28 FOREST VALUATION 



Since the average farmer with his family can not be engaged 

 at less than $500 per year and usually demand part or all the gro- 

 ceries for the household paid by the employer it is evident that the 

 above three and a half per cent is too high and it is doubtful if two 

 per cent is actually made. 



This fully agrees with the findings of Cornell Agricultural Col- 

 lege and with bulletin 41, United States Department of Agriculture, 

 1014, which shows that the interest made on selected farms in Indi- 

 ana, Illinois and Iowa in 1911 was about three and a half per cent 

 and in cash rent system less than three per cent. It is evident that 

 many farmers make no interest at all and do not even make the com- 

 mon farm hand wages. 



Whether this fact is explained by saying that farm products 

 are sold too cheaply or that cost of production is too high is imma- 

 terial, the fact remains that the rate actually made by the most im- 

 portant industry of the country and the industry most closely re- 

 lated to forestry is less than three per cent. In Germany farming 

 paid about two per cent, in some provinces only one and a half, in 

 1899. 



b. What other kinds of business actually make is little known 

 and much disguised. If the losses and gains of our stores, factories, 

 railways, etc., could be known, and if the natural wealth, timber, 

 coal, etc., could be deducted and also the entrepreneur's risk and 

 effort, if these could be ascertained, it is doubtful if the business of 

 the country really makes one and a half per cent, even in good times 

 like 1900-1910. 



Generally it is a fact that the current rate paid by the farmer 

 is not made by the farm, it is equally certain that as an average it 

 is not made by other business. To employ or set the current rate as 

 measure, then, would discourage most of our ordinary industries. 



c. What rates a good forest business makes is well illustrated 

 by the state forests of Saxony where the rate actually made has been 

 2.3 to 2.6% for over forty years. Since a great deal of forest prop- 

 erty is assessed on a basis of income and an assumed rate of inter- 

 est this interest rate in Germany frequently is an argument in circle. 



d. Germany today uses an interest rate of 3% or less, in Baden 

 2*/2, in all calculations of values of land, timber or forest. 



e. In adopting an interest rate in forest valuation we have the 

 choice and say : 



i. Adopt a rate which the ordinary forest business can make, 

 which encourages the improvements and methods necessary for a 

 secure paying enterprise. The best measure and basis is the farm 

 business. 



