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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. . - 2 - 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 / ; "'· .. ,...., ,~ ··.·I(_ .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. ~is- X-3562 - 5 - 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 ..... (" ' ( 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. \ l 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. • X-3562 - 8 - 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 • ,· ~ , ..... ,., .._.. ,-.:. 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 ·,- .... X-3562 - 10 - 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. ... .. X-3562 - ll - 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.