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farmer produces individually his marketing is also an individual problem. The

same applies to the better and more economical production of his products. Because of the grouping of capital in corporations, they are able to have experts in production, selling, and costs, but because of the small units in farming the individual farmer is prohibited from employing experts to direct his different farm problems on account of the high cost, therefore it must be done cooperatively.

On account of the vital interest of the whole population in securing more effective results in production at cheaper costs the Federal and State Governments are justified in spending money as they do for this very purpose.

A sure marketing program for the farmer can only be worked out on a collective basis. The individual farmer can not become both an expert producer and distributor. If he could, individually, his volume would not, for a single farmer, justify such a program.

It is necessary that he have experts in the distribution of his products, men handling the marketing of many farms, so that the volume will justify the hiring of them.

In sections of the United States we are rapidly developing such a system. The Pacific States are taking the lead. Practically all of the agricultural industries in California are organized. Ninetyseven per cent of all the berry growers in central California are in one organization, 86 per cent of the almond growers in another, 92 per cent of the raisin growers are organized, 83 per cent of the apricot growers, 80 per cent of the prune growers, over 75 per cent of the walnut growers, and 80 per cent of the peach growers. The organizations are now handling products in excess of $250,000,000 annually. Even the egg producers, perhaps the most difficult of all, are successfully organized. They have under contract 2,300,000 hens and will handle over 23,000,000 dozen eggs, and the egg producers under the system of sorting and storing are taking warehouse receipts and, when necessary, going to the banks and borrowing often as much on the receipts as they were formerly getting for their eggs, leaving a margin as additional profit and giving the banker a desirable loan which, if necessary, he can rediscount at the Federal Reserve Bank.

To be successful the cooperative organizations will be made for business only. No politics or social affairs should be allowed to enter, and competent and experienced men must be employed at a salary adequate to engage them, and they must be given scope to operate successfully.

An outstanding example of cooperative marketing in a small way is the development of the Grove City community. Starting six years ago with only five farmers in the community who had purebred cattle on their farms, they have to-day a community with 300 farms on which there are purebred animals worth $3,000,000. This community is completely organized for agricultural development and marketing.

The marketing plan is only two years old and in the past year has sold over $100,000 of purebred dairy cattle. The association is called the Grove City Dairy Cattle Show and Sales Association. No one can become a member unless his herd is tested for tuberculosis and he signs an agreement to represent every animal sold exactly as it is. In case a disagreement occurs between buyer and seller after the sale is made, if it can not be adjusted by them it is referred to the directors of the association, whose judgment is final. This association has created a spirit of fellowship and helpfulness among all of the breeders which is talked about whereever known and has set an example for the whole country.

The association is maintained by a $10 initiation fee and $5 per annum dues, in addition to which, each member contributes 5 per cent of the sale price of cattle sold off the farm for dairy or breeding purposes.

At the present time Mr. R. R. Welch, with a stenographer, handles all of the business of this association, but it is growing so rapidly that an assistant is needed.

So much for the marketing of the livestock. The milk products are also handled cooperatively through the Grove City Creamery.

In 1915, the Federal Government decided to establish a creamery for the purpose of putting into operation on a commercial basis the experiments worked out in their laboratories, and we were fortunate in having it located at Grove City, Pa. The community has invested in the creamery and equipment $125,000, and after the interest on the investment and upkeep and running expense of the plant are paid, the producers share the profits in proportion to the milk furnished.

The farmers of the community are receiving about $300,000 per annum for the milk products sold through the creamery.

THE FARMER'S MARKETS.

With the increased cost of transportation of all kinds a serious problem is confronting the farmer, the expense of getting his produce to markets. Relief, in the way of reduced rates, is a long way in the future. Some other solution must be found, and the easiest solution is the study of local demand, and the accommodation of the farmer to it." A study of Federal and State reports shows that the ordinary farmer is still raising the grains and food products year after year which that community has been raising for years, while the population is growing more dense and an entirely different variety of products is in good local demand. A study of the problem will show the farmer what is demanded at his door and he can supply it without transportation cost and at a profit.

