September 1946
LIQUID ASSETS AND EXPENDITURE PLANS OF FARM OPERATORS1
Liquid assets held by farm spending units are
a significant potential source of funds for the purchase of consumer and producer goods as well as
for investment in farm lands. According to the
"Balance Sheet of Agriculture" reproduced elsewhere in this BULLETIN, these holdings of deposits,
currency, and United States savings bonds amounted
to about 19 billion dollars at the beginning of 1946,
after having increased fourfold during the war years.
Certain useful information about the liquid asset
holdings and spending plans of an important group
of farmers, namely, farm operators, is provided by
the national survey of liquid assets conducted for
the Board of Governors of the Federal Reserve
System by the Division of Program Surveys of the
Bureau of Agricultural Economics. Farm operators
make up about half of the 9 to 10 million farm
spending units. The term includes (1) all fulltime operators who maintain a farm all year and
have no other major occupation, and (2) all parttime operators who receive at least 50 per cent of
their annual gross cash incomes from farming. It
does not include farm laborers, retired farmers, and
spending units not engaged in farming but living
on farms with their families.2
Checking accounts and savings bonds are the
types of liquid assets most frequently held by farm
operators.3 The position of the farm operator as
a producer as well as a consumer has made for
more widespread use of the checking account by
the farm operator than by the population as a whole.
Farm operators not only plan to buy consumer
durable goods and houses in 1946 but in addition
plan to purchase a sizeable quantity of farm machinery and to build and repair farm buildings.
In so doing, they plan to use their liquid assets
to a greater extent than does the rest of the United
States population.
1
Prepared by Duncan McC. Holthausen of the Board's Division of Research and Statistics from a special report for farm
operators based on the national liquid asset survey data. The
results of the survey were summarized in the June, July, and
August 1946 issues of the BULLETIN. Mr. George Katona and
Mrs. Eleanor Maccoby of the Division of Program Surveys,
Bureau of Agricultural Economics, were primarily responsible
for the conduct of the studies.
2
A spending unit is denned as all persons living in the same
dwelling unit and belonging to the same family who pool their
incomes
to meet their major expenses.
8
Currency holdings were not included among holdings of
liquid assets, because of the difficulty in obtaining accurate reports of such holdings. See BULLETIN for June 1946, pp.
574-75.
SEPTEMBER
1946
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HOLDINGS OF LIQUID ASSETS
Three-fourths of all farm operators held some
type of liquid asset at the beginning of 1946. As
is indicated by Table 1, more than one-half of the
group held Government bonds, about the same
proportion had checking accounts, and only
one-sixth held savings accounts. For the population
as a whole no more than one-third of all spending
units use checking accounts. Reflecting the possible
use of checking accounts by farmers for savings
and the nonavailability of savings accounts in certain farm areas, the data indicate that the farm
operator makes less use of the savings account than
does the population as a whole. No very significant
difference is apparent in the proportion of all people
or farm operators that held Government bonds at
the beginning of the year.
Practically no difference between farm operators
and the population at large was revealed by the
total amount of liquid assets held by individual
spending units in the respective groups. In both
instances about three in ten spending units held
$1 to $499 in liquid assets, another three in ten held
between $500 and $1,999, and not quite two in ten
had more than $2,000 in liquid assets. In addition,
little difference between these two groups of liquid
asset holders was reflected by the average amount
TABLE 1
PERCENTAGE OF FARM OPERATORS AND OF U. S. POPULATION
HOLDING VARIOUS T Y P E S OF LIQUID ASSETS, EARLY
Type of liquid asset
U. S. discount bonds
Other Government bonds
Savings accounts
Checking accounts
Any one type of asset
1946
* T2
Farm
operators
U. S.
population1
57
3
17
57
78
63
3
39
34
76
!A11 spending units in the U. S. population, including farm
operators.
of any one type of asset held. Farm operators with
checking accounts carried an average deposit of
the same amount as all people with checking
accounts. This similarity was also observed in
the case of savings deposits. Farm operators with
savings bonds generally held somewhat smaller
11
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September 1946
LIQUID ASSETS AND EXPENDITURES PLANS OF FARM OPERATORS
amounts than the rest of the population with
savings bonds.
PROBABLE USE OF LIQUID ASSETS
Farm operators expressed greater willingness
than the total population to use their liquid assets
in 1946. This difference can be largely attributed
to the prospective use of checking accounts by
farmers and probably reflects a seasonal influence,
since farmers' cash balances are generally high early
in the year and are drawn down for operating purposes during the crop production period. When
asked whether they intended to reduce the balance
of their checking accounts by a large amount, about
45 per cent of the farm operators as compared to
about 30 per cent of all people indicated they would
or would probably do so. In the case of Government bonds, there is no such marked difference for
the immediate future. About one in ten of the
farm operators and also of the population as a whole
expected to use some Government bonds for various
purposes in the current year.
When asked during the interview period about
prospective use of Government bonds in the next
five years, a significant difference was revealed in
the attitudes of farm operators and the total population. Half of the total population indicated that
they would not be willing to use their Government
bonds for the purchase of houses, farms, or investment in businesses or real estate; only one-third of
the farm operators indicated that they would not
be willing to use their bonds for these purposes. In
general, it appears that farmers regard liquid assets
as less permanent holdings than do all other people.
plans. In their plans for purchasing cars and other
consumer durable goods, farm operators show no
differences from the population as a whole.
Farm machinery purchases and the repair and
construction of farm buildings were most frequently
mentioned in the farm operators' spending plans
for production purposes. The purchase of farm
land was next in importance.
In terms of the approximate dollar amounts that
would be spent by farm operators for the various
purposes listed in Table 2, the purchase of farm
land is the largest item, accounting for roughly
two-fifths of the estimated total of contemplated
expenditures. Farm machinery and all consumer
durable goods each account for about one-fifth
of total prospective expenditures. In the case of
farm land, the bulk of purchases would be financed
by mortgage credit; for consumer durables, farm
machinery, and farm building repairs, farm operators would draw largely from current income for
payment.
It is very probable that the expenditure plans of
many farm operators will not be realized during
1946 because of the shortages in supplies of certain
types of farm equipment and construction materials. Nevertheless, it is clear that farm operators,
in comparison with the rest of the population, plan
to make relatively more extensive expenditures and
at the same time to use more of their liquid assets.
This is primarily because their potential expenditures reflect outlays for both production and consumption purposes.
TABLE 2
EXPENDITURE
DURABLE
EXPENDITURE PLANS OF FARM OPERATORS, 1946
During the interview period in the first quarter
of 1946, farm operators expressed plans for very
sizeable outlays in the current year for automobiles
and other consumer durable goods, farm machinery,
repair and construction of farm buildings and
houses, and farm land. Table 2 indicates the proportion of farm operators with definite and tentative plans for these various types of expenditures.
About 6 per cent^of the farm operators had definite
plans to buy automobiles; 3 per cent had tentative
plans. For other consumer durables, 22 per cent had
definite purchase plans and 7 per cent tentative
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PLANS
GOODS,
OF FARM
FARM
FARM
OPERATORS
MACHINERY
LAND,
FOR CONSUMER
AND BUILDINGS, AND
1946
Percentage of spending units
Type of expenditure
Automobiles
Other consumer durables
Farm machinery
Farm buildings:
Repairs
New construction
Houses:
Repairs
New construction
Farm land
1
With definite
expenditure
plans
With tentative
expenditure
plans 1
6
22
20
3
7
7
18
7
15
1
6
2
2
2
1
Those who say they would probably buy or build.
FEDERAL RESERVE BULLETIN