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Federal Reserve Bulletin December 1991

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Federal Reserve Bulletin December 1991 VOLUME 77 • NUMBER 12 • DECEMBER 1991 FEDERAL RESERVE BULLETIN BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood • Donald L. Kohn • J. Virgil Mattingly, Jr. • Michael J. Prell • Edwin M. Truman The Federal Reserve Bulletin is issued monthly under the direction of the staff publications committee. This committee is responsible for opinions expressed except in official statements and signed articles. It is assisted by the Economic Editing Section headed by S. Ellen Dykes, the Graphics Center under the direction of Peter G. Thomas, and Publications Services supervised by Linda C. Kyles. Table of Contents 967 AN UPDATE ON THE FARM ECONOMY believes that more sweeping changes are premature at this time, before the Subcommit- The latter part of the 1980s was a relatively tee on Telecommunications and Finance of the prosperous time for farmers. In 1990, how- House Committee on Energy and Commerce, ever, prices fell sharply in some parts of the October 25, 1991. farm economy, and in 1991, weakness in the sector has become more widespread. A soften- ing of the farm economy perhaps rekindles 992 ANNOUNCEMENTS memories of the farm financial stresses of the Final modifications of risk-based capital first half of the 1980s. But overall, imbalances guidelines. in the sector are far less pronounced than those of the early 1980s, and its vulnerability to Fee schedules of the Federal Reserve Banks financial setback has been reduced. for 1992. Publication of the revised Lists of Marginable 980 INDUSTRIAL PRODUCTION AND CAPACITY OTC Stocks and of Foreign Margin Stocks. UTILIZATION Proposal to permit bank holding companies to The index of industrial production edged up raise additional tier one risk-based capital 0.1 percent in September; after revision, the through the sale of perpetual preferred stock; index was unchanged in August. Total indus- withdrawal of proposed modification to the trial capacity utilization slipped 0.1 percentage price structure for the Interdistrict Transporta- point in September, to 79.7 percent. tion System. 983 STATEMENTS TO THE CONGRESS Extension of comment period for meetings held on the proposed acquisition of C&S/Sovran John P. La Ware, Member, Board of Governors, Corporation by NCNB Corporation. comments on the credit and charge card legislation being considered in H.R.2440, as Changes in Board staff. well as other issues concerning credit cards, and says that it is not apparent to the Board that 992 RECORD OF POLICY ACTIONS OF THE the current disclosure rules and public informa- FEDERAL OPEN MARKET COMMITTEE tion on credit card charges need to be supple- mented by further legislation, before the At its meeting on August 20, 1991, the Subcommittee on Consumer Affairs and Coin- Committee adopted a directive that called for age of the House Committee on Banking, maintaining the existing degree of pressure on Finance and Urban Affairs, October 9, 1991. reserve positions. The Committee also decided that somewhat greater reserve restraint might 987 David W. Mullins, Jr., Vice Chairman, Board be acceptable or somewhat lesser reserve of Governors, presents the views of the Board restraint would be acceptable during the inter- on legislative proposals pertaining to the meeting period depending on progress toward regulation of the government securities market price stability, trends in economic activity, the and says that surveillance and enforcement behavior of the monetary aggregates, and activities in this market have been intensified developments in foreign exchange and domestic and that plans for automating the auction financial markets. The reserve conditions process have been accelerated; however, he contemplated at this meeting were expected to be consistent with a resumption in the growth A69 GUIDE TO TABULAR PRESENTATION, of M2 and M3 during the weeks ahead, but in STATISTICAL RELEASES, AND SPECIAL light of the declines in these aggregates since TABLES June, the Committee now anticipated that M2 would be little changed and M3 would be down A80 BOARD OF GOVERNORS AND STAFF at an annual rate of about 1 percent in the period from June through September. A82 FEDERAL OPEN MARKET COMMITTEE AND STAFF; ADVISORY COUNCILS 999 LEGAL DEVELOPMENTS Various bank holding company, bank service A84 FEDERAL RESERVE BOARD PUBLICATIONS corporation, and bank merger orders; and pending cases. A86 ANTICIPATED SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES AI FINANCIAL AND BUSINESS STATISTICS These tables reflect data available as of A88 INDEX TO STATISTICAL TABLES October 29, 1991. A90 INDEX TO VOLUME 77 A3 Domestic Financial Statistics A44 Domestic Nonfinancial Statistics A102 FEDERAL RESERVE