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133
1J,P•.AT TiiJ: FEDERAL B:CS}::R··r:c s·::sT::l:i
SI!:JCE
TI~
FLAS DONE
.ARI:IS':'ICE TO SUPPOP'I' AGJUCUL'l''Gl!\:8.
Relaased for Aft~rnoon P~pJrs
\'!ednosday, Fsbruary 28 •
.ADDRESS OF
JOHl\ R.liiTC?::SLL
IITIIB:ER, F::7DERAL B:CSw''E BOl\RD
r!ASH!NGTON,D.C.
Ilefor3 tho
NORTHVmST AGRICULTURAL STr'U3ILIZATION CONFERENCE
St .Paul ,Liinn.
February 27-28,1923.
X-3642
X-3642
It is a pleasure and privilege to be here today to
discuss with you the F"'deral Reserve System and its relation
to agriculture.
Jefore approaching the particular phase of
tba t subject .vhich has been assigned me, viz.:
"':;bat the
Federal Reserve System has done to support agriculture since
the arT:Jistice, 11
I would ask your attention for a few minutes
to a brief cons ide ration of the nature of the Federal Reserve
System.
To many of you, undoubtedly, these facts will be
familiar, but my warrant for repeating them is the arrazing ignorance and misconception of the System which is evident throughout the country and is disclosed even in debates in Congress.
First, the Federal Reserve
panacea for all economic ills.
~ct
was never intended as a
!t #as adopted solely for what it
was, a banking reform which would put the commercial banking system
of the
country·i~
a better position to serve the needs, especially
the short term credit needs, of agriculttrre, commerce, and industry.
As set forth in the title of the Act, it was designed as,
provide for the establishment of Federal Reserve
~--anks,
".An Act to
to furnish
an elastic currency, to afford means of rediscounting commercial
paper, to establish a n:ore effective supervision of banking in
United States, and for other purposes. 11
n.e
In no sense was it planned
as a price regulating rrachine, nor was it considered th3.t the Systen
should provide capital to be loaned out for long periods.
X-3642
- 2 -
Drafte.i while the morwry of the panics of 1893 and 1907
was still fresh. the framers of the ,',ct sought to prevent the recurrence of su::;h pa-'.1ics, when banks 1Nere urnble to realize upon
their reserves, and depositor.::; were unable to receive in currency
the fund s due tl1 em.
To thJ.t end the old systam of pyramided re-
serves which had failed repea.tedl;y was abolisLed :mel the reserves
of all nationill oanks and those of such state banks as chose to
enter the System were yut on a rr.ore sci,entific basis, and ware
It is these re;>erve de-
posits, arr.ot:.nt:ing now to about
$~L,SOO,OJO,OQO.
- the reserves of
sixty per ce!'lt of the bank deposits of the country - that the
Federal Raserve Janl::s are ca11 :;d upon to protect.
Right here, let rr.e call your at tent ion to the fact that
the interests of the depositors as well as the interests of the
borrowers of a bank are entitled to the fullest protection.
it not for the depositors, there would be no banr,._s, as we know
them, and I think this is a fact that has been to8cften
u13rlool'~ed.
That the Federal Reserve Act has provided the public with
an
elastic currency abundantly able to meet all requirem.:mts during
the most severe crisis in the h5.story of the count;r·y has been _f1-:lly
demonstrated.
of section
'I'hat elasticity is maJe possible by the
opnat~
on
13 of the Act, whereby mem-ber tanks in need of fl.._r,ds to
make good their reserves may rediscount their elie;:;i ole :.1.otas with
the Federal Reserve 1>ank.
iG6
- 3 -
X-3642
And nere let me say tha.t it ;;.:;,s never contemplated.
that any bank
should continually lean on tl1e Federal Reserve ·aa..."lk for support.
Rat.~er
1
it
was tile purposa that tile banks s::J.ould oper.=.:1.te upon t.1eir o;vn resourcGs, but
would find ever ready
~elp
at the Federal Reserve Banks in times
or
seasonal
expansion of credit, such .=.:1.s pLmting or crop-;Doving time, Cllr im times of
emergency.
But t~1e facts are that .iurin5 t~1e critical yoars just passed many banks
were obliged to borrow steadily from tile E'eder,J-1 Reserve Bank.
While tne
arnoun_t of necessary borrowings in some instances was stc:1rtling, excessive borrowings today are pretty well liquLiated, snowin;
~'lOW
it is possible for a::;ri-
cultural c;.nd live s to-.::k .iistrh: ts to grow out of a:onormal finsmcial difficulties,
when proper time .=md encouragement .=.:1.re •extended.
In this respect I say th0 Faderal R-3s'3r're B;;u1ks nave gone t:'le limit.
Just a word now as to the organization:
Tne F-:3deral Reserve System is not a. central banking system, nor is it a
governrnent bank, - for tn::; governrr.ent
~1as
never invested a cent in the capital
of any of t_1e Federal Reserve Banks, nor do goverrunGnt deposits form any consiiarable proportion of L1e system 1 s resourc<3s wnich ar8 composed chi2fly of
con~ributions
from member banks in thJ form of ca:pitcll 3l'ld reserve deposits;
nor is it a system whose opJrat ions are dictatad or controllGd by any set of
government officials or by a
bureau in Washington.
T"1er,:J are instead. twelve
separate Federal Reserve Banks 1 each an individual unit, under governnant supervis ion, "but mana.ged by its own board. of directors, composed of residents of
the district.
In the FeJerdl Reserve Act careful provision is made that the
directors of a Feder31 Reserve
Bank,
nine
in number,
be fully
X- 3642
- 4representative of all interests of the district.
Three of them
are appointed by the government through the K:deral Reserve l>oard,
and they can have no connection 'Ni th any other bank.
Three others,
known as Class A Directors, are elected by the member banks as their
representatives, and they are practically always officers of member
banks.
Three others, lmown as Class 13 Directors, are also elected
by the rrBmber bank stoc}:holders, but these directors are representative
of the industrial, commercial, and agricuitural - the borrowing interests -and can be neither officers nor directors of any bank.
Further precaution has been taken to insure that all interests are prope·rly represented, accordingly, the member banks are
divided into three groups, according to size, the large banks in one
group, those of medium size in another, ru1d the smaller banks· in a
third.
Each group then elects one Class A and one Class 3 director,
thus insuring fair representation.
The Federal Reserve
~oard
is a supervisory body ana defines
by regulation what classes of paper may be discounted at the Federal
Reserve :0ank, in accordance with the law~
Jut, the Federal Reserve
=·o3,rd cannot compel a Federal Resarve :'ank to make any loan .which it
does not care to, nor can it prohibit a Federal Reserve Bar~ from
making any legal loan.
The only control it has over the loaning
policy of the Federal Reserve :>anks is to authorize, and compel if
necessary, one Federal Reserve :Jank to come to the assiStance of
another.
- j
X-)642
-
Such authorization has been granted whanaver reo_uested,
but at no tirr.e has it ever been necessary for the Federal Reserve
,o::trd. to order one bank to help .::mother, as they have always cooperated to the fUllest extent.
