-Pecos region is also the meeting place of the great geographic realms and regions and the crossing of the great period-ending mountain system" which have so largely determined the geologic architecture of the j\or th American continent. In area, the Trans-Pecos occupies nearly 12 per cent of the area of Texas and includes more than 31,000 square miles, or more than 20,000,000 acres. The Trans­Pecos is a huge irregularly shaped quadrangular sect1~n occupying the country between the Pecos and the R10 Grande· it extends northward into south-central :\ew l\lexico.' South of the Rio Grande (the Rio Bram sec­tion of that river forming a great elbow, in which lies the Big Bend country) are the even more inhospitable lands of northern Mexico-the great sand-filled low­lands of the Chihuahua deserts \\·ith their "lost'' moun­tains, desert streams, and widely extending bolson plains or enclosed drainage basins without outlets. Perhaps the most distincti\·e features that .first meet the eye in the Trans-Pecos are the rnountarns--great ran