ANALYSIS OF TOBACCO GROWERS' ASSOCIATION 31 



to the sale of the crop. This is especially true of the landless pro- 

 ducers who have no security other than the crop. 



A survey of 361 farmers in the piedmont and coastal districts of 

 North Carolina and South Carolina shows that of this number 73 

 per cent of the owners and 87 per cent of the tenants used short-term 

 credit in 1926, and that the credit given on the two storable cash 

 crops (cotton and tobacco) was 39.3 per cent of the value of these 

 crops for the owners and 44.1 per cent for the tenants. 12 In other 

 words, over three-fourths of the tobacco and cotton farmers reporting 

 borrowed about 40 per cent of the value of their cash crop on short- 

 time credit for living requirements and to enable them to produce 

 and market their crops of the current year. 



A feature of considerable importance is the relationship between 

 the farming population and the time merchant. The credit situation 

 in the Southern States has frequently been described by writers and 

 has been roundly condemned by all. The time merchants have been 

 severely criticized, but it is doubtful whether they as a class are as 

 antagonistic to the interests of the farming population as they are 

 often depicted. They are probably just as much a product of the 

 prevailing conditions as are the tenant farmers. 



It is admitted that the crop lien is the curse of the southern farmer, 

 but it is extremely doubtful whether it has benefited either the time 

 merchant or the banker. In many areas of the South, because they 

 obtain their cash income during about two months of the year when 

 their crops are sold, the farmers depend upon the time or supply 

 merchants for household or farm requisites during six or eight months 

 of the year. The economic function of the time merchant is thus to 

 supply the farmers (usually tenants and croppers, but frequently 

 owners as well) with goods on credit. These goods are usually paid 

 for as soon as the annual cash crop is sold. If the season is a poor 

 one, owing to adverse weather or other conditions, the time merchant 

 frequently has to bear very heavy losses, which even the high rate 

 of interest charged on goods sold on credit fails to cover. In a re- 

 cent study conducted by the Bureau of Agricultural Economics it 

 was found that the credit merchants, as a group, suffered very heavy 

 losses in 1920-21, and they are now making a determined effort to 

 sell on a cash basis. Even in the more prosperous years of 1923 to 

 1926 it was found that in some areas losses on credit sales to farmers 

 exceeded the interest charges. 



The rate of interest charged must needs be high on account of the 

 risk involved. In a survey of North Carolina (7, p. 32) it was found 

 that the annual interest rate was from a little more than 6 per cent 

 to as high as 34 per cent of crop lien credit for the colored cropper. 

 The average cost of short-time credit for the whole State was found 

 to be more than 25 per cent. When a crop produced under a crop 

 lien is marketed it is done under the control of the holder of the crop 

 lien, who tries to collect as soon as the annual cash crop is sold. 



This prevalence of crop liens held against the members of the asso- 

 ciation was a large factor in causing nondelivery. The creditors, 

 desiring settlement, were influential in many cases in encouraging or 

 compelling their debtors to sell outside the association, to purchasers 

 who would pay immediately and in full. 



"Division of Agricultural Finance, Bureau of Agricultural Economics. 



