1
phate (DAP) to be the most active of this group. Mixed solids fell be- hind a year ago in production and domestic disappearance because of cutbacks in chemically mixed goods. Prices, most companies agree, have firmed at levels predicted earlier in the season. International Minerals and Chemical, which boosted prices 11.5% across the board at the retail level in January, says that prices are generally holding up. Despite adverse 1969 financial re- sults^agricultural chemical earnings were 38 cents per share lower than in 1968—Grace says it is in "a favorable position." Grace adds that ammonia product distributors are probably los- ing $15 to $20 per ton on ammonia delivery to the farm gate at today's depressed fertilizer prices of $70 to $75 per ton. It also estimates that DAP delivered to the farmer costs $80 to $90 per ton, compared to the cur- rent price of $75 to $80. Policies. Fertilizer's improved fortunes are the result not only of strengthened prices but also of man- agement's tightened controls to pre- vent regional managers from indis- criminately cutting prices and extend- ing credit to meet competition in the field. Despite some improvement, Mr. Wheeler maintains that the industry as a whole doesn't have the right kind of pricing to guarantee a reasonable return on investment. Last year, fer- tilizers were the major industry in red ink, he notes. The biggest headache for fertilizer producers this spring has not been prices, however, but transportation. Industrywide there has been a critical shortage of rail cars and trucks, especi- ally for anhydrous ammonia. According to one major fertilizer producer, transportation was "horrible in rails." Slow movement of potash out of Saskatchewan and phosphates out of Florida was particularly crip- pling to delivery. One southeastern producer tells C&EN that high trans- portation costs might even determine the success of the season. At one time fertilizer companies could afford to build storage terminals close to use points, but today many companies can't afford additional costs. Teamsters' wildcat strikes also added to the transportation problem. De- liveries were severely affected in northern Ohio and Michigan. "Transportation problems are going to be with us for some time to come," acknowledges Mr. Wheeler. Later this year the institute hopes to initiate a fact sheet on transportation in the industry designed in part to help solve the industry's growing logistics problem—the necessity to move most of the year's output in a single six- or eight-week period in the spring. BUSINESS PERSPECTIVES By DAVID M. KIEFER, Senior Editor Getting a fix on an economic what'sit Just what is it, this present soggy state of the U.S. economy? A pause? A readjustment? A recession? Or—breathe the word softly—an incipient depression? For many, to be sure, the question verges on academic nit-pick- ing. If you work-or worked-for the auto industry in Detroit, the aerospace industry on the West Coast, or a Wall Street brokerage firm, what you are experiencing now certainly feels like a recession. In the main, too, business obviously isn't what it was last summer, as even a casual glance at any number of common economic indicators reveals. Thus a clear consensus is building among both businessmen and eco- nomic analysts that the current condition of the economy does indeed qualify as a full-fledged recession. No broad agreement exists, of course, as to exactly how a reces- sion is recognized. One frequently heard definition: A recession is characterized by a decline in gross national product, measured in con- stant dollars, for two consecutive quarters. But this, in fact, is merely a handy rule of thumb of obscure origin, backed by limited logic and tending toward gross oversimplification. It is difficult, moreover, to get much of a fix on a business cycle other than by comparing it with previous cycles. This is easier done with hind- rather than foresight. No two business turns run quite the same course. Hence the length or severity of a downtrend can't be pre- dicted merely by overlaying charts of an earlier experience on current trend lines. This is especially so now. Nearly a decade has passed since the U.S. economy last went through a full-scale recession. Mean- while, the economy has changed. No wonder that the present decline fails to fit past patterns. In contrast to the sharp drop in new investment that typically has accompanied past recessions, for example, this year a strong increase in capital outlays is being planned by businessmen. (Many observers are skeptical of current spending estimates, however, in light of sagging out- put and growing overcapacity.) While industrial production has been drifting slowly downward since last July, output is off by less than 3%, a fourth of the drop averaged by previous postwar declines. Unemploy- ment, while climbing steeply since the end of the year, also is still much less severe than in any of the previous recessions. Manufacturers' inventories continue to rise, although at a much reduced rate; prior downslides have always been marked by liquidation. For these reasons, many economists still look for only a moderate dip in economic activity, followed by an upswing before the year is over. Their argument is buttressed by prospects for continued growth in consumer buying power stimulated by lower taxes, larger government and business payrolls, and increased Social Security benefits. Yet much of this same evidence can be interpreted to indicate that the current correction has yet a considerable way to run. And all the more optimistic forecasts for renewed growth by year end could be overridden by an erosion of national confidence or a sapping of nerve- perhaps already evident in the stock market—stemming not just from economic factors but from even less predictable psychological, social, or political pressures as well. The economy, after all, does not operate as a closed system divorced from noneconomic influences. In any event, what is clear from current statistics is that the busi- ness climate already has deteriorated well beyond what the Administra- tion had planned when it was working out economic policy for the year. The economy was slower to react than had been expected when federal policy began applying the brakes to expansion a couple of years ago. Does this suggest that its response now to pressure on the accelerator may likewise be laggard? MAY 25, 1970 C&EN 23

Getting a fix on an economic what's-it

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phate (DAP) to be the most active of this group. Mixed solids fell be­hind a year ago in production and domestic disappearance because of cutbacks in chemically mixed goods.

