OCR Text |
Show Financing1 the Farmer. The Federal Government is establishing es-tablishing many agencies in its efforts ef-forts to assist agriculture to a permanently perm-anently stabilized basis upon which the farmer can make a reasonable profit out of his operations. Th? Production Credit Corporation is designed de-signed to make credit facilities a-vailable a-vailable to the farmer upon reasonable reas-onable terms. As explained by William Wil-liam I. Myers, Governor of the Farm Credit Administration, it works as follows: A few fanners have attempted to sell their credit on the central money mo-ney markets where the cheapest rates are obtainable. To do this would cut many dollars from farm expenses, which is Just as effective as obtaining more income. To sell successfully on the central markets, the farmers have found they must cooperate and pool their products Into volumes large enough to attract buyers and to give them a voice in the market. The individual individu-al is usually lost In the large markets. mar-kets. But he can cooperate with his neighbors in setting up a local credit cred-it plant, wheh will ship his credit to the darge money centers to be sold at the best possible price, which, to the farmers, means the lowest interest in-terest rate. - When farmers have wanted to sell their products cooperatively, they were generally faced with that dreaded task of raising money to build the milk plant, the potato grading and storage warehouse, the fruit packing shed, or the grain elevator. el-evator. Many such enterprises have been abandoned because the capital capi-tal was not available. Under recent ' legislation, the farmers find no such difficulties in setting up their local credit cooperatives: cooper-atives: for the Production Credit Corporations, organized in each land bank district, provide the Initial In-itial capital for this local organization, organi-zation, known as a production credit cred-it association. The corporation is. in reality, a cooperative holding company which organizes, capitalizes, capital-izes, and supervises its local organizations. organ-izations. The farmers are required to provide pro-vide part of the ultimate capital. They must own 5 per cent of their loans in stock of the association. In this way, the members of each credit association own about one-fifth one-fifth of its capital and the corporation corpor-ation owns four-fifths. Such an arrangement is accomplished accomp-lished by the use of two classes of stock; A stock and B stock. The A stock of the association is non-voting, is preferred upon its liquidation and is bought by the corporation. Each holder of B stock is entitled to one vote. This stock can be held only by active borrowers. Both stocks share equally in dividend payments and neither carries double dou-ble liability. These credit associations will, market mar-ket production credit only, and Just one grade of that, the best. By production credit is meant loans for the purchase of feeder and stocker cattle, sheep and hogs, for increasing increas-ing or improving breeding herds and flock and dairy herds, for producing pro-ducing staple crops, and fruits, for poultry production and for the mau-y mau-y other productive farm enterprises. Mort of the credit will run from 3 to 12 months, but such loans as those on breeding and dairy cattle will be renewable. The maximum period is for three years. By the best grade of credit is meant not only that the loans must be adequately secured, that the borower must present a good financial fi-nancial statement, and that he must have a definite plan of repayment, but, in addition, that borrowers must have a good moral character. The local member of the association associa-tion takes his application for a loan, his note, his credit statement and the mortgage on acceptable chattels to the secretary-treasurer of his local lo-cal association. The losal inspectors inspect his security to see if it comes up to the grade requirements. The local loan committee also passes upon up-on it. If the loan is approved, the note is then sent to the central sales agencythat ag-encythat is, the intermediate credit cred-it bank to be sold. There, agan, the loan is inspected and, upon approval, ap-proval, the full sales price that is, the face value of the note is returned re-turned to the local association and to the borrower at once This central sales agency accumulates accum-ulates these notes until it needs more funds, and then uses them to secure an issue of its short-term notes or debentures. In reality, it is marketing these farmers' notes it has accumulated. The notes have been selling for a good price, or to be more exact, a low rate of interest inter-est about 2 per cent. What are the marketing charges? The product sold for 2 per cent interest in-terest or discount, and the intermediate inter-mediate credit bank charges 1 per cent for selling it, which makes the total charge 3 per cent. Then the local association adds 3 per cent for Its services, which makes the total interest charge to the borrower bor-rower 6 per cent. These interest charges are not paid, however, until the note is due. In addition, the cost of inspection is borne by the borrower. Just as the dairyman pays for having his herds tested and his barns inspected. |