THE PRESENT COTTON SYSTEM 179 



assumes, then, include risk of production hazards of the crop, 

 and market risks for the sale price of the crop when they 

 are ready for marketing. In a one or two crop system of agri- 

 culture, the assumption of these risks is pure speculation. 

 It is believed that this factor of risk is a major cause of the 

 high cost of credit extended by time merchants. 14 



That the need of the grower of cotton and his lack of 

 alternatives enable the supply merchant to charge higher 

 credit prices must be admitted. On the other hand, if 

 such business enterprises were uniformly successful, com- 

 petition to secure high returns on investment would lead 

 to a lowering of interest rates. 



The Federal Farm Loan Act and the Joint Stock Land 

 banks furnish only long-time credit. This form of credit 

 on land enables an owner to improve his farm, or an 

 industrious farmer to purchase land. It, however, makes 

 no provisions for short-time credit needs of groups such 

 as cotton growers. 



DIVERSIFICATION 



When one seeks to ascertain why growing cotton should 

 require so large a percentage of credit, he is confronted 

 with two types of answers. One answer explains the situa- 

 tion in terms of human defects incompetence and lack 

 of thrift and industry. Another answer may be found in 

 the nature of cotton and the system under which it is 

 produced. The cotton farmer receives his income all in 

 a lump sum at the end of the season. Students of budgets 

 will agree with agricultural economists that "if the year's 

 income is all received at one time, it is difficult to make 



"Op. cit., p. 83. 



