ANALYSIS OF TOBACCO GROWERS' ASSOCIATION 79 



FINANCING 



The membership fee, due and payable upon entrance, was $3. To 

 facilitate the sign-up the association would accept notes in lieu of 

 cash payments for the amount of the membership fee, or it would 

 charge the amount against the account of the member and deduct 

 it from his net returns when he delivered tobacco to the association. 



Beside the fund from membership fees, which was used to meet 

 the expenses of organization, the association had no funds with 

 which to begin operation. The organization expenses, according to 

 the audit report February 7, 1924, were as follows : 



Legal expenses $17,250.00 



Field service 160, 448. 26 



Directors' fees and expenses 2, 842. 24 



Executive salaries 29, 213. 30 



Employees' salaries 12, 988. 94 



Traveling expenses 1, 816. 07 



Interest paid 7, 405. 00 



Gross organization expense 231, 963. 81 



Within two or three months prior to the opening of the markets 

 and the receiving of tobacco, a sufficient sum of money had to be 

 available to purchase supplies, operating equipment, and all other 

 articles necessary to enable the association to receive the large volume 

 of tobacco. 



The problems of financing of the association fell under three main 

 heads: (1) Financing advances to farmers for green tobacco deliv- 

 ered; (2) financing redried stored tobacco; and (3) financing the 

 sales of tobacco from the time hogsheads were delivered to the cus- 

 tomer until it was finally paid for. Sometimes a period of 30 to 60 

 days elapsed before final payment was received. 



All of the association receipts of tobacco of the same type and 

 grade were to be put in annual pools. Upon receipt of the mem- 

 bers tobacco, it was graded by the grader of the leaf department and 

 commingled with tobacco of the same type and grade of other mem- 

 bers. The member was given an advance payment on the basis of 

 grade and weight and was issued participation certificates showing 

 the amount paid and the quantity and grade of tobacco delivered. 

 It was necessary to make these advance payments to members im- 

 mediately upon their delivery of green tobacco. This presented a 

 most serious problem as many of the bankers, who professed to 

 know something about tobacco, maintained that green tobacco was 

 not good collateral because of the danger of rapid deterioration. 

 This argument was used for refusing to make loans to the associa- 

 tion, notwithstanding the fact that it was the common practice to 

 loan large sums to leaf dealers for the purpose of buying tobacco 

 in exactly the same form. 



In some cases this argument was sincere, but frequently it was 

 used as an excuse to avoid lending money to the association in order 

 not to displease some influential depositors and customers of the 

 banks. Considerable opposition to the association existed among 

 financial institutions throughout the entire territory, especially on 

 the part of the large and important banks. It was necessary to 

 obtain a large amount of the preliminary money from the friendly 

 country and city banks in the form of short loans, issued entirely 