Federal Reserve
~ank
In 1920, for instance, the
of Cleveland was
l~nding
rr.ore funds to the
hard-pressed agricultural districts than it was to its own member
banks.
One other point must be borne in mind:
The Federal R::1serve :;anks have no dealings with individuals
or with private corpor:1tions.
They receive deposits only from
banks and from the government and make loans only to mem 1:e r banks.
With this sketchy explanation of the Federal Reserve System
let us come to the subject at hand and review briefly the economic
conditions since the am is tice.
~~en
on November 11, l91S, the armistice was signed by
General Foch and by represantatives of Germany, the world was
emerging from the worst struggle in history.
Men and treasure had
been destroyed at a fearful rate for more than four years;
large
stretches of territory had been devastated, and the entire economic
machinery of the belligerents had been aiverted to the one end of
producing war materials.
similar, but in
~roportion
In the United States the situation was
to our population and resources, much
'i
X-3642
- 6less acute.
1C9
W'nile foul' millions of our men were wi thdravvn from
productive activity and were actually takj_ng part in the war or
training for it, and while much of our incustrial machinery was
engaged in satisfyin6 war requirements, nevertheless our fundamental
industries - agriculture, iron and steel, coal, textiles, etc. were in a prosperous condition, and, though requiring some
readjustment, prepared to continue operations in times of peace.
The credit rnechanism, ,as well as the industrial plants all
over the world, had been diverted from the service of the civil
population to the service of the States and their military needs.
In this respect also America, though affected by the same influences,
had suffered less than her allies.
Currency inflation everywhere
was great, and in the United States prices were about double their
pre-war level.
The years immediately following the armistice, 1919 and 1920,
were generally speaking, characterized by continued business activity
and credit expansion, which developed into a world-wide post-war boom.
Prices were high and ri'sing, production continued at a high rate, and
here in the United States prosperity was general.
In Europe the bel-
ligerent countries were endeavoring to reconstruct their economic
foundations~
Their own resources were exhausted by the long struggle,
food supplies were low, raw material stocks were almost all gone,
and there was urgent need of imports in order to feed the populations
and to resume productive activity.
\'/bile these countries had 1 i ttle
.;
- 7with Which to pay for
impo~ts,
X-3642
they btill had large
war credits with the United States
TreasUl~y,
1~10
~~eL~austed
and they were permitted
to utilize thase credits to secure food and raw materials from the
United States.
Funds supplied d'irectly by the United Sta;tes Government in
1919 paid for no less than $3,000,000,00C. of our exports to Europe.
In addition European countries were able to borrow large amounts privately
from our banks.
hei~.ts
As a consequence, our exports reached unprecedented
in 1919 and 192C, the value of exports of agricultural products
alone in 1919 being $4,loc,ooo,ooo. and in 1920 $3,500,000,000.
It was not
u.~til
the spring of 1C)20 that the period of post-
war prosperity and speculc.tion began to show signs of a possible turn.
With Government credits exhausted and private credits increasingly
hard to obtain, European countries were .no longer able to buy our
food and raw materials in such large quantities, or to pay such good
prices.
Prices of all com.rr.odi ties 1 as we11 as of agricultural com-
modities reached their peak about June, l92J, and then declined
spectacularly.
Once the turn had come, the downward rr.ov arr.an t gathered
momentum as speculative booms collapsed ro1d speculative holdings were
thrown on the market.
All through the rest of
1~20
and the first part
of 1921 prices continued to decline; only in the latter part of that
year did they become relatively stabilized, and not until 1922 did a rise
occur.
X-3642
- 6 -
Prices of
~gricultural
products, which are peculiarly
sens::.tive to foreign demand, and, as raw materials generally more
quickly responsive to economic changes, dropped loNer than those
of other
comr~odities.
Keepin 6 this situc;tion in minn.,
L~t
us
EOW
Faderal Reserve Sy::otam did to support asriculture.
see what the
This shoula. be
considered. from t'.vo points:
First 1 to what extent did the Federal Reserve Sys tern extend
credit; and second, what was the attitude of the Federal Reserve
::Joard 1 expressed through its ret:,JUlations and rulings, towards
agricultural paper.
Accomn~odation
extended by the Fede r;!l.l Reserve Banks to their
member banks is measured primarily by the volume of bills discounted
for member banks, the direct means by which a member bank in need of
funds may obtain accommodation from its Federal Reserve Dank.
In this connection I wish to emphasize the fact, referred to
before, trmt Feaeral He .serve ::Janks cannot create credit, nor can they
rnake direct loans to indiv1duals or corporations.
The assistance of
the Federal Reserve Janks is extended to agriculture and industry
throue;h the member banks, which must first pass upon the
application for an extension of credit.
borrower's
The member bank is, of course,
familiar with the needs of its comrrunity, with the reliability and
integrity of the uorroNer, and the sufficiency of the security which
he offers, and will not be disposed to deny credit to a customer who
is entitled to it, so long as funds are available for the purpose.
X-3642
- 9-
It is hera that the function of the Federal Reserve
:Dank appaars in so far as the extensi0n of cre:iit is concerned,
which is to f'L"'.rnish the mcr.1bar bank with ne-3deJ funds by tile
discount of eligible pap3r.
This chart tells the story of hoN the Federal Reserve
:Danks came to the. aid of agricu::. ture r:mcJ::.. more clearly than any
number of statistical tables.
These ti1rea curves shO'N the course
of y.,rices, tl1e 1913 average price beine, taken in all ins t.1nces as
100.
The black ltr.e representing the price of all commodities
shows that in Novamber, 1913, the average prke stood at 203, c.::.nd
then increased steu.dLy until !'1_-;,y, 1':)20, when it
or two and a half ti:nes the average 1913 price.
the sudden drop, as sho·v'\1!1 by the curve.
w~s
almost 250,
Then followed
The blue curve revresenting
live stock prices abows that for part of 1919 they stood slightly
above the g<:meral averac;e of prices, tl·.-:m broke sl:..aqJly, recovered
slightly, and then in October, 1920, several months after the
slurr~ in other prices, Qeclined to about the same level as crcp
prices, since when they have fl uctuatad together at a level considerably below th&t of the prices of other
corrmvdi~ies~
Prices of crops are shown by the red lh:3, ,,vhich stc;rts at
November, 1913, at a level of 215, sorr;ewhat above the ;:we-rage p:~::.;;e
of all commodities.
Then followed a rapid rise until
ime',US ~
o,;.' 1:)19,
when there was a sharp break, which ciid not, hoNever, brine, the price
X-3642
- 10 down to the general average.
This decline lasted but three months,
following vhich came a rapid and continual rise until a pea};: of 304
was reached in June, 1920, about a month after the prices of other
comnodities had started to decline.
Then came th3 almost per-
pendicular decline ii'ihich soon carried them below the level of other
com'1lodi ties, where they have rerr:ained ever since.
