AGRICULTURAL PRICES. In the early stages of English agriculture the mass of producers were content to satisfy their own wants and were practically indifferent to outside trade. Later, however, the need arose for some machinery f or bringing buyers and sellers into touch, and this was met by the institution of fairs and markets held at fixed places and periods. These in the first instance no doubt arose spontaneously, but it speedily became apparent that the holding of a fair or market in a town could be made a source of profit to the burgesses, or if there were no suffi ciently powerful organized community, to the lord of the manor. Thus arose a system of tolls on goods exposed for sale in the mar ket. The Crown, exercising its authority as overlord, saw at once an opportunity of revenue and claimed and exercised the right to forbid the holding of a fair or market except under royal charter, which was granted on terms. Tolls and regulations of the market would tend to raise the price level, but the effect could only have been slight.
A more serious effect on agricultural prices was caused by legis lation against the practices of badgering, f orestalling, engrossing and regrating, which was passed in the early part of the i6th cen tury and did not disappear from the statute book until late in the i8th century. The purpose of this legislation in restraint of trade was to protect the consumer from trade practices which were pre sumed to raise artificially the price of food. A "badger" was a dealer in food who bought in one place and sold in another. He was licensed for a year and was under recognisances against fore stalling, engrossing and regrating. "Forestalling" was purchasing food on the way to market with intent to sell it at a higher price ; "engrossing" was attempting to control—in modern phraseology to "corner"—the market by buying up all the food for the Purpose of exacting higher prices; "regrating" was the resale of f ood previous ly bought in the same market.
The State for many centuries intervened directly in the regula tion of the price of wheat and bread. From the Norman conquest to the reign of Henry VI. the exportation of wheat was prohibited, although in earlier times it had been common. Importation was unchecked, although there is no record of it until the i4th century. In 1436 an act was passed authorizing the exportation of wheat whenever the price did not exceed 6s. 8d. per quarter and in 1463 the exportation of corn was forbidden until the price exceeded that at which exportation ceased. Thereafter a succession of enact ments were passed some giving a bounty on exports, others impos ing a duty on imports, or adopting both methods under limitations of prices. In 1774 an act was passed permitting imports at a nominal duty of 6d. per quarter when the price reached 48s. and forbidding exports unless the price was below 44s. when a bounty of 5s. per quarter was given on exports in British ships.
Up to this time legislation had for its main object the interests of consumers while attempting also to have regard to the interests of producers, and also to encourage shipping. In 1791 the first of a series of acts was passed which, with increasing stringency, aimed mainly at protecting the interests of home wheat-growers, which continued until the repeal of the Corn Laws in 1846.
In the i3th century the Assize of Bread was established, by which the duty was imposed on justices of the peace of adjusting the weight, quality and price of bread to the current prices of wheat. The system was modified in detail from time to time, but continued in force until 1822 in London and until 1836 in the provinces.
The organization of commercial price-fixing on a national basis had, however, scarcely been completed when a new factor was interposed which speedily changed the basis on which price-levels of some of the principal foodstuffs rested. Imported wheat, meat, cheese, butter and other kinds of agricultural produce were sent to the British markets in ever-increasing quantities. As they increased in bulk and improved in quality their influence became so great that prices in the wholesale markets were fixed on an international rather than on a national basis.
The most prominent instance of this modern development is to be found in the wheat trade, where imported grain, forming as it does about four-fifths of the whole supply, dominates British prices and determines the value at any given time, of British wheat.
Price-fixing arrangements in the wheat trade are highly organ ized. World's prices are practically settled at four great markets, viz., Chicago, Winnipeg, Liverpool and London, and so well adjusted and sensitive is the mechanism that fluctuations in one are immediately reflected in the others.
The question of the effect on prices of the system under which the world's wheat trade is carried on is debatable and has been, in fact, hotly debated. It has been contended that speculation in "futures" depresses the level of prices and thus injures farmers, and, on the other hand, that it raises the level and thus injures con sumers. The subject has been investigated closely, and it appears, by comparison with the price records of other commodities, that, on the whole, the organized "futures" market tends to maintain a more stable level of prices, notwithstanding occasional fluctuations caused by gambling operators.
The "stabilization" of agricultural prices is advocated in some quarters, but no intelligible scheme has been produced which does not imply State control and an acceptance by the taxpayers of the risks of State trading.
Yearly, or seasonal, fluctuations of agricultural prices are, as already indicated, occasioned mainly by variations in the weather, but there are also cyclical changes which are the result of mone tary causes. Periods of low prices react not only on agricultural products but on all other commodities, and a consideration of them requires a wider outlook than that presented by one branch of production.
The average prices per quarter for each decennium since 1647 are as follow :— The highest price for any single cereal year was 126s. 6d. irr 1812, and the lowest 2 2S. od. in 1894. The highest price in the last decennium was 8os. od. in 192o, and the lowest 42s. 2d. in 1923.
Systematic records of food prices were begun by Sauerbeck in 1846 and the series is continued in the Statist. Similar records have since been started by the Economist and the Board of Trade. In go4 the British Board (now the Ministry) of Agriculture be gan to collect and publish weekly a market report which includes prices of all agricultural products.
By the method of index numbers these records enable the changes in the prices of agricultural products to be compared with those in the prices of commodities generally. There was a fall in prices generally between the periods i871-75 and 1894-98 which averaged 4o%. In the period from 1894-98 to 1910-14 there was an average rise in the prices of all commodities of 33%. The changes in the prices of British agricultural products in these two periods are indicated in the table given overleaf : Af ter 1914 prices of agricultural products, as of other commod ities, rose rapidly under war conditions. Taking the period 1911 13 as the base, the average percentage rise in each year is shown below, the rise in the price of feeding stuffs and fertilizers being also given: United States.—The great rise in commodity prices caused by the World War and the consequent post-war decline had grave economic consequences throughout the world. One of the dis tinguishing features of that international price upheaval was that during the period of rising prices, agricultural prices advanced more, whereas during the period of falling prices they declined more than did other prices. The nature of this post-war price disparity can be well illustrated with the price changes that took place in the United States, where the effect of agricultural price depression was not limited to the business depression of 1921 and 1922 but continued as a political factor for years thereafter.
