THE FARMER'S CAPITAL 879 



than if borrowed for buildings. The life of the machinery will be shorter 

 than that of the buildings. In no case should the mortgage be drawn for a 

 period of time longer than the life of the equipment or improvement for 

 which it is negotiated. 



One should be prepared to pay a mortgage when it comes due, or to 

 renew it. If renewal is necessary, the agreement for such should be made 

 at least a year in advance of the date of maturity. 



Extent of Debt Permissible. — The extent of indebtedness depends 

 partly on the man, but to a considerable extent on the character of land for 

 which he goes in debt. Careful observations indicate that good land may 

 justify a larger percentage of indebtedness than poor land, yet we more 

 often find the man of very limited means purchasing poor land and going 

 deeply in debt for it because it is cheap. The young man runs fewer risks 

 in paying a big price for first-class land than he does in paying a low price 

 for run-down land, especially if he must go heavily in debt for the purchase. 

 The one will bring good returns without expenditure for improvements, 

 while the other must be improved before it can be farmed with profit. 

 In this case the poor land requires relatively more working capital than the 

 good land. 



Relation of Banker to Farmer.— In recent years bankers have begun 

 to realize that farming is the first industry of the country, and that the 

 needs of farmers should be cultivated by the bankers. As a result, confer- 

 ences between bankers and farmers with a view of establishing a better 

 relationship between them are frequent. It is interesting to note that the 

 bankers always take the initiative in this matter. The agitation for better 

 systems of rural credit have doubtless had their effect in this direction. 



If farmers are not accorded fair treatment by banking institutions, it 

 is quite possible for them to establish their own credit institutions, just as 

 has been done in many of the European countries. 



Building and loan associations have been successful in aiding home 

 builders in cities and towns. These, with slight modifications, could doubt- 

 less be applied to farm conditions. Such co-operative institutions reduce 

 to the minimum the incidental costs that now often seem exorbitant in 

 negotiating loans for farmers. 



' Working Capital. — One of the greatest needs of farmers in most parts 

 of the country is working capital; that is, money that can be used for the 

 purchase of livestock, equipment, fertilizers, seeds and an adequate labor 

 supply in order to increase to the maximum the efficiency of the farm. For 

 example, the efficiency of labor has been enormously increased by the inven- 

 tion and use of labor-saving farm implements. The time required to 

 produce nearly all of the staple crops has been reduced from 60 to as much 

 as 95 per cent through the introduction of machinery. This has made neces- 

 sary an increase in the working capital of the farmer. 



It is not uncommon to find railroads discarding their old locomotives 

 and purchasing costly new ones, abandoning old tracks and constructing 



