117 



uncertainty whether it would obtain a sufficient quantity of the 

 1926 crop to justify setting up a receiving system, after a vigorous 

 court battle the court considered it advisable to order receivership 

 and release the growers from their contracts. 52 



This order came as a surprise, as it was generally understood that 

 the court would refuse to grant the petition for receivership. The 

 association's directors and creditors opposed receivership, believing 

 it to be unnecessary and contrary to the best interests of the mem- 

 bers. The suit for receivership is reported to have been instituted 

 mainly by contract violators and others interested in the dissolution 

 of the association. 53 



Several reasons have been advanced in justification of the receiver- 

 ship which, in the light of subsequent developments, should carry 

 considerable weight. The more important of these are the fol- 

 lowing : 



1. Deliveries had fallen to such a small percentage of the crop as to make 

 the continued operation impracticable and uneconomical. 



2. Practically all the tobacco had been pledged as collateral for loans, and 

 there was but little additional collateral which could be used to secure funds 

 to pay the principal and interest upon the obligations of the warehousing 

 corporations, which would soon mature. 



3. With the opening of the 1926 season, the open-market price for tobacco, 

 particularly the Virginia dark-fired, declined so much below the bankers' valua- 

 tions that the interests of the creditors would have been seriously endangered, 

 and it is probable they would have been forced to ask for a receivership. 



CAUSES CONTRIBUTING TO FAILURE 



The association had failed to meet the expectations of its mem- 

 bers, and was discredited throughout the Tobacco Belt. Although 

 financially solvent, it had failed as a marketing organization. Many 

 factors contributed to this failure, but it is difficult if not impossible 

 to assign any of them a definite rank among the causes of failure. 

 Nevertheless it became evident in the study of the association that 

 there were certain factors in the promotion, organization, opera- 

 tion, and conditions surrounding the operation of the association 

 which were of fundamental significance. These factors or causes 

 of failure may be placed under four general headings: (1) Condi- 

 tions among tobacco growers, (2) policies and practices during the 

 organization of the association, (3) mistakes in policies and in 

 management, and (4) market conditions and commercial interests 

 unfavorable to the cooperative marketing of tobacco in the tri- 

 State area. 



Disloyalty among the members was rampant from the beginning 

 of the association, and membership defections increased as the years 

 passed. This failure of the members, whether voluntary or involun- 

 tary, to live up to their contracts was undoubtedly one of the most 

 important causes leading to the failure of the organization. This 

 disloyalty, especially much that occurred during the first years, may 

 be attributed largely to the economic, social, and educational con- 

 ditions of the tobacco farmers in the tri-State area. The per- 

 centage of tenancy is very high: tobacco is often the only cash 

 crop; credit facilities are limited and most unsatisfactory. The 



62 Appendix C. 



63 Previous motions for dissolution had been denied. 



