September 7, 1923
Entire Report

The following prediction, credited to Eugene Meyer, jr., managing director of the War Finance Corporation, is causing much concern in Washington, although it is to be doubted whether Mr. Meyer made a prediction in just this form:

Conditions in the wheat belt, instead of improving during the next few months will go from bad to worse. A depression in the cotton belt will follow, spreading later to diversified agriculture. The result will be another depression in industry, beginning in the spring of next year.

The material which follows is based upon information gathered by a corps of investigators working in the wheat and cotton belts the last four months under the direction of Edwin G. Nourse, a member of the Council of the Institute of Economics.

  1. There is little in the agricultural situation to warrant optimism. On other hand, conditions may develop during the next few months which will lead to a debacle in the grain growing states. The fall months will be a very critical period for American agriculture. A tail spin in wheat prices at the end of October or the beginning of November, followed by dumping of the crops, may very readily produce a condition from which it will take American agriculture and American industry a long time to recover.

  2. The present condition of the wheat farmers is fairly familiar. For several years they have been unable to realize the cost of production in the sale of their crops. They are heavily burdened with debt. The banks in the wheat areas are loaded upon with farm paper. Bank failures have been numerous during the last two years. In Montana, for example, more than one third of the banks have gone into liquidation. Even in so rich a state as Iowa the farmers are borrowing to meet interest and to pay taxes.

  3. The primary cause of this condition is the large expansion in wheat farming that took place in response to the increased European and domestic demand during the war years. The peak in wheat acreage harvested was reached in 1919. In this year, 75,694,000 acres were harvested as compared with a pre-war average of 47,000,000 acres. The acreage planted in 1923 exceeded the prewar average by 13,744,000 acres. The largest increases in wheat acreage planted in 1925, as compared with the average for the five year period 1909 to 1913, took place in Iowa, Oklahoma and Montana.

  4. When, in July of this year, wheat prices went below 80 cents a bushel — well below the cost of production — discouragement spread throughout the grain growing states. There was evidence on every hand that wheat raisers were ready to throw up th

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