AGRICULTURAL FINANCE 21 



However, there are a few difficulties encountered in discussing short-term credit 

 which have not been cleared up: (1) What is short-term credit? (2) To what 

 crop year does short-term credit apply? The crop year in which the loan is made, 

 or the crop years during which it is outstanding if it runs for more than 12 months? 

 (3) Another difficulty arises from those studies which ask "How were expenses 

 paid? — Cash, Open Account, or Note?"; namely. What constitutes cash, open 

 account, or note in meeting an expense? 



In the discussion of short-term credit the impression has often been given that 

 the credit was used for one crop season. If that is the case, then practically 

 no one has discussed "intermediate" credit, which is often used for purchase 

 of machinery, tractors, trucks, autos, dairy cows, etc. Unpublished data from a 

 study of credit use by G. W. Hedlund at Cornell shows $105,815 credit on notes 

 during the crop year 1930-31. However, he reports $241,329 outstanding on 

 notes payable at the end of the year. 



Furthermore, credit obtained by open-book accounts or merchant credit is 

 not very well defined. Some have said that accounts which run for more than 30 

 days constitute merchant credit. However, it is the common practice of one of 

 the large grain distributors in this State to make an extra charge if grain is not 

 paid for in 10 days after delivery. 



In applying short-term credit to one particular j'ear, the definition used makes 

 a great deal of difference. If short-term credit is only that which is borrowed and 

 paid off in the same year, the problem is simplified; but what, then, is to become 

 of that credit which is carried along for more than one year, even though it 

 was intended to be repaid in one year? 



In trying to determine the amount of credit used in one year on the basis of 

 how payment was made to meet expenses, the problems are many. In a study 

 made in Massachusetts by Miss J. E. Donley in 1934, it was reported that 0.8 

 percent of the expenses was paid by notes which totaled $9,890. However, of 

 notes outstanding at the end of the year, $48,135 had been made in the year 

 covered by the report on how expenses were paid. In other words, cash had been 

 obtained from notes and paid to meet expenses. Adding up the amount of open- 

 book credit used in a year presents a further problem. If a farmer is always a 

 month behind in meeting his feed bill, does that constitute one month's feed bill 

 of open-book credit, or was all his feed bought on open-book credit? 



The problems do not cease with a definition of terms, application of credit to 

 one year, or determining the amount of credit used. The problem of the survey 

 method and the idiosyncracies of the farmer remain. In a survey, the whole 

 year's business is reviewed in one or two hours' visit. Bills and debts are things 

 which farmers, along with others, wish to forget and when they are paid there is 

 ample justification for putting them out of mind. Great faith is put in surveys; 

 but to believe that a reliable figure on all the credit transactions of a farmer's 

 business for a year can be obtained in this way, strains faith in the survey's re- 

 sults to the breaking point. 



Since this study is based on a personal interview survey, an inventory of credit 

 outstanding as of March 1, 1941, is depended upon to determine credit use. 

 Instead of trying to determine what constitutes short-term credit, this classi- 

 fication was used: notes, open-accounts, unpaid taxes, past-due interest and /or 

 principal payments on mortgages, and loans from life insurance companies se- 

 cured by life insurance policies. The total amount of these types of credit out- 

 standing is shown in Table 26. 



The average amount of outstanding debt other than mortgages was $715. 

 However, at least 70 percent of the farms did not owe this amount. About a 



