allotments, carry-overs of wheat and cotton had risen to about 31⁄2 times those of 1952 and the carry-over of corn had nearly doubled (see Chart 11, p. 31). Partly as a by-product of large cotton crops, stocks of food fats also nearly doubled. Substantial shifts were subsequently made in crop acreages-predominantly out of wheat and cotton-but large parts of this cropland were diverted to the production of feed grains, with the result that markets for a widening range of commodities have been threatened by excessive supplies. These developments in output and stocks have been reflected in farm prices and income. For nearly five years the index of prices received by farmers moved persistently downward from the peak reached in February 1951 under the inflationary impact of the Korean conflict. But because the volume of farm marketings increased, realized gross farm income in 1956 was only 1 percent below the high level attained in 1947, before agricultural production abroad had recovered from wartime dislocation. However, the newer techniques of production and a delayed rise in prices paid by farmers raised farm expenses more than one-quarter in the interim, and net farm income was accordingly reduced substantially. These conditions have naturally tended to bring about an extensive and difficult transition in agriculture. In general, adjustments have been in the direction of a better balanced farm economy. Most of the decline in the total number of farms has been among units that yield inadequate income to their operators; the number of moderate-sized family farms has increased; and the proportion of farms owned in whole or in part by the farm operator has risen. The value of farm assets has increased in recent years, and farmers' equities are at a record high level. Although total farm debt has increased every year since 1946, the mortgage debt component is now only slightly higher in relation to the value of farm real estate than in the most favorable years on record. Debt repayments have proceeded largely on schedule, and foreclosure rates are low. Farm families have added to their holdings of consumer durable goods at a rapid rate and, as usual, with less resort to consumer credit than is customary among urban families. In short, agriculture as a whole has made gains, though its income is not as high as in years of exceptional war and postwar demands. Forces and conditions originating in the nonfarm sectors of the economy have to some extent contributed to agriculture's adjustment problems. As individual incomes rise, certain major farm products, such as wheat and cotton, meet severe competition from other desired consumer goods. Jointly with increases in efficiency, these demand factors have tended historically to reduce agriculture's proportion of employment, population, and national income. And conditions in the nonfarm economy have a direct impact on farm costs; for example, the prices of tractors and farm machinery reflect the pressure of general industrial demand, and the price and supply of fertilizers respond more to factors at work in the chemical industry than to those originating in farming. CHART 5 Agricultural Production and Technology Since Prewar Farm output and productivity have risen to record levels. Changed cost relationships have influenced the combinations of resources used in farm production. CHART 6 CCC Operations and Agricultural Exports, 1950-57 Output in excess of market requirements has increased Commodity Credit Corporation price-support loans and inventories. Agricultural exports declined sharply in 1952-53 but have since increased under Government programs. BILLIONS OF DOLLARS (ENLARGED SCALE) 5 4 3 2 ע END OF QUARTER, EXCEPT LATEST DATA PLOTTED, WHICH ARE FOR NOVEMBER 30, 1956. AT COST; FISCAL YEAR TOTALS. 3 INCLUDES DOLLAR SALES AT SUBSIDIZED EXPORT PRICES. SOURCE: DEPARTMENT OF AGRICULTURE. Some trends in the nonfarm sectors of the economy have operated distinctly in agriculture's favor. Increasing population and rising incomes have sustained total domestic consumption of farm products. Higher real incomes have increased the demand for livestock products, and industrial technology has created new market opportunities for the vegetable oilseeds. General prosperity has widened job opportunities for farm people outside agriculture, and farm earnings have been increasingly supplemented by off-farm employment. In the immediate situation, however, efforts to stabilize farm income have led to Government activities on a broad scale. These have involved not only substantial public expenditures but also serious encroachment on the private marketing system. Net budget expenditures on behalf of agriculture, which are an indication of the immediate fiscal burden though not necessarily of the ultimate cost to the Treasury, now account for almost onequarter of the Federal budget excluding national security expenditures and interest on the public debt. The six so-called "basic" commodities were supported at 90 percent of parity through 1954, and dairy products likewise until early in that year. Even under the somewhat more flexible scale in effect since then, support levels are frequently the most important single factor in determining the prices prevailing in a number of commodity markets. The Commodity Credit Corporation has become a major operating unit in our economy, with a statutory borrowing authority of $14.5 billion and an outstanding debt of more than $11 billion to the United States Treasury. Its investment in price-support loans and inventories increased nearly $7 billion between June 30, 1952 and June 30, 1956, despite the disposal of commodities valued at about the same amount. Among shipments overseas, there has been a marked increase in commodities moving under Government programs concurrently with a decline in unsubsidized, commercial exports (Chart 6). The implications of these measures for agriculture and for the economy in general emphasize the importance for sustainable agricultural improvement of the policy objectives of the last four years-wider freedom for our commercial farmers in managing their own enterprises, appropriate shifts in the use of the Nation's cropland, an improved system of price supports, and research into new products, markets, and uses. ADJUSTMENT TO ECONOMIC CHANGE The last four years have demonstrated the ability of the Nation's private economy to expand, to provide an increasing number of jobs, and to raise levels of living. Also, they have tested the capacity of our economy to adjust to large changes in the pattern of demand and the effectiveness of public policies designed to promote growth and stability. Because the stabilization problem is continually changing in a dynamic economy, policies aimed at promoting stable growth must be flexible. This fact was well illustrated in the last four years, in which the problem shifted from one of helping to |