BULLETIN OF THE UNIVERSITY OF TEXAS NO. 355 SIX TIMES A MONTH EXTENSION SERIES NO. 60 AUGUST 25, 1914 CO-OPERATION IN AGRICULTURE, MARKETING, AND RURAL CREDIT BY CHARLES B. AUSTIN AND GEORGE S. WEHRWEIN Division of Public Welfare, Department of Extension PUBLISHED BY THE UNIVERSITY~OF TEXAS AUSTIN, TEXAS Entered as second-class mail matter at the posrolfice ot'Austin,'Texas 54.0-7l4-20m-GUi.S BULLETIN OF THE UNIVERSITY OF TEXAS NO. 355 SIX TIMES A MONTH EXTENSION SERIES NO. 60 AUGUST 25, 1914 CO-OPERATION IN AGRICULTURE, MARKETING, AND RURAL CREDIT BY CHARLES 8. AUSTIN AND GEORGES. WEHRWEIN DIYlaioo of Public Welfare, nepar1men1 of Extension PUBLISHED BY THE UNIVERSITY OF TEXAS AUSTIN, TEXAS Entered • second-class mail matter at the postoffi.ce at Auslin, Texu The benefits of education and of useful knowledge, generally difrased through a com­munity, are essential to the preservation of a free government. Sam Houaton. Cultivated mind is the guardian genius of democracy •••• It is the only dictator that freemen acknowledge and the on1y security that freemen desire. Mirabeau B. Lamar. CONTENTS Department of Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Introduction ....................·. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 CHAPTER I. CO-OPERATION. I. Su<)cess and Failure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 II. Reasons for Success. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 III. Types of Farmers' Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 IV. Essentials to Success in Farmers' Organizations . . . . . . . . . . . . . . 33 V. What is True Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 CHAPTER II. MABKETING. I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 II. Crops and Values .. ....... . ........ .. . .. .......... . .. . .... . 44 III. Grain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 IV. Hay and Feed. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 47 V. Corn ..... ... .. ...... .. . . . ... . . . . ... .. .. .. ... . .. .. ......... 50 VI. Live Stock .................. ... . . ....... . .... . . . . . .. . ... .. 51 VII. Dairy Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 VIII. Poultry and Eggs. . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 55 XI. Fruit, Truck and Vegetables ... . ........ .. ...... . . .. .... . . ... 57 X. Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 CHAPTER III. RUBAL CREDIT. I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 II. Nature of Capital. ......... . ..... . ... ..... . . ..... . ... ....... 71 III. Why Should Farmers Borrow ( ? ) . . . . . . . . . . . . . . . . • . . . . . . . . . . . 72 IV. A Low Interest Rate............................... ........ 74 V. Farm Loans in Texas ....... . ............ ..... . .... -. . . . . . . . 76 VI. Farm Mortgages in Texas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 VII. Jewish Farmers' Co!Sperative Credit Unions . . .. ... .. ... .. .... 83 VIII. Catawba Rural Credit Association ..... .. .......... . ...... . .. 87 IX. How to Form a CoBperative Credit Union Under the Texas Law. 91 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 DEPARTMENT OF EXTENSION. Ol!'l!'ICERS OF ADMINISTRATION SIDNEY EDWARD MEzEs, PH. D., President of the Unive1·sity. F. M. BRALLEY, Director of the Department of Extension. SAM C. POLK, Secretary to the Director. Dii1ision of Correspondence Instruction. L. W. PAYNE, JR., PH. D., Head of the Division. W. ETHEL BARRON, Registrar. Division of Public Welfare. CHARLES B. AUSTIN, M. A., Head of the Division. GEORGE S. WEHRWEIN, B. S., Specialist and Lecturer on Cooperation. W. A. SCHOENFELD, B. S., Specialist in Farm and Coopera­tive Accounting. Division of Public Discussion. E. D. SHURTER, PH. D., Head of the Division. A. J. ROBINSON, B. A., Lecturer and Athletic Organizer. MARIAN EDITH POTTS, B. A., Package Librarian. Division of Horne Welfare. MARY E. GEARING, Head of the Division. JESSIE P. RICH, B. S., Lecturer on Domestic Economy. EDITH ALLEN, B. A., Lecturer on Domestic Economy. Division of Public School Improvement. E. V. WHITE, B. S., Head of the Division. EDWARD E. DAVIS, B. A., Lecturer. AMANDA STOLTZFUS, L. I., Lecturer. Division of Public Lectures and Publicity. JOHN .A. LoMAX, M. A., Head of the Division. Division of Child Welfare. A. CASWELL ELLIS, PH. D., Head of the Division. N. L. HooPING4-RNER, B. A., Assistant.. I. THE DEPARTMENT OF EXTENSION Purpose. Every university should serve not only its resident student body but also the entire community. This is true in a peculiar sense of a state university; supported as it is by the taxes of all the people, it is under business obligation to render back service to each citizen and to the commonwealth. In a general sense a university fulfills this obligation by sending edu­cated young men and women back into their home communities to carry with them the culture of a broader outlook; the skill ac­quired through professional training as lawyers, teachers, doctors, nurses, home-makers, business men; and especially the inspiration to unselfish service as citizens that is the intangible and priceless asset of university life. Taking the University to the People. This indirect contact with the whole people of the State is, however, not sufficient. The constant aim of the President and Regents has been to broaden the scope of the University of Texas with the broadening interests of the State, and to bring its benefits within the reach of as many individuals as possible. In 1898 the Suinmer Schools were opened and have been maintained each summer since for the convenience of students who are unable to attend the long session, especially for the teachers of the Texas schools whose professional work fills the winter months. As a further step toward making the University directly useful to large numbers of people who are unable to at­tend the classes of either the long or the summer session, the De­partment of Extem:ion was et>tablished four years ago. This De­partment has developed rapidly, and its work is now carried for­ward under seven divisions as follows: The Division of Public Welfare. It is the purpose of this division to go into the field and investigate the economic and social conditions in the State, with a view of collecting such re­liable data as may present a basis for intelligent efforts at improv­ing such conditions. It is hoped that through this Department the citizens of the State may have the advantage of unbiased Uni­versity experts, who can come to them and advise with them when­~ver they wish to plan any economic and social movement. The time of one or more persons will be devoted to the various prob­lems of rural economy, sanitation, social life, finance, marketing and kindred subjects. The Division of Public Discussion. This di vision has for ite purpose the encouragement and intelligent direction of public discussion and debate, and athletics both in schools and out of them. Bulletins have been issued giving advice regarding the organiza­tion of debating clubs, and furnishing lists of references for read­ing and preparation for debate on a number of topics. Loan li­braries on important subjects, such as prohibition, woman suffrage, initiative and referendum, prison reform, compulsory education, the commission form of city government, municipal ownership of public utilities, and the tariff and free raw material, have been prepared and are being loaned to such clubs and individuals as request them. The University Interscholastic League has been successfully organized, and it is the hope of this division to assist in developing the school as a social center through which the com­munity may become better informed. County organizations be­longing to the League hold annually county contests in debating, declamation and athletics. Every school in Texas should be in­terested in this work, and a League should be organized in each county. Upon request the Constitution of the League, together with bulletins and other information, will be mailed. The Division of Home Welfare. The division deals specifically with all problems relating to the home, and exists primarily for the benefit of the home-maker and with a view of placing the home on the same intelligent and prosperous basis which characterizes other progressive institutions. Lecturers and demonstrators will attend fairs, county educational rallies, and make a limited num­ber of engagements through the medium of women's organizations to give specific instruction on subjects of vital interest to the home. Bulletins will be issued frequently on matters pertaining to the home and may be had on application to the Department. Ques­tions will gladly be answered at any time on matters pertaining to the welfare of the home. Further information may be obtained by writing to the division. Cooperation in A.griculture, Marlceting, and Rural Credit 'i The Division of Public School Improvement. 'l'his di vision has in charge the various educational exhibits sent out by the Uni­versity to the fairs and other large gatherings, to call to the atten­tion of the people certain needs of Texas and to point out the most intelligent methods of meeting these needs. These exhibits cover such vital subjects as school buildings and school hygiene, plays and playgrounds, use of schools as social centers, medical inspec­tion of schools and care of the feeble-minded. Information on miscellaneous subjects is furnished through the cooperation of men in the faculty who have expert knowledge in their various fields. Ready-made lectures, accompanied by slides, are sent out to responsible people who are attempting local improvement. Short, practical bulletins have been prepared on many such timely subjects as Wholesome Cooking under Rural Conditions, Beautifi­cation of Home and School Grounds. Pamphlets have also been issued on One and Two-Room Rural School Buildings, Three an. Denmark's chief products-bacon, butter, and eggs-are pro­duced, concentrated and exported by the farmers themselves. England's wonderful stores and Ireland's rapid progress in but­ter and egg production owe their success to cooperation. The following table is taken from the second Year Book of International Cooperation (1910) and shows the strength of the movement throughout the world: International Summaries-Statistics of Cooperative Societies A. Europe: No. of Societies No. of Inhabitants to one Society Austria .......... .. .... .. 16,563 1,725 Belgium ..... ... ......... 2,270 3,282 Bulgaria ...... ........ ... 727 5,551 Denmark .. ... ............ 5,033 514 Finland ... .. .... ..... .... 1,929 1,58'5 France ......... ..... ..... 10,983 3,573 Germany ...... ... .. ...... 30,555 2,124 Hungary ... ...... ...... .. 6,000 3,473 Italy ...... .. .... .... .. .. 7,564 4,569 Nether lands ..... .. ...... . 2,679 2,184 Norway .... ......... ..... 3,078 777 Roumania .. ..... ........ . 2,904 2,051 Russia ............. .. .... 16,000 5,840 Servia ................... 1,252 2,14B Spain ................ .... 274 71,909 Sweden ............ ... ... 2,100 2,607 Switzerland ... .... ...... .. 7,827 481 United Kingdom .. ...... .. 2,500 18,086 Japan ...... ...... ....... 5,149 10,048 United States ..... ........ 