Evening Republican, Volume 20, Number 298, Rensselaer, Jasper County, 15 December 1916 — Effect of Method and Character of Farming on Loans [ARTICLE]

Effect of Method and Character of Farming on Loans

Washington, •D. C Bankers are more and more requiring of farmers who Wish short-time loans, statements as to their business similar to tfiose that are required of merchants and manufacturers. In certain cases bankers supply farmers with specially' prepared blanks or rate sheets which the farmer is required to fill out before his application for a loan is considered. In discussing this practice the writer of U. S. Department of Agriculture Bulletin No. 409, “Factors Affecting Interest Rates and Other Charges on Short-Time Farm Loans,” says in part: “One important purpose of the rate sheet is to show how far the farmer devotes his energies to raising a single crop, or how far he diversifies his # farming and gives attention to the raising of foodstuffs for his family and feed for his animals. If, for example A has a garden and raises enough vegetables and fruit to supply the family needs, if he keeps enough poultry, pigs, and other live stock to meet the requirements of his household for eggs, meat, milk and butter, if he provides enough pasture, hay and fodder to feed his live stock he has this advantage, that when the cash crop, whether cotton or grain, is ready for sale in the fall, it is not tied up with a lien to meet a season’s advance for food or feed. He is in a position, therefore, to sell his cash crop whenever the marketing conditions are favorable. The relatively favorably position of such a fanner assists him in commanding the confidence of lenders. "On the other hand, consider farmer B, who comes to the local merchant and makes credit purchases of bacon, cornmeal, and canned goods for table use, and who goes back to his farm with a bale of hay or a sack of feed in his wagon box. In his cotton field there are patches where the yield is poor because of low soil fertility and indifferent methods of cultivation. The only enterprise on the farm is cotton growing and this crop is mortaged'in advance to supply the food and feed purchased in town and consumed on the farm.- Farmer B has little if any credit at the bank. He gets a limited store credit on an advancing basis from a local merchant. His is the most erpensive kind of credit and probably he is the farmer who is me least able to pay for it. Responsible for the One-Crop System “In some regions the lender even more than the farmer is responsible for the continuance of a one-crop system of farming. There is especially true where bankers refuse to extend credit to farmers except on the basis of a single crop, such as cotton in the Siouth or a cereal crop in the North. Such a mistaken policy' can be corrected only to the extent that the banker realizes the evij effects of one-crop farming and undertakes to cooperate actively with the farmer in the extension of credit on a proper basis. “It is scarcely possible to lay too much emphasis upon the practical importance of the method and character of farming as a factor affecting interest rates on farm loans. Every agricultural region has its own peculiar problems *bf adapting farming methods and practices to local conditions. There are progressive bankers in various parts of the country who realize the importance of cooperation with the farmers in promoting the kind of farming that will be permanently beneficial to the community. This suggests .a common interest between bankers and farmers which should be made the basis for futher cooperative effort. Attitude of the Loan Agency Towaro « the Farm-Loan Business

“In many regions the banks are not accustomed to dealing with farmers to any extent, especially with tenants and croppers, and the latter, therefore, must obtain their loans from other sources. This is especially true in the cotton States, where the system of advances from merchants to farmers still prevails. A few banks are breaking away from this traditional attitude, however. In one community of South Carolina the banks are actively soliciting business wah croppers and renters as well as with farm owners. One of these banks began this policy 15 years ago on the assumption that many small accounts of this character properly scattered would u for the bank than- a few large accounts. The experience of these banks has led them to become more active than ever in tnc extension of their farm-loan business, while the farmers of their vicinity generally are obtaining loans on better terms than those living under similar agricultural conditions elsewhere. “It is realized that the farmers in some sections of the country are accustomed to carrying check accounts with banks and are as familiar with the requirements of banking relations as other business men. There are other regions, however, where many farriers have not had such experience in commercial matters and where the bankers could be of practical assistance in making the farmers better acquainted with banking methods. The banker should re-

member that th* farmer !■ not subject to thje periodic visits of an examiner, requiring that certain matters receive attention promptly within definite time limits. Thia is one reason why farmers do not* always realise the importance of meeting their obligations on specified dates. One plan that has proved helpful* in this connection is to have the bapker give the farmer the benefit .of ample written notice with reference to the maturity of interest or other payments. "Existing banking methods and practices as related to farm loans are often criticised bjr reason of the unwillingness or inability of certain bankers to carry over farm loans until the farmer is prepared to meet his obligations. Complaint is often hejtrd of cases where a banker, with -'arTittle extra effort, could make arrangements to carry over the loan of some farmer patron, but where in fact an apparent indifference to the welfare of the farmer is shown. It is interesting to learn, however, that many bankers manifest exactly the opposite attitude, wind use every resource at their command, including such assistance as they can obtain at larger financial centers, in order to carry over their farmer patrons until such time as payment on loans can be made conveniently.* “Where hanks are active in developing farm-loan business they realize the importance of understanding the requirements of safe and , progressive agriculture and also the of educational work amon* in the interest of improved agriculture. Such knowledge gives the banker a .better understanding of the mferits of farm loans and at the same time tends to raise the standard .of farm-loan paper. These considerations not only make possible a safer and larger loan business for the banker but also lead to a decrease in the interest rates paid by the farmer.”