Evening star., 1934-07-29
Enormous Loss of Income
From Crops to Have Wide
A. spread Effect.
CARRIERS ARE EXPECTED
TO SUFFER HARD BLOW
Stand to Lose Large Part OF I'M
portant Farm Tonnage and
Merchandise Traffic Also,
BY CHARLES r. SPEARE.
Ipeclal Dispatch 10 The star.

NEW 1OftkA, July Gos~ AtAC oAoAhh-
ing turn OF affairs in Austria this
week served TO accelerate the down.
ward course Cf prices in security mar
kets, which had been sagging under
the weight Of growing apprehension
as to the probable economic effects
Of dwindling harvests.
Financial leaders here do not ex-
pect the peace of Europe to be openly
disrupted, but the possibility of such
a DEVELOPMENT undoubtedly became
a potent influence In squirting the
flight from securities to cash. Liqui-
dation extended even to commodities
such as wheat and cotton. which
would be in heavy demand IN the
event Of actual war. For the first
impulse Of the trader, aSsailed by
uncertainty, Is TO get into the clear.
To some degree, at this stage, there
Is also uncertainty as to the ultimate
effects Of the worst drought in Amer
ican history. Not only securities, but
mercantile transactions as well have
this week suffered from this threat
of grave economic loss. 1t Is i'm
possible to measure the loss of in
come due TO smaller crops Of grain
stock. Directly and collaterally, It
will be Of such size as 10 retard the
progress Of recovery In some sections
Of the United States and TO make the
Government relief work more costly
than ever.
Drought, the most terrible OF all
natures manifestations and against
which man Is helpless. Is this year
common TO the entire Western world
and is likely to be a prominent factor
in the immediate economic and po-
ntical trends here and abroad.
Railroads Hard Hit.
On the average, the American rail-
roads show about 10 per cent Of
their freight tonnage 10 be grain
and grain products and live stock.
1t is a moderately profitable item Of
their total haul. This year. owing
to the drought. they win lose not
only q considerable amount Of this
tonnage, but the merchandise trafic
that Is produced by II. So the out
look for earnings OF the carriers
In the second half Of 1884 Is un-
promising. This has caused liqui-
dation In their stocks, Of which most
Of the active issues are down so TO
so per cent from their high prices
Of last Winter. Junior railroad bonds
have reacted with them, but not
over an average Of 10 to is per cent.
Instead Of being the medium
through which q general rise In
the stock market had been planned
this Summer, the rails have led a
decline to the lowest average level
Of the year.
There is not much logic in the
railroads move for an advance in
freight rates. There is little prospect
Of its being granted. The cards
are against them. They win continue
to be forced into higher costs and
denied relief through increased COM
pensation for services.
The shadow Of labor strife on q
national basis, which hung over the
business world q week ago, has been
lifted. IL Is the most fortunate
of this weeks events. Where q strike
directly entered into the daily life of
large communities, It's end has brought
q revival Of retail activity. Elsewhere
there Is the tendency to limit pur-
has not been the degree Of business
slump that had been feared, but a
strong inclination to sound out the
consumers attitude toward prices and
to measure his requirements before
adding 10 the supplies already In the
market. The operations Of the IN
dustr1al act and the housing bill will
eventually produce more employment
and so more demand for goods, but
some months viii elapse before the
benefits Of either project and the dis
tribution of Federal funds which they
will release are apparent.
The Outlook for August.
In those years before the depres-
sion, when conditions were normal
and one could determine the policy
of business from the experiences of
the past, the early part Of August
was q time of awakening in industry
and Of preparation for the Autumn
trade. The interior then began TO
draw on New York for funds TO move
the crops and to finance those pur-
chaseS dependent on the harvests Of
grain and cotton. Money rates stiff
fened; there were active days in
sterling and continental currencies;
the professional element on the ex-
changes started to anticipate the
effect Of commercial expansion and
higher earnings.
August, therefore, was q period Of
rising prices for stocks, Just as Janu-
ary and July were noted for the
strength in investment securities based
IN the f7nv of fY1kerest and dividend
payments into their market IN those
months.
We approach August this year from
different angle than heretofore.
There are no precedents for the
domino ting conditions under which
business must operate through the
present season and the one to follow.
The only sure fact Is that the ae-
cepted borrower can obtain all the
money he needs and at the lowest
rate quoted since the period Of mini
mum interest rates was entered.
Money promises to be an extremely
cheap commodity for many months
10 come.
Previously, the pickup in business
in midsummer was natural. Thers
was q high average Of constancy In
1t. Now It depends considerably on
the momentum created IN the hrst
and second quarters Of the year and
on the degree TO which It is pro-
PEELED by the "priming" method OF
the Government. Obviously, 1t is
seriously affected by the rayages OF
the drought, introducing an element
Of delay in recovery that had n0t