Meanwhile, what was the Federal Reserve Sys tern doing?
Throughout the war period there had been a rapid increase
in the amount of discounted paper held by the Federal Reserve Eanks,
and on November 1:), 191S, four days after the signing of the armi" t ice,
the Federal Reserve
~anks
held under discount for member banks a
total of $1,800,000,000. of eligible paper, the lar@8St amount of
accomrr~dation
at any one
extended to member banks by the Federal Reserve System
ti~e
up to that date.
DUt the post-armistice period
saw an even greater extension of credit to rrember banks by the Federal
Reserve System, for there was an almost continuous increase in the
amount of discounted paper during the next two years, culminating on
November J, 1920, in the stupendous total of $2,1527,000,000., wLich
marks the high point in the history of the Federal Reserve System.
That declining prices should ·ultimately result in a lessened requirement for accommodation at the Federal Reserve Janks was only to
be expected, but as the chart shows, this reduction did not begin
until late in 1920, five months after the break in prices began.
after it ran a practically parallel course with the price decline.
There-
X-3642
- ll -
These being the facts, how can the statement be justified
that the Federal Reserve System, by curtailing credit, brought about
the decline in prices?
An
analysis of Federal Reserve Bank discounts during this
period made for the Joint Comrnission of Agricultural Inquiry, shows
that the decline in the loans of the Federal Reserve Banks began in
the industrial and financial sections of the country, and that While
liquidation of loans was occurring in the East, loans in the agricultural districts were increasing in volume.
Again I say, in the face of these facts, how can the Federal
Reserve System be said to be responsible for the decline in agricultural prices?
Such an accusation is ridiculous.
That the rapid increase in prices Which
marY~d
the year
1919 and the first half of 1920, and the consequent increase in credit
requirements could not go on indefinitely is self-evident, and the
fact that the break in prices which came was not confined to the
United States, but was comrr:on to practically all of the civilized
world, further indicates that its cause is not to be found in the credit
or discount rate policy of the Federal Reserve Banks.
Inter-Federal Reserve Bank accommodation through the rediscount or sale of paper discounted for member banks or purchased
in the open
mark~t,
as I have said, is the means provided to enable
one of the Federal Reserve Banks to obtain assistance from
another in time of need.
Rediscount
operation~
were resorted to
X-3642
.,.. 12 s~ale
on a small
for the first time late in 1917 and frequently
thereaftij,r during the war.
It was not until the post-wal
of exp::msion, howev::Or, that the ever increasing derr.ands
~eriod
of member banks for accomffiodaticn at the Federal Reserve Banks
occasioned any misgivings as to the ability of the Federal Reserve
Sy~tem
to meet any legitirrate demand for credit, without
having recourse
t~
the provision in the Federal Resarve Act
authorizin6 the Joard t~ waive the minim.un reserve requirements.
]y the end of 1919, the reserve ratio of the Federal
Reserve Sy;,tem- ttat is the ratio of its gold and lawful money
reserves to ita combined. deposit an.d Federal Reserve note
liabilities -had fallen
ranged between 42 and
peri~d
t~ 45~·
45~·
Throughout 1920 this ratio
During the early post-armistice
the Federal Reserve :Janks in the MidJ.le West had an excess
of lending power beyond the needs of their districts, and they were
able
t~
rediscount paper for other Federal Reserve Banks in need of
ass is tance .
Just before the prices of farm crops began their pre-
cipitous decline, the situation vms reversed and the increased
demands of merr,ber banks in the Middle West, not only forced the
Federal Reserve Janks in the Middle West to withdraw their assistance
to other Federal neserve :Danks, but compelled them t.> rediscount
substantial amounts of their paper with other Federal Reserve
One point Which I wish to
stres~
~Janks.
is that the only way in
;111hich the Federal Reserve ::Janks can extend credit is through the
X-3642
- 13 -
member banks, and in so far as eligible banks refrain from joining
the System, just so far is the Federal Reserv3 System nandicapped in
its efforts to
~id.
At the present time there are about 9,900
mei;;-bJr banks, of which over 1600 are stat·e banks .:md trust companies.
There are, however, approximately 9!300 eligible state banks and
trust comp::miz_s which ar.:;! not rnemb3rs of the Fedaral Reserve System.
These non-memb3r banks
are, of course, chiefly the smaller banks,
but it is avident tl1at the nurr1ber of eligible state
trust companies that have
rem~ined
b~nks
and
outsidG of t:'le FedGral Reserve
System is nearly equal to thG total number of member banks, including all national banks.
While the Act expressly providas that member banks shall
not act as agents for nom,Gmber banks in discounting their paper
with the
Feder~l
Reserve banks, when need arose tne Federal Reserve
Board waivei tnis provision and authorized the F3:ieral R%erv 3 Banks
to r_adiscount for n;em.ber banks paper which they had received from nonmember b3.X'J.ks,
~n
tbis wa¥ extending the aid of the system to practically
avery bank in th.:J country.
We hava now arrived at the point w:nerc3 we C:ln consider the
attitude of tne Fedaral Reserve Bo3.rd
~s
expressed through its
regulations and rulinss, towards agricultural paper.
When
t~e
Federal Raserve Act was eDaated Congress discriminated
in favor of agriculture by
permit~ng
t:ne F0deral Reserve
Bank~.
discount agricultural paper having a maturity up to six months,
to
whereas
the longest maturity of all other paper eligible for rediscount with
·- l::3a -
tl::.e Fc;der3.l Raserv,; ·;:;:::.nk:s
iLlS
fix.;i J.t :1in:>ty d.ays.
T~1e
la.v; provides
~nd t~::.e Bo3.rd fixed tlus r,,.tio 3.t S9~S .:md ':l3.S n.:;vor r.cduced. it.
- l4 ,n;;. turi ~iss
up tc six rr,ontts
in langu::1ge but rco.y be
::l.rG
of necessity sorr:ovhat t2ctnical
SU!llL.ar i ze,j_ 3.S
•
permit tj,ng Feaeral Reserve
.:.lanks to redi2count for six months any louns which are in the
pro}ler forrr, .:mci
which
are
used to finance
any one or rrore of tha ste_tJs of l~la.nting, cultivating, harv2stine:;,
or mar);{ating a crop or of breeding, fatteninf:S, or marketing live
stock.
Moreover, one of the norrnaJ. phases cf rr.arketing ac;ricultu.ral
products is carrying them for a reasonable time in order to z;ffect
their orderly rr:arketing, rather th.sm d1.1.mljine; large quanti ties on the
market at cne tirr:e,
a."1Ci
paper ·vvhich is used to finance the carrying
of a crop pending its ord.erly rr.ark.:;ti·,lg may be eligible as
agricultural paper.
The Federal Reserve =.,oard has also been partly responsible
for a change in existing laws, which has been very helpful to the
agriculture interests.
Ycu bankers are familiar with Section 5200
of the Revisad Statutes, which contains the limitation on the amount
which a national i:Jank may lend to any one person.
