The method of determining the comparison between prices for farm products 



and non-agricultural products uses index numbers. In computing the farm price 

 index number of an item, the average farm price of the years 1909 to 1913, is 

 taken as a base, or 100 per cent, and is divided by the farm price for any month, 

 or the average for any year to obtain the price index of that month or year. 



The purchasing power is obtained by dividing the index of agricultural prices 

 by the index of non-agricultural prices. 



In the accompanying table it will be noted that the average price index of 

 all agricultural commodities, after some fluctuations during the early spring 

 months, mounted steadily from 126 in January to the high point of 140 in Sep- 

 tember, with a final index of 137 for December. This is in contrast with the index 

 of non-agricultural products which, beginning with 156 in January, dropped 

 steadily to 151 at the end of the year. 



The table shows that the level of cotton prices was raised decidedly during 

 the year, that fruit prices remained practically unchanged, that meat prices stayed 

 at about the same levels (though prices for beef were considerably higher than 

 1926,) that grains showed a slight increase over last year, and that other 

 commodities remained at about the same levels. 



MONTANA PURCHASING POWER 



PURCHASINe POV/ER 



NOV^EMBER. 



The relative November purchasing 

 power of the Montana farm dollar in- 

 creased from eighty-one per cent in 1926 

 to eighty-nine per cent in 1927, but did 

 not keep pace with the United States 

 purchasing power, which increased from 

 eighty per cent in 1926 to ninety-two per 

 cent in 1927. Both purchasing powers 

 were computed as of date November 1 of 

 each year. 



This purchasing power of eighty-nine 

 indicates that one dollar on November 1, 

 1927 was equal in buying power of manu- 

 factured commodities to the buying pow- 

 er of eighty-nine cents for the average 

 of the years 1909 to 1914. The purchas- 

 ing power of the United States farm dol- 

 lar is obtained by dividing the price index 

 of thirty of the most important farm 

 commodities by the index of wholesale prices of non-agricultural products. That 

 for Montana is obtained by weighting the United States purchasing powers ac- 

 cording to the relative importance of the groups in Montana. 



That the purchasing power of the Montana farm dollar should fail to gain 

 in proportion with that of the United states in the year of the biggest crop in 

 Montana history may seem strange. However, it must be noted that cotton, which 

 has the highest purchasing power of any of the agricultural commodities for the 

 United States must be omitted in weighting the Montana purchasing power. Last 

 year the purchasing power of cotton was low, raising the purchasing power of 

 the Montana farm dollar compared with the national average. It will be noted 

 that though the farm dollar in Montana now is not worth as much as is the 

 United States farm dollar, the Montana dollar is now worth more than during 

 four previous years. 



The prices received for grains, from which Montana receives 54 per cent of 

 her farm income, were much lower in 1927 than in 1926 and while prices of cattle 

 and other meat animals were higher than the previous year, shipments to market 

 were lower than in 1926, failing to offset the loss in case of the grains. The 

 other commodity groups used in computing the purchasing power constitute only 

 18 per cent of the total income value of the state for the past year. 



NOVEMBER PURCHASING POWER IN CENTS 



ALL GROUPS 1923 1924 1925 1926 1927 



Montana 68 84 82 81 89 



United States 83 86 87 80 92 



