Conservation zoning districts, a new term, may enclose either watersheds, flood plains, or both. Their regulations resemble those of watershed and flood plain zones. New open-space zoning districts provide permanent open space or protect natural watercourses. Historic zoning districts now preserve and protect historic buildings and places in nine States. 10. Sizes of farms.—In a study, of sizes of farm businesses necessary to obtain 4 levels of operator cash earnings ranging from $2,500 to $5,500, 8 types of farm were budgeted in 15 selected areas. The budgets describe resource requirements for efficiently organized farms making full use of improved practices and available technology at 1959 cost rates and prospective prices. The budgets, which characterize rather closely the more progressive and adequate-size farms in agriculture, do not necessarily describe current production and income relationships on average farms. Two findings are especially significant: (a) The amount of gross farm sales required for operator cash earnings of $2,500 a year averages $13,400 on the 15 budgeted farms. Operator cash earnings of $5,500 are associated, on the average, with gross sales of about $26,800. Gross sales of farms budgeted for $2,500 operator earnings range from $9,275 on the southeastern Minnesota dairy farm to $26,450 on the cotton-wheat farm in the rolling plains area of Oklahoma. Throughout the $2,500 to $5,500 range of operator earnings on the budgeted farms, an average of approximately $5 gross sales is associated with each $1 of operator earnings. This relationship constitutes a strong incentive for the rapid shifts that are occurring in the size of farms throughout the Nation's agriculture. Farms with $10,000 or more of gross sales are expanding in number, while smaller farms are rapidly decreasing. (b) The average total capital investment in real estate, livestock, and machinery needed to obtain operator earnings to $2,500 was $57,000; for $5,500 operator earnings, $111,000. Returns to capital on the budgeted farms, as measured by a capital charge calculated as 5 percent of the total investment, approach or exceed in some instances, the operator's labor and management earnings. 11. The farmland price puzzle.-Market values of farm real estate have advanced almost steadily since the end of the Korean outbreak without corresponding support from net farm income. As a result, the average value of farm real estate has advanced to about 10 times net income in 1959-61, compared with about 5.6 times income in 1950-54. The imputed rate of return on current market values remains below the rate of interest on farm mortgages, although the rate of return has increased each year from 1959 through 1961. Nearly $50 billion has been added to the apparent capital value in agriculture, despite essentially constant net returns to the industry. Some of the major factors that have contributed to the rise in farmland values appear to be (a) Land prices have responded to general inflation.-Land values have increased about a third more than the general price level, but substantially less than common stocks. Total returns to land from both annual earnings and capital appreciation averaged about 8 percent a year in the 1950-54 period but somewhat less in 1955-60. Farm real estate also has yielded other kinds of return in the form of tax savings and intangibles such as the satisfaction of ownership. (b) Population growth creates a scarcity value for land. The rapid increase in population since the end of World War II has strengthened the belief that land prices will continue to rise over the long term. Projections of land requirements indicate no likely shortage of land for some time to come for the production of food and fiber. Rapid strides in technology have increased the economic supply of land substantially. However, nonagricultural uses of land are likely to increase. (c) Increased returns from technology have been capitalized into land values. Many farms have an excess supply of nonland inputs such as machinery and operator labor which they can profitably utilize by operating more land. Also, the optimum size of farms under present levels of technology is substantially higher than the majority of farms in most areas. As a result, the demand for additional land by established operators has helped to bid up land prices. 12. Part-time farming attractive to farm families.-Studies of part-time farming in Michigan and other States reveal several facts that continue to make it attractive to farm families in better as well as in poorer farming areas. Higher and steadier incomes are usually the primary aims reported by farmers who take off-farm jobs. Part-time farming as practiced in most areas is not as efficient in the use of farm resources as full-time farm operations. The need for recombination of small acreages into more efficient full-time farming may be slowed up or even deterred when considerable numbers of farmers take offfarm jobs, because the part-time operator continues to hold onto his land. 13. Appraisal of the 1961 feed grain program.-A study of about 600 participants in the 1961 feed-grain program, and of 600 nonparticipants, in Ohio, Minnesota, Iowa, Kansas, and Texas showed that farms in the program were larger than other farms in their respective areas, had a higher proportion of land in crops, had a larger proportion of total cropland in feed grain, and prior to 1961 used more of their cropland for such high-value crops as corn, grain sorghum, soybeans, and wheat. Participants had fewer livestock than nonparticipants. Little evidence was found of any difference in the productivity of cropland on farms in the program compared with those not in the program. The increase from 1960 to 1961 in the amount of fertilizer used per acre of corn generally was about the same for participants and nonparticipants. Compared with nonparticipants, participants were younger, had occupied their farms for a shorter time, and more of them had off-farm incomes. There was little difference in the amount of family labor available or in the sources of off-farm incomes, although a slightly larger proportion of nonparticipants had incomes from pensions, social security, and the like. The reasons given most frequently by farmers for participation were that participation was more profitable, it would improve (or rest) the land, it helped to reduce surpluses, reduce risk, or reduce costs. Reasons given most frequently for staying out of the program included a belief that incomes would be higher, opposition to all Government programs, inadequate understanding of the program, or dissatisfaction with program provisions. MARKETING ECONOMICS RESEARCH Mr. KOFFSKY. The Service is concerned as well wih developments in the marketing system, particularly as they affect the returns to farmers and the markets for farm products, including the potential for new products and new uses. Here the illustrations of work are on pages 18 to 21 of the "Notes." (The pages referred to follow :) MARKETING ECONOMICS RESEARCH Current activities and trends.