500 183,940 In comparing the different countries, interesting facts are brought out. Even little Bulgaria is credited with 727 associa­tions and Japan with 5,149. The United States has only 500. This is due to the fact that the :figures for the United States are for 1905 and since then the cooperative societies have made great strides forward. Secondly, the note accompanying the table says that it "has been difficult to obtain information as to the present development of cooperation in North America. The unions at present existing do not compile statistics and the returns with re­gard to cooperation published by the statistical offices are very in­complete." This accounts for the comparatively low figures for the United States. In the Year-Book of the Department of Agriculture, for the year 1913, Dr. T. N. Carver, in his article on the "Organization of Rural Interests,'' lists a total of 1867 farmers' mutual insur­ance companies, 2165 cooperative creameries, 336 cooperative cheese factories, 2020 cooperative elevators, which alone is a total of 6388. There are hundreds of purchasing societies and marketing organizations, stores, cow-testing associations, and breeders' asso­ciations which he does not mention at all. This shows that there are certainly more than 500 cooperative associations in the United States. He adds, however, "The question often arises as to whether these are all strictly cooperative. Undoubtedly many of them are, in form at least, merely joint stock companies, and not cooperative in the strict technical sense. Such a claim, however, is based upon the letter rather than the spirit of the enterprise." (For a discussion of cooperative vs. joint stock enterprises, see later in the chapter.) This table, however, is limited to strictly cooperative societies and, therefore, does not list many of the associations that Carver has enumerated. Many will dismiss such comparisons with, "0, well, conditions are different over there. Their laws, governments, and customs permit of cooperation, but it won't work in the United States." Some even say that cooperation is suited only to monarchial gov­ernments and, if we introduced it here, our own people would be reduced to peasants lorded over by aristocratic landlords. But the principles of cooperation hold true all over the world. If it has been the salvation of the European farmer, it will do much for the United States. There is no use arguing that "conditions Cooperation in Agriculture, 'Marketing, and Rural Credit 15 are different." Some so-called "conditions" need changing and uprooting. It is no use plowing around these stumps any longer. We had better blast them out-get rid of them ! Some funda­mental differences remain and we will plow around these for a while. Cooperation can be adapted to these conditions. Reasons for Success in Cooperation It would not be fair to compare Europe with America in the matter of cooperation without saying something about the differ­ences between the two continents. Permanent Settlers Europe has been settled for centuries. America is new and our people have not been permanent settlers. Some 22 per cent of our people do not reside in their native state. Thirty-seven per cent of our farmers do not own their farms, but rent them and are here one year and on a different farm, and perhaps in a different county the next year. In Texas 52.6 per cent of our farmers are renters, and the problem is still greater. Teachers tell us that it is not uncommon to have 25 per cent or mGre of their pupils change during the moving season, and some schools are almost depopulated. It is not uncommon to find that people will not know neighbors living within a mile of their house, even though these people have lived there a year or more. Not knowing each other, people have no interest in their neighbors and how can we expect them to go into business organizations and risk their money in a venture with people they know nothing about? Many Nationalities of United States Our people are of many nationalities and it is hard to get peo­ple of different habits, traditions and customs to act together. A German citizen of Texas said, "As long as you keep the farmers' organization among Germans it is going to succeed, but as soon as you admit people of other nationalities it is going to fail." This is not because the Germans are so much better adapted to working together, but because different peoples won't "mix." 1ti Bulletin of the U nfrersity of Te:ras Prospe1·ity and Extraragance On the whole, the American people have been unusually pros­perous, and this is also true of the farming people. We have had a whole continent thrown open to us with seemingly inexhaustible resources of forest, mineral and agricultural wealth. And up to a few JCars ago no one thought of "conservation," but only of "development,.. "exploitation" and "opening up the country." Our gosernments, state and national, have treated these natural resourecl! in this light and have opened the door to any one who would "develop." Our prosperity has made us feel that we do :'lot need to work together. Mr. Fay, the noted English writer on cooperation, says: "A cooperative society is an association of the weak who get together in order to lift themselves and others out 9f weakness into strength."1 \Vhen people do not feel that they are weak, they are not likely to feel the need of mutual organiza­tion. One farmer from Kendall county writes: "I know of no way you can be of any assistance to the farmer-I mean the pro­gr~""Sivc fa.:m1er. He is on to his job, and gets all he is entitled to." A speaker at the first Conference on Marketing and Farm Credits in Chicago (1913) said: "I have had some experience in ·organizing cooperative associations, and I remember well talk­ing with one German farmer-he happened to be German-others arc largely the same. I drove from farm to farm, to influence five or six meu to go into an organization. I tried to explain to this mau; I talked hard and earnestly to him, and when I finally thought he was going to become a member, he said to me: 'Well, I made two thousand dollars last year; I think that has been enough.' ''2 In Europe things have been different. The land has been farnwr­ganization and adopt a standard of quality and packing, they will not only put a marketable product on the market but also estab­lish a trade name. At Milano we were told that there is a plan on foot to get ten or more pe<>ple to go into a tomato growers' association. It is proposed to take the products of these ten members and have such strict rules that only the first-class proo­ucts will be handled. A brand is to be established and put upon each package, and this brand will guarantee that the g<><>ds are up to standard. By such means, it is hoped that whenever people see the Milano brand, they can rest assured that they will get only first-class produce. A name will be established for this brand and higher prices and a goocl business expected. TYPES OF FARMERS' ORGANIZATIONS Cooperative Buying One of the simplest forms of cooperation is the purchasing society where a group of people get t<>gether to buy fertilizer, lum­ber, groceries, or any other necessity in wholesale or carload lots. The local merchant is often in a position to make very reasonable terms to such a group if they buy in bulk and pay cash. In these cases the organization selects a secretary or manager to handle the goods and attend to the business. Such a transaction is not too complicated for any organization and with growth in business experience can enlarge its activities. Here are a few Texas ex­amples: "We ordered cotton bagging as an association, thereby saving $150 to $200 on the car. We also ordered lumber by the carload, and saved also at least $200 on the car. We ordered seed potatees. It is our intention to build a wareh<>use here as an asso­ciation, and buy and sell everything together and we think to do at least twenty-five per cent better." "I have had experience once in buying corn cooperatively for the Farmers' Union. Farmers of Burnett county bought direct from farmers in Oklahoma."1 'Farmers' Fireside and Bulletin, December 10, 1913; I<'ebrunry 18, 1914. Many of the Farmers' Union locals have purchased coal, flour, corn, and feed. Meat Clubs Fresh meat is a luxury on the farm, especially in summer, yet by cooperation it is possible to have it with but little expense. At one place a farmers' club induced a butcher in a neighboring town to make the rounds of the club members once a week. In Doug­las county, Minnesota, is a meat club which has been in existence for over t.wenty-two years without the least bit of trouble among its members. Every week one of the members butchers a beef about one or two years old. Friday is ''butchering day" and the owner kills, dresses and cuts up the animal during the day. At night the neighbors gather at his house for a social evening and take their share of the meat home with them.2 At Topsy, Texas, there is a successful meat club of this type. The farmers own a cooperative slaughtering house and have hired an expert butcher to kill the animals. He is paid three dollars for killing, keeps the records for the club, and decides whether the animals furnished are in proper condition to make good meat. The record is kept on a large sheet posted in the slaughter house and includes the names of the members, the amount of meat taken by each member, and the amount furnished by the animal that the member brought. At the end of the year if a member has used more meat than he furnished to the club he pays ten cents a pound for the excess. The good and poor cuts are divided up equally among the members so that every one gets the same pro­portion of each. Mr. W. D. Lewis, who told us of this club, said there has not been a ripple of discontent. One year a widow was unable to furnish a beef, but the members gladly furnished her meat free and all were satisfied. One farm demonstrator has advocated the building of a com­munity ice plant so farmers could store their perishable foods. A cooperative creamery could easily add this feature to its already existing plant. 