dairying, is no exception, and I hope and believe that you will know all about it before our speaker has concluded his address. Let me introduce Doctor Anderson. [Applause.]

AGRICULTURE AND DAIRYING IN THE WORLD'S ECONOMIC

EQUILIBRIUM.

BENJAMIN M. ANDERSON, Jr., Ph. D., economist, Chase National Bank, New York City.

Mr. Chairman and gentlemen of the World's Dairy Congress: It was a somewhat difficult matter, in contemplation at all events, to prepare a speech that would be of interest to specialists in the dairy industry when I know very little about it. The New York banker has his contacts with the dairy interests, has his contacts with agricultural dairying, including agricultural dairying in very small places, but the contacts are indirect for the most part.

In going through the portfolio of the Chase National Bank some time back I came across a note for $104, signed by John Wilhite and Lizzie, his wife, secured by a chattel mortage on Mollie, Mollie being a mare mule 16 hands high, 5 years old, and broken to single and double harness, resident in the State of North Carolina. Now it is not ordinarily supposed that a Wall Street bank with resources of $500,000,000 would be making very many loans of $104 on mare mule collateral at that distance; but the note was there.

What had happened was very simple. We had made a loan of a good many thousand dollars to a correspondent bank in a rural community in North Carolina and they had sent us, to secure that loan, a stack of collateral a foot high, made up of the small receivables of their local customers with, in many cases, chattel mortgages attached and with the names of the livestock represented by the chattel mortgages in many cases.

We have similar paper from many parts of the country sent in by our correspondent banks. I think that at some time in the year we are lending money through our correspondent banks to farmers in almost every county in the country. In the collateral of these correspondent banks we are very glad to see collateral representing dairy animals. During this troubled period when crop values have been fluctuating widely, our experience has been that those communities where the dairy interest is well developed have a greater stability, the country banks are able to liquidate better, they have a more steady income, and they are a very wholesome element of American agriculture. [Applause.]

The economic world is out of equilibrium. I do not want to go elaborately into a discussion of the political causes, the financial causes, the monetary causes of this breach in the equilibrium, but I want to characterize it in terms of industries rather than in terms of finance.

Production and consumption go on together so long as the balance among the different elements of production is maintained. There is no possibility of production exceeding consumption if the proportions of production are kept right. A supply of wheat comes into

the market; well and good. But the wheat also is demand for other things-sugar, silk, cotton goods, automobiles-for other things that the wheat producer wants. A supply of automobiles comes into the market; but the automobiles are demand for wheat bread, for sugar, for clothing, for various things that the automobile producer wants. And so with every other commodity. It is a supply of its own kind but it is demand for other things.

Therefore, viewing the whole economic situation, taking in account all industries in their relation to one another, supply and demand are not merely equal; they are identical, since everything may be looked upon either as supply of its own kind or as demand for the other things.

Now this holds true of aggregate supply and demand. It is not true of particular supply and demand, particular commodities. You may have one thing produced in excess, another thing produced insufficiently-a maladjustment, a wrong distribution of your productive activities, and then the price of a thing that is overabundant will go so low that the producers of that thing are not able to buy at prevailing prices, even the relatively scant product of the producer whose goods are deficient, and his prices collapse too; he can't sell and general disorganization comes.

We witnessed something of this sort in the nineties in this country. We had had, following the Civil War, a very rapid development of the transcontinental railroads and then, following that, an immense. pouring of population into the Mississippi Valley. Simultaneously cheap ocean transportation throughout the world had been developed rapidly and great agricultural regions in the Argentine and other parts of the world had come into the markets.

Agriculture during those decades outstripped manufacturing in its rate of growth, with the result that proportions were wrong and agricultural prices fell very low. Then the farmers could not buy. I remember as a boy, living in the blue-grass country in Missouri, seeing the farmers boiling their wheat and feeding it to the hogs because that was the best use they could make of it. I remember visiting country homesteads and meeting there very gracious hospitality, excellent country food-fried chicken, cornbread, fresh vegetables, good milk, various other of the things that the farm itself provided. But if there were coffee (and there wasn't always coffee), the quality was apt to be poor; the housewife was obliged to use the grounds two or three times. They had no cash to buy "store things," as they called them. They could not always afford store sugar. They would use sorghum molasses at times in sweetening the coffee. The farmers wore straw hats, blue overalls, coarse cowhide boots. The straw hats cost 5 cents in those days-broad-brimmed hats which many of you will remember. When they came to town they had no cash to spend for manufactured goods. There was a crude abundance of local products. Life was not hard except when they thought about their mortgages. There were things to worry about, but there was not a scarcity of the basic comforts.

But there was a reaction of that upon cities. You also remember how city industry was depressed, how there was great unemployment in the cities because the agricultural regions couldn't buy.