-Research in marketing economics embraces all aspects of economics in marketing farm products from the time they leave the farm until they are purchased by ultimate consumers. The research includes such things as farmers' bargaining power; the economics of product quality and grade; market potentials for new products and new uses; market structure and practices; marketing costs and margins; economic effects of special programs such as school lunch, special milk, food stamp, and direct distribution; and the effectiveness of merchandising and promotion in increasing the demand for farm products. Consumer expenditures for domestically produced food and food services in the United States total more than $60 billion annually. The equivalent value of farm products in nonfood uses is estimated at least at an additional $30 billion. Three-fourths of these values are added in marketing-in transporting, storing, packing, handling, risk taking, processing, and distributing. Marketing economics research deals with this 75 percent or so of the consumers' dollar spent for food, natural fiber, tobacco, and industrial products cierived from domestic farming. It also deals with economic aspects of the Competition from fish and imported foods, synthetic fibers, and other chemical and industrial materials of nonfarm origin in traditional agricultural markets. The marketing economics research program of the U.S. Department of AgriCulture is carried out directly and in cooperation with the State agricultural experiment stations, with processors and distributors of agricultural products, transportation agencies, and, to a limited extent, with associations of farmers and other groups. Research is directed primarily toward solution of problems of regional and national scope. 95910-63-pt. 3-2 SELECTED EXAMPLES OF RECENT PROGRESS 1. Federal lamb grades study completed. In response to a request from the House Committee on Agriculture, a study of the effects of the 1960 change in Federal grades for lamb and the role of Federal grades for lamb in general was initiated. (The first report of this study was published by the House of Representatives in March 1962.) No support was found for the view expressed by certain industry groups in 1959 that Federal lamb grades were hurting rather than helping producers. The 1958-61 lamb price decline was principally caused by the high levels of production of lamb and substitute meats. There is no evidence that Federal grades were a factor. On the contrary, their impact on lamb marketing is important and positive. They promote competition by helping the small firms compete with the large. They lower marketing costs. They help encourage production of desirable types of lambs. They help consumers consistently find the kind of lamb they prefer. Forty The revised lamb grades have been favorably received by the industry. four percent of total commercial lamb slaughter was federally graded in 1961: only 35 percent was graded in 1959. Total commercial slaughter increased 12 percent during this period, indicating a strengthened industry demand for Federal lamb grades. 2. Some cotton marketing practices adversely affect use values of cotton.— Analyses of effects of marketing practices and cotton grades on qualities of cotton yarn produced reveal that higher grades of cotton resulting from excessive cleaning at gins frequently produce cotton yarns of lower average quality in appearance and strength than do lower grades of cotton. Certain ginning practices, especially excessive drying and lint cleaning, often necessary to improve the grade of cotton, actually damage cotton fibers so much that top quality yarns cannot be produced and mill operating costs go up. As a result, present price differentials among raw cotton grades may be too high and may be encouraging undesirable production and marketing practices and damaging the competitive position of cottons in textile product markets. On the other hand, spinning tests indicate that average staple length and length distribution may be more important factors in producing high quality yarns than most mill operators appear to realize. Hence, premiums now paid growers for longer staples may not cover the full value of this fiber attribute to mills. The value to cotton growers of more than one lint cleaning operation in ginning cotton is seriously in doubt except for the lower grades of cotton. Subjecting cotton grading Middling or better to any lint cleaning usually does not improve the grade enough to offset losses in weight from cleaning and the higher costs of extra cleaning. 3. Total marketing costs rise-unit marketing costs stable.-Studies of price spreads and marketing costs for food, cotton, and tobacco were continued and findings were published regularly. The spread between the retail store cost and farm value of the annual market basket of farm-originated foods averaged $656 in 1962, about the same as in 1961; 1962 is the first year since 1950 that the spread has not increased. The farm value and retail cost of the market basket were up slightly (fig. 5). The total bill for marketing domestic farm originated food products to civilian consumers in this country in 1962 was estimated at $41.9 billion (preliminary estimate), $0.5 billion higher than in 1961 (fig. 6). This rise the smallest since 1951-resulted mainly from an increase in the volume of products handled. Farmers received $21.3 billion from these foods, about $0.5 billion more than in 1961, and the cost to consumers was $63.2 billion, up $1 billion from the previous year. A new index was constructed during 1962 showing quarterly changes in prices of intermediate