This limitation
is, in general, lO';o of the lending bank 1 s carital and surplus, with
certain classes of paper excluded as not being considered loans of
money.
The Eoard f 21 t tta t the clas ;:;es of paper exce _t)ted from this
loan limitation n,i6ht pro_t-:erly be oroadened in a way that would enable
the farrr:ers and cattle raisers to obtain additional crecii t from
national banks without contravening any principles of sound bar~ing,
and it recomrr,endeJ cer taj_n amendments to Sect ion 5200 of the Revised
Statutes to accomplish this purpose.
- 15 -.
Following this
recommend~tion,
Congress amended Section
5200 by an Act approved October 22, 1919, so as to permit a national
bank to ler.d to any one borrower in excess of 1~ of its capital and
·surplus, but not to exceed 2516, provided that the loans over and
above 10~ are represented by notes, se.cured by shipping documents,
vvarehouse receipts, or other similar doci.J.ment s covering readily
rr.arketable non-perishable staples, including live stock.
At the same
time, Congress also broadened the class of paper kno'-·m as "bills of
exchange drawn in good faith against actually existing values 11 , which
r>.ational banks rray discount without limit, so as to include drafts
secured by shipping doauments conveying or securing title to goods
shipped, demand obligations when secured by documents covering
com"Dodities in process of shipment, and bankers 1 acceptances of the
kinds described in Section
13 of the Federal Reserve Act. These
amendments, by increasing the
p~er
of national banls to extend
accommodations on the security of farm products and live stock,
have proven of great value to farmers and cattlemen in their financial
problems •
.At this point I ':vould like to say a few words about
bankers• acceptances, which have lately been corning into continually
greater use as a desirable form of
credit instrument.
Bankers'
acceptances, as you know, are drafts or bills of exchange dra'vn on and
accepted by a bank or trust company or other banJdng concern, and the
law authorizes ?=:t:?r::l.l Reserve Ban}-s to rediscount bankers t acceptances
under :certain conditions.
For this purpose, such acceptances rrust be
indorsed by a member bank, and must be drawn to finance the importation
X-3642
- 16 -
or exportation of goods, the domestic shipment of goods, or the
storage of readily rrarketable staples.
Acceptances which grow out
of the domestic shipment of goods or th.e storage of readily marketable
staples must further be secured at the time of acceptance by shipping
documents or warehouse receipts conveying or securing title to the
goods or staples in question.
Under existing law all bankers'
acceptances, whether used to finance agricultural or colL!llercial needs,
must be limited in maturity to three months in order to be eligible for
rediscount.
Bankers' acceptances have now been used very extensively in
connection with the shipment of agricultural products, although the Board
recently had occasion to rule that a national bank may accept a draft
drawn upon it, if secured by a bill of lading covering a shipment of
cattle to a cattle raiser who has purchased them with the intention of
fattening and re-selling them, and that such acceptances may be eligible
·for rediscount.
This was a very liberal ruling in permitting the
acceptance credit to cover the period required to fatten the cattle and
was a distinct advantage to farwers, since the Board has always ruled
that acceptances drawn to finance the manufacturing or processing of
industrial materials are ineligible.
3ankers' acceptances, however,
used to finance the storage of agricultural products pending orderly
marketing have recently been coming into more general use, both by
individual farmers, and more particularly by cooperative marketing
associations.
Most of the rulings on agricultural credits made since the
armistice have been in connection with cooperative
~arketing
associations,
'
X-3642
- 17 which have been of so much assistance in the orderly marketing of
agricultural products and in securing for the farmers a fair return
for their labor.
.
The Board recognizes that cooperation in
under proper
may
w~nasement
~arketing
crops
is a step in the right direction that farmers
take toward improving their credit standing and their general
economic condition, and it has gor.e as far as existing law permits in
encouraging the extension of credit to cooperative marketing
organizations.
A very recent evidence of the Boardls desire to provide
more ample credit facilities to the agricultural interests, is the
amendment to its Regulation B, dated December 19, 1922, which makes
eligible for purchase by Federal Reserve Banks in the
bankers' acceptances with
~aturities
open market,
up to six months, drawn by
farmers, or by cooperative w.arketing associations to finance the orderly
marketing of staple agricultural products, and secured by warehouse
receipts coverirg such products.
Such acceptances were formerly
eligible for purchase only with maturities not in excess of three
months, and their present eligibility for purchase with longer
maturities should prove the means of furnishing much of the additional
credit needed in such transactions.
The Board recently also issued a number of very liberal
rulings designed to secure to farmers operating through cooperative
marketing aasociations the maximum credit facilities possible under
present law.
These rulings were rrade from time to time as questions were
submitted from various sections of the country.
They involved farm
X-3642
- 13 produce differing as widely as fruit f:;:-om California, wheat from the
Middle
Wcs~,
and tobacco and cot.tc:n f:;:om the South, but the same
principles of sound f-inancing were i:mro:ved in all, and in each case
the cooperative association was a non-stock, non-profit corporation, the
members of which .. consisted exclusiv·E>1.y of growers of the particular
crop which the association was organ5.zed tu m:...rket.
agreed
to sell and deliver their entire
c'~ops
The growers
to the association, title
passing at the time of delivery, and the association assuming absolute
control over the commodities and their re-sale.
Generally speaking,
the commodities were pooled according to grades and after all of a
particular pool had been sold the proceeds were distributed pro rata.
It should be understood that the Board.1 s rulings on this subject would
not necessarily apply to associations operating on a materially
different pHm.
S::'::;r_.l
..... -3::.
Y.inds of borrowings are involved.
If the grower
ira:J to do the borrowing himself, he can borrow on his
O\vn
note, using
the note or its proceeds to finance the carrying of his product for suCh
reasonable period as is necessary in order to effect orderly I!'.arketing ..
Such a note constitutes agricultural paper, and may be rediscounted with
IT.aturities up to six months.
Or he can draw a draft on the cooperative
ITarketing association at the .time he delivers his crop, the association···
accepting it.
He then discounts the draft at his local bank, which,
under the Boardts rulings may rediscount it at a Federal Reserve Bank
as agricultural paper with a maturity up to six months, if the grower
uses the proceeds for an agricultural purpose.
If the association
itself wishes to borrow money directly from a bank in order to make
X-3642 ,
- 19 -
payments to the grower;;; for pro.iuce delivered, its notes are
eligible for redisc.ount, but the
law
Bo[~rd
has held that under existing
such notes are comme1'cial notes 1 the maturity of which must not
exceed ninety days, because the proceeds of such notes are used foL
the commercial
pui~pose
•
of buying the commodities from the growers.
There was considerable discussion over the case where the
grower draws his own draft on the association, as to whether the draft
should be considered agricultural and have a six months .. maturity.
The point was made that the grower in all probability would use the
money so obtained in paying debts previously incurred, and that unless
this could be held to be an agricultural purpose, little agricultural,
or six months: . credit could be obtained in this way.
