April 10, 1974
Directors' reports indicate that District farmers generally look for a good year in 1974, even though the livestock feeding industry is experiencing difficulties and the outlook for grain prices is uncertain. Gains in District retail sales probably exceeded national increases in the first quarter, and District retailers expect business to remain good in the second quarter. With the lifting of the Arab oil embargo and the prospect of increased gasoline supplies, the outlook for this summer's tourist business has improved. Many directors report that both residential and nonresidential construction are expected to be quite strong in their areas this year.
Despite problems in the cattle feeding industry and concern about grain prices, most District farmers still hope for a good year. Many District cattle feeders are losing money, however, as high feed costs combine with declining prices for fat cattle. A Minnesota director indicates that these developments will force marginal cattle feeders out of business. A Montana director does not expect the situation to improve in the near future since cattle marketings in March fell considerably short of expectations and sizable inventories remain to be marketed. Not only are fat cattle prices down, but prices for feeder cattle have also declined recently, and a western South Dakota director indicates some uneasiness among ranchers in his area about the outlook for feeder cattle prices this year. A southern Minnesota director also points out that poultry producers are also facing a cost-price squeeze, and his area's two largest turkey producers are losing money on their current flocks due to high feed costs. Furthermore, dairy farmers fear reduced demand because of consumer resistance to higher milk prices. The outlook for crops is not so discouraging. The general impression conveyed by the directors is that some decline in grain prices is expected this year because of a softening in export markets and increased domestic supplies.
Although District farm incomes in 1974 may not match the record set in 1973, several directors indicate that farm income gains this year will probably compare quite favorably to those of recent years. Even if farm prices decline this year, one director feels that increased production will prevent a loss of gross income. In addition, many farmers carried crops over from 1973, postponing income until early 1974 for tax purposes. This too should enhance farm income in 1974.
Due primarily to 1973's high farm income, directors report that District retailers enjoyed a good first quarter and are quite optimistic about the second quarter. A Minneapolis-St. Paul area banker, for example, estimates that relative gains in District retail sales in the first quarter were probably double the comparable national increase and expects this region to exceed national increases in the second quarter. Another director, however, indicates that District retail sales may have been off somewhat in the first quarter, but he looks for improvement in the second quarter. A different view comes from a southern Minnesota director who believes that concern about future income may discourage farm spending and therefore his area's retail sales in the second quarter. Although District automobile sales have been down from a year ago, sales in the Midwest have been much better than in the nation. Furthermore, District car dealers in early March reported a pickup in full-sized car sales. Pickup trucks and particularly medium-sized grain trucks have been selling at a rapid rate.
Reduced snowfall and fears of gasoline shortages dampened the District's winter recreational business, but the prospects for the summer tourist season have brightened recently. Several directors from areas where the tourist industry is important indicate that the outlook for tourism has improved with the prospect of increased gasoline supplies later this spring.
Although building permit data do not yet point toward a resurgence in District home-building, many directors look for a good year for both residential and nonresidential construction in their areas. Housing construction is down in the Minneapolis-St. Paul metropolitan area, but two directors located on the periphery of the Twin Cities report considerable residential construction in their areas. Other directors throughout the District also expect considerable residential and nonresidential construction. However, a Minneapolis-St. Paul area banker feels that Minnesota's 8 percent usury law will depress home-building in Minnesota this year, and he does not expect commercial construction to be strong in the Twin Cities metropolitan area. With regard to highway and heavy construction, a director associated with that industry says that lettings for new projects so far this year are down and that many blacktop contractors are looking for work.