WHEAT STUDIES of the FOOD RESEARCH INSTITUTE VOL. XVII, NO. 7 (Price $1.00) APRIL 1941 WHEAT IN THE POST -SURPLUS PERIOD 1900-09 WITH RECENT ANALOGIES AND CONTRASTS Helen C Farnsworth The wheat-surplus period of the 1890's was followed by a decade characterized by extremely heavy wheat output. In per capita terms, this output was larger than that respon­ sible for the burdensome surplus stocks of the mid-'nineties or that later associated with the depressing surplus of 1928- 35. But the early years of this century witnessed no piling up of surplus stocks comparable with the accumulations of 1892-96 and 1929-35. Historical and statistical analysis sug­ gests that this extraordinary outcome was largely due to three factors: (1) the sharper upward trend and higher level of per capita normal wheat disappearance in the early 1900's; (2) the more favorable timing of crop surpluses and deficits in those years; and (3) the fact that wheat disappearance was then farther above normal than in 1928-35. In the absence of burdensome wheat stocks, the purchas­ ing power of British import wheat, trend considered, was moderate rather than low during 1898-1909. Except in 1898- 99 and 1901-02, deflated prices of such wheat reflected rea­ sonably well the wheat commodity position of each of the crop years considered. From about 1902 to the beginning of the World War, the trend of purchasing power of British import wheat was horizontal, in sharp contrast with down­ ward trends during the 15 to 20 years prior to 1902 and from 1922 to 1939. Since 1938 the world's wheat output has again been heavy, and existing wheat stocI{s are unprecedentedly large. These might conceivably be reduced to normal by two successive years of abnormally low yields per acre, or by prompt expan­ sion of wheat consumption following an early peace; but neither of these developments can at present be expected. Nor would such reduction in wheat acreage as now appears in prospect suffice to bring stocks to a normal level by 1943. Although future developments are not predictable, it now seems probable that the next few years will be characterized by the persistence of some degree of wheat surplus. STANFORD UNIVERSITY, CALIFORNIA WHEA T STUDIES OF THE FOOD RESEARCH INSTITUTE Entered as second-class matter February 11, 1925, at the Post Office at Palo Alto, Stanford University Branch, California, under the Act of August 24, 1912. Published eight times a year by Stanford University for the Food Research Insti­ tute. Copllright 1941, by the Board of Trustees of the Leland Stanford Junior University WHEAT IN THE POST -SURPLUS PERIOD 1900-09 WITH RECENT ANALOGIES AND CONTRASTS Helen C. Farnsworth "History repeats itself." This expression, These spectacular changes in the level of known to every schoolchild in America, is wheat prices were so closely tied to prominent perhaps nowhere better illustrated, with its crop changes that one might be tempted to limitations, than in the charted course of in­ conclude that any period of years character­ ternational wheat prices during the past dec­ ized by abnormally heavy wheat output would ade. The sharp decline in British import necessarily be a period of depressed wheat prices of wheat from 1929-30 to 1933-34, the prices. Such a conclusion, however, is clearly subsequent striking re- contradicted by the avail­ covery to 1936-37, and the able supply and price sta­ new collapse in 1938-39 CONTENTS tistics for the early years are all reminiscent of PART ONE PAGE of the twentieth century. roughly similar develop­ Absorption of Heavy Sup- After the bumper wheat ments in the 1890's. These plies after 1898 ......... 317 harvest of 1898, the price similarities are readily ob­ Price Tendencies, 1898-1909 326 of British import wheat Some Aspects of the Current servable in Charts 1 and 2. Outlook ................ 333 declined only moderately The two major periods in 1898-99, then tended PART Two of price depression, 1892- slightly upward for about Annual Wheat Developments, 96 and 1930-36, were asso­ 1900-09 ................ 337 a decade in the face of sev­ ciated with extremely Appendix Charts and Tables 378 eral successive large crops. heavy wheat supplies and This was due in part to the the persistence of burden- influence of general eco­ some world carryovers of wheat. Subsequently, nomic and monetary factors that were re­ prices recovered to relatively high levels in flected in rising prices in many other com­ 1897-98 and 1936-38 under the influence of modity markets. But it was also partly due short crops and small aggregate wheat sup­ to strengthening elements within the wheat plies. But bumper harvests in 1898 and 1938 position itself, a situation suggested by the foreshadowed the accumulation of new bur­ lack of persistent depression in the purchas­ densome surpluses, and the price and pur­ ing power of wheat during this period. Only chasing power of wheat again declined sharply. in two years, 1899-1900 and 1906-07, was CHART 1.