According to the indexes of the U.S. Bureau of Labor Statistics, commodity prices reached a peak in 1920. In that year agricul tural prices were about 1 2 I % higher and non-agricultural or in dustrial prices about 141 % higher than the average prices of the five year period, 1910 -1914.
In the great price decline of 1920-21, non-agricultural prices dropped 74, but agricultural and farm prices dropped 88 points.
The sudden deflation in the value of the farmers' products affected all sections of the agricultural industry. Land values were high, many had purchased farms at high prices, burdened them selves with heavy mortgages and expected the high prices of 1920 to continue. On practically all farm-land taxes had more than doubled, and other expenses of production, such as wages and machinery, had also risen. When in 1921 prices crumpled to half or less of those prevailing in 1920, the necessity of meeting the fixed high interest and rent charges, as well as the high production costs, left very little, if anything, of income available for living expenses. Furthermore, the higher prices of goods bought by farmers reduced the buying power of the farmer still more. The low and inadequate farm incomes' of 1921 and 1922 naturally also hurt those undertakings dependent on agriculture, such as country banks, country stores, fertilizer and implement agencies. As a result of many causes, partly domestic, partly for eign, agricultural prices did not recover materially in 1922. Be tween 1922 and 1929, first one farm commodity, then another, usually as a result of reduced production, recovered temporarily, but in the main agricultural prices remained nearer the pre-war prices than did the non-agricultural prices, and the costs of serv ices represented by farm taxes and debt charges, throughout the period 1921-27. About this agricultural and non-agricultural price disparity centred much of the discussion of farm relief. The removal of that disparity by raising the level of agricultural prices to that of industrial prices, creating a greater degree of stability in agricultural prices and giving farmers a larger share of the national income have been the objects of practically all proposals for farm relief, particularly the McNary-Haugen plan which came before the U.S. Congress in several modifications for four years. It was twice passed by both Houses in 1927 and in 1928 and twice vetoed by the President.
Briefly described, the McNary-Haugen plan of farm relief provided for the establishment of a Federal Farm Board with power so to buy and sell surplus farm products of the United States as to raise the domestic prices received by producers. The cost of operating the plan and any losses sustained in the sale abroad at prices lower than in the United States would be met by a fee known as an "equalization fee" collected at the central markets from mills, packers, etc., on all units of a commodity that entered commerce. In that way all producers would con tribute alike to the cost of the plan, and all would share alike in the benefits of the difference between the advance in domestic prices and the fee collected, the advantage arising from the fact that far more would be sold in the domestic markets at higher prices than would be sold at lower prices abroad.
In its early form, as voted down by Congress in 1924, the McNary-Haugen plan aimed to equalize agricultural and other prices by setting up a Federal agency to buy and sell the surplus production of crops which were held to be responsible for main taining agricultural prices on a low level. The general level of all commodity prices, which was then approximately about 15o% of the pre-war level, was to be used as a standard. This price-ratio scheme was dropped in favour of a plan to make the tariff effec tive, the emphasis of the latter growing out of the belief among farm leaders that the stability of non-agricultural prices was the result of protective measures enjoyed by other groups, such as existing tariffs on non-farm products, the immigration-restriction law, aiming among other things to maintain high wage standards, and the Federal Reserve System aiming toward stability in finance and commerce. The emphasis on "making the tariff effective for agriculture" was not maintained in the later forms of the McNary Haugen plan because a tariff could not effectively protect prices of the major export products such as cotton, tobacco and wheat.
As a substitute for the McNary-Haugen Bill, the New Congress of 1929 passed the Agricultural Marketing Act, which established the Federal Farm Board. This Board was authorized among other things to carry on stabilization operations, to buy surplus farm products in order to support market prices. Its operations in cotton and wheat were conducted at a most inopportune turn of business conditions which collapsed after 1929. The Farm Board sustained very heavy losses as agricultural prices fell to record low levels in 1932, and their average purchasing power fell to about half of that of the pre-war years. Under the new adminis tration in 1933, the Agricultural Adjustment Act was passed, creating the Agricultural Adjustment Administration with power to levy processing taxes on domestic consumption of certain basic farm products, this revenue to be paid to producers entering into contracts with the Federal Government to reduce acreage and marketings as a means of reducing accumulated surpluses. As a result of operations under this Act, devaluation of the currency, other recovery measures, general improvement in economic condi tions and severe droughts, farm prices advanced from the low point of 58% of the pre-war average in June 1932 to 131% in Jan. 1937.
During the three-year interval of industrial and agricultural collapse, Dec. 1929–Dec. 1932, wholesale prices of "all commodi ties" fell from 136% of the 1910-14 level to 91%. Farm product prices fell from 143 to 62 or nearly 6o%. Prices of non-agricul tural products fell only about 20%. This unbalanced price situa tion was corrected in Aug. 1936 when the general average of commodity prices returned to 119% of the pre-war level, and farm products at farms returned to 124% of the pre-war level.
Wholesale prices and farm prices continued to advance until Jan. 1937, after which both farm and non-farm prices declined with a decline in business activity and a depression in economic conditions. The most significant development since the recession of 1937 has been the stimulus given to prices at the outbreak of the European war beginning Sept. 1939. The prices of agricultural products and of some non-agricultural products advanced sharply at the outbreak of the war in 1939. (L. H. B.; X.)