Prices, most companies agree, have firmed at levels predicted earlier in the season. International Minerals and Chemical, which boosted prices 11.5% across the board at the retail level in January, says that prices are generally holding up.

Despite adverse 1969 financial re-sults^agricultural chemical earnings were 38 cents per share lower than in 1968—Grace says it is in "a favorable position." Grace adds that ammonia product distributors are probably los­ing $15 to $20 per ton on ammonia delivery to the farm gate at today's depressed fertilizer prices of $70 to $75 per ton. It also estimates that DAP delivered to the farmer costs $80 to $90 per ton, compared to the cur­rent price of $75 to $80.

Policies. Fertilizer's improved fortunes are the result not only of strengthened prices but also of man­agement's tightened controls to pre­vent regional managers from indis­criminately cutting prices and extend­ing credit to meet competition in the field. Despite some improvement, Mr. Wheeler maintains that the industry as a whole doesn't have the right kind of pricing to guarantee a reasonable return on investment. Last year, fer­tilizers were the major industry in red ink, he notes.

The biggest headache for fertilizer producers this spring has not been prices, however, but transportation. Industrywide there has been a critical shortage of rail cars and trucks, especi­ally for anhydrous ammonia.

According to one major fertilizer producer, transportation was "horrible in rails." Slow movement of potash out of Saskatchewan and phosphates out of Florida was particularly crip­pling to delivery. One southeastern producer tells C&EN that high trans­portation costs might even determine the success of the season. At one time fertilizer companies could afford to build storage terminals close to use points, but today many companies can't afford additional costs.

Teamsters' wildcat strikes also added to the transportation problem. De­liveries were severely affected in northern Ohio and Michigan.

"Transportation problems are going to be with us for some time to come," acknowledges Mr. Wheeler. Later this year the institute hopes to initiate a fact sheet on transportation in the industry designed in part to help solve the industry's growing logistics problem—the necessity to move most of the year's output in a single six-or eight-week period in the spring.

BUSINESS PERSPECTIVES

By DAVID M. KIEFER, Senior Editor

Getting a fix on an economic what'sit Just what is it, this present soggy state of the U.S. economy? A pause? A readjustment? A recession? Or—breathe the word softly—an incipient depression?

For many, to be sure, the question verges on academic nit-pick­ing. If you work-or worked-for the auto industry in Detroit, the aerospace industry on the West Coast, or a Wall Street brokerage firm, what you are experiencing now certainly feels like a recession. In the main, too, business obviously isn't what it was last summer, as even a casual glance at any number of common economic indicators reveals. Thus a clear consensus is building among both businessmen and eco­nomic analysts that the current condition of the economy does indeed qualify as a full-fledged recession.

No broad agreement exists, of course, as to exactly how a reces­sion is recognized. One frequently heard definition: A recession is characterized by a decline in gross national product, measured in con­stant dollars, for two consecutive quarters. But this, in fact, is merely a handy rule of thumb of obscure origin, backed by limited logic and tending toward gross oversimplification.

It is difficult, moreover, to get much of a fix on a business cycle other than by comparing it with previous cycles. This is easier done with hind- rather than foresight. No two business turns run quite the same course. Hence the length or severity of a downtrend can't be pre­dicted merely by overlaying charts of an earlier experience on current trend lines. This is especially so now. Nearly a decade has passed since the U.S. economy last went through a full-scale recession. Mean­while, the economy has changed. No wonder that the present decline fails to fit past patterns.

In contrast to the sharp drop in new investment that typically has accompanied past recessions, for example, this year a strong increase in capital outlays is being planned by businessmen. (Many observers are skeptical of current spending estimates, however, in light of sagging out­put and growing overcapacity.) While industrial production has been drifting slowly downward since last July, output is off by less than 3%, a fourth of the drop averaged by previous postwar declines. Unemploy­ment, while climbing steeply since the end of the year, also is still much less severe than in any of the previous recessions. Manufacturers' inventories continue to rise, although at a much reduced rate; prior downslides have always been marked by liquidation.

For these reasons, many economists still look for only a moderate dip in economic activity, followed by an upswing before the year is over. Their argument is buttressed by prospects for continued growth in consumer buying power stimulated by lower taxes, larger government and business payrolls, and increased Social Security benefits.

Yet much of this same evidence can be interpreted to indicate that the current correction has yet a considerable way to run. And all the more optimistic forecasts for renewed growth by year end could be overridden by an erosion of national confidence or a sapping of ne rve -perhaps already evident in the stock market—stemming not just from economic factors but from even less predictable psychological, social, or political pressures as well. The economy, after all, does not operate as a closed system divorced from noneconomic influences.

In any event, what is clear from current statistics is that the busi­ness climate already has deteriorated well beyond what the Administra­tion had planned when it was working out economic policy for the year. The economy was slower to react than had been expected when federal policy began applying the brakes to expansion a couple of years ago. Does this suggest that its response now to pressure on the accelerator may likewise be laggard?

MAY 25, 1970 C&EN 23