goods and services used by food marketing firms. Prices of these goods and services averaged 39 percent higher in the first half of 1962 than in 1947-49. This index will aid in analyzing trends in the food marketing bill. Special studies were made of marketing spreads for a number of individual products in 1962. The farm-retail spread for bread, one of the products studied, has increased in each of the last 15 years. This increase resulted mainly from the steady climb in the baker-wholesaler margin, traceable to increases in bread distribution costs and costly competitive practices. Another study shows that convenience foods are having little effect on food marketing costs and retail food prices. For each $100 spent in grocery stores for food, $14.03 was spent for convenience items. The cost of duplicating convenience foods with fresh or homemade foods, in the quantities purchased by housewives, would have been $15.10 or $1.07 more than the convenience foods, not including any charge for the housewife's time in food preparation. Such a favorable cost differential for convenience foods is due in part to economies resulting from processing foods in volume. Also, savings in handling, transporting, and storage of foods with reduced perishability and bulk, in many instances, more than offset added costs of processing. FIGURE 5 Marketing Spread Accounts for Rise DATA ARE FOR MARKET BASKET OF FARM FOODS CONTAINING AVERAGE 1952 PURCHASES BY URBAN FAMILIES. 4. Wide use of research findings on price spreads.-A growing effort is being made to inform the nonfarm public of the facts concerning changes in the retail prices of food. During the year the Department distributed more than 1 million sheets that summarize the information directly to consumers at food stores through the cooperation of retail food companies. The information shows that retail food prices have increased less than consumer prices in general, and that the increase in food prices which has occurred has been due to increases in marketing costs and not to increases in the farm prices of food (fig. 5). The Department provided information for leaflets, television, and radio presentations that has been used widely by many local groups. The theme "Food Is a Bargain" based on the facts developed by the Department has been employed extensively in newspaper and magazine articles and editorials, in speeches by spokesmen for the food industry, and advertisements and benefits developed by private firms and trade associations. 5. Transportation research expanded.-Progress has been made in measuring the volume and kind of exempt farm products hauled by motor carrier and in determining the business practices, rates, and operating costs of these carriers. Preliminary results indicate that exempt motor carriers' operating costs are probably less than common carrier costs, that the rates charged generate revenues which average more than enough to meet essential operating costs, and that the rates charged shippers for transporting exempt commodities are relatively stable but they do vary in response to supply and demand for unusual services at particular times and places. Carriers of exempt commodities provide adequate and flexible service to meet the needs of seasonably produced and perishable agricultural commodities. This information is of particular timely value because of the interest being taken in changes proposed for the Nation's transportation system as a result of the President's message on transportation to the 87th Congress. Attention also is being given to the economic consequences of the St. Lawrence Seaway. Improvements in the seaway have reduced shipping costs on agricultural products and have enabled U.S. farmers to increase sales of grain in foreign markets. However, growth in seaway traffic has been below expectations. This rate must rise if total traffic is to reach the planned goals of 50 million tons a year by 1968 on the seaway and 60 million tons on the Welland Canal. The respective 1959-61 averages are 21 million tons and 29 million tons. The rate of future expansion will depend on factors such as U.S. and Common Market trade policies, developments in other industries, particularly in the Great Lakes iron and steel industry, and the supply and price of agricultural products available for export. 6. Processing plants location in rural areas.-Substantially increased attention is being given to appraisals of the economic feasibility of various types of off-farm employment opportunities in low-income rural areas. For example, a study is now underway concerning the feasibility of establishing several kinds of agricultural processing plants in Alaska. Another study concerning the economic basis for constructing a wool-scouring plant in a producing area has been completed. The need for properly blending wool before scouring was pointed out as an important difficulty which the proposed plant would face. An additional investigation concerning the establishing of new livestock slaughtering plants in the Southeast indicated that in many instances an expansion in slaughter at existing plants would be a more economical way to handle larger numbers of animals. Other studies concerned the pelleting of hay, a new plant for the production of corn oil and related products, and several relating to the processing of various fruits and vegetables. 7. Industrial possibilities of new crops examined.-Physical science research in other department agencies and economic evaluations by Economic Research Service are uncovering market possibilities for new crops not now grown on a commercial scale. Some of these may prove to be better alternatives for some farmers who presently are growing grains, cotton, or other surplus products. For example. physical science research has shown that seed of a new potential crop called Indian ironweed contains an oil that is important in the production of plastics. Recent economic investigations indicate that a large potential market (35 million pounds or more per year) exists for such oil at prices which could enable the profitable production of Indian ironweed in certain areas of the country. In fact, research toward early commercial adaptation of this crop is now being urged by potential industrial users. Recent investigations also indicate commercial possibilities for other new annual cash crops, such as |