-ANNUAL AVERAGE PRICES OF BRITISH IMPORT WHEAT, 1885-1916 AND 1921-39* (Sllillings per cental: logaritllmic vertical scale) 14 I 4 VWar-time inflation \ 12 '" I 2 10 I \ / I o ,...., / \ 8 ""\ V-J '" '" ~ 17 \ r\ /\ ~II \ 6 "v V hi \ 4 4 1885 1890 1695 1900 1905 1910 1915 1920 1925 1930 1935 1940 -86 -91 -96 -01 -06 -II -16 -21 -26 -31 -36 -41 * August-July avcragcs of monthly values pcr ccnlal of thc whcat importcd into Grcat Britain. Basic price data from Gl'cnt Britain, Co'romons, Accounts Relating to Trade of tlle United Kingdom, for the period of years covercd. WHEAT STUDIES of the Food Research Institute, Vol. XVII, No.7, April 1941 [ 315 1 316 WHEAT IN THE POST-SURPLUS PERIOD 1900-09 wheat priced unusually low relative to com­ carryovers and a depression of wheat prices, modity prices in general; and in neither of such as characterized the early 1890's and the those years was the "deflated" price of Brit­ early 1930's? The answer to this question, ish import wheat far below what we judge to treated in the first two sections of the study, have been the normal level (see Chart 6, is not a simple one. A number of factors ap­ p. 328). pear to have been significant; but of these the most important were: (1) the varying trend CHAIn 2.-ANNUAL AVEnAGE PmCES OF BmTlsH of per capita normal wheat disappearance in IMPon-r WHEAT, ACTUAL AND DEFLATED, the different periods, (2) the different magni­ 1886-1909 AND 1925-3.9* tude and timing of crop surpluses and crop (Shillings per cental; logarithmic vertical scale) deficiencies, and (3) differences in the devia­ 12 r---------_,-----,-----,___--, 12 tions of wheat consumption from the normal •••••••••• ACTUAL trend. These factors exerted different degrees IOI------"~-+_---_t_---__t----t_----jIO ........ \ of influence in the several periods compared. el-----~+_---_t_+_~~-+----t_~e In order to understand the wheat consump­ tion and price situation in 1900-09, it was necessary to collect, study, and interpret a great mass of statistical data and market in­ formation for each of the crop years covered. 4~~_L~~~~~-L~~~~~_L~~~~4 These detailed materials, which have an inde­ r------~---_,~--_.----,_____,IO pendent historical value, are summarized in the crop-year wheat reviews presented as Part Two of the present study. Long after in­ terest in the current wheat-surplus problem 61-----~+----~-_r-__t-------t_----je \ Postwar ••• has subsided, these annual reviews should ......................... prove useful in analysis of other problems that may arise in connection with wheat sup­ 4~~-L~~L-~~-L~~~~~-L~~L-~4 1886 1891 1696 1901 1906 plies, trade, consumption, carryovers, and -87 -92 -97 -02 -07 1925 1930 1935 1940 prices. -26 -31 -36 -41 As a contribution to economic history, this • Actual prices as in Chart 1. Deflated prices computed study should be considered not alone but in its by dividing the actual monthly prices by corresponding averages of the Sauer beck-Statist index of wholesale com­ relation to earlier WHEAT STUDIES ba'sed on modity prices expressed in terms of Its average for 1910-14. similar historical materials. Since 1923-24 the Food Research Institute has published The relatively favorable price response to comprehensive annual reviews of the world heavy wheat output in 1898-1908, as con­ wheat situation, which now afford students trasted with the early 1890's and the 1930's, of economic history a continuous view of suggests that intensive study of the wheat world wheat developments over the past 17 situation in the early years of the present cen­ years. For the years prior to 1923-24 no such tury might throw new light upon the recent comprehensive reviews are available. But wheat-surplus problem. This, in turn, should the World War period is reviewed in M. K. improve our interpretation of current condi­ Bennett's "Wheat and War, 1914-18 and Now" tions and our judgment as to the outlook for (WI-IEAT STUDIES, November 1939); and the the future. decade of the 1890's in the present writer's The present study of wheat developments "The Decline and Recovery of Wheat Prices in 1900-09 was undertaken with these con­ in the 'Nineties" (ibid., June-July 1934). The siderations in mind. Special attention has present study brings the historical record of therefore been devoted to the question: Why wheat developments through· the following was the heavy wheat output of 1898-1908 nine years, and a study now in progress will (and especially of 1902-08) not associated deal with the five crop years immediately pre­ with an accumulation of burdensome wheat ceding the World War of 1914-18.