AGRICULTURAL FINANCE 35 



combinations of factors that would assure Increased farm returns. After long 

 and careful investigation he concluded that there were none that were dependable 

 in all cases. The same is felt to be true of loan repayment, especially since it 

 rests in large measure on farm rrvanagement operation. 



Loans are necessary and it is necessary that most of them be repaid. ' If a 

 creditor prefers repayment in cash and not by the value of the collateral, he 

 should then try to measure the chances for sufficient income and to judge the 

 integrity of the borrower. Farm management factors of success will help to 

 measure chances for income. The sociologist and the psychologist need to be 

 called on to determine the integrity of a farmer. 



SUMMARY, CONCLUSIONS, AND SUGGESTIONS 



It is difficult to judge the financial condition of farmers In Massachusetts on 

 the basis of a one-year survey. The Income on each farm can vary considerably 

 from year to year. The amount of income, with such things as gifts and the 

 spending habits of the farm family ruled out, determines the direction which the 

 farm financial position will take. One year's figures for this factor are inadequate. 

 However, judging from the amount of debt, of assets, and of the relationship of 

 the two, it appeared from this survey that roughly 50 percent of the farmers were 

 doing well, 30 percent were getting along, and 20 percent were In poor financial 

 condition. 



Poor credit practices were being used, but not by a large percentage of the 

 farmers. The worst practice was borrowing from so-called "personal or house- 

 hold finance companies" whose Interest rates are 30-35 percent per year. About 

 2 or 3 percent of the farmers were doing this. Installment buying with interest 

 rates ranging around 12 percent was another less desirable practice used by about 

 15 to 20 percent of the farmers. The use of open-book accounts with higher 

 prices for purchases was another undesirable practice. It was not known how 

 many were paying higher prices because they used open-book accounts. 



The financing of operating losses presented one of the more difficult problems 

 in farm financing. Crop failure, livestock disease, family sickness, price dis- 

 parities, etc., may cause dollar losses which are hard to repay. Although such a 

 loss can occur In one year, it usually takes several years to repay. If credit Is 

 used in financing current operations and this credit Is written for payment In 

 one year, the farmer may get a poor credit rating from such losses, through no 

 fault of his own. The separation of this group, which suffers losses through no 

 fault of their own, from the farmers who under no conditions can operate profit- 

 ably needs more attention. 



The farm credit policy appears to be that ample funds at low cost should be 

 available to all who want to use the funds on a farm. Some effort is made to see 

 whether the type of farming can be profitable. However, It does seem as though 

 more attention should be paid to the entire economics of farming in the area around 

 the farm. For instance, in an area which for profitable farming requires a Class I 

 milk market. It seems undesirable to finance a dairy farmer If there is already a 

 50 percent surplus In that area. 



Not only should the economics of the aurea be examined before making a loan, 

 but also the qualifications of the farmer need attention, even though it is felt, 

 particularly with mortgages, that the loan is based on the money value of the 

 farm. Those who are raaking loans to farmers may say that farmers' qualifica- 

 tions are considered. The degree of success even in mortgage repayment may be 

 high. However, loan repayment should be higher than It Is at present. Industrial 