FINANCING THE FARMER.

All of the farmer's problems at some point touch his proper financing, and always the local bank must be his main source of supply, but many times in the past the local bank's resources were not sufficient at crop-moving times and again the farmers' turnover was not rapid enough to give the banker a liquid loan.

Several real financial panics were necessary before we were able to establish the Federal reserve system; now it is considered absolutely necessary. Yet we still need some adjustments to take care of our agricultural interests.

The successful way to handle any problem is to find the man who knows and while knowing is on the ground and can see the progress of the problem at first hand and is in a position to be in constant touch with it. In all of these matters the local bankers are preeminently the men.

There are three kinds of credits which the farmer needs: Longtime credits, intermediate credits, short-time credits.

Until recently the farmer depended for his long-time credits on individuals and mortgage companies, both of which were too expensive and in other ways unsatisfactory.

Individuals and mortgage companies loaned only for three or five years at the outside, making renewals necessary, and renewals are always expensive. Finally in 1916, the farm loan act was passed providing for a Federal Loan Board, with headquarters in Washinglon, which has general supervision of the system. Twelve farm loan banks, in as many districts, each with a capial of not less than $750,000, are provided for.

These banks were organized and are now functioning for the purpose of permitting the farmer to purchase, equip, and improve farm land, or for the purpose of liquidating existing indebtedness on such land.

The loaning capital is raised by the issue of tax-free bonds to an amount not to exceed 20 times the capital stock and surplus, using the farm mortgages as collateral. The Secretary of the Treasury was permitted by a war measure to purchase these bonds, and in 1923 the Government owned over $100,000,000 worth of them.

The same act provides for the organization of joint-stock land banks, with a capital of not less than $250,000. These banks are under the general supervision of the Federal Farm Loan Board and are subject to about the same regulations as are the land banks with the exception that they are privately owned corporations under Government supervision, but the stock is not subscribed for by the Govinent, which makes them to a certain extent similar to national banks. The loans by these banks are not so limited as to purpose as are the loans made by the land banks. The rate of interest charged is not determined by the Federal Farm Loan Board, except that they shall not charge more than 6 per cent. The banks are permitted to issue bonds up to fifteen times their capital stock and surplus. The loans made by the joint-stock land banks and the Federal land banks are made for not less than 5 years nor more than 40. Practically all of these credit banks provide an easy method for the farmer, as the loans are made on the amortization plan.

To provide for the intermediate credits of the farmer, an act was passed on March 4, 1923, known as the agricultural credits act of March 4, 1923.

This act provides for the establishment of two credit organizations, the Federal intermediate credit banks and the national agricultural credit corporations.

Under this act an intermediate credit bank can be established in each of the cities where Federal farm loan banks are located. Each one of these intermediate agricultural credit banks has a capital stock of $5,000,000.

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The stock is Government owned ; and while there is no retirement of it, this act provides that the earnings shall be divided between surplus and the Government.

The purpose of the credit banks is to discount loans made by banks for agricultural purposes. Each bank may issue bonds up to ten times its capital and surplus, and the rate of discount shall not be less than 1} per cent less than the rate charged the borrower.

The bonds issued shall mature in five years, and the banks are examined at least once every year by the Federal Loan Board.

National agricultural credit corporations may be formed by five or more natural persons, but such organization must be approved by the Comptroller of the Currency.

Every corporation must have a capitalization of not less than $250,000, and any member of the Federal reserve system may, with the approval of the Comptroller of the Currency, invest a sum not exceeding 10 per cent of its capital and surplus in the stock of credit corporations. The entire capital stock is to be subscribed by private individuals or corporations, and the Government is not a stockholder and has no direct financial interest whatever in these credit corporations.