The Federal
Reserve Board ruled, however, that when a farmer or grower delivers
his crop to a cooperative marketing association actually engaged in
orderly Ir.arketing and when he is obliged to borrow money for ordinary
general purposes, such as the payment of obligations previously incurred
in growing or harvesting the same crop, a draft .drawn by him on the
association may properly be considered as drawn for an agrieultural
purpose, because it puts him in funds so that he can carry his crop
)ending its orderly Ir.arketing.
As I said before, the carrying of
agricultural products for such periods
as
are reasonably necessary in
order to accomplish orderly marketing is a legHiir.ate and necessary
step incident to norir.al distribution and constitutes an agri~1ltural
purpose.
The Board pointed out, however, that there is a distinction
between carrying products for such periods as are reasonably necessary
X-3642
- 20 ....
and mere speeulatiYe withholding from the rrarket in the hope of
obtaining highet prices.
Under the Federal Reserve Act paper drawn
to finance speculation is ineligible for rediscount •
.Another very liberal ruling which has been of material aid
to cooperative matketing associations is the ruling that bankersl
acceptances drawn to finance the domestic
~tora.ge
of commodities pending
orderly market.ing by such associations are eligible for rediscount.
The association arranges with some national or state bank to accept
drafts secured by warehouse receipts, and, after acceptance, such
drafts are eligible f~r rediscount by ~deral Reserve Banks with three
months
rraturity.
Under the new amendment to the Boardts regulation
they rray also be purchased in the open rrarket with maturities up to
six months ..
One of the most reeent, and also one of the most liberal,
rulings of the Board on this subject was to the effect that where a
member of a cooperative rrarketing association delivers his crop to the
association and at sttb.stantla.Lly the same time draws a draft on the
association, which is accepted by it and discounted by the drawer at his
mvn bank, the draft is a "bill of exchange drawn in good faith against
actually existing values 11 •
By virtue of this ruling, such a draft is
not subject to the 10~ limitation prescribed in the Federal neserve Act
on the aggregate amount of paper of any one borrower which a Federal
Reserve Bank may rediscount for any one zrernber bank.
- 21 These are probably the most important rulings
!
~ade
by
the Federal Reserve Board on this subject, but, of course, there are
other classes of eligible paper that can be used in borrowing by
cooperative rrarketing associations.
The point I wish to emphasize
is the past and present willingness of the Board to assist the
cooperative rrarketing movement in every appropriate
way~
I have sho\vn how the Board is limited by the terms of the
law in ruling upon the eligibility of paper for rediscount and how it
has gone as far as it could under the terms of existing law in fostering the need of agriculture for broader credit facilities.
Under these
circumstances, orily Congress has power to provide additional credit
facilities to agriculture by liberalizing the provisions of existing
law, or by creating new credit rrachinery.
The post-war period of expansion and inflation, followed
quickly by the inevitable deflation, with its particularly harmful
effect on the agricultural 'interests,
~ade
it evident that the
existing credit machinery of the count:y was inadequate to care for
the needs of the farmers.· The Federal Reserve System can properly
supply only short term credits, because the assets of Federal Reserve
Banks furnish the basis for a large rart of the country's currency,
and they must be kept liquid.
o~her
The Federal Farm Loan System, on the
hand, provides long term credits, but there is an obvious need
for some machinery to provide what rray be called intermediate credits
of from six months to three years.
X-3642
- 22-
Among the nany ·onls introduced in Congress designed to
extend additional credit facilities to the agricultural interests,
perhaps the most important are the biD.s recently introduced by
Senator Capper and Senator
Ler.~root.
These bills have been passed by
the Senate and are now being considered by the House, and
~less
some-
thing unforseen develops, it seems probable that a bill embodying!the
best features of each, will become law during the present session of
Congress.
You are, no doubt, familiar in a general way with the
provision of these bills, so that I need not
even if time permitted, but I wish
dis~~ss
tham at length,
to point out how the Federal Reserve
Board has supported the agricultural interests by recommending the
enactment of such a bill, and by recommending also the paasage of other
legislation which would provide still further credit facilities to the
farmers.
As frequently happens with rega;:-d to legislation affecting
banking and credits, the Board was requested to consider and comment on
the so-called Capper and Lenroot bills.
In response to this request,
the Board on December.21, 1922, addressed a letter to the Chairman of
/
the Senate Banking and Currency Committee, expressing its approval of
the general purpose of both bills and mald.ng detailed comments on
certain provisions in them.
Except for expressing its general approval
of the purpose, the Board refrained from commenting on those portions
of the bills, which contain provisions creating new machinery to supply
agricultural credits of an intermediate type, running from six months
to three years, because such
Board's jurisdiction.
~atters
were not properly within the
The Board confined itself rathar to the
""~ r~
~'l_/·
- 23 provisions of the bills wLich auended the Fede::-al :Reserve Act or
directly affected the opera.tions of the Fed.e:ral Reserve
S;ys~em,
and
offered a few constructive suggestions designed to safeguarcl t:1e
elasticity and soundness of the currency issued through the F'edoral
Reserve Eanl;s, and also to make the proposed amend:Jents more liberal
and effective.
In that letter the Board recomrrended that the maturity of a
certain type of farmers
paper eligible for rediscount at the
Fe~eral
Reserve Banks he extended from six months to nine months.
It further recowmerded that certain paper of cooperative
marketing associations be expressly declared to be agricultural paper,
and thus eligible for rediscount
with rr.aturities up to nine months.
Under the present la·.v some of this mu.st be classed as commercial paper
eligible for discount only with maturities up to three months, and
some of it must be classed as finance paper and not eligible at all
for discount.
The Board also recommended that bankers' acceptances, dra\vn
for agricultural purposes and properly secured be made eligible
rediscount with rr.aturities up to six months.
for
Such acceptances are now
aligible for rediscount only ·,vith three months w.aturity, but the Board
endorsed this amendment to the law, as being in line with the recent
amendment to its Regulation B, which I have already discussed and
which rr.akes such acceptances eligible for purchase in th8 open warket
with six months w.aturity.
·l
now required to hwe
<:.LS
a condition to becor:irle_; rr;ember banl':s.
a1r:andments :JXe designed to attract rr:ore LanLs to
member~hi 1-'
These
in the
Fei.leral Reserve Syc>tarr:, and t;m::; ma:e L;,a resources of the System more
In addition to t£1e se recorr:rr,endations t:1e :Joard suggested
and. urged.
ti1c~t
sigr.t or dem_.nd draft:;, dra'Nll to finCLnce the domest1c
shipment of non-;_Jerishable, readily
rra'-~.etable,
ae;riculturc;.l
sta1~le~,
be made elic;;ible for rediscount or purchJ.Be oy the Federc::1 R2serve
ULder a::is tine; law such drafts are
ineligiole for redi;,count at .:.<'aderal Reserve Jani:cs because they have
no definite maturity.
Such drafts are largely used in financing
the movement of crops and I believe the lJ''lssa.ga of the amendment will
be of much asshtance to agriculture.
