RURAL CREDITS 745 



239. STORE CREDIT IN THE SOUTH 1 

 BY LEWIS H. HANEY 



A majority of the tenant farmers find in the country merchant 

 their chief source of credit; and store credit and crop mortgage 

 arrangements form a dark place in the Texas farm credit system. 

 Virtually all negro tenants, and 75 per cent to 90 per cent of the white 

 tenants, foreigners and the best black-land tenants excepted, regularly 

 depend upon advances of credit from the local storekeeper for food, 

 clothes, and various supplies, and give mortgages on their crops as 

 security. Probably less than 10 per cent of farm owners are accom- 

 modated in this way, and the percentage of white tenants seems to be 

 on the decrease in most sections. The nominal interest rate is always 

 10 per cent. 



The system usually works as follows: At the end of the year those 

 who have secured advances on a crop mortgage have little or nothing 

 left. One of them will go to his merchant about February i, and 

 ask for credit until he can make a crop in the fall. The merchant will 

 agree to extend a certain amount of credit in return for a mortgage 

 on the prospective crops of the tenant and any other property which 

 he may own which is often nothing. Often the acreage in cotton 

 is considered, and whites may be allowed about $5 an acre and negroes 

 from $3 . 50 to $4 . oo. Generally, however, the amount is not formally 

 figured in this way, but a maximum allowance per month is set, being 

 about $30 for whites, and somewhat less for negroes. The amount 

 varies with the community, and may run up to from $60 to $75 a 

 month in a German community. As low a limit as $15 may be set. 

 It depends on the character of the tenant and the number of his teams. 

 The aggregate amount for the season, then, is the product of the 

 monthly allowance and the number of months, say nine months. The 

 character of the security is indicated by a crop mortgage form which 

 accompanies the farmer's note. 



This crop mortgage system is satisfactory to no one but the dis- 

 honest storekeeper not all storekeepers are dishonest. The interest 

 is nearly always deducted in advance, and it is almost universally 

 complained that the borrower is overcharged for his goods. If the 

 farmer borrows $300 he gets only $270 in cash, and is given the worst 

 bacon and flour at the price of the best. Once the mortgage is given, 

 the tenant becomes the storekeeper's man; for he must depend on 



1 Adapted from American Economic Review, IV (March, 1914), 50-55. 