Under regulations prescribed by the Comptroller of the Currency, the credit corporations are authorized to discount or purchase notes, drafts, bills of exchange drawn for agricultural purposes which have a maturity at the time of discount of not more than nine months. The loans must be secured by warehouse receipts or other documents giving title to nonperishable and readily marketable farm products, or a first lien on livestock for market or for breeding purposes.

These banks may also invest not over 20 per cent of their capital and surplus in the stock of rediscount corporations organized under this act. They may charge interest at the rate allowed by the laws of the State in which such corporation is located, but not in excess.

Credit corporations may issue debentures with a maturity not exceeding three years to which obligations held by these corporations are held as security. Practically all of the details in connection with the issue of debentures are under the direct control of the Comptroller of the Currency, but the Federal Government assumes no liability for these debentures.

Another feature of the credit corporations is that every credit corporation must keep on deposit with the Federal reserve bank of the district United States Government obligations equal to 25 per cent of its paid-in capital, or 7.} per cent of its indebtedness, depending on whichever sum is the larger.

Some people are of the opinion that amendments to the Federal reserve act permitting country banks having capital of less than $25,000 to become members would help the farmer get his needed credit and would help the banker extend this credit by allowing him to discount with the Federal reserve bank agricultural loans, as the country bank, the bank of smaller capital, is really after all the greatest means of extending credit to the farmer.

Summing up the whole proposition, it seems as though we have now arranged for an adequate plan to finance the farmer for all of his different kinds of credit needs. The machinery is still new and will no doubt require many adjustments.

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To my mind, it seems as though we could have used to advantage more of the credit machinery already in operation and which has been so successfully taking care of the business and manufacturing interests.

To safeguard the system and make it successful it will be necessary to provide some means of interesting the country banker in the system, and if this is done there can be no question about the farmer's needs being taken care of in a safe and sane manner, and the agricultural credit banks will fulfill their mission.

An increasing interest in the problems of agriculture is being shown by the business men and bankers in the larger centers. They are beginning to realize more fully that the prosperity of business depends on the purchasing power of the farmer and that a curtailment of his output means stagnation.

Agricultural production is seasonal, but the farmer's products are consumed the year round, and if they are thrown on the market immediately after harvesting in a lump the market is overbalanced, rhile if they can be financed by the producers or their organizations, the crop can be marketed in an orderly way, thus stabilizing the whole industry.

Agriculture should not be satisfied with anything but the best system of financing, and while there may be many things in our system, as now outlined, which will need revision as it is being practically worked out with the interest taken by the business man, banker, and farmer, and the groundwork so ably placed, the proper financing of the farmer and dairyman is assured. I might say in closing that the American Bankers' Association held their meeting in Atlantic City two weeks ago and one-third of the meeting was devoted to the study of better agriculture. With the interest that is being taken, there is no question but what the financing will be worked out, and there is no question at all but what the financing of the farmer to-day through the banks is very much better understood and very much better looked after than in the past.

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Chairman Miner. According to the rules, gentlemen, Mr. Harshaw's paper is now open for discussion.

Mr. CALDWELL. I would like to ask Mr. Harshaw if the jointstock land banks return any dividends to the borrowers.

Mr. HARSHAW. Not to the borrowers, although the borrowers only get dividends in the farm loan banks on the amount of stock they

Mr. CALDWELL. I was director in one of the farm loan associations Every six months there is a dividend returned to the borrowers in proportion to the profits of the bank of that period. I noticed you didn't mention that in connection with the advantages.

Mr. HARSHAW. It is a stock proposition.

Mr. CALDWELL. It has always seemed to me that any farmer that had a safe loan would always get it through his local bank.

Mr. HARSHAW. He can get it through his local bank, although in many sections the local bank at the period does not have sufficient funds to take care of it unless he has some way of going to the Federal reserve bank, and the Federal reserve banks only take commer

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