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transactions. It is estimated that over 90 per cent of the business of the United States was performed by checks and less than 10 per cent by money. Increased credit transactions as well as the increased gold output were therefore among the foremost causes of the general increase in prices prior to the war.

It is futile, however, to contend that the rise of the wholesale prices of farm products or of any other special group of commodities was due solely to the causes considered in the preceding paragraphs. The above formula could at most serve to explain the increase in the general level of all prices combined. Yet the price of wheat, cotton or any other farm product or of any commodity whatsoever is to some extent a special price which is only partly dependent upon the factors which establish a general level of prices. As was previously stated, the prices of farm products increased to a greater extent than the general level of all wholesale commodity prices combined, and there was wide variation between individual farm products in the extent to which their prices advanced. Similar variations also occur between other commodities. While the index numbers of the Bureau of Labor Statistics show an advance of 66.5 per cent in the price of eggs in 1913 as compared with the average for the decade 1890 to 1899, lard 68.3 per cent, bacon 88.7 per cent, dressed beef 62.4 per cent, yellow pine sidings 74 per cent, and white pine boards (uppers) 113 per cent, the wholesale price of men's boots and shoes increased but 22.6 per cent, house furnishings 18.1 per cent, and the wholesale price of some commodities such as sugar, news and wrapping paper declined. All of these fluctuations varied widely from the advance in the general level of commodity prices.

The unusual advance in the price of farm products was only partly due to the increased amount of currency and the greater velocity of check transactions. Moreover, the exact proportion. of the advance chargeable to these factors is not known, because the opportunities for error in the theoretical price calculations mentioned above are obvious. That the calculations were made with exemplary care is admitted, yet some of the principal items are estimates rather than definitely known facts. It is doubt

ful, for example, whether any two statisticians, working independently, would arrive at substantially the same figure for "total volume of trade" in the United States (T in the price formula). The increase in the general level of commodity prices, likewise, is not definitely established, the advances shown. by such general index numbers as have been compiled presenting appreciable variations.

The inflation of money and credit, particularly of credit, from 1913 to 1920 was also responsible in part for the rise of commodity prices, including those of farm products, during and subsequent to the war. Inflation began when the amount of currency and credit in use was not required and offset by greater production and a corresponding volume of commodities to be handled. The great increase in currency and bank credits which occurred in the United States after the nation entered the war, was not followed by a corresponding increase in production. A more dominant price factor was the resulting scramble for labor, materials and capital by some industries at the expense of others. The increased currency and credit enabled the competitors to bid against each other and contributed to the rise in commodity prices without contributing a corresponding volume of production.

2. The Forces of Supply and Demand.-An important cause of the special rise in the wholesale prices of farm commodities was the changing relation between supply and demand. Both of these price factors were in turn subject to numerous fundamental underlying influences.

The supply of farm products is a definite price factor, but at different times, different conceptions of it are operative. The ruling consideration in the minds of the buyers and sellers at the wholesale markets may be the acreage planted, the condition of the growing crops, the visible supply in existence, or the total production of the year. The supply may, moreover, be derived from the farms of the United States, or partly from those of foreign agricultural countries. It is, likewise, not the actual supply of the moment which solely governs the prices of farm products, but also the judgment of the buyers and sellers at

the ruling central markets as to the probable supply of the future. Traders are continually discounting the future. Particularly is this the rule in the case of those commodities which. are dealt in on well-organized exchanges and products which are not perishable.

Whatever the ruling conception of supply may be at a given moment it ultimately depends upon the total available production of the crops, and this in most cases declined relative to the country's needs. From the statistics of production presented in earlier chapters it may be seen that during the years of greatest price increase before the war the number of cattle, hogs and sheep in the United States declined, and that prior to the year 1914 the crops of corn, wheat, barley, potatoes and wool increased less rapidly than the country's requirements. The crops of oats, rye, leaf tobacco, cotton and rice, on the other hand, continued to increase as compared with earlier years. It is significant that by far the greatest price advances occurred in the case of cattle and hogs, and that with the exception of cotton, prices advanced to the greatest extent in those crops where production made least headway.