'Supplement to Rural School Agriculture (University of Minnesota), November, 1913. Cooperation in Agriculture, Marketing, and Rural Credit 27 Telephones Rural telephones are spreading over the whole State. As an ex­ample, one farmer writes, "We have a 'phone system. There are about eighteen rural lines now, with the town well connected up also. We believe in cooperation; the different towns near us have taken the telephone £ever and are going to connect with us soon. The Oberin and Weinert people are building 'phone systems. We are expecting Rule and Knox City to build soon and connect with ns."1 Farmers' Mutual Fire Insteranc13 Companies 'l'he thirty-eighth annual report 0£ the Commissioner of Insur­ance and Banking 0£ Texas, £or the year ending August 31, 1913, lists twenty-five farmers' mutual insurance companies in Texas. Twenty-three of these make reports 0£ their business. The re~ port shows that during the year 1912, $2,676,087.72 of insurance was in force, and they paid losses totaling $62,133.59. The same report shows that there are sixteen local mutual aid associations whose business is confined to one county or to a territory within twenty-five miles of the home office. These also could be classed as cooper.ative associations, although some 0£ them may not be agricultural. Doctor At the Mercy Farmers' Union Local they have a unique insti­tution in having a community paid doctor. One hundred people have agreed to pay him $12 a year, or $1.00 per month each, but he has the privilege of practicing on the outside all that he cares. The people say they are well pleased with this plan on which they have employed him.1 Cooperation in Dairy Industry Dairying is a coming industry in Texas and it is one that is in need 0£ cooperation among the farmers interested. In the first place, a silo is desirable, i£ not necessary, to provide the feed £or 'Farmers' Fireside and Bulletin, November 18, 1913. the cows. A Buna man told us that he would like to put in a silo but could not afford to own the necessary machinery. "If I could get two or three of my neighbors to build silos, we could afford to buy the machinery together," he said. This is not only true in this case but wherever farming operations demand a large_. expensive piece of machinery. If enough farmers are in the dairy business and a local cream­ery is not advisable, cream shipping associations may be organized to haul the cream of the association cooperatively, as the farmers of New Mexico have done. In one community they live thirty-five miles from the railroad and take turns in taking the cream to the station. Where the amount of milk produced is sufficient that a cream­ery would be desirable, it ought to be cooperative. There are sev­eral in Texas today. It is necessary, however, to make sure that there are enough patrons with enough cows to furnish milk to make it profitable. Promoters whose object is to sell machinery, have often induced farmers to build cooperative creameries where business did not warrant it, and the machinery was usually sold at $500 to $1000 above the market price. In the northern part of Iowa, there are over five hundred cooperative creameries, while in the southern part, there is hardly one. The reason for this is that grafters came in and "organized creameries where there were not enough cows to keep a hand-churn going." It is impossible to organize farmers in that section now; in fact, it is im1)Qssible to get farmers to believe in any cooperative ideas because they have been grafted upon so often.1 Oooperat1'.ve Breeders' Associations 'l'he average cow in Texas produces about one hundred and fifty pounds of butter per year. This is not profitable. All our dairy associations and agricultural colleges are agreed that we need to improve our dairy herds as well as our other farm animals. But a pedigreed or registered sire is expensive and unless a farmer has a sufficiently large herd of his own, he is not in a position to own one himself. However, if there are enough farmers in a com­munity raising the same kind of stock, say Jerseys, it will be to ':Marketing and Farm Credits, p. 91. C&operation in Agriculture, Marketing, and Rural Credit 2H their advantage to buy a sire to head all the herds of the com­munity. Mr. W. F. Raven, who represented the State of Michi­gan at the Corn Show at Dallas, spoke at that meeting on the organization of these breeders associations in his state. The plan briefly is this : When the owners of one hundred and twenty cows decide upon the breed they wish to have, the state field agent takes up the matter with the farmers. The cows are divided info three groups of about forty cows each and three bulls are pur­chased. At the end of two years the bulls are changed from one group to another to avoid inbreeding. The initial cost is about $10 to $40 per member. Today there are seventy-seven centers and in Livingstone county the Holstein Breeders' Association has three hundred and forty-seven members.1 Cooperative Sale through Associations These breeders' associations also furnish a nucleus for cooper­ative buying and selling of animals. A buyer wishing to buy a carload of Jersey cattle has to spend a week among the unorgan­ized farmers to find what he wants. But by having registered with a secretary all the stock for sale in the community, there is no difficulty at all. The Breeders' Associations of Wisconsin have found this very profitable and not only hold public sales, but ad­vertise their cattle. In Bulletin No. 189 of the Wisconsin Agri­cultural Experiment Station, this is brought out: "The small town of Lake Mills, Wisconsin, js another example of what com­munity effort can accomplish in the way of breeding one specific kind of cattle. Through the efforts of a few men, many Holstein herds exist in the vicinity of Lake Mills. The early activities of these men established a reputation for Lake Mills as being the greatest Holstein center of the Middle West. Buyers have gone there from all parts of the world to buy high-grade and pure-bred Holstein cattle. As high as $175,000 worth of Holstein cattle have been shipped from Lake Mills in a single year. Breeders in the vicinity of Lake Mills have been unable to satisfy all of the demand. "Several of the associations now in existence in Wisconsin are advertising in the leading dairy papers of the country by carry­ 'See circular 4 of the Michigan Agricultural Collegf'. ing, at the expense of the associations, such advertisements. In reply to inquiries, which these advertisements attract, sales lists, published at intervals determined upon by the association, are sent out. These sq.le lists contain a complete enumeration of all stock for sale, together with the names of the respective owners. From this sale list the buyer may choose whatever he may desire. "A community organization may also render great assistance to its members in selling various farm products and in buying feed­ing stuffs and other supplies." Some excellent breeders' associations are found in other States in connection with the United States Department of Agriculture. "Two such associations are now at work,-one in Minnesota, where short-horn cattle are being bred; the other in North Dakota where a group of German farmers in the semi-arid regions are breeding Holsteins. Tennessee breeders are thinking of applying the plans to the production of mules; and interest in it is being shown in other sections."1 The same type of associations could do a great deal in the South towards the community eradication of the cattle tick. At St. Elmo, Louisiana, there is a splendid dipping vat built by and for the use of the community to fight the ticks. Gow Testing The breeders' associations often work together in cow-testing associations. The individual farmer cannot afford to have a large Babcock tester nor give the time to the work he ought to, to find out whether his cows are up to standard or not. These associa­tions hire a man who goes from house to house and spends a day or so at each farm house, tests the cows, and keeps the record for the farmer. In a short time the record of the cow will show whether she is paying for herself or is merely a ''boarder." At Dickinson, Kansas, such an organization was formed in 1912. They had twenty-one members and three hundred and seventv­nine cows. They assessed each member one dollar per cow pa;,_ able quarterly with a minimum charge of twelve cows. It was found that the best cow in the herd produced $201.00 worth of butter and her feed cost $55.91; the poorest cow produced $21.38 'Progressive Farmer, January 11, l!ll3. Cooperation in Agriculture, Marketing, and Rural Credit 31 worth of butter and her feed cost $33.23. This last cow helped to cut down the profits of the first and ought to have been culled out long ago.1 Other Breeders' Associations The same type of organization may be used for the improve­ment and sale of horses, mules and swine. Grayson county has begun to work in this direction. 'l'he Sherman Chamber of Com­merce has taken up the matter of organizing a hog raisers' asso­ciation. A poultry association has also been formed in this county. Farmers of Lee county have organized a Swine Breeders' Associ­ation that has more than one hundred members. They also sell their hogs through the association, and buy Irish potatoes directly from Maine. When it comes to horse breeding associations the money in­vested in a good sire is a good deal more than in the other associ­ations mentioned. Here the "promoters" have also played their game. Many such associations have been sold $500 stallions for $3000 or more, and in a year found they have been swindled. The advice of competent men should be asked before money is invested in an enterprise of this kind. Cotton In the cotton industry there are plenty of examples of farmers' organizations that are doing a good business. "Our organization in this district (Quanah) owns and controls nine Farmers' Union warehouses to store and finance our cotton and cotton seed, and one of the largest oil mills in the state (just completed) to grind and protect our cotton seed."2 The people at Anna, Texas, have organized a company which has successfully built a gin, and operated it for the past season. The organizers tried to get one hundred farmers and business men into the organization, but got only ninety-three. The cashier of one of the banks was made secretary-treasurer and has had a great deal to do with the organization and management. He told us that they went ahead with their ninety-three members and built 'Circular No. 35, Kansas Agricultural Experiment Station 'Farmers' Fireside and Bulletin, December 3, 1913. and equipped the gin for $10,700. They allow only one vote to one member, restrict the number of shares to be held per member, but allow voting by proxies. At the end of last year they paid up the difference between the actual share capital and the cost of the gin, laid aside $300 for their reserve fund and paid twenty-five per cent on the capital. The actual dividend was probably near forty per cent. None of the officers receive pay except the secre­tary-treasurer, who receives $25. The gin has proven such a great success that they are thinking of putting in their own oil mill, which, however, will take a capital of $40,000. They do not have any warehouses, although they had room to store a few bales of cotton. This gin is a splendid example of cooperation between the business men and the farmers of the community. The gin company lacks some of the features of a truly cooperative concern, but is as near to it as their composite membership will allow. In Atascosa county, the Farmers' Union secured control of two gins in the fall of 1913, and found them so successful that they organized the Cooperative Gin Company o-f Atascosa county, with the object of owing all the important gins of the county.1 An interesting letter was published in Farm and Ranch of June 13, 1914, by C. G. Burkett of Collin county, 'l'exas, which demon­strates the fact that farmers can handle their economic problems if they once make up their minds to do so: "We had four gins in Farmersville up to last summer. They had become owned and controlled by the local mill, or at least the farmers thought so, and while they were considered very good gins, equal to the average, there were many new features in gin­ning cotton that added to the grade of the lint that these gins did not have, and the owners did not feel inclined to supply them. The farmers also felt they were not getting the full value of their seed as compared with other sections. They could see no way of getting the best results except by going into business for them­selves. They decided to build a first-class gin with a reinforced concrete building, equipped with the latest machinery to cost $20,000. About one hundred and fifty farmers and a few busi­ness men of the town, who were known to be outspoken friends ::if the farmers, took about half of the stock and an old ginner 1Farmers' Fireside and Bulletin, December 3, l!ll3. Cooperation in Agriculture, Marketing, and Rural Credit 33 and farmer took the balance. The gin was completed and ginning begun. "The first unnecessary evil which the new gin eliminated was to prevent an advance in ginning and wrapping of seventy-five cents per bale. It was soon discovered that the new gin was turn­ing out a bale that sold for from $10 to $25 per bale more than those of the plain gins. 