44 BULLETIN 1224, IT. S, DEPARTMENT OF AGRICULTURE. 
investments practically exist for these classes of potential sellers 
of land? It is said that these classes do not know of other invest- 
ments, or that such investments are not made readily available 
for them as they are for the city investor, or that they are afraid to 
invest in bonds which they do not understand. On the other hand, 
it is argued that they do know farm lands and that they will keep 
their capital invested in them even though better investment oppor- 
tunities exist elsewhere. In other words, that there may be better 
investment opportunities, but practically they do not exist for this 
class of retired farmers. 
This argument overlooks the fact that these retired farmers do 
know farm mortgages just as well as they know farm lands. In 
almost all agricultural communities there is a large demand for 
mortgage loans. The retired farmer is in a better position than 
anyone else to know the value of farms offered as security for such 
mortgage loans. Consequently, he can make a loan at less risk and 
expense than any bank or insurance company, hence can afford to 
make loans at lower rates of interest than such institutions can 
offer. The competition of insurance companies or Federal farm 
loan banks can not, therefore, close this line of investment to him. 
Since these institutions do place a large volume of loans in all the 
major agricultural regions of the country, it would seem that the 
demand for such loans is considerably greater than can be supplied 
by farmers who have funds to invest. This one line of investment 
alone, therefore, is large enough to make it unnecessary for the re- 
tired farmer to keep his capital tied up in farm land if there seems 
to be a greater advantage in selling his farm than in continuing 
to lease it. 
The retired farmer who thinks that land is yielding a return that 
is too low, taking account of anticipated increases in income, in 
terms of what he could get by investing in farm mortagages, will 
sell his farm and invest in these mortgages. In many cases, in fact, 
the sale of the farm will carry with it the opportunity to take a 
mortgage on the place. A large number of purchasers can not pay 
for a farm outright. They must obtain credit from some source 
and the seller of the farm has the opportunity to furnish this credit. 
With these considerations in mind, it is difficult to see how the 
anticipated rate of return on farm land, that is, the rate of capitali- 
zation, can get very far away from the mortgage rate of interest when 
farm mortgages are readily available to a large class of potential sellers 
of land. If buyers bid up the price of land because they are willing 
to accept a low rate of return on their investments, some of these 
retired or retiring farmers will decide to sell rather than lease their 
farms. This will increase the supply of land for sale and thus hold 
down its price. If, on the other hand, farm land tends to offer a 
better return than farm mortgages, fewer farms will be offered for 
sale, which will increase the price. 
It may be true that some of these retired farmers will not respond 
in this way to changes in the rate of return on farm land. Some of 
them, for instance, may be holding their farms for a son or son-in-law, 
hence will not consider selling their farms. It is not necessary that 
all of them should. A few additional farms offered for sale in any 
given year will be sufficient to hold down the price. At any given 