BANKS, BRANCHES, A53 International Statistics AND OFFICES A103 MAP OF THE FEDERAL RESERVE SYSTEM An Update on the Farm Economy John Rosine and Nicholas Walraven, of the the first, about 1981 to 1986, the farm economy Board's Division of Research and Statistics, was under severe pressure as the prices received prepared this article. Michael J. Ott provided by farmers for farm products fell IIV2 percent research assistance. overall. Price declines extended to almost all livestock products and crops; they were espe- The latter part of the 1980s was a time of strong cially large for grains and oilseeds. Although recovery in the farm economy. Farm exports farmers oifset part of that pressure by cutting rebounded from their lows of the mid-1980s, farm costs and improving productivity, their nominal prices rose more than prices in general, farm income was well short of the levels of the late income strengthened, and the farm balance sheet 1970s. With prices in general having risen con- stabilized. In 1990, however, prices fell sharply siderably over the period, farmers suffered a in some parts of the farm economy, and in 1991, sizable loss of real purchasing power.' price weakness has become more widespread. In the second period, 1986 to 1990, the index of Agricultural exports have been sluggish this prices received by farmers rose 22 percent. In- year, farm income has fallen, and the value of creases extended to virtually all commodity farm land appears to be edging down in real groups. The climb in the prices of meat animals terms. was especially large, amounting to more than 30 A softening of the farm economy may rekindle percent over the four-year period, with relatively memories of the early and middle 1980s, when steady gains throughout. The annual price the sector suffered a major decline and a wave of changes for crops were much more volatile. In farm failures. But as we will discuss below, the 1988, when severe drought cut deeply into pro- current situation in farming differs in several duction, the prices of feed grains, oilseeds, and ways from the conditions that existed then. In- food grains all surged. Later on, as concerns ventory overhangs, which were sizable in the about a persistence of drought diminished and first half of the 1980s, are virtually absent now; exports flagged, the prices of these crops fell, stocks of some key crops are in fact rather tight retracing part of the 1988 gains. The overall rise at the moment. Moreover, farmers have not been in prices received by farmers from 1986 to 1990 in a mood to boost output aggressively. Partly in was more than double the increase in prices of response to government incentives, many acres production inputs purchased by farmers from the are being held out of production, and farm capital nonfarm sector; it also exceeded, by about 6 investment has been restrained. On the financial percentage points, the cumulative rise in the side, farmers have been cautious in bidding up implicit price deflator for GNP over the period. land values, and they have cut back heavily on This year, overall farm prices likely will be the use of debt since the early 1980s. Overall, down for the first time since 1986. Through the imbalances in the sector are far less pronounced first ten months of 1991, the prices received by than those of the early 1980s, and financial vul- nerability has been reduced. 1. We have followed the practice of the Department of Agriculture in using the implicit price deflator for gross national product to adjust nominal values for inflation. At the THE RECENT BEHAVIOR OF FARM PRICES time this article was being prepared, the GNP accounts still were being published on a 1982 base, and our inflation adjustments are thus in terms of 1982 dollars. New accounts Three fairly distinct periods can be identified in on a 1987 base were scheduled to be published in early the farm price data of the past decade (table 1). In December, after the article had gone to press. 968 Federal Reserve Bulletin • December 1991 1. Changes in prices received and paid by farmers, selected periods, 1981-91 Percent First Second Third Second-period detail' Third-period detail (1990-91)* Item period period period MEMO: 3 Weight (1981-86)' (1986-90)' 990-91) 1987 1988 1989 1990 HI Q3 Oct. Prices received by farmers All farm products -11.5 22.0 -1.7 3.3 8.7 6.5 2.0 -1.6 -1.1 -3.4 100 Livestock products .. -3.5 23.2 -4.8 5.8 2.7 6.7 6.3 -2.6 -8.3 -7.6 55.8 Meat animals. -3.3 33,1 -1.9 12.4 3.1 3,6 10.9 2.8 -8.3 -9.8 37.2 Dairy products -9.2 9.3 -14,8 0 -2.3 11.1 .7 -18.6 -12.0 .7 U.I Poultry and eggs.., 10.3 2.3 -5.0 -16.4 10.3 16.1 -4.4 -6.2 -1.6 -7.5 7.5 Crops5 20.1 19.6 2.6 -.9 18.9 6.3 -4.5 -.5 8.8 4.2 44.2 Feed grains and hay, 30.5 25.5 -5.8 -13.3 41.2 6.7 -3.9 -5.5 -8.2 .9 12.1 Oil-bearing crops .
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