'l'his at once compelled the other gins to put in improved machinery. "They estimated the grade of the cotton was raised at least $15 per bale. This was correction number two. "They had their seed under their own control and shipped them for about $3.00 per ton more than they could get at home. This was evil number three. "There were about 8000 bales raised in that d.istrict; the bene­fits for last year to the cotton growers was nearly $150,000. The dividend was forty-three per cent on the stock. "Persuasion or petitions would not have had any effect toward correcting these evils, but getting into business for themselves where reforms were needed did the work. Farmers and merchants cooperated together, as they should, and got results." There are many farmers' cotton warehouses throughout the state, successful in many instances and failures in others. Coop­erative cotton marketing has also been tried. One of the most successful cases is at Scott, Arkansas.1 In a bulletin of this size it is impossible to describe many types of farmers organizations. So far we have only discussed consum­ers' and producers' organizations; very little has been said of sell­ing of cattle, truck or other farm products. This will be treated more fully in the chapter on Marketing. Essentials to Success in Farmers' Organizations 'fhe farmers of Texas in many places feel the need of organ­ization but do not know how to go about it. One farmer from Cameron county writes: "I am convinced that many of our 1See proceedings of first meeting of Southern States' Association of Mar­keta, Bulletin No. 36, Texas Department of Agriculture, or Progressin' Famner, June 6, 1914. troubles in this line may be averted by close cooperation through associations throughout the state and I believe further, that the only way to cure the evils complained of is through a system of training by well-organized, well-officered associations, which will eventually teach the shippers and buyer as well, the importance of and the benefits to be gained by a National Bureau of Marketing." In the chapter on Rural Credits, directions are given as to the formation of a Rural Credit Society. The principles stated there will apply in general to the formation of any farmers' organiza­tion, so we need not repeat them here. Leadership Leadership is a large factor in the success of any cooperative undertaking. As one farmer writes: "It is not a question of what we can do, it's only a question of what we will do, and \\"hat we do depends upon our leaders. If they are men who have the get-up-and-go and have the confidence of the membership we can carry out all our undertakings with ease,-and we have learned that the right man in the right place is worth forty men in the wrong place."1 Due credit must be given to the Farmers' Union in the matter of educating the people to work together, and the leadership of their men in the formation of these organizations. A striking example of what a leader can do is found in Pasa­dena, Harris County. There, Mr. Glasgow, the teacher of the Pasadena school, has organized a strawberry selling association, composed of eighty farmers. They employ regularly a sales agent at $1000 per year, and the first year's business amonntepec­tion of the members at any time. The Right Relationship League of :Minneapolis, which has promoted the formation of cooperative stores in the Northwest, insists upon proper accounting and audit­ing of the accounts of the stores under their supervision. In fact, the success of their stores is largely due to this precaution, but in any organization there ought to be an auditing committee and other committees who have the authority to inspect the books. and supervise the business. Membership Agreement Another fundamental is that there should be a well defined membership agreement, and every one should sign it so that he may know exactly what is required of him. This should cover all the details of the business, and in order to hold members, the constitution or by-laws should contain some provisions for hold­ing them together, or there will be danger that some will leave the organization and break it up. The Cranberry Association of New England requires the sale of all the cranberries through the Exchange. The Walnut Growers of California fine their mem­bers $100 if they are found selling outside of the organization. Manager A good manager is essential to the success of farmers' organ­izations. There is a good illustration in connection with a gen­eral store in southern Iowa. They put in a manager whose chief qualification was his low salary. At one time he purchased 2000 pairs of shoes without regard to whether the people who belonged to the organization would or could wear the shoes. The purchase was almost a total loss.1 A good manager must be a well paid 'Marketing and Farm Credits, p. 90. man; one who is willing to work for the benefit of the coi:iperati ve enterprise, and one who has the ability to handle the business in question. After employing a good manager, and seeing that he is conduct­ing the business honestly, it is necessary to let him manage. Too often the members of the organization trouble the manager with all kinds of suggestions and feel hurt if he does not carrv out their ideas. The manager has troubles enough. A farmer~' ele­vator manager told us that he was "tired of his job." "If I have several hundred bushels of grain on hand some of the farmers will Cooperation in Agriculture, Marketing, and Rural Credit 37 come in to tell me that I ought to sell and sell quick, for grain is going down. The next one that comes will tell me that it is a shame to have only four hundred bushels on hand. Grain is ris­ing and we ought to take advantage of it. I listen to all of them and do as I pleMe. If I didn't have a thick skin I'd have quit long ago." If the manager is a good man, keep him and do not practice rotation in office. One of the reasons for the failure of the Iowa elevators was the fact that the farmers pMsed around the "good jobs,'' as they called it, and changed the management every year or two.1 What is True "Cooperation?" In the first few paragraphs of this chapter it was stated that there is a great deal of confusion as to the word "cooperation." So far we have discussed the principles that apply to farmers' or­ganizations of all kinds. There is, however, a form of business organization which is the purely cooperative type, and it is recom­mended by the American Commission that, to avoid the confusion, the word cooperation ought to be restricted to the purely cooper­ative enterprises. Wisconsin has passed a cooperative law outlin­ing the requirements for the organization of such companies. This law forbids the use of this term to any company that does not comply with the law in its organization or methods of doing busi­ness. In the same way the Texas Rural Credit Law forbids the use of the name to any banking association that does not comply with this law. The following points are considered as fundamentals in truly cooperative business organizations :2 One Man One "Vote 1. There ought to be only one vote to one man. Cooperation is a combination of men, and not dollars. The small producers, or consumers ought to have the sa,me right in business affairs of the organization as those who have larger shares of the capital. •See Co<>peration in Agriculture, G. H. Powell; Cooperation in New England, Ford; Report of American Commission, Senate Document 261, ps.rt I. 1Coulter, Co<>peration Among Farmers, p. 121. The Right Relationship League makes this one of their funda­mental principles, because they say it is American and democratic, and it would be just as well to allow people to have the voting privilege in accordance with the amount of property they held when it comes to a national election. Some organizations, how­ever, allow the voting privilege in proportion to the amount of produce furnished to the organization. This is true of the Cali­fornia Citrus Fruit Growers, but this does not mean the same thing as being allowed the privilege of voting in proportion to the number of shares held. Limited Number of Shares to Each Member 2. The number of shares allowed to each member should be limited by the constitution. The Right Relationship League does not allow more than ten shares to each member. The Walnut Growers of California limit the number of shares by saying that there shall be no more than one share per acre of walnut trees. No Proxy Voting 3. There ought to be no voting by proxy, that is allowing a member to give his vote to another if the first one cannot be at a meeting. It is held that if a member will not attend a business meeting he ought to lose his vote. Besides, proxy voting has many faults which ought not obtain in a cooperaive organization. Only Producers as Members 4. Only those who are interested in the producing or consum­ing side of the organization ought to be allowed to become mem­bers. In the case of a gin, only farmers who have cotton to gin should come into the organization. The share capital of the cooperative creamery ought to be held by the patrons who are fur­nishing the milk. This principle is carried out by the Florida Citrus Exchange and the Walnut Growers of California who have it specifically stated in their constitution that only producers shall be members. In fact, one of the reasons for the failure of the California Citrus Union was the fact that others were allowed to become members of the organization. Cooperation in Agriculture, Marketing, and Rural Credit 39 It also ought to be stated in the constitution that, if a. man leaves the organization to go into some other business, he be re­quired to sell his stock to the organization itself, which can then resell it to some other producer. This will prevent the stock from falling into the hands of non-producers or non-consumers. Furthermore, it will prevent a man from being a stockholder in two rival organizations. Here is where a truly cooperative con­cern differs from the method of organization adopted by the gins at Anna and Hillsboro.1 These allow business men to hold stock in the organization and the combination of farmers and business men is a good one for the latter have been loyal leaders, giving time, money, and business experience to the enterprise. But if the next fundamental point in cooperation is also insisted upon there may be friction. It is this : Division of Profits 5. All profits, above-a reasonable dividend on the capital, should be divided among those who furnished the business to the association. That is the important difference between a. joint stock company and a cooperative concern-in the former profits are divided among the stockholders in proportion to the amount of money they have