I Nish to em1)hasize tha.t in this statem:mt of the attitude
of the Federa.l Reserve :Oo_ctrd to:vards pending rural credits legjsb.tion,
I have been substantially quoting from a letter which the :3oc::rd wrote
to
Congress in response to a rec.uest for an expression of the :Vo::trd 1 s views
on this le&isl::ttion.
This letter, t:nen, iS ::tn officiJl staterr:ent of how
the :.:.o_Lrd regards the pending let:?,isl.J. tion designed to improve the credit
st.mding and economic po<>i tlCn of the farming interests, and I thir1:~ you
Nill agree Ni th ffie ti1~, t the Federal Reserve :.Jo--1rd has shown itself to be
ready end willing to })LlCe the vast resour~es of the Feu.erdl Reserve
System at the service of agriculture, so far as is ·consi.tent with the
l'rinciples of sound banking, which I do not bGl ieve the farrr:er hin;self
would c tre to see vioL:..tod.
....
'.~ne
,;,.~;;;-
to suppo:r:t .:;,griculturc: J.nd liv2. stock intarosts during
recent yaars.
1f!b:::tt follows is my p.:::rsornl obs Jrv~tion of wl:::~.t
might b.; don..; to 2ssist :-.gricultur.:.:.
:SeforJ this consic...;r~ticn, ho,;:.:;vor, I \!.:mt to dvvoll
brbfly upon the gros.t b::mefi ts th.:".t h.wc b-:;on dorivod not only
st::-~tos
in th.:l Northwestern
but thruug::out :1.11 ::g-ricultur::t.1 ::md
live stock sGctions from tho op.Jratbns of tho
poration.
A
mo1~o
bc;3n :tccomplished
\~::..r
Fin::mce Cor-
l1olpful, constructiv3 pioce of ,-,ark h"'.s novor
b~l
::..ny govornm:.mtal org:mlz::>.tion.
EvGry
assistance possiblo wJ.s ror,dorcd by tho Fcdor:t.l R..;sorve :B:mks
in f::t.cilitating th..;
c~rpor~tion 1 s
operations.
The plight of th,; f:'.rmc;r tod1.y is not d'J.3, in my opinion,
to a lack of credit fs.cilitics. ThG causos J.rG mor,;
fun:l:::un::mtC~-1.
Mont ion h:ts b.Jon mJ.do of l:o-:: th:; short torn crodi t no.Jds of
3.griculturc are provided for by tho comr::;:;rci:t.l b::mks
::-~nd
tho
F2der::1.l Res0rvo System, ::-.nd of ho\y the pending ruretl crvdit lvgislation is design;;;d to settisfy the: nc,;;d for
int~rmGdi:tt-:3
credit.
In this connection it is interesting to note that the
estimated borrowings at b:tnks of the 6,448,000 f:trn1:.:;rs on p.:;rson::cl
lo~ns, securad :tnd unsecured, ~aunt to ::1.pproxim~tely $3,870,000,000,
or an average borrowing per farmer of $600..
that one of the difficulties
is paying too high
:t
It has been stetted
confront:i.ng the fetrmer is that he
rate of interest. Even if true, and if a
reduct ion of 4 percent could be made, it wouli maan
:1.
s::wing of
-26-
only $24. p:;;r yc~ar to thJ 2.v0rago farm0r, £l.nd I submit thJ.t there
is morctinn a $24.
diff.3ra:nc0 betn0~n succoss .:md f:dlur-J with tha
t icularly to bu desir.Jd., '::o,lld not holp th.:J farmer out of l1is
C:.ifficulti3s to ::my n.ppr.Jci.:'·blo dogre,J,
It can b.:: st::.t::Jcl that the
org::J.nizn.tion of tho prcpoi:l-Jd intermediate agricultur:::1.l credit associations would ,·:ithout dcubt
prov~.de
the f.:.r:.:.;r with
2..
low0r
rat.J of intorust than he is noc;:; p::,ying and be greatly bcndici::.l
in this rcsp,;;ct.
But thJy wculd not by J.ny man.ns bv a p3.naca2.
for all of his troubles.
There rcr:t:..ins tho question of l1ovv tha governm.:mt has
provided fer. tho long term credit :1oeds of agriculture.
The Federal Farm Loan Act l:as made it possible for tha
farner to borrow a lib;;ral pa:·centagc of th.:: v::.lu0 of his f:1rm
at more favorable t;;rms and for a longer period than any other
line of business en,joys.
The reason for this is th.:J fact
that
the income of s0curities issued by the Fndoral Farm Loan System
is exempted from all taxation of evory kind.and dJscription.
Th<:l total ::unount of farm loans outstanding Doc.Jmb0r 31, 1922,
m:1.dc un1cr the F0doral Farm Loan System, m1s approximately
$860,000 1 000.
During 1922 alone total loans made by the
System ~nountcd to appr~imately $363 1 000,000.
It is 0stlinatod
that the total mortgage indebtedness of the farmer is about
$7,800,000,000 so it would seem that within a few years a largo pro-
t
-27portion of the f::.rners r:1crtg:1gc in:lobtodn.Jss \Vill be in the
Federal
F~r~ Lo~n
To
f~ciliti•.3s
SystJn.
sum up, i t is :::y p_;rson:-.,1 opinion t:nt th..; credit
of this
g:LJ:l.t
country :r.; :::.bt."tnd;.ntly sufficbnt to
in"Tustry, if properly "\Js.:.;:"c.
A graat :1"--:1cunt of stross ::".s be:
;n
1:-:.id on t::.:J inr.c:)ort:mc<3
of the ol.·g:miz:-.tion of cc-opor::tiv0 L1.-.rk.;ting ::.ssoci::.tions for
the purposo of bringinr; ·}oout en orderly r.1.--..rk...:ting :md iistribu.tion of agricultural products.
Th..; FJdoral R.Js0rve Eo.:.rd is in
full -'lccord v.rith thi·3 pl :m of co-oporation ::u::ong the
appreciat.Js tho
b~Jnufits ~:Jd.vod
rnrkJting association
tL'.. s
:->nd
by th-.J grovror wbon t1l-J co-op..;rativo
b-:hm properly
~dministored.
of this pLm, of cou.rso, :1.opcnds .:mtircly· upon
is ma.nn.ged.
f::~rEJ.Jrs,
l;.o'Y
Tho
S1-·.ccoss
tho associ::.tion
In me\ny cJ. ses most s:-:.tisfactory results h.J..vJ boun
?.ccomplish.:ld, ;·.rb.ilo disnal f:J.ilures have. been 6xp3ricmced in others.
