746 AGRICULTURAL ECONOMICS 



credit, and all his credit is pledged. He, or his trade at least, is 

 regarded as the possession of the merchant who holds the mortgage 

 on his crop. Then, at the end of the season, he is not infrequently 

 virtually compelled to sell his cotton to the storekeeper, and as a 

 result often fails to get its full value. The same is true of the farmer's 

 other market produce, such as chickens and eggs. The total actual 

 interest paid under such circumstances averages at least 20 per cent. 

 On the other hand, the tenant is often a shiftless and unreliable 

 person and the percentage of bad debts is high. In this way a big 

 sum of debt accumulates, and, in order to cut a long debt short, the 

 tenant "pulls up" and leaves the country. All this is true, to say 

 nothing of the social harm done by the continuous planting of a single 

 crop (cotton) which the system demands. 



Here someone asks, Why do farmers ever go to storekeepers? 

 Why do they not get cash from the banks, and buy on a cash basis ? 



The reasons are numerous and cogent, (i) The banks do not like 

 long loans and often refuse to make them; the tenant wants credit 

 for nine months. (2) From August to January it is generally hard 

 to get money at the banks; the tenant wants someone to run him 

 through the whole year. This the storekeeper will do. (3) The banks 

 do not want to make small loans; the tenant wants no other. (4) Too 

 much security is required by the banks; the tenant often has nothing 

 to pledge that is not bought on time. (5) Banks generally will not 

 take crop mortgage security. (6) This kind of credit business requires 

 close local supervision, even to the extent of directing the tenant's 

 farming operations hi not a few cases, and such intimate knowledge 

 and care the banks cannot give. 



In a very real way, however, the country merchants act as the 

 banker's agents in making crop mortgage loans, the business being 

 farmed out to them, as it were. From 5 per cent to 20 per cent of 

 the loans of many Texas banks are made to country merchants, such 

 loans being "largely" or "almost entirely" used to carry farmers on 

 crop mortgage security. The interest paid is usually 8 per cent. As 

 security, the merchants endorse and turn over to the banks the 

 farmers' notes and crop mortgages. They do not, however, receive 

 dollar for dollar on such security. In this way, indirectly, the banks 

 carry a larger part of tenant farmers than would at first appear to 

 be the case. 



About two-thirds of the sales made by hardware and implement 

 dealers to Texas cotton farmers are on time to be paid out of the 