invested in the stock, in the cooperative busi­ness the profits are divided in proportion to the amount of busi­ness furnished by the members after a reasonable dividend has been paid on the stock. To illustrate this, in the case of a store run under the plan of the Right Relationship League: The con­sumers pay full price for their goods, and a record is kept of the amount purchased. First the interest is paid on the capital and a sum is laid aside for a reserve fund, then the profits are di­vided up among the consumers according to the amount they have purchased. Suppose a ten per cent profit has been made. Then a man who has purchased $450.00 worth of goods will receive a rebate of $45.00. According to the rules of these stores, custom­ers who are not stockholdc:rs get half as much rebate, in this case five per cent, or $22.50. To show the difference between the ordinary stock company 'l"arm and Ranch, May 2, 1914. and a cooperative concern in the division of profits, we will as­sume the following case: Suppose a $10,000 gin is built and there is no limit to the number of shares held by one member and voting is by shares. Mr. A. is a business mQ.n and holds twenty-five shares. Mr. B. is a farmer and holds one share. They gin 3000 bales at $3.00, which would be a gross income of $9000, of which $2250 is clear money. They lay aside a reserve of $450, leaving $1800 to be divided among the stockholders, a dividend of eighteen per cent on the investment. Mr. A. will get a dividend of eighteen per cent on $2500, or $450. Mr. B., eighteen per cent of $100, or $18. In business meeting A. has twenty-five votes, B. only one. According to cooperative principles this is not right. The farmer is the one who by his patronage furnishes the business by which dividends are created. It is true the capital of the bllsi­ness man ought to produce the usual amount of interest, but everything above that does not belong to capital, but to the man who has produced the business. Many would go so far as to say that all the profits should be divided on the basis of business fur­nished and this is practicable where the cost of putting up the plant, etc. (the physical capital, in other words), is small as in the case of a purchasing society. Let us work out this assumed case on cooperative principles, keeping the number of shares the same. We will allow eight per cent interest on the capital. Eight per cent of $10,000 would be $800; A. with his twenty-five shares would get eight per cent of $2500, or $200 interest; B. on his $100 would get $8.00. Taking out the interest on the stock there still would be $1000 of profits to be divided in proportion to the business furnished to the gin. Suppose B. has furnished 60 bales of cotton which is one-fiftieth of the total. 'l'herefore, he would be entitled to one-fiftieth of $1000, or $20. The two compare as follows: Mr. A. Mr. B. In joint stock form­18% of $2500=$450 18% of $100=$18 In cooperation form­8 % of $2500=$200 8% of $100=$ 8+ $20 on cotton ginned=$28 Cooperation in Agriculture, Marketing, and Rural C1·edit 41 This still looks in favor of A., but in a purely cooperative con­cern the number of shares of stock would be limited to a great deal smaller number than twenty-five and he would have only one vote, no more than B. with his one share. Some organizations might exclude A. altogether. But under such cooperative arrangement we can see that the non-producer stockholders would feel that they had a right to object. They would prefer to have the dividends paid upon the capital, but according to cooperative principles if they are not furnishing any of the business out of which dividends are created they are not entitled to the profits above a fair return on the capi­tal invested. Limited Stock Dividend 6. In most cooperative concerns the interest on shares is lim­ited by the constitution and by-laws, as has been explained in the example given above. In the Cranberry Exchange of New Eng­land, six per cent is allowed on the money in shares, and the rest of the profits are divided on the basis of business furnished. Reserve Fund 7. As shown in the above example, a certain reserve fund should be set aside before profits are declared. This is very im­portant, for in very many farmers' organizations nothing is set aside for repairs or depreciation, and the results are that they pay enormously high dividends for the first few years. But after awhile the bills come in for repairs and depreciation, the divi­dends drop off, and in fact members may be called upon for as­sessments instead, and then it is likely that the organization will be broken up. One of the reasons for the failure of the New England creameries is the fact that no reserve fund was laid aside. The Wisconsin Cooperative law requires that all institu­tions organized under that law must have a reserve fund. They must set aside ten per cent of their net profits, until this amount is thirty per cent of the paid up stock, after that five per cent must be set aside for an educational fund to be used in teaching cooperation. Judged by these standards there are not many farmers' organ­izations in the United States that are truly cooperative. "But any organization of this kind may be said to be cooperative in spirit when it is managed exclusively with a view to giving the farmer a better price for his butterfat or his grain, and not at all for the purpose of securing dividends on the stock," says T. N. Carver.1 "If the stock is owned by farmers and if each share 'Year Book, U. S. Department of Agriculture, 1913. of stock is in practice limited to a normal rate of interest and all surplus earnings go to the farmers in the form of better prices, the enterprise is cooperative in spirit, even though its form be that of the ordinary profit-making corporation. "However, it must in frankness be admitted that there is al­ways danger, under the joint stock form of organization, that the cooperative spirit will be destroyed and the organization shifted to the profit-making purpose. In a creamery, for example, if one man own a large number of shares and very few cows, or none at all, he will naturally be more interested in dividends than in the price of butterfat. If a majority of the shares are owned by such men, the comfany is almost certain to be managed in the interest of dividends rather than in the interest of the price of butterfat. It is therefore highly desirable that the form of organization be such as to prevent this result and insure that the management shall always be in the interest of the producers. Nevertheless, so long as the management is in the interest of the producer, it is reasonable to list such an organization as cooperative." CHAPTER Il MARKETING INTRODUCTION It would not be possible to discuss in one short chapter all of the important questions in connection with the marketing of farm products. Marketing has been for some time a much studied question and there yet remains a vast amount of study and effort before some of the most perplexing difficulties can be removed. The purpose of this chapter will be to show some of the conditions which exist at this time in our own state, and to suggest improve­ments and solutions which may be offered by the individual farmer rather than by government action. The statements made here concerning conditions are from the people concerned. The chap­ter is a product of the evidence and testimony which have been given to us by farmers, shippers, merchants and dealers. This information has been obtained either by correspondence or direct interview. Naturally, those who have furnished us with infor­mation have also given us much personal opinion. Of necessity much of this is omitted. The purpose of this chapter is not argu.­ment except as the experiences of the producers tell their own story. Wherever opinion has been offered or scheme of solution by fhe government proposed, we have considered the same and placed it where those concerned with law making may have access to it when desired. Correspondence and interview have brought us charges and counter charges of fraud, theft and dishonor. But producers, middlemen and consumers all make mistakes. Not all the present­day difficulties could be based upon mistakes, but we have hesi­tated before putting into print the charges brought in many cases and some of them will not appear. Enough is given in these pages to show that the widespread dissatisfaction of the farming class has a very solid basis. It is not personal opinion but a de­duction from facts that the farmer and producer markets his wares against great odds. Conditions in many places are chaotic. It is also a deduction from his own evidence that he is not doing what he should to remedy his own condition. The principles underlying what he should do have been suggested in the previous chapter. The conditions and times demand action. We advise a cam­paign for cooperative marketing because it has succeeded. It will be well to note again the distinction drawn in the first chapter between true cooperation and some of the organizations which have paraded under its name. We advise cooperative marketing in the second place because it will eliminate from the produce world much of the personal antagonism and fraud which now exist. It will show that men in certain situations are victims 0£ circum­stances. Methods and principles will be studied instead of per­sonalities. A third reason for advocating cooperation in market­ing is the fact that it will make students of the producers. To study the market is to find out what to produce, how much to produce, how to prepare it, and where to dispose of it to the best advantage. There are many other facts in favor of cooperative action and prominent among them is that it is a method within the grasp and control 0£ the smallest producers as well as largest and there need be no wait for legislative action or further work on the part of those not actually following the plow. In this way private initiative, while not antagonistic to, may yet be in­dependent of, state action. Cooperation will eliminate conflict. by making useless those who cause it in the marketing world. In time legislative action will assist that which has been done by the producer himself: that which he must do of his own action whether legislation comes first or second. Crops and Values During the past year nearly five thousand farmers have had an invitation from us by letter to give information on marketing con­ditions. Twice five thousand and more have had a direct per­sonal invitation. Out of the hundreds of letters which we have received, we tabulate the following facts: Per cent of Letters in Products Mentioned. Which Mentioned. Cotton . ................. .. .. . . . . . .. ..... . . . 61 Truck and vegetables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38i Grain~ .......... ...... .......... ....... ...... .. 17 Cooperation in Agriculture, Marketing, and Rural Credit 45 Per cent of Letters in Products Mentioned. Which Mentioned. Corn ..... ................................... ... 16 Live stoek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Fruit . . ..... .. ... . ... . .. .. . . . .. ......... .. ...... 13! Poultry and eggs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13! Dairy products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Hay and feed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ll Wool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . 