COMMODITY PRICES

Wholesale prices continued throughout 1934 the rise which began in the spring of 1933. From the depression low of 59.8 percent of the 1926 level in February 1933, the index of the Bureau of Labor Statistics rose to 70.8 percent in December 1933 and to 76.9 percent of the same base in December 1934. The rise in this index during 1934 amounted to 8.6 percent, and was fairly continuous throughout the year, there being only three months, April, October, and November, in which a rise did not occur.

The rise during the year was almost wholly attributable to the increases in the prices of farm products and foods as is indicated in chart 2, which shows the trend from December 1933 to December 1934 in each of the 10 commodity groups and in the combined index of the 8 other groups. The index of the prices of farm products rose from 55.5 to 72.0 percent of the 1926 level, or 30 percent during this period, and the index of food prices from 62.5 to 75.3, or 20.5 percent. The combined index of the 8 other groups remained practically unchanged, advancing from 77.5 to 78.0.

Of the 8 groups other than farm products and foods, the sharpest rise was in the prices of miscellaneous products which advanced 8 percent. The increases in the prices of cattle feeds, crude rubber, and tires and tubes were important factors in the rise of the index of this group. The prices of chemicals and drugs rose 5.6 percent and of metals and metal products 3 percent. The prices of textile products declined 8.4 percent, and hides and leather products 4.6 percent. The indexes of the 3 groups, fuel and lighting products, housefurnishing goods, and building materials were practically the same in December 1934 as in December 1933.

Another classification of the 784 price items in the Bureau of Labor Statistics' index, raw materials, semimanufactures, and finished products, also reveals the relatively marked influence of the rise in prices of farm products. The index of the prices of raw materials, including 109 items, of which 67 are farm products, rose from 61.9 to 73.1 percent of the 1926 level during the 12-month period, or 18.1 percent, while the prices of semimanufactures (93 items) declined 1.8 percent to 71.0 percent of the 1926 base, and the prices of finished. products (582 items) rose 6.3 percent to 79.5 percent of the 1926 level of these prices.

The price movements of these items from 1929 through 1934 are shown in charts 3 and 4, in 2 different classifications. The declines were continuous in the various groups from 1929 to the early part of 1933, but the rate of decrease varied greatly. The declines in the prices of farm products, foods, and commodities other than farm products and foods, were approximately 60 percent, 46 percent, and 28 percent, respectively, from the 1929 averages to February 1933.

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Chart 2.-Wholesale price trends, by groups.

NOTE.-Indexes were recomputed from the United States Department of Labor indexes.

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The same data combined into raw materials, semimanufactures, and finished products show declines during this period of approximately 50 percent, 40 percent, and 30 percent, respectively. During the few months immediately following February 1933, the rise in prices was continuous in all of the groups in each of the 2 classifications, but the sharpest advance took place in the groups which had declined the most. Since the summer of 1933 the prices of other than farm products and foods have remained practically unchanged, while the other 2 groups continued to advance. Chart 4 shows the same general trend with raw materials continuing to rise and semimanufactures and finished products changing but little since the summer of

1933.

PRICE DISPARITIES

As the charts indicate, the marked disparities in the prices of the various groups which prevailed in the spring of 1933 had been greatly reduced by the close of 1934. This is especially apparent with the three classes, raw materials, semimanufactures, and finished products, which in December were in almost the same position as in 1929 relative to each other.

The prices of farm products in December 1934 were 31 percent and food prices were 24 percent below the 1929 level, while commodities other than farm products and foods were 15 percent lower. These percentages are about one-half of the corresponding percentages in February 1934.

Of the 10 groups of commodities indicated in chart 2, the prices of farm products were 40.9 percent and food prices 53.7 percent of the 1926 levels in February 1933 and prices other than farm products and foods 66.0 percent of that level. In December 1934 these 3 percentages were 72.0, 75.3, and 78.0, respectively. In February 1933, the prices of farm products were the lowest of the 10 groups in relation to the prices of 1926, and the prices of textiles were next lowest; in December 1933 farm products and foods were the two lowest groups as compared with 1926 prices; but in December 1934 textile products and miscellaneous products were the two lowest priced groups in this classification. The prices for farm products were the third lowest, and the prices of fuel and lighting the fourth lowest.

The behavior of the prices of farm products and foods during 1934, as compared with the prices of industrial production indicate, as did the price movements of these groups during the decline from the summer of 1929 and February 1933, the divergent market forces affecting agriculture and industrial products. In the one group production is not controlled; market demand and supply are equilíbrated at a price; whereas in the other field, supply is subject to control and is adjusted in conformity to the market demand. This results primarily from the fact that industrial producers are free to dismiss their employees when prices and profits decline while the selfemployed farmers continue at their accustomed work regardless of market conditions. This is strikingly illustrated by the prices of agricultural implements and the quantity of output during the 4 years 1929-32, as compared with the prices and output of agricultural products. In the first case prices remained practically unchanged while output declined to about one-fifth of the 1926-27 level by 1932, and in the other case production was about the same and prices fell to approximately two-fifths of the predepression level in 1932.

The rigidity in price and the drop in the production of agricultural implements is a somewhat extreme illustration of the entire field of industrial products (textile products are among the outstanding exceptions), but it does indicate the general characteristic of industry as compared with agriculture in respect to price behavior. The inflexibility of such prices during a period of growing unemployment tends to accelerate the increase in unemployment and during a period

Chart 3.-Wholesale prices of farm products, foods, and other commodities. NOTE.-Indexes were recomputed on a 1929 base from the United States Department of Labor indexes.

Chart 4.-Wholesale prices of raw materials, semimanufactured articles, and finished products. NOTE.-Indexes were recomputed on a 1929 base from the United States Department of Labor indexes.

of revival the pursuit of the policy of resistance to price cuts tends to retard the absorption of the unemployed.

DAILY SPOT PRICES

The Bureau of Labor Statistics, at the request of the Treasury Department, has developed a series of daily spot prices of 30 commodities or 31 price items, two series being included for wheat. These commodities are dealt in extensively, and in almost all cases, on organized markets. They are, further, almost all raw materials, there being only a few semimanufactures and no finished products in the group. The list of these commodities, which has not been pub

lished before, is given in the accompanying table, together with the price change for the year for each item. The averages for the first 5 trading days of January and for the last 5 trading days of December are used as the prices for the first and the close of the year.

The prices of 22 of the 30 commodities advanced during the year and 8 declined. Of the 8 that declined, 3 were agricultural productshides, sugar, and wool; 3 were metals-lead, zinc, and tin; and the other 2 were raw silk and burlap. The sharpest decline was the price of wool, 17 percent, and the second greatest that of zinc, 12.3 percent. The decline in silk was very slight, 1 percent.

Wholesale Prices of Specified Commodities in 1934

The largest increase was in the price of cottonseed oil, which advanced 137 percent. Four agricultural products rose from 82 to 95 percent-tallow, corn, lard, and hogs. The prices of steers and butter rose 76 percent, family beef 63 percent, and the two grades of wheat, 26 and 33 percent, respectively.

The price of every one of these 30 commodities increased from the low in the spring of 1933 to January 1934. The increase varied from 9.7 percent for coffee to 206 percent for rubber. Of the 8 price items that declined during 1934, 3-hides, wool, and tin-advanced more than 100 percent from the spring low of 1933 to January 1934, and 2-burlap and zinc-rose more than 50 percent; lead rose 33 percent, silk 30 percent, and sugar 20 percent. The decline in the price of sugar during 1934 is attributable to the decreases in the tariff on Cuban sugar, and that in the price of hides to the slaughter of an

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