^ 



-2- 



eteere are selling at the ceiling. How long will this situation continue? In order 

 to answer that question intelligently, a number of factors affecting the demand for 

 fann products must be considered. In spite of the facts that war plants are closing 

 down and that men are being discharged in large numbers from the armed forces, there 

 seems to be no decline in the demand for food. 



Prices of foodstuffs were not permitted to reflect the actual level of de- 

 mand during the war. Prices received by farmers more nearly reflected the actual de- . 

 mand than the price paid by consumers. Consumer prices were held down by price 

 controls and liberal federal subsidies. The situation has not changed since the fight- 

 ing stopped. Retail prices of foods are still low relative to the Incomes of an un- 

 usually large fraction of consumers, and an abnormally large backlog of savings is 

 available to supplement current incomes. In spite of lay-offe-'and strikes, it is 

 likely that the demand for foodstuffs will be maintained at a high level during the re- 

 conversion period; that IndustrieuL activity will be high enough after reconversion to 

 maintain buying power at a high level compared with prewar but considerably below the 

 wartime level; and that private construction will be resumed fast enough to help absorb 

 the shock of the discontinuance of wartime construction. In addition, present indica- 

 tions point to a relatively large export outlet based upon loans to foreign countries. 

 Part of these exports will be agricultural products, but exports of industrial products 

 also provide employment and purchasing power for agricultural products. 



In connection with possible exports it is reported that vast loans are under 

 discussion for Britain, China, Russia and other foreign nations. Amounts suggested 

 include six billion dollars for Russia and from three to six billion dollars for 

 Britain. A recent estimate indicates that within six years imports into reconstituted 

 China, including Manchuria euid Formosa, will amount to the equivalent of approximately 

 one billion dolleirs in United States currency. It is expected that the United States 

 will supply about 25 percent of these imports. Most of them will be machinery, trans- 

 portation equipment and other industrial products. Loans £ire now under active discus- 

 sion for Britain, Chile, Ecuador, Greece, Norway, Denmark and the Netherlands. 







One of the causes of prosperity following World War I was a large voliane of 

 exports financed by loeuis, hence not offset by lii5)orts. It appears that the same pro- 

 cedure will be followed this time but on a much larger scale. One of the causes of 

 the depression of the thirties was the shutting off of credit and the necessity of 

 debtor countries to repay their loeuis. Although steps are being taken to extend the 

 loans over a longer period of time in order to facilitate payment, we may look for 

 another depression any time the procedure is reversed from an expansion of credit to a 

 contraction of credit. 



Considering the stimulation that is likely to result from a high level of 

 industrial activity and a high level of exports, no serious collapse in prices of farm 

 products need be expected In the immediate future. However, the relationship between 

 prices of the various farm products will undoubtedly change. Prices of products which 

 rose most as a result of special wartime demands and limitations of the availability of 

 competing products wlll-defcllne most. Some prices held down by ceilings may rise. The 

 ^verage price of all farm products is more likely to decline than to rise during the 

 Jrext two or three years. Inflation is In the air, but it is likely to be represented 

 by rising costs of industrial goods, construction materials and wages, rather than in 