3 Pecans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 'fhe eleven classes mentioned include nearly all products upon which we have been furnished information. There is an average mention of about two products per letter. Of course, this does not mean that these farmers have an average of only two products to sell, but it does mean that they have only that many which they consider worthy of note when talking about marketing problems. The class of truck includes all the different kinds of vegetables. 'fhe grains include wheat, oats, etc. Kaffir, milo, etc., go under corn or feed. All other products are very scattering. For ex­ample one mention of tobacco; one of sugar cane; one of molasses; and five of honey were given. It is worthy of note that even in a limited number of letters, grain, corn and live stock stand close together. Also that dairy products and hay and feed are tied for eighth place. The following table taken from the last census shows the value of these classes of products for the year 1909: Cotton and seed ...... .. . .. ... ... .... .... . $188,673,954 Truck and vegetables... . . . . . . . . . . . . . . . . . . . 12,122,255 Grains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,545,305 Corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,564,618 Live stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,648,000 Fruit ... ......... ........ .............. . 2,304,574 Poultry and eggs . ....... .. . . . ... . . . .. ... . 5,909,942 Dairy products .. .... .... ............... . 15,680,000 Hay and feed . .. . ... ..... ... . . . ....... .. . . 12,824,433 Wool .... ........ ... ............... ..... . 2,202,342 Pecans .... ........ ...... ....... · · · · · · · · · 556,203 It will be seen from this that the following pages contain a discussion of the marketing of all our principal agricultural prod­ucts. However, they are not discussed in the order of their value. Grain As is well known, the rice producers have had some experience in cooperation or association work. Rice growers say freely that by aswciation they have secured much which could not have been obtained by individual action. What can be done further is well suggested in this statement: ''The rice growers and truck growers seem to be having trouble in buy· ing feed which they do not raise. . . . The rice men have an organ· ization for selling, which handles their business in a manner satisfactory to them, but have failed to see the need of cooperation in buying. To illustrate: The rice farmer has very little land suitable for feed crops, 80 he has to buy a large amount of feed; in fact, the larger part of his expense account is his feed bill. If the grain growers were as well organ­ized as the feed or grnin dealers, they could sell direct to the rice growers through their association at a better price and the rice man would buy food cheaper. Corn has not sold for less than $1.00 per bushel for a long time, and often at $1.l(} and $1.15. These prices are not governed by the price the farmer gets. In talking the matter over with my neighbors who grow rice, I find that they are hopeless of any relief from the exa.ctions of the middlemen. Good table rice is sold by our local rice mill at from $3.50 to $5.00 per 100 pounds, yet rice retails in our local stores at H to 8! cents per pound. Some of us are hoping that the feed growers will organize and divide the profits the middlemen now get between producer and consumer." The rice grower wants feed. Here is the man with the feed. It is simply a question of get together. "I raise corn, cotton and grain, the principal crop being onts. l\larketed 15,000 lmshels. I own and operate a farm with hired h1bor, doing every­thing from breaking land to threshing with own machiner:v. . . . I sold my crop through local dealers. I think the price would be better if a more direct communication could be had with the consumer. l\fy observa.­tion is that our local buyers buy on a good margin, and sell to other brohrs who also require a margin. Commission selling is very rarely satisfactory in the grain business, but I find it very much so in the cattle businPss; however, in the latter transaction, your prospective buyer is looking at your wares, while the displaying to a buyer of fifteen or twenty cars of sacked grain, or loose grain, would be quite an item in time, space, expen!!e, etc., and after all the satisfactory handling of farm products through the cl1annel of commerce to the consumer will remain, as a rule, an unsatisfactory business transaction." Cooperation in Agriculture, Marketing, and Rural Oredit 47 Hay and Feed Closely related to the grain market is the market for hay and other feed stuffs. Opinion is about evenly divided as to satisfac­tion and dissatisfaction in buying and selling. In one case where satisfaction has been had the selling has been done through an association. The large amount thus handled has attracted more buyers. 'l'he association manager received the bids from the buyers and the producer accepted or rejected any bid. 'l'his has been found effective in keeping the price up to the quoted market. Weekly meetings were held for the purpose of discussing the market and "the spineless ones were worked with until a better system of marketing could be worked out." Suc­cess in this case has been due largely also to the fact that a ware­house was constructed. Now the product is sold as a whole: grading is easier and the buyer does business with the association as if it were one man. The association sells only in car lots and therefore does not have direct connection with the consumer. Another alfalfa association has trouble in reaching the small consumer because so many people want to do business on reference only. The distance over which some hay must be shipped makes all personal contact between buyer and seller impossible and thus the large buyer has the advantage over the smaller. It is sug­gested that greater security could be had with some kind of mar­ket supervision. At this time the safe way seems to be through the association, even for a man who produces as much as 150 tons of alfalfa and 25,000 pounds of seed in one year. The price of unorganized effort is stated in the following com­ ment: "Hay season comes and the town is filled with hiiy wagons. Dnll time with the town people; a few grain men buy it at $8.00 or $!l.OO a ton, atore it, and in the winter sell it at 50 cents a bale, or $16 to $18 per ton." With regard to this condition the question naturally arises, did the grain men come first or did they come second? If second, then the producer must have been waiting for a market. Here is one producer who found out in time: "The bundled feed was loaded on wagons and hauled to be sold to any ehance buyer who might happen along. I quit selling such feed becnuse marketing consumed too much time, and because ultimately that kind of marketing would impoverish the land. I sold direct to the consumer and the price was fairly good. Milo heads consumed less time marketing, the price was fairly good, and usually one could place a car with some mer­chant in the cotton country. The stalks could remain on the land. That looked fairly good, but I soon saw that my stock could graze the stalks to advantage, but this same stock would later need the grain. I sell no more milo heads." Satisfaction in selling hay and feed seems to come from the two sources of associated effort and ability to store and hold. Dissatisfaction comes from several sources. One example is where selling was done to a distant company upon exchange of telegrams. This system worked very well on a rising market but in certain cases of falling market the company would return mes­sage that the hay was not up to agreement or classification. One party who sells about sixty tons of alfalfa, claims that it was wholly due to local conditions that hay last year was worth only $14.00, while the year before it sold for $20.00. As with the grower of perishable produce, so with the seller of hay, it seems that sometimes he is out his feed and asked to pay something more to cover freight charges. One sorghum producer sold last year about 400 tons by carload throughout the state and found about three out of five dealers honest, honorable business men. Knowledge of only one market has caused several shippers to re­ceive a price which might have been refused if there had been any knowledge of another market. One shipper says he has had several unsatisfactory deals because he was afraid of "being stuck with a car of hay perhaps one hundred or two hundred miles from home." That he had a right to this opinion is proved by the following: "I know of one party at this point who shipped a car of hay to North ·Texas and it was refused. He wired the parties to unload and sell for his account. His returns on same were 92 cents, but they kindly sent him $1.00. At this same time he could have gotten $4.50 per ton on track here for bedding hay, and the hay he shipped was fairly good, fall cut, feeding hay, but a little clark. If there hacl been a bonded broker within fifty to one hundred miles of this hay, it would have paid him well to have pa.id this broker's expense and commission to go to the town and dispose of it for him, and he would have had the satisfaction of knowing he had not been robbed." The majority of growers of hay and feed make haste to explain Cooperation in Agriculture, Marketing, and Rural Credit 49 that while they charge down-right dishonesty on the part of some of the dealers, that they are assured that there a1e many honest comm1ss10n men. 'rhe trouble seems to be uncertainty more than dishonesty. The producer is willing to admit that the majority of commission men are honest but that it is certain that there are some dishonest ones who are largely responsible for the perplexi­ties and difficulties with which the average producer must deal. No one will deny that a number of commission men fill a legiti­mate place in the present marketing system. It would appear, therefore, that the honest commission men would be very anxious to have the dishonest eliminated from the business. Could not the producer assist in this as well as the dealer? Take for ex­ample the case given above, where the town was filled up with hay wagons at the busy season. If there are among the buyers in this case dishonest men it is as much the fault of the sellers as it is of the buyers themselves. Nothing could be simpler than cooperative action on the part of the sellers and by a very simple association, dealing only with buyers who prove themselves trust­worthy. In other words, if the producers use no foresight, make no attempts to contract with a buyer in advance, but simply drive into town, sell to the best price, and if necessary compete with a neighbor who is also a seller, does not this kind of business man­agement get just the kind of a buyer that it deserves? The aver­ave dishonest commission man does not have much to do with an effective farmers' organization. As we might say in the case of hay, the fields are greener somewhere else. The principles mentioned in the preceding paragraph apply not only to hay and feed but to practically everything which the farmer has to sell. '!'here is a general opinion on the part of the consumers or those who buy hay, that retail prices