PRICES OF FARM PRODUCTS. 7 
and 1915. The outlook for crop yields in the spring of 1920, how- 
ever, was not very favorable. This resulted in a tendency to hold 
the surplus on hand. Unusually favorable weather later and con- 
sequent unexpected production were important causes of the sever- 
ity of the drop in farm prices. 
The United States is subject to severe droughts. With the growth 
in population such droughts become increasingly important. With a 
sparse population, large numbers of animals are kept. In drought 
years some of the food that would have gone to animals is eaten by 
human beings, and more than the usual number of animals them- 
selves are eaten. This lessens the food shortage of a drought year and 
allows the farmer a larger income than he would otherwise have in 
drought 3 T ears, because he then sells some of his animals that represent 
crops of previous years. In a good year animals are increased and 
some of the surplus feed is thus made use of. With each reduction 
in the number of animals this reserve food supply is reduced and the 
shock of high and low yields is felt more seriously. Thus, the greater 
the dependence on vegetable foods the worse the effect of surplus 
years on farm prices, and the worse the effect of poor years on indus- 
trial conditions. Additional facilities for storage, and the increased 
holding of crop surplus on farms to even up the good and lean years 
are becoming more and more important. In unusually favorable 
years, like 1920, it is especially important that the reserves held on 
farms be increased. 
PERIODS OF OVER AND UNDER' PRODUCTION. 
Violent changes in the price level result in violent changes in 
industry. If the price of a particular product is not favorable, its 
production is checked, but the price does not fully respond to the 
reduced effort until the product that is already in the process of 
production and merchandising is nearly exhausted. Prices then rise 
and new production begins, but the new efforts at production have 
only a limited effect on prices until the new goods have passed through 
the process of production and merchandising. The length of time 
that the prices of a particular product remain high or low, therefore, 
depends largely on how long it takes from the beginning to the com- 
pletion of the product. Other factors are, of course, involved. 
The purchasing power of hogs and horses illustrates this principle 
as shown in Table V and figure 4. 