V'bil.J thJ J:ct,msion of this movomont nny bring ·groat rolhlf to
tho fU"m0r, it cannot solve all of his <iifficulti;:Js. T:J.Jro still
remains th.J q_uustion: "What will bring :-.bout the rostor.:J.tion of
t ::.:;; f -::rrnar and put him b ::-~ck on his f-: o t? 11
:Before m:Jking ::ny suggosticn '\.long this linJ I want,
if possibl:.;, to cla.:-..r up some .mist::-..kon i:io::-..s v:hich th.; f:'..rmJr
h::t.s "lbout ·,·.r:J.:>.t h;.s h::1.pponod to hin, sincG th.J signing of the
161
- 28 -
In the first pl3.ce, ·vvnile L"1e farlJ,er il.J.s .:.Hd
t:nings
ha~:pen
HdYJY
to hirr. for w:1icl1. l1e was unprepar0d, Lis business
was by no means tne only busin;ss tns.t wa..s adversely affected.
T hers is not a business of any kind or d..;script ion t~1at was not
advusely affected just .J.S was LHt of
t~B
fa:rrLer.
M::my b3.nk
failures have 01itcurred, uaey re-org1ni z~"lt ions of industrial
enterprises nave been necess::1.ry, and r.Jductions in inventori3S
of jobbers and retJ.iL::rs at onG time tl1.r,:nten3d to put nearly
all of them out of business.
But, fortun.J.tely, fer the
fa~mer,
as well as for all otl13r individuals, a recov:Jry lns been r11ade
and
t~1.e
country industrially ctnd. ccrrmdrciJ.Uy is :;radu..1.1ly
gettins back on its feet.
it is most necessary he s3.".ould, is well lci.own and for thJ.t
reco·Jery we all .1ere today are trying to 1;;ork out a solutl!.on.
It is the o3.Siest thin·?; in the world for silver-tonp1ed
orJ.tors to offer destruct.ive
is constructive criticisr,..
criticism,
but w:i:Llt we want
We want to knoW what t9 do and
l1ow to do it.
T~1e
farmer has been told th3.t the Federal Reserve
System set about ti:1e deli'bwate inflation of the currency of
1918 and 191<2, ::md in t:1e spring of 1920 comr1.enced a rut:1le ss
de flat ion.
~,
I want to say something right here, and I hope you will
take it back home with you, and get your ovvn people to
thinking right about the Federal Reserve System.
want to say is this:
What I
The Federal Reserve System, including
the Federal Reserve Banl::s and Federal Reserve Board had no
more to do with the cause of the inflation of the currency or the deflation in the prices of agricultural products
than you had.
The reason for the ir.flation in the currency
of the country and also in prices of all commodities and
wages was that we were engaged in war.
been and always will be the
Inflation always has
natural resultant of war.
Is it not possible for the people of this country
to realize that the Federal Reserve System enabled our
side in the great conflict to come out vistorious?
Had it
not been for our monetary system, the establishment of which
...t
--'·
..,29-
-~
r:
-.,.,.
:~
.A"
X-36'±2
- 30 -
borders on providentiality, I ventur":l to say that today ani
for f-Jldlny years to come we woilld still be settlin,s our reparations
contracts or bills to GerE"any.
But to return to the situdtion of the f:'l.rrr,er.
~10
he goes to rudrk:;t,
W.n.en
finds th:=tt tl:e purclnsing power of £1is
doll;,r is only ;,bout 68 per c<mt of wlnt it was before t-he war.
In ot:L1er words, since 1S20, t!10re :::-tas been a ;radual in;orease
in tl:e costs w.• ic~~
L~,3
farmer n.ust pc:1y in nanufacturans, wa:;es,
frei ;:1t rates and t::1xes,
while everyt:1in::; the farJr;er
produ..::es is sold on 3.bout the s2Jr,e SC3.le of prices prev-ailci:ng
in pre-war times, with tl:·e exc'ept ion of wool, cot ton, and flax.
Tl:;:; inGvitable law of supply and demand :laS gotten in its work.
Tha reason for no appreci.J.ble increase in prices of agricultural products is t:1at elere lus been an ov-er-product ion, as
compar·ed wit:: tlw
.3L~ount
s which Europe C::ln purcl1ase.
As is well knoWIIt, t:1e price at wl1icn t:·J.e export3.ble
surplus is sold fixes the price for the
makes her purchases where prices ar·e the
~1ole
crop, and Europe
c~1eapest.
If our
fan.,ers persist in rdisin; r.iors w:neat tlB.n is consumed in tt-"is
country, the only price that t110y can
GXpc~Ct
to receiv-e is
tile Liverpool price less tne ct.arges for laying our
in Liverpool.
T~1is
w~1eat
do-vvn
is bec3.use the w.neat ::;rovver in this country
is in competition with
t~1e
wheat ;rowers in Canada, the
Argentine, Australi3., 3.nd India, in wnic:1 countries everyt.'1ins
''
-31-
t::.i 3
,·;or 1 i
tl13 L1rmc r 1: -..s to 'o1.:w.
:C:vory :.ni,_,_sb-y pr.?.,ctic.:1ll:' _is running on
a nol·mal b ::.sis.
of t ..:o
o:g
:::,cr..:s
'"- pl::.sterel' in t::e :2:::-:,st, sortuthing is rad.ic:::1lly wron::; ::-,n:: s~m..cli
be corr·octed.
It is osti:.ut.;;d t::at t~:::; bu".lcUn<; pro:-rrx:: fo1· lS23 tot:-:.ls
:C:p;Jroxir.1?..'cely
~:5, 000,000,000.
Cc't-
st::,n:'.ing f3atur;; in ~vJry line of businJss bc:t ~"gricultur::;. Is it
'
of
---{;.......(! .__.~.
"·
1~
-··~
X-3642
- 32 -
There would seen, to be two ways by w.c.i::3"1 the farn;.sr
W~'lere
can WOrk himself into a pOSition
it is ,POSSible for him
to show a profit at t:1e end of ec.c.:1 ye3-r out of his operations.
First:
Curt3-il the production of all a~ricultur~l
comrTJOdities that are exported in con;petition wit.L1 products
produced in foreisn countries to such an extent
t~nt
our farmers
would be producin;s sli;.1.tly less than our domestic consumption.
This v;ould mean for exan.ple tlBt tne prod1..1ction of wneat
would :have to be reduced to a_round 6:;0,0CC,OOO bushels, and
the pric.s the consun,Gr v1;ouli
l1~ve
to pa,y would b,J tb.J C3.nadian
price plus the tariff and cost of tr.=ms:;:>ortation.
This would
1;1ean th3.t today the farmer would receive around $1.65 for ~1is
wheat.
Suc~1
curta_iln,ent ·,>vould not necess:1rily mean a
decrease in productive activity but would entail a re-a_rran-;ement
of the farmer's oper3.tions all alon; t:ne line.
It would mean,
in other words, a better balancin; and diversification of
crops.
It is r£G>st necessary that every farmer producG
practicall~'
everytnin; he eats and n:1ve f .:1rm products to excnan.;e for t;.1os e
necessities he cannot raise.
There is no r-:;ason
w~1.y
the farmers snould not raise
r"P:,
....... ... _....
~
''
more fla.x tl:::m is no··_, b.dnc r:cisod in this country.