are too high. They are probably not too high considering the way the business of buying is carried on. The point is, that the average farmer has little defense when asked, "Why do you buy feed?" But it is a well known fact that there are many who could produce feedstuff, who prefer to buy. Of course, this kind of a preference is rather costly. If the farmer uses the business management, which leads him to buy a manufactured article to feed to his live sh>ck, is it not reasonable to suppose that he will have to pay manufacturers' profits and the commissions of the commercial world for so doing? To those who cannot produce their own feed, there is as much to be said on the side of unplanned and unorganized buying as there is to those on the side of helter-skelter selling. Gorn With corn, as with hay and feed, although local supply does not equal our demand, the producers are about equally divided as to whether marketing is satisfactory or otherwise. Prices vary with local conditions. For example, out of the first half dozen letters glanced at the following prices are quoted: Eighty cents in shuck; $1.00 a bushel; seventy cents in shuck; whatever the merchant says it is worth. The dollar corn was sold to neighbors. The seventy-cent corn was reported satisfactory with a yield of 35 to 40 bushels per acre. One Jetter reports : "Ten loads of corn will glut the market in Paris and prices go down 15 to 25 cents per bushel, and the same thing with oats." The next one says: "Corn is never considered a product for the market in East Texas coun­ties from the fact that it consumes all the grain crops at home. Thie country buys corn every year." The solution of high prices and low prices in these two com­munities by their getting together in organized exchange is easy. One correspondent says : "I have bought from the dealer at 75 cents per bushel, seventy-two pounds for a bushel, ca~h, in spring, and sold better corn the coming fall at 25 cents per bushel of seventy-five pounds for a bushel." Perhaps so, but this does not mean that the farmer paid too much nor that he received too little. No one had com in the spring perhaps, except the dealer. One seller and many buyers mean high prices. In the fall it was one buyer and many sellers, hence low prices_ In addition to this fact we must'remember that the value of an agricultural product depends largely upon where it is, and what time it is there. Since corn is usually regarded as a grain and is a large item Cooperatiort in Agriculture, Ma1'keting, and Rural Credit 51 in feedstuffs, what has been said above on grain and feedstuffs, applies also in the case of corn. Marketing of Live Stock Among the farmers who have given us information concerning the marketing of live stock, there is about one satisfied seller to two dissatisfied sellers. One satisfied seller says that he sold 60 Jersey cows this year at a good price and that he did this by ad­vertising. This man, of course, is more than an average pro­ducer; he is (just the same as the cattlemen) in a specialized business. The majority of our correspondents belong to the class of general farmers. The foilowing comment applies to the ma­jority of the producers who have written us: "I have a few fat hogs for sale. Our local dealer offers me 6~ cents, live· weight. He sells pork from 16 to 20 cents. Of course, I could do better by selling to San Antonio or Fort Worth packers, but I have no carload. Through the medium of our Farmers' Institute I tried to organize clubs, but the farmers won't organize." Another case is that of the producer who has several thousand acres of pasture, and half as much land in cultivation. He says: "We market cattle, sheep, hogs, horses and mules, and these consume most of the rent feed on the place. What feed there is left is disposed of locally, and the selling becomes a personal proposition of salesmanship. The fat stock shipped to market is handled in a satisfactory manner by the live stock commission companies. There is so much competition be­tween these concerns that there is a constant incentive to better sales. On the whole, we have no fault to find with the present system of marketing stock and wool." Here is another case of the producer who is above the average: "I market about $4000 worth of hogs of my own raising for some years, and find that selling through commission men, mostly at Fort Worth and Oklahoma City, has been satisfactory, though the slow movements of trains, that is, the long stops and lay-overs, caused heavy shrinkage, but in justice to the railroads, will say that though I have lost from that cause, I have never put in a claim that was not settled without suit. All feed stuff was consumed on the farm, but poultry was never soJ..d for a fair price except in a few cases where I sold to a man trying to load a car. My hogs were finished for the packer; my poultry the same. To the man who does not expect too much, I believe cattle and hogs are pretty well handled if the loading stations were forced to furnish water for the stock at each and every station when they are handled. I have been forced to haul water a long distance at heavy expense to water stoek after a long drive before I could load, as it would be twenty-four hours before I could compel tlie road to water." With regard to shipping facilities, and accommodations fur­nished by the railroad, opinion is divided, but the majority believe that this phase of the marketing situation is fairly satisfactory. It is to be regretted that so little is said concerning the quality of the product sold. Very little mention is made of improve­ment in breed or an attempt to furnish high-grade stuff. There is much criticism of the difference that exists between what the producer gets in the local market and what the consumer pays at the local meat market. Little comment is made upon losses which must be incurred in transforming the product on the hoof into a finished meat product. Most of this kind of criticism comes from those who have had a very small amount of product to sell. In one case, there is criticism because certain local deal­ers have bought up cows, and after keeping the same for a cer­tain number of weeks, have doubled their money. It would ap­pear that such criticisms are unjust. The writer knows of sev­eral cases where such local buyers have built silos, and have sim­ply finished out the cattle in the way that the small producer could not or did not want to do it. This is legitimate business. The writer has in mind one case of an Indiana farmer who bought fifty-three head of calves out of the Texas market, and after keep­ing them for a few months, during the winter season, on a little pasture, wheat straw, and silage, sold to a profit of about $1300. The calves were finished to top the Indianapolis market. It appears that this is a case of regret not open for criticism except that the feeding out was not done in the State of Texas. Among the difficulties that a certain man who sells from 400 to 500 sheep, and 200 to 300 head of cattle a year or more, has to deal with, are given the following : First, although commis­sion men are men of ability, their charges are high; second, that the price is controlled by a very few firms; third, that when hay is fed in the pen, that it is sold at a high price. Several examples are given to show the wide margin which exists between prices in the local market and the large city market. This point is brought out along another line by the turkey market. This letter shows Cooperation in Agriculture, Marketing, and Rural Credit 53 that cooperative action could be applied to advantage. It is the testimony of a woman : "I thought I would raise turkeys, but there is no market here and by the time I shipped them to Shreve­port, paid the express and commission there, I could not afford to raise fowls, so have turned my attention to raising cattle." Word from the sections of the State that are classed as cattle country indicates that there would be a much greater production of cattle by the smaller producers, or general farmers, and there­fore the men who do not care to go extensively into the cattle business, if the rates of interest on cattle loans were not so high. And if the small producer could have equal opportunity with the men who specialize in cattle. The following paragraph comes like a breath of the open air : "I am making my living on the safe and sure plan by keeping milch cows and hogs, and running them on green pasture all the year. Fat hogs and cream is always a good price and sure market. I have my farm fenced off in fields and plant only one kind of crop in a field, and when the crop is gathered I open the gate and turn in the cows and they clean up the field, stalks, weeds, grass, and everything, and have the field ready for the plow, and make cream enough to pay all our running expenses." After reading the testimony of both sides, one is almost ready to agree with the "P. S." added by an earnest correspondent: "The person that solves the marketing question satisfactory to both the buyer and seller must possess wisdom that would make Solomon look like 30 cents." Dairy Products The rapidity with which silos are being introduced bespeaks an early increase in the amount of dairy products. In other states the farmers in many localities have had their first experience in cooperation through the creamery. In Texas, this has been a neglected business. What products have been produced have de­pended largely upon local markets and fluctuating prices. The future promises better prices and the government by giving us the parcels post has aided most in bringing about that situation where producer and consumer can get together. Opinions may differ, but actual experiences in marking dairy products by parcels post seem to be entirely satisfactory. "My butter netted me 25 cents by parcels µost. At the same season our country stores were paying 121 cents per pound. I save all my syrup buckets, mould butter in brick, wrap with bought butter paper as I mould. This paper keeps the butte:r fresh for quite a while." "Since the parcels post has been in vogue we can get 35 cents per pound for butter, when the local market pays only 15 cents." "I market 2000 to 4000 pounds of butter or butter fat and 30,000 to 50,000 pounds of milk annually. Fint I sold through creameries and later found it more satisfactory and profitable to ma,nufacture my own butter, and under the new parcels post laws find it very satisfactory, selling to city customers 200 to 300 miles distant." Some opinions do not agree with what has actually been done. "We also sell about $400 worth of butter every year, at from 27 to 30 cents per pound. The merchants seem to have a set price to pay for butter. They think that 25 cents is all they should pay for it. It seems to me that the butter maker should be in touch with the butter eater. There is so much red tape about mailing butter that we think it won't pay. People want it fixed very secure. Our butter is very firm and solid. We use a separator and make the butter out of cream. Butter made from cream is superior to butter made from milk." Of course, there is "red tape" about it. But red tape in this case is worth money. It is the customer who demands the best and that best served to him in the way he wants it who is worth while. The producer who tries to satisfy a want stands a better show to get