4 BULLETIN 216, U. S. DEPARTMENT OF AGRICULTURE. 



From careful observation it appears that in North Carolina most 

 of the loans on cotton are made by banks at a rate of from 6 to 8 per 

 cent. The average would doubtless be 7 per cent or less. These 

 same banks charge 8 per cent or more for ordinary loans on personal 

 security or real estate. In Georgia the rate on loans on cotton ranges 

 from 7 to 10 per cent. The average is probably about 8 per cent. 

 This refers to comparatively small loans made by banks to individuals 

 and small companies. Doubtless many of the Georgia cotton com- 

 panies obtain money at the rate of 6 per cent. The rate on personal 

 notes in Georgia ranges from 8 to 12 per cent, with an average of not 

 less than 9 per cent. In both States the interest charged on store 

 accounts (which is usually included in the selling price) ranges from 

 10 to 35 or 40 per cent. The average is not less than 20 per cent. 

 All these facts show that in both States loans can be obtained when 

 cotton is offered as collateral at a much lower rate than when per- 

 sonal security is given. 



It can readily be seen that one of the greatest needs of the cotton 

 farmer is to get away from the present credit system. Many, es- 

 pecially those of the tenant class, pay the supply merchant an ad- 

 vance of from 25 to 35 cents on a dollar's worth of supplies, and these 

 supplies are actual necessities. These accounts ordinarily run from 

 six to eight months. Such exorbitant rates of interest would be 

 disastrous to any class of people. When the crop is harvested the 

 farmer disposes of his cotton and settles his accounts with the pro- 

 ceeds, provided, of course, that he receives sufficient funds for this 

 purpose. Then it is usually necessary for him to mortgage his next 

 year's crop to the supply merchant in order to obtain credit, which is 

 necessary to enable him to live while the crop is being made. While 

 it is difficult to see how this situation can be remedied, owing to 

 the fact that these tenants have no means of living while the crop 

 is being made without trading with supply merchants, it does seem 

 that the situation would be improved greatly by establishing a 

 system of warehouses and encouraging the tenants to store such 

 cotton as is not absolutely necessary to settle their accounts. If 

 this plan should be pursued for two or three years, while economy 

 in living was exercised, many could eventually free themselves from 

 the present system. 



The merchant is almost as helpless as the farmer. He advances 

 supplies while expecting cotton to bring a fairly good price. In 

 most cases he has bought his stock on time and can not meet his 

 own obligations until the farmers' accounts are paid. Whenever 

 the price is so low that the farmer fails to meet his obligations, the 

 merchant is likely to be seriously embarrassed. Late in 1914. for 

 instance, many farmers refused positively to sell their cotton, and 