,;
A f::t.ir
aver:::.ge of tho :mnu.:..l ".r:lount of fl:cx inported into this country
from 1914 to 1922, incl usivo, nou1·· be
bushels.
ap~,)roxim:ctely
12,000,000
The f:::.rmors could vmll incr..::ts0 t::..:ir production
of fl&x -- so.y ten million bushJls -- or or.'lploy ono million :ceres
··.-~thout
afL;ctinr: th;; prico t::oy :=cro non r:.;coivins; v·vhich is
tl:.G Arg.:mtino p1·ic0 plus tl:J cost of tl·ansport::.ticn ::l.nd t:·.e
t.:l.riff.
Woulcl tho.t the producers of •ahoG-t
'.V8r0
in tho fortun?.te
positionth=tt tho fl:::.x grower is !
Lot ne 2-sk you t:-:;.; y_u:Jstion:
Houlc'l. tho Unitod St:::.tos
Steel Corpor.:ttion r·..:-,nr f.:tcture ::'.. surplus o·.;or :loraostic der.mlids
i f the price at vrhich tho surplus h:td to bo sold. fixed
::t
price
for tho entire product t1nt w2.s loss th.:m the cost of production?
TllJ answ.;r is:
Most corta:'..nly No.
the country are in
~
comp:cr.:l.bl3 situation tod.ay.
Tl:0re can b:J no sound argumont •-:hy tho L:.t.rr::ors of
this country should raise wheat and sell i t .:.;.t :1 lov7Jr p:cice
than it costs to prccluc8 th0 wheat.
ni"~oat
If we only grev-v .:1s much
::-..sour d.om..;stic consumption roq_uir.;;s, tl:-.;ro wouli not
b3 any sufforing ab1·oad.
It is cl':·,imod that C.:m::td:l 1ns
potent:.:::.l• rrho::tt producing po5sibilitios sufficient to su))ly
t::o r.:;q_ui1·0m:mts of th.:; vvorld.
if such
~,s
It should b.:;
~n
o:Lsy m:'.ttor
th.:; c2.so for C:::,n-:::1.2, to incro.:,so h.;r production
200 million bushels, if n:::cossary.
pot;:mti:l.litios, it is c,;rt:1in th£Lt Russi:1 ·,:ill soon.c:r or l::tt.Jr
again b3
3.
competitor in tho raising of ';lh..;::'..t.
· Th,; s,:;cond motho:i would bo to
seriure
.:1.
reduct ion
r~
-"··"'-' ·I
-34in the prices of 2,11
ccmr.:-:oc~ities
t!::; f:JTmc:r is obliqed to
purcl:ase. But such z: reduction does not
nor is i t clear ::o;: nny '::tction by :my
it 3.bout?
T},is c:::;.n bs
•;vhich cc>.n b:.: st b.:;
~ccomplishod
cbtained
<UJ:D
to b:.; in prospect,
-.gr·~_cultur:1l
group could bring
only by .:::, reduction in 1·::cges
by ::c libor1.liz::ttion of our
im::Jigration laHs, ::cnd ..:. modific3.t ion of
01J.l~
tar:.ff la"17s.
The conclusion V!Oul::l. then seem to be: forced upon us
that to work cut thoir s:1lv::1tion the
their
pr~blems
f::cr~.Grs
must appro:::,ch
2.s :t businass problc:-.1 :::,ni solve it along business
lines, must org,:miz.:; to g::1in all the adv::1ntag;:;s that li8 in
co-operative r.nrkctinr; Ztssoci:ltions, but ::cbove 2.11, seek to
plan their production ,-:i th rGlation to the dc:xmd.
It is just
'-S
import::tnt th:-tt ths business of f.::lrming
be conductGd ::clong 30und, busin:3ss linGS ::cs :my othar businGss,
It is folly :-tnd a shoGr waste of timG Gven to try to change
0conomic la'ilS by legisl3.tiv8 2-.ction.
in
~ny
Th;,; successful m::m,
kind of business, "chieves his success not by opposing
.;conomic Lwvs but oy :::.d::lpting l:is opGr::ttions to thorn.
Th~.t
tha future of :?..gricul ture i
3
'bright seoms to macertJ.in.
It is astimated t:::1t in ton ye:?..rs our popul::ttion
rrill have in-
cre?Lsed to such em JXtont that our present whe::1t production •vhich
is said to h:::.vo rGacl;.-.Jd practica:'..ly our full producing cap2.ci ty
vtill b<J cmtir_;ly consur:1ed by doraastic consurnption.
This is no sound
farmer in the
argurn:.Jnt for lottiJ.1t; naturo t3.k3 its.courso.\:lh:;;,t will b0com.; of th§../
•'
~:
r(-;,
,...... "''·'' ltJ
X-36:t2
- 35 meantin;e?
") If a plan can b3 i;vorkcd out t.c.Cl.t ·vill provide for
for all tin.e to co1;1e tne problei,; now confronU.n; us.
As for
the future, it appears to n.e thJ.t it is onJ.y n3cessary for one
to take :t. . is p:mcil and paper a.nl do a littlJ fL;LITin'~·
In ::111
probability our pe;pulation '"''ill increase s.t :m 3-VerJ.::,:e r.:;;.te of
one and one-.nlf rrji}.lions durin;
t~10
next ten years.
consumption of whe3.t, per person, j_n L;.is
co1~.ntry,
'l2e ::LVera,:;e
is approximJ.tely
lion bushels, arr.ountin:;, in 10 years, to an iJ:Jcre':l.se of 90 million
bus~1els
per :mnu:a1.
In addition to
tt-~:!.s
increased. ccmsun:pt ion of
wneat, tnere will, of com·se, be an incre3.S·3d
other a;ricultural proJucts.
co~1SUir,ption
of a.ll
'l'l1e q_nestion n?"T;tlrally 3.rises wh.:1t
a:Sricultural sections "Vill tJ.ke ca.r·e of this incrGas·:Jd consurr.pt ion?
I do not beli GVe 2illY one would say t.nat ~'Tew En:;Lmd can expand
to any extent a;riculturally,
neit~1er
can t ...J.e Midile States.
only sections left are L1e Sout.1 and West.
t.~e
bri:;ntest future,
great Northwest.
a~ricultura.lly,
~ocustorlled
Th3 section that has
is, in nzy- jud5u.ent, this
Its business is tint of providing necessities
for a rapidly increasin; public
public
Tne
w~ich
n,ust be fad, and a
to the hi{nest standard. of livin,:;-.
I am sure tint ac;riculture ,"Jill ultimately recover,
but this recov0ry can bast '::>e a.cceletated by t:r..e fullest cooper::ttion
be tween all t~1e forces at work, t.:1e United. St :J.t es DGpartrr.ent of
Asriculture, t:.e A :;ric1..Jltural Colleges, suc~1. or~::.nizations ::.s the
X-3642
the Farm Bureau, the Farmer Banker Council, and all others that
are working for one corr::mon end - the welfare of the Larmer.
Let;
them all pull to.sether along sound lines and the farmer will be
restored to that position he is justly entitled to, and be the
Monarch of all
ne
surveys.
@FedFRASER