At the present time the world, from a very different cause, is in much the same position, although it has not been nearly so severe upon American agriculture this time as it was in the nineties. Formerly Europe was the world's great center of manufacture and the world's great market for farm products and raw materials. Europe's partial withdrawal from this position, leaving the rest of the world producing raw materials, with their raw-material capacity and farm-productive capacity unimpaired, has led again to a breach, a relative excess of raw-material capacity, farm production, and shipping, a relative scarcity of manufacturing activity, with the result that farm products are low in price, manufactured products high in price, out of line, with the further result that the factories alternately have a feverish boom and then reaction and setback, and with the final result that farmers in many lines, and particularly those dependent upon the export markets in this country, are in pretty hard straits indeed, bearing in mind their liabilities and obligations. The dependence of wheat on the international market is obvious and recognized. Wheat is relatively very low in price, partly because of the unsatisfactory state of European markets and partly because of the increased production in Canada and certain other nonEuropean wheat-producing regions. The situation is intensified by a wheat production in the United States well above prewar levels. In the case of cotton, the unsatisfactory state of European markets is an acutely bearish factor, and if there were anything like normal production of cotton in the United States, cotton would also be selling at a distressingly low price. Bearish foreign factors, however, have been offset in our markets by startlingly bullish domestic factors, primarily by the activity of the boll weevil, leading to very subnormal production of cotton for several years.

Livestock values in the United States, in the Argentine, and in many other parts of the world, are also very sensitive to the European situation. American agriculture, as a whole, appears to be more immediately dependent upon European demand than most other American interests, although copper and certain other raw material interests are also very directly and immediately affected.

Where American agriculture is able to concentrate upon the domestic market, however, its position is much better than where it is obliged to rely largely upon the international markets. Farmers in manufacturing States producing vegetables, fruits, poultry, eggs, and dairy products for near-by cities, are in most cases doing well. In general, to the extent that the American farmer is able to concentrate upon his domestic markets, his position is very much better than where he is largely dependent upon the international markets. The American dairy interest in particular seems to have emancipated itself very largely from the foreign markets. The table which follows shows that our excess of exports over imports of dairy products dwindled to the trifling amount of less than $4,000,000 in 1922, but dairying is so little dependent upon foreign demand, and the power of the American people to consume dairy products is so great, that American dairying remains, on the whole, a prosperous industry despite the demoralization abroad.

Moreover, there appears to be ample opportunity for further consumption of dairy products in the United States. The Department of Agriculture states that the annual per capita consumption of whole milk in the United States has been about 43 gallons as compared with about 69 gallons in Sweden, 68 in Denmark, and 67 in Switzerland. The per capita consumption of cheese in the United States has been a little under 4 pounds as compared with 26 pounds in Switzerland, 13 pounds in Holland, and about 12 pounds in Denmark.

The comparison of consumption of milk and milk products in the United States and in other countries must not be taken to mean that we can expect to consume as much per capita as the other countries. To do so would mean that our people would have to dispense with certain other items of food which they may prefer, and which the greater per capita income of the United States makes it possible for them to obtain. The discrepancies are great enough, however, to justify the belief that even moderate price recessions in dairy products would uncover a very great potential demand in the United States and that there is, therefore, no reason to fear that a reasonable further increase in dairy production would break prices much.

The advice to American farmers to turn from the international markets to the domestic markets and, in particular, to increase their activity in dairying, poultry raising, fresh vegetables, and similar things is sound advice within limits. It is especially sound for farmers living close to great centers of population. The most serious difficulty that stands in the way of it is the labor shortage in the United States, growing out of our immigration policy. Unable to get accustomed increases in the labor supply from Europe, our factories have been drawing in labor from the farms, leading to an acute shortage of farm labor in many regions and leading to very high wages for farm labor. Dairying requires more labor than many other forms of agriculture, and it is probable that the most serious limitation upon the expansion of the dairying industry is to be found in the labor situation.

To determine the comparative importance of dairying and other forms of agriculture is not easy. Our agricultural statistics have not been presented in a form that makes direct comparison of the importance of dairying and livestock, on the one hand, with crop production, on the other hand, possible. Both the Department of Agriculture and the Bureau of the Census give us figures of "gross values" of farm products, with subdivisions for the different crops and some subdivisions for animals and animal products. For this discussion I am using the figures of the Bureau of the Census. They are not, of course, such recent figures as are the figures of the Department of Agriculture, and the best I can do is to take the years 1909 and 1919, whereas the Department of Agriculture figures are much more nearly current. The census figures, however, supply more detail for the purpose in hand than do the Department of Agriculture figures.

Gross values of farm products in 1909 and 1919,1

Students will note that the gross values given for 1919 by the Bureau of the Census, $21,426,000,000, are less by about $2,000,000,000 than the figures given for the same year by the Department of Agriculture, whose figures for a series of years follow: