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EFFICIEl\TT COOPEF..ATION BET"':'EEN
THE BUSI1'ESS NfAN A11D THE FARMER
Rerr.arks by J. R. Mitchell, Member of the Federal
Reserve Board, at meetings of the Civic and Cormert:;e
Association, of Minneapolis, and the St. Paul .Association,
of St. Paul, November. 14th and 15th, called to consider
the future of agriculture in the Ninth Federal Reserve
District.
These rerr.arks followed an address by Dr .. '"!. J.
Spillman, Consulting Specialist of the Department of
Agriculture, who spoke ·an nA Perrranent Policy for Agriculture in the Northwest 11 •
X-3562
Since I have been a member of the Federal Reserve
Board, now some eighteen months, I have .often been asked just
'vhat
the Board does, and my reply has been that no inconsiderable
part of its time has been spent in answering criticisms of its
policy, and in explaining the scope of its activities, what it
can do and what it cannot do.
withstanding the
But, in addition to that, not-
fact that the Federal Reserve Let was not
created as a panacea for
all financial and economic ills,
since its work reaches to every part
of the country, it is,
nevertheless, the recipient of tales of trouble coming from
every part of the United States.
If the boll weevil has
~otten
in his deadly work in
the cotton belt, we are about the first to be advised of the
fact- and tha boll weevil has been active, with the result
that there is
a short crop of cotton, by reason of which the
growers of the ten million bales are obtaining a
~ood
price,
But the ravae;es of tho boll 'Neevil have not been al togethc:r
without profit., for it i:;; that acourgs \Vhich has made diversification necess2>ry in th0 South and
mac:l.·:;
possible a greater
prosperity.
If there is a drou'?-ht in th: Pe.nhandle section of
Texas , or in New Mexico, "'e kno1·,, of it , and ar J asked how
cattle covered by chattel mortga::c_;s can be:: rr.ov"'d across the
border to Me:x:i co -,rhers thsrc.. is feed.
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X-3562
that if I were the banker hol.dinr; those mortgal?es, I would be
tempted to waive some of the legal tschnicali ties,. p:r:eferring
...
to have mortgages on live cattle anywhera, even in Mexico, than
mortgages on dead ones in Texas.
Again, if the prune and raisin
crop in California is
not in as r;ood a condition as it should be,
w.;;;
know it, and if
there has been an overproduction of potatoes in Arostook County,
Maine, we are told of that.
r'hen one considers the present busin-:;33 situation as
it affects the business rr.an and farmers of thJ Northwest, the
outstanding fact
is that
th~
business recovery which for several
rr:onths has been under way in the industrial East has not been
•
felt to the same extent in the agricultural '"'est.
has been a substantial improvsment in the
business can not be questioned.
~~neral
That there
trend of
The recov2ry began over a
year ago in the textile industry of Now England and has extended to include build in::;, automobil :.:;s, iron and stecl, railroad equipment, and related industries.
nishing
buildin~
of residences
Those industries fur-
rr.aterials have benefittsd by th.;; construction
throu~hout
the country
Thus far the revival has been chiefly industrial in
character, but its
continuanc~
depends upon its 0xtension to
all sections of the country, and
inclusion of
th~
agricultural
particul~rly
com~nities.
ths more complete
There can be no
complete national prosperity unless th-'3 buyinP" power of the
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.X-3562
.,. 3 farmer. is restored.
In the long run, factories can sej.l their
output at profitable prices only when the farmers in turn are
sellin~
their crops at a profit.
How fal' the prices he nceives are out of
the prices
•..
takin~
the
lin~
with
he is compell8d to pay is shm•m by the fact that,
purchasin~
power of the farmer's dollar in
1913
as
100f, at· the present time it is approxi~ately 65 t, only 3t
more than in December,
1921, when
it
was '''Orth but
62f;, the
lowest sines 1313iand a reduction in the pr.;;sent cost of life
necessities to the farmer is at this time far from being in
sight.
and
This can only be
brou~ht
about by a reduction in
wa~es,
ths tendency today is towards hi<;:her rather than towarJs
lower •Na£?-eS.
There is a scarcity of labor today in the citi2s. and
that at a tim0 when industry is
norrral conditions.
ope~atin~
at considerably under
\:hat will be the r csul t wh2n the requirements
of the country restore industry to its full capacity?
It is
X-3562
- 4possible that
the familiar slogan,
supplanted with
11
Back to the
city~· 11
...
13ack to the farm:•, will be
11
Such a movement \'IOuld have
the effect o'f p;rea tly reduc im; fe:trm product ion and thereby crea t inf!
higher prices.
Tiere this
meetin~
in some citi,s, it mivht be necessary
to dwell on the importance of ag;riculture; to call attention to
the fact that
45.6( of the population is classed by the
1!3-st
census as rural population; that the valu·a of all farm property
in 1920 was almost $78,000,000,000.; that the farmer provides
a large portion of all
frei~ht
traffic; that the
far~er
and his
family purchase about one-third of all wanufactures; that the
value of the farm production is astirrated to
be in each year
almost exactly equal to the value created in the
factories, i.e.,
to the value that the factories have added to the raw rna.terials
in the process of conversion into finished articles,
Twin Cities it· is unnecessary to argue the point.
the importance of agriculture is.
f'e know that
But in the
"e
'~'hen
knO'N
what
the farmer
prospers the cities prosper, that the welfare of each is closely
interwoven .,1ith that of the other.
'-ith the exception of th.:: iron regions in the northern
.part of the State, and the copper districts in the upper peninsula
of Michiqan, and in Montana, the 2ntir0 Ninth Federal Reserve
trict is depcndent.for its pro:sperity wholly upon the products
of the farm, the dairy, and the raisinP.: of live stock.
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X-3562
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That a condition can long continue where the farmer sells,
his
crops for less than it costs to produce is patently impossible.
Either he must receive a larger return for products, must learn n~w
and improved methods enabling him to reduce his costs of production,
or he must give way to someone who can farm more intelligently.
Eventually, however, he is bound to
~et
his proportionate share,
for the world must be fed and will have to pay the price.
But
we, I take it, are not so much interested in that millenium when
each will
~et
The problems
his share apportioned
facin~
''~ith
us are present ones,
scientific accuracy,.
~nd
some measure of
relief is immediately necessary.
~hny
find the
have been ths solutions advanced.
answer
throu~h
political action.
can never repeal economic laws.
Some would
But
politic~l
~ay
place obstacles
Politicians
laws
to the free play of economic forces and statesmen, remove them,
but those who seek to reach the root of the farmer's difficulty
through
ls~islative
action are, I fear, doomad to disappointment.
Others see in cooperative
salvation of the farmer.
~ark~ting
The history of
associations the
coop0r~.tive
movanents
in the United States is full of the story of their failures#
.the other hand, where there
On
has been good wanagement and sound
policy there have been brilliant successes.
It seems probable
that the development of the cooperative movement will continue
with increasing succ2ss.
But, even the complete success·of
the
coopera-tive warketinq: associations will not, I venture, be the
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X-3562
... 6 complete remedy.
The Capper-TinCher Bill is evidence of the fact that the
farmers are not satisfied with the present marketing processes, and
if there be any injustices or inefficiencies in our present system,
I hope that they may be rapidly eliminated.
~ut
men in the De-
partment of Agriculture, men who understand th;;; plip;ht of the
farmer, and whose
sympathies are 1vith him, tell me that the
farmer can gain more by diversifyinp; his farminP-" and standardizing
his grades than he can by
controllin? the !Tll?rketing of his product.
There are others who assert that the answer to the whole
question is greater and more liberal credits.
Perhaps the need
is not for more credits, but for credits bett2r adapted to the
needs of the farmer.
ThrouP;h the local banks ,and the Federal
Reserve Eanks, his short-term credits up to six rr.onths rraturity
are taken care of.
ThrouP"h th<J Federal Land :.:anks, Joint Stock
Land :.='anks. Farm Mortgage =anks and :Dankers, and Life Insurance
lon~-term
Companies, his
credits are providvd; but, there is, in
the opinion of some, a lack of intermediats credits adapted to
his needs, a lack which the Joint Commission of Agricultural
Inquiry points out in its report.
The
"'~ar
Finance Corporation, which has done such
splendid service in this field is an emergency creation, and
Mr. Meyer, its Managing Director, predicts that there will be
no need to extend its a.ctivities. which by law will end this
coming spring.
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X-3562
- 7 I~on.
Sidney Anderson, Chairrr:an of the Joint Commission of At;riin Congress
cul tur2,l Inquiry, has introduced a Bill/which would provide this
intermediate credit by amendine; the Federal Farm Loan Act.
Inci-
dentally, the Federal I\sserve Board has endorsed this Bill.
:Sut
more credit is not the final answer to ths situation.
l\'1any of
the farmers themselves recorrnize the,t they have had not insufficient,
but too much credit,
Undoubtedly, improvements can be effected all along: thase
lines, and no efforts to effect
th~se
but even wer2 the wishes of the
~ost arie~t
irnprovem;;nts should be abated,
advoc&tes of these re-
forms met, still the root of the problerr 'vouli rerrain untouched.
In th,e final analysis, the farrr:ers
of a
1
problem is as much
business problem as is that of the manufacturer.
To be
successful each must producs articles for which there is a demand,
and sell them for
mora than it costs to producs.
survey his resources and
Each must
produce th: t for which he is best
equipped, and c.ach must plan ahead to
us2 his plant most effi-
ciently at all times.
Js I see it, thers are only three ways by which the
farmer can attempt to obtain a larger income.
secure for
He can try to
himself a larger share of the value of his crop, and
aJS the processes of
distribution become more efficient it is
a1 to9:ether likely th9..t the
farmsr will rsceivc:o rr.on: for what
he sells, and the consumer pay less for wh2,t he buys.
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X-3562
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The farmer can attempt to reap a larger harvest, but he
has
someti~es
done so only to receive less in return than he had
for a srraller crop.
Or, he can analyze his situation, survey his resources,
produce that for which his farm is best suited) abil.ndon his
efforts along lines which have proved unprofitat.le, and so
diversify his crops and activities that he may reduce his
chances of failure and increase his
chances of success.
To some, this proposal that the farmer e,djust his
production to his market may not seem revolutionary
enough~
Tie
have become so accustomed to the burdens of agriculture that
sometimes
'W?;
think only some complete revolution can remedy
rratters.
T''lis solution, to be sure, is not new or startling.
The Department of Agriculture and the Agricultural Colleges have
be en urgin'<': it.
Only r,;;cantly some
of your leading ne'vspapers
.have 'been conducting a campai8"n for diversific:::tion.
Last month
your Jairy 6hovc was a crreat success in demonstrc::t ins?: the
of farm
dairyin~.
advanta~es
Dr. Spillrr.an has just sho,.vn you what can be
done, what has been done in certain localities, to increase the
farmers' return.
'.':hat is necessary is that the farm,;r be able to see
clearly just what he ought to do in the way of diversification
ani to
understand the limits beyond which .he must not
~jO
in
this direction, and when he understands these things I have
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X-3562
sufficient confidence in his intelligence to believe
tha~
he
will act wisely.
Something must be done,as to tha.t we are all agreed.
But what to do and how to do it is the question.
Can we not consider this gathering a meeting of stock·
holders. all interested in making a success out of agriculture,
upon which our
success is solely dependent?
I feel that I am
a large stockholder in this basic industry, and I am just as much
interested in getting the
farmer back on a profitable basis as
anyone.
Now, the best 0xperts in the
remedy -
country point out the
diversification, and proper planning of crops and
efforts - a scientific survey of each farmer's resources, and
the determination of what his farm is best fitted for.
How to translate that knowledge into actuality is the
problem.
1"e have the county agents, cooperatively employed by
1
the Department of Lgriculture, the AgricUltural Colleges and the
counties, who are doing a renarkabl.;; wotk; we have the agricultural
colleges, which have contributad greatly to tha upbuilding of our
section; there is the United States Department of
}.~:;riculture,
studying the problems and ever ready to help; there are the bankers
and merchants in the
~pon
smaller towns, whose prosp6rity is dependent
that of the farmer, no less and no more than is that of the
bankers and merchants
in the
which traverse the territory.
lar6er
citi~s,
and the railroads
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X-3562
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All thase, with
in common.
Is it not
th~ir div~rs~
possibl~
intarasts, have one interest
that all of
th~m
should cooperate,
poolin6 their facilities and·their abilities for the common good?
It seams to
l1kl
that thara is only one answer, and th:::.t is that
it is possible.
It has occurrad to me that what tha Ninth
Federal Raserve District naads, or What we, as stockholders
need, is a Dapartmant of A0 riculture of our own, which not only
will be informed on what is
nacess~ry
to be done in this dis-
trict, but which will ba in a position to see that what should
be.dona is dona, and in a position to cooperate with these other
agencies - a
dap~rtmant
.,
which could serve as a ciearin6 house for
all the information, which could coordinate all activities; which
could interpret agricultural needs and conditions to the city
interests, and
~:a
effactive their intarast in and the aid they
are ready to extend the farmer; which could brin 6 together the
farmers and the business man of all
cl~ssas
in tha study of their
common int;;,rasts, which NOuld lead to a batter
In tha workin 6 out of such a
pro~ram,
the country banker not only a most willine:,
effective one.
understanding~
you will find
worb~r,
but a most
In touch with tha whole of his community he
can aid hera, help
th~ra,
make a sugc;,estion to
~lds
farmer !lnd
above all, finance in an understandine, manner tha chance into
diversification.
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X-3562
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SuCh a pro 6 ram is not theoretical - it is practical.
has bean provod.
It
In certain sections of the South, for example,
the cooperation of the bankers and business men, Nith thase
a6encies, and with the farmer, has bean largely instrumental in
brin6in~
about the 6raater prosperity due to diversification
and the proper balancin 6 of efforts and activities.
What has been dona alsevVhera, can be dona hare.
various a6encies are eager to
cooperate~
leadership and I am sure that is hera.
can be
The
All that is laCkin6 is
vfuathar that leadership
supplied or not, determines the aifference, in my opinion,
between a discontented rural population with its attendant disastrous results and a prosperous a 6 riculture.
which only you can answer.
Let me assure
It is a question
Vfuat shall it be?
you,~n
conclu6ion, that
th~
Federal
Reserve Bank of Minneapolis, and the Federal Rase.rvo Board as
well, will gladly
cooper~te,
in every way possible, in any sound
constructive pro 6 ram aecid.ed upon to relieve the situation now
confrontin5 you.
The initiative must come from you.
@FedFRASER