Beige Book Report: Atlanta
August 10, 1977
Continuing improvement characterizes the southeastern economy. Agricultural producers have received a drought-breaking rain, but the ill effects of hot weather on corn, cattle, and egg producers persist. The outlook for reliable energy supplies is improving as a result of two projects which provide port facilities and emergency storage for petroleum. A utility company has successfully tested a clean-burning fuel derived from coal. Manufacturers of carpet and industrial gases report continuing gains in their industries. Competition is growing among financial services firms.
The agricultural outlook has brightened in recent days as a result of sustained extensive rainfall. The corn crop appears to be almost entirely lost, but tobacco, peanuts, and soybeans will benefit from badly needed moisture. Some portions of the District report an upturn in retail purchases in response to an improved crop outlook.
Livestock producers remain in a precarious position. The impact of the drought on pasturage, as well as the high cost of feed, is maintaining the pace of herd reduction by cattle producers. It appears likely that producers will enter the winter season with very limited reserves of feed, even if improved moisture conditions are conducive to the growth of forage crops. Thus, limited cattle numbers and high feed costs are likely to result in sharply higher cattle prices early next year.
Southeastern poultry producers state that reports of poultry losses due to excessive heat have been exaggerated. In reality, the percentage loss by broiler producers has been minuscule. Instead, the major effect of the weather has been to retard weight gains. Slow gains in weight usually result in low returns to producers and higher costs per pound to consumers as a result of fixed costs of production and processing. Commercial egg producers are suffering because of drastic declines in egg size, which sharply reduce revenues. A glut of small and medium eggs has resulted in more eggs being sold to processors of liquid egg products; as a result, the price of this important food ingredient has fallen.
Several events have occurred which may enhance the reliability of energy supplies. In southern Louisiana, imported oil is now arriving for storage as part of the nation's emergency energy reserve. The oil is being pumped into subterranean salt dome formations. Another petroleum-related development is the announcement by participants in the Louisiana Offshore Oil Port (LOOP) venture that the deepwater oil port will proceed as planned despite the withdrawal of one company. This announcement follows the cancellation of plans for a similar oil-receiving facility which was to have been constructed off the Texas coast. Construction on the LOOP project is expected to begin in early 1978; operations are scheduled to begin in 1980.
The Southern Company, a major southeastern electric utility holding company, announced the successful test burning of solvent-refined coal. This experimental fuel, consisting of coal which has been chemically processed to remove pollutants, reportedly offers improved reliability in addition to reduced air pollution. Although the fuel is now prohibitively expensive, production in commercial quantities should reduce its cost substantially.
Industry sources cite steady improvement in key sectors. Georgia's carpet industry, which produces nearly 60 percent of national output, reports continuing solid gains in shipments and may equal the previous peak set in 1973. This industry is experiencing no shortages or bottlenecks. Although plants are producing at maximum output, additions to capacity are very limited. Most manufacturers have completed provisions for use of stand-by fuels to avoid a repeat of last winter's debacle. Processes are being developed to use manufacturing waste materials as a fuel source.
A leading producer of industrial gases has experienced improved business in recent months. Its sales of gases and materials, closely linked to activity in a variety of metal fabricating industries, including construction and transportation equipment, are well above last year's levels. Its equipment sales, consisting of capital investment items, have also participated in this advance.
In the financial sector, several significant developments are resulting in increasing competition. First, Atlanta has been selected as one of three locations for tests of Merrill Lynch and Company's new package of consumer financial services. Their "cash management account," to be inaugurated in September, will permit customers to use balances held in margin accounts by means of drafts and credit cards and will provide the ability to borrow up to 50 percent of the value of securities on deposit with the firm.
Also, a large Mississippi savings and loan association, whose difficulties precipitated last year's closure of the state's privately insured savings and loan associations, reopened in mid-July. The remaining associations have either obtained Federal insurance, have merged with federally insured institutions, or have liquidated without losses to depositors.
International banking activity continues to grow in the Southeast. A leading Swiss bank has recently received approval to open an agency in Atlanta. Two foreign banks have opened Atlanta facilities within the past year, while three other institutions have been granted approval to open facilities. The State of Florida's banking regulations were changed in late May to allow foreign banks to locate facilities there.