UniTersity of California College of Agriculture Agricultural Experiment Station Berkeley, California AmiUAL INDEX NmffiERS OF FAR.M PRICES, CALIFOMIA, 1910 - 1932 fey H, J, Stover A' Preliminary Report June, 1933 COLL ContriTSution from the Giannini Foundation of Agricultural Economics Mimeographed Report No. 25 AMUAL INDEX NUIvIBERS OF FMll PRICES, CALIFORNIA, 1910 - 1932 H. J, Stover ^ ^•■^ I.'Iany market price and farm price series of California's major commercial agricultural crops have "been compiled and disseminated. A composite or average measure of prices received "by California producers has, however, not been avail- able up to the present time. The United States index of farm prices prepared by the United States Department of Agriculture has been used in many instances in California to represent the general movements of farm prices. Because of the var- iety of California crops and the special nature of their harvesting periods, a national index cannot serve adequately for representing farm price movements in California. In response to this need, a California farm price index has been pre- pared and is here presented in preliminary form. A complete analysis of the in- dex will come forward in printed form at a later date. The index number series here presented includes prices of thirty-five commodities from which 85 to 90 per cent of the gross cash income of the farmers of the state is derived o C rop-y ear Annual Index Numbers and Ea se P eriod. --For most purposes, annual index nuinbers of farm prices based on crop-year data are more significant than those based on calendar-year prices. This is due to the fact that the year- to-year fluctuations in the prices of most agricultural products are accounted for, to a considerable extent, by variations in the supplies of those products. The supplies of most agricultural products are determined on a crop-year basis which does not correspond with the calendar year. Due to the character of the seasons and the t^^pes of products grown, a fair approximation to a crop-year period which is satisfactory for most crops in California can be obtained by considering July 1 as the dividing date between successive crop years. Hence, the amiual index numbers of California farm prices have reference to crop years beginning July 1 and ending June 30. In view of recent agricultural legislation, prewar price relationships are significant » The United States index number of farm prices is based on the five-year period August, 1909 to July, 1914 as 100. Due to lack of data, the California, farm price index could not begin with 1909 j it is therefore based upon the period July, 1910 to June, 1915 as 100. The United States index of farm prices included in this report for comparison with the California index, has, in order to obtain comparability?', been recomputed, using July, 1910 to June, 1915 NX Assistant Professor of Agricultural Economics, Assistant Agricultural Economist in the Experiment Station, and Assistant Agricultural Economist on the Giannini Foundation, """v^The v^rriter wishes to express his appreciation to I.ir . E, W, Braun, Dr. S, Shear, and Dr. H„ R. X'/iellman of the Giannini Foundation for contributing much data and offering many valuable suggestions in the preparation of this study. I'lr . D, R. Rush, Research Assistant, aided in the collection of the data and in the construction of the index number series. 1- as 100, and each yoar, as in tho California index, roprosents a two Ivo -month July to June crop yoar. Farm Prices in C alif or nia^ and in the United States since 1910.— Annual index numbers' of" the fam' prices of all products combinod and of major groups of products, in California and in the United States as a whole, are presented in tables 1 and 2, As shoYm in figure 1, farm prices in California were comparatively stable from 1910 until 1915. Betv/oen 1915 and 1919, they vigto rising at a very rapid rate, reaching a peak in 1919 at a level over 100 per cent higher than the level of 1910 to 1915. Tho declines of tho next four years carried farm prices in California to a level approximately 40 por cent above prewar years, a level vfhich ¥/as maintained until 1929. Since 1929, prices have fallen at a rapid rate, reaching in the year beginning July 1, 1931 an average of 24 por cent belov; the 1910-1914 level. During tho early stages of the War, -when prices vrore rising at a rapid rate, farm price advances in the United States as a v>rhole preceded the rise in California farm prices (figure 2). Similarly, in each of the two post-war periods of price declines, farm prices in California lagged behind farm prices in the United States. These lags in prico movements were due, to a largo extent, to tho character of the commodities produced in the two areas. The United States farm- price index is weighted heavily with tho staple products such as cotton, wheat, corn, hogs, beef cattle, and potatoes, Tho index of farm prices for California, on tho other hand, includes many specialty crops of major importance in tho state, T'Jhen prices in general rise or fall, tho staple food products are usually among tho first affected. Method of C onstructing the Inde x Nuinbo r Series. — The indox number series arc of tho type technically knoivn as the """""weighted aggregative". In tho con- struction of an annual index number series of this type, the prico of each com- modity for a given year is multiplied by tho 'Veight" assigned to that commodity. The products thus obtained are then added, and their sum, or aggregate, is ex- pressed as a percentage of tho corresponding aggregate for the base period (July, 1910-June, 1915 in this case). This ratio expressed as a percentage is the indox number for the yoar givon. Tho index number for oach year is obtained in this manner . Basis of We ight ing , --S inc o some commodities are of much more importance than othors, in so far as tho income derived from their sale by the farmers of California is concerned, tho prices of oach commodity are "weighted" in the index in proportion to tho estimated annual quantity of that commodity marketed during tho five-year period, 1924-1928, inclusive. Sources of p rico data. --The price data used in the construction of the annual index numbers of farm prices for California are presented in table 3, Tho pricGS of beef cattle, veal calves, hogs, shoop, lambs, market milk, buttorfat (since 1929), butter, eggs, chickens, vrool, horses, barley, wheat, oats, corn, hay, alfalfa (sinco 1915), cotton (since 1921), potatoes, beans, oranges, (since 1912), lemons (since 1912), and apples are unweighted averages of the monthly prices received by producers at local farm markets in California as reported by the Division of Crop and Livestock Estimates of tho United States -2- Index 250 200 150 100 J ! L J L J L 1910 1915 1920 1925 1930 Figure 1. Annual index numb'^rs of farm prices, California, years beginning July 1, 1910-1931. (July, 1910 - June, 1915 - 100 index_ 250 200 15C- 50- 1910 California .J J™ L J f . f -L J ! I L V ^ J L 1915 1920 1925 1*30 Figure 2. Annual index numbers of farm prices in California and in th*? United States, years beginning July 1, 1910-1931. (July, 1910 - June, 1915 - 100.) -3- Dopartment of Agriculturo. A monthly sorios of "milk fat prices in cents per pound for churning cream", as published in table 43 on page 86 of California Agricultural Experiment Station Bulletin 514 '"^i^i/iras used to supplement the buttorfat price series for the period prior to December, 1929. A series of the monthly prices received by growers at Modesto, California, for alfalfa v/as usod for the years 1910 to 1914 inclusive. These prices wore obtained from table 13 on page 33 of California Agricultural Experiment Station Bulletin 521'^''^=, The prices of rice and sugar beets, and of cotton for the years prior to 1921, are the December first farm prices, as published by the Division of Crop and Livestock Estimates of the United States Dopartment of Agriculture. The prices of grapes, peaches, pears, apricots, cherries, raisins, prunes, walnuts, and almonds were compiled by the author from available sources of inf ormtion. Each price is intended to represent an average of the prices received by producers for the product throughout the marketing season. Voorhios, E, C. Dairy products. California Agr . Exp. Sta. Bui, 514. 193 lo ^^Braun, E. W, Alfalfa, California Agr. 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