his money than the producer who tries to make a con­sumer want something else. The producer can determine the character of the supply but the consumer determines the character of demand. He expresses his opinion in terms of money. Note how it is brought out in the following-cases : "I have marketed during the present year about 200 pounds of butter to my local people, they being the actual consumer, receiving 25 cents per pound, or a total of $50, which has been very satisfactory to me under existing circumstances. Our butter was moulrled in one-pound moulds and wrapped carefully in tissue paper, delivered direct to our customers by someone on the farm two or thr,ee times a week ." "We are planning to build up a herd of Jersey cattle. We are eight miles out. At first I tried selling skim milk, buttermilk, eggs, and butter direct to consumer by making three trips a week. Prices were fair. The round trip over a scattered town was too much for man and team, and my customers often moved without leaving their addresses, so that I would lo~ small bills ln that way. We found that plan unsatiafa.itory. We O<>Operation in Agriculture, Marketing, and Rural 01·edit 55 then began selling butter to our groceryman at 25 cents per pound. We got nice cartons, put our butter up in neat packages with trade name, character of contents, and maker's name printed on outside. People learned our trade name and our butter became popular. The price gradually rose, until we have received 35 cents per pound all the year of late. Our gro­ceryman always sells the butter at 5 cents more per pound than he gives us. This is satisfactory all around, as much as any plan can reasonably be expected to be. Of course, if we made much butter we might be unable to sell it for quite so much a pound. Our groeeryman will have bought about $850 worth of butter from us this year when this month has passed; the demand is so great that it causes the clerks some trouble to decide who &hall have our butter when the number of pounds available varies. We expect to market eggij the same way, and have cartons ready, but, alas! not the eggs. (Price of the butter is cash.)" The following case seems to present a problem which has been met successfully by parcels post. But even at the lowest figure mentioned butter is perhaps more profitable than most of the staple products: "Our butter netted, or rather brought, us 30 to 35 cents per pound so lo11g ae local demand consumed the local supply. When local supply ex-0eeded looal demand, we got only 17 or 18 cents per pound. We sold to the local merchants, preferring to do this rather than make deliveries with so few pounds. Creamery butter throughout the time we have been here-three years-has never been below 30 cents. One of our neighbors made deliveries for 35 cents all the time, her customers preferring her butter to the creamery product." In certain places, there are charges of unfairness against the creameries in the making of tests. In cases of this kind the farm­ers in many sections of the country have simply started their own creameries on the joint stock or cooperative plan. In general the marketing of dairy products is satisfactory. Prices quoted are usually high compared to prices in other sec­tions of the country. The regret is that the dairy business should have such a small development. Poultry and Egg-s The selling of poultry and eggs is usually closely connected with the selling of dairy products. So far as the producer is con­cerned the market is in most instances local but the parcels post is modifying this the same as in the case of dairy products. Re­ i'iG Bullet·in of the University of Texas cently, there came to our office by parcels post a test shipment of one dozen eggs from Long Island, New YoI'k. The eggs and paste­board package were in perfect condition when they arrived. Par­cels post eliminates all middlemen by substituting the postage stamp. Here cooperation is not needed on a large scale because there is a direct relation between producer and consumer. Dressed poultry can be handled in the same way. It appears to us that the government by giving the producer and consumer the parcels post has given them the solution for every problem men­tioned in the following case : "W'e have marketed several hundred eggs, for which we have received an average of 15 cents per dozen only; sold to local dealers and consumers. Eggs were gathered up every day and carried to market twice a week. The price received was not very satisfactory. Have recently sold on the local market four dozen hens to a local dealer, who is buying and ship­ping, only paying 5 cents per pound, and I notice hens are quoted in Houston and other cities at 11 and 12 cents per pound. From these figures it seems that somebody must be getting something for nothing; the producer is not getting the worth of his poultry, and the consumer is paying a long price for what he gets, the producer getting 5 cents per pound for his hens, or about 22 to 25 cents per hen, and the consumer paying 12 cents per pound. What poultry (that is, hens) that go on his table at 50 t o 60 cents per hen, or more than as much again as the pro­ducer gets, cannot be satisfactory with the producer or consumer." In our effort to get at marketing conditions, we have welcomed information from merchants and dealers: "To give you an illu~tration of marketing of poultry, I give you below some figures which may prove interesting. Suppose I pay the producer $3.00 per dozen for two dozen chickens, which is about what the average ~hipping coop contains, and consign them to an honest commission man in San Antonio. Here are the results: Sold by commission man for $4.25 per dozen ........ , . $ 8 50 Commission, 85 cents; express, $1.00 . .. . .. , .. , . . . . . . . 1 85 Net to shipper .. .. . .... .. .. .. ... .... .. .. .... .. $ 6 65 Bought by retailer for $4.25 per dozen . ............ ..$ 8 50 Sold by retailer for 45c each .... , .. .... , , . .. , . . . . . . 10 80 Difference between cost and selling price .. .. , . , . . . . . . 4 80 So you can see how this expense runs up on a small item right at home, "Ire might say. The selling expense on two dozen chickens is $3.80 and Cooperation in Agriculture, Marketing, and Rural Credit 57 the transportation expense is $1.00, which don't look reasona,ble, but it is a fact, nevertheless, and I believe that I am putting it a little mild. . . . Now you will ask why don't the producer ship his own produce? He would if he wasn't afraid of being skinned. He has no confidence in the commission man, where he would have if the government was behind it to assure him a square deal, and the same chicken that he got only 25 cents for could net him that under my plan and go t.o the consumer at a little better than 30 cents, or give the producer 30 cents and charge the consumer a little better than 35 cents, and you would please both of them." In other words, this means that the farmer receives $6.00 for 2 dozen chickens, and the consumer paid $1'0.80. Who got the difference of $4.80? The shipper got 65 cents; the commission men, 85 cents; the express company, $1.00; the retailer, $2.30. If the retailer fed, he received $2.30 minus the cost of the feed. Jn no case was the profit excessive. The trouble was that there were four parties standing between the farmer and the consumer. Fruit, Truck, and Vegetables The marketing of perishable produce presents more problems than any other phase of the marketing question. These problems are .due to many causes but discussions at this time and place must be brief. It appears at times as if the whole vexatious con­dition was the result of the action of some middleman or agency. In general this is by no means the case. In order to get a better understanding of the situation and conditions, and to show how some of the problems may be solved, we shall devote our attention to such questions as: preparing for the market; difficulties which confront the commission men; troubles met with in following a policy of consigning; difference between price paid by consumer and what was received by the producer; how home canning may help and what can be expected from cooperation. It should be remembered that the Texas farmer has no monop­oly in the production of early perishable produce. On the con­trary, after the very earliest part of the season his products must compete with those from other states having a similar climate To obtain and hold a market, the product must compare favorably with the products from other sectiom as to grading, packing, ap­pearance, etc. On this point, a volume could be written. A dealer gets at the vital points in the following way : "The marketing problem is one that requires long experience in locating reliable houses, closely watchi.ng the markets, keeping posted by wire daily or oftener, knowing what you can safely expect as a safe risk, buying only the best stock, and it properly packed, establishing a reputation for fair dealing, and living up to your agreements." This dealer has not only given the producer a glance at the middleman's business, but he has also indicated what would pay the producer best. Where there is cooperation to the extent that small pi-oducers combine in loading a car, there many difficulties arise. These represent the troubles which arise even if there were no middle­men concerned. "Farmers have failed to learn the lesson of grading and packing, and as all farms in this section are too small for carload shipments singly, they have to join in loading, and the quality of the car is judged by the product of the most belligerent man permitted to load. Personally, I have suffered considerable loss from this cause, especially in sweet potatoes and cabbage, where inferior stock passed the inspector, or where sweet potatoes were not sufficiently seasoned to stand shipment. I have known instances where entire carloads of sweet potatoes have been lost because of the loading of a few sacks of freshly dug potatoes, generally because someone bad made a short estimate of car capadty and the inspector would permit these to be placed in the car to fill. Of course, the chance was that they would spoil before reaching destination, and being the last loaded they are the first inspected on opening the car, and as a result the entire car i8 rejected." "There were 1500 or more crates of beans shipped from this place last spring and two-thirds or more were packed in very poor condition. Many were refused by commission men, or prices were very poor." The principles of quality, culling, grading, testing, packing, etc., form a science. To disregard these things is just as disas­trous as to have no knowledge of transportation rates, lack of in­formation as to the amount of product in the market to which products are sent or dealing with catch-as•catch-can commission men. In the marketing of perishable produce, not all of the trouble is on the producer's side. As a matter of fact, it is quite likely that the greater part of the trouble originates with the producer. Cooperation in Agriculture, Marketing, and Rural Credit 59 The middleman has his side of the question : "My experience is confined to cantaloupes and potatoes, and I lay the greater part of the trouble to the farmer. As to the cantaloupes, I handled two cars a year or two ago, when I first got what I thought and what was recommended to me as an expