Show SPECULATION SPECULA TION i OR SECURITY Some Historical for Agriculture By y G. G ALVIN CARPENTER Extension Economist Utah State Agricultural College The appearance of prosperity immediately preceding the panic is isso isso isso so deceitful the activity of trade and the upward movement of prices so exhilarating that the torn tornado tornado tornado ado always finds us with every inch of canvas spread all the ports open and the crew fast asleep by Horace M. M White These words of Horace M. M White deserve the attention of all farm fann farmers ers today in Davis county Also a few historical facts from the per per- period iod lod of World War I and its after alter aftermath aftermath math may help in sound financial programs for the future The big rise in farm mortgage indebtedness in Summit county and in the nation came after afterWorld afterWorld afterWorld World War I had ended Farm Fann mortgage loans outstanding in Utah increased from in 1018 to a peak of in 1923 or more than doubled In five live years During this same period farm tarm mortgage loans in the United States as a whole increased from 61 2 6 billion dollars to a peak of nearly 11 billion dollars This was 1 truly an era of reckless farm fi r nance Many farmers were edby ed by the apparent l prosperity and and anticipated that farm prices would continue high enough to enable them to pay payout out When the big in farm prices came in 1921 and again in 1929 and 30 it left hardships all over the nation Many farmers lost their farms and their life savings Other farm fam Lam families did not give up entirely but had to accept lower levels of liv liv- ing to try to meet the heavy finan finan- financial financial cial cia obligations Past history of prices shows that prices which farmers were required ed to pay for goods interest and taxes did not fall as rapidly nor noras noras noras as low as prices they received for their products While prices paid by farmers dropped from per percent percent percent cent of the 1910 14 average in 1920 to in 1932 the prices received by farmers dropped from to 65 during the same period Costs of production change slowly prices of retail purchases remain relatively high taxes and mort mort- mortgage mortgage gage payments freight rates wag wag- wages es Cs rent and interest all move down much more slowly than prices of farm products The ef effects ef- ef effects of these tendencies on agri agri- agriculture agriculture culture are very far Farm mortgage foreclosures in inthe inthe inthe the United States averaged less than 4 per 1000 farms in 1920 With the precipitous fall of farm earnings after 1920 land prices I declined sharply and the number of foreclosures increased to 17 per 1000 in 1924 and reached a high of 39 per 1000 in the depths of the he depression in 1932 It was like the he biblical story of old The seven fat at years were devoured by the I seven even lean years except that the i misery lasted much longer than seven even years Much of this financial difficulty was traceable to the large numbers of persons who paid too high a arice aprice aprice price rice for land and borrowed too much Farmers failed to recognize the he difference current mar mar- market market ket price and the time long-time agri agri- agricultural agricultural agricultural cultural productive value of land It appears that the same situation situations is s developing following World war II IL The real danger period lies ahead Will history repeat itself WHAT IS HAPPENING TO FARM I INCOME Another glance shows that farm falm income in Utah increased rapidly over the war years to a high of in 1945 What have farmers been doing with this in in- increased increased creased income Thus far on the whole Utah farmers have been following a sound and conserva conserva- conservative conservative tive policy of farm finance They have reduced the outstanding farm mortgage indebtedness to nearly in 1945 which is the I lowest since 1917 Utah farmers can be proud of that fact Only one other state in the union Mon Man Montana Mantana tana can show a greater percentage percentage percentage tage reduction of mortgage indebtedness indebtedness indebtedness edness since 1940 Perhaps the soundest way to use income during periods of inflation like new exists is to retire or reduce debts Dollars spent for payment of debts during inflation periods bring greater value than if U spent purchasing goods Prices of goods have in increased creased and the quality may have decreased whereas the amount of reducing term long-term obligations to the original debt remains the same in terms of dollars and cents and anda a dollar applied on its payment has the same value as when the debt was incurred Utah farmers as well as farmers armel's throughout the nation have used much of their increased farm in in- income income income come to purchase war bonds Dur Dur- During During During ing the loan drive agricultural people purchased 20 of all the theE E bonds sold in Utah This is a commendable record which shows that many people are thinking I ahead and want to build up liquid reserves for the future as well as as aid their country in financing the tremendous war effort I Roughly one fourth of all the pictures produced in Hollywood are westerns I |