Evening star., 1936-07-05
DROUGHT BECOMES
PRINCIPAL THREAT
TO j. S. RECOVERY
Loss May Be as Great as in
1934-Imposes Big Load
on Government. y
FOOD INDEX AT PEAK,
LIKELY TO GAIN MORE
Farm Income During May Sets
Highest Mark in Six Years.
Dry Areas Hit.
BY CHARLES F. SPEARE.
&c In ThA Qfar

Special Dispatch to Tine Star.
NEW YORK, July 4.-The only seri-
GUS menace to business recovery at
present Is the drought which afflicts
portions of the Northwest and South
east The loss from it may be as great
as in 1894, when the Government
granted $500 100000 for relief to dis
tressed farmers and stock raisers. The
cycle of flood and famine has appar-
emily not run its course.
Fortunately it has manifested its
most serious phases toward the end
OF the industrial and agricultural de-
preston. However, it imposes serious
tax on the Federal Government, which
always has to shoulder the load placed
on States when they face an extraordi-
nary emergency.
The shortage of grain and Of cattle
two years ago caused a sharp rise in
the cost of foodstuffs. 1t would not
be surprising If this were the effect
of the present drought. With the
advance in June, the food index is
now at the highest Of the year, but
only slightly above that of the same
period in 1895.
Farm Income Sets Record.
Grain markets this week have been
at times buoyant on the Western
weather situation. Farm income in
May was the highest for that month
in six years. For the first five months
of 1885 the cash received was $780,
900, 900 greater than the year previous.
For the first half of June a further
price advance of several points added
TO the farm products return. There
is as yet no decline noted in sales of
agricultural implements, of general
merchandise, or indicatio of falling
of in railroad car loadingS from the
distressed districts.
On the other hand, retail transac-
tions have declined. The loss in farm
ers' buying power will be most evident
in the drought States later in the
season. Expectation of it has already
changed sentiment somewhat toward
railroad securities. Not only will the
Granger" roads have less wheat and
corn to move, but, as in all similar
crises, they are pressed to grant lower
rates on shipments Of livestock from
the drought regions. Low, evenewhen
at the prescribed tariffs, the rates in
emergencies allow little if any profit
to the carriers.
Steel, Power Outputs Up.
Iron and steel production took
sharp jump at the end of June, when
it reached IA per cent of capacity,
another high record since 1880, and
comparing with less than SO per cent
year ago. Then occurred the turn in
the steel industry which Gen. Charles
G. Dawes had predicted as the signal
for universal business revival. Opin-
ion IN the trade is that this may be
the top level for 1886 and that it re-
fleets an abnormal demand prelimin-
ary TO higher prices and the possibility
OF labor troubles.
The output Of the power and light
industry also is at about its best fig
ures, while railroad car loadings in
June were Is per cent more than a
year ago. Eastern lines that petitioned
the Interstate Commerce Commission
to rescind their lower passenger fare
order, and then took their case to
court, find that they have not been
hurt as much as expected; in fact,
have gained revenues in spite of the
2-cent rate.
1t is too early to estimate or even
approximate the amount of profit
achieved by American corporations in
the second quarter of the year. About
all that can be said is that a large
number did better in the three months
ending June 80 than in the March
quarter. when a substantial group of
industrial concerns showed a gain of
about so per cent over the same period
in 1885. And dividends declared for
the six months were 20 per cent more
than last year. This, 1t must be un-
derstood,. followed q record In 1895.
marked by a so per cent rise in profits
Of about 1900 concerns, compared
with those of 1884.
Receipts Cutrun Profits.
So the momentum of return on capi-
tai invested in business is increasing.
But In many cases, an expansion in
gross receipts is in contrast to a fall
ing unit of profit on turnover.
A striking example of this is given
in the recently published annual re-
port of the Great Atlantic & Pacific
Tea Co. of America. In the IL months
to February 20, 1886, this closely held
Continued on Third Page.)
,rne IN Whont.