A multitude of reasons for the reduced rate of and the actual falling off in the production of some of the great crops have been assigned-increased land values, the movement of population into the cities, higher farm wages, decreased efficiency of farm laborers and a general increase in cost of agricultural production, the relative absence of intensive farming in the United States, in some instances depleted fertility and inadequate use of fertilizers, in others the scarcity of available pastures, or in the wool trade the competition with foreign growers. The influence of production upon the prices of farm products may not however, be considered without at the same time considering the demand for them. Prices may rise even when a bumper crop is produced, and decline when the crop is small as compared with the preceding year, should the market demand for farm products suddenly expand in the former or shrink in the latter case. Production may increase rapidly but if at the same time there is an even greater growth in the demand for farm

products their prices will advance. In 1914, for example, large crops of grain were raised in the United States and grain prices would normally have been lower than in the preceding year, yet record prices ruled largely because the outbreak of the European War created an unusual demand for American grains and flour. Similarly cotton production gradually increased after 1896, yet after 1902 cotton prices were higher than during the preceding twelve years, chiefly because the textile industries alike in the United States and abroad were rapidly expanding and created a demand which until the outbreak of the European War, with its depressing effects upon European textile mills, maintained the average price of raw cotton above ten cents per pound.

The market demand for the farm crops cannot be concretely expressed in the form of bushels, bales or pounds, but it is nevertheless a very definite price factor dependent upon definite present or expected market conditions. Movements of population from the country to the city, the growth of population at home and abroad, the expansion or shrinkage of food requirements in food-importing countries, the development of the world's cotton and woolen mills, foreign tariff rates and inspection regulations, widespread wars which affect the demand for, as well as the supply of the world's farm products, the state of business prosperity or depression, and the increasing or decreasing purchasing power of American and foreign consumers -all of these considerations which variously affect the market demand for farm products are considered by the army of buyers and sellers whose bids and offers determine wholesale prices. As in the case of supply or production, the market demand for farm products is judged both from the standpoint of the present and of the future. The relation between supply and demand is constantly being discounted in the great wholesale markets. The rapid increase in the prices of farm products and of many other commodities from 1913 to 1920 and the unequal movement of the prices of different commodities was also due in part to the forces of supply and demand. Agricultural production increased, but not sufficiently to meet the enhanced demand for American farm products. Market demand increased in the

United States, the price effect being especially great in case of that portion of the population which suddenly became prosperous as a result of the war. The foreign demand for various farm products and foods produced in the United States, particularly the urgent European demand, must be added to the domestic demand. The increased exports of various farm products referred to more fully elsewhere, do not disclose the full price effect, for the foreign demand at various times was compelling.

The break in agricultural prices which occurred in 1920 and 1921 was not due entirely to the deflation of currency and credit, but also to a readjustment of supply and demand. The European demand for various farm products and foods declined. In some instances, the volume of exports continued at a high level, but the demand nevertheless was shifting to a different basis in that the international trade once more became competitive. Foreign customers were no longer dependent so closely upon the American supply as during the war and for several years following the cessation of hostilities. As the worldwide shortage in ocean vessel tonnage disappeared, many of the previous sources of supply were again available. The industrial depression, moreover, affected not only the domestic and foreign markets for cotton but to some extent also those for other farm products.

The changing volume of currency and credit and the changing relation between supply and demand have been principally responsible for the fluctuations in the general level of prices and for most of the special variations which have occurred in the wholesale prices of farm products. There are other factors, however, some of which bear an important relation to wholesale prices.

3. Speculation in Farm Products.-Ordinarily there are several conceptions of produce speculation-one referring to the practice of purchasing or holding farm products for a future rise in spot prices, a second to the making of contracts calling for the delivery or acceptance of spot produce at an agreed future time and price, and a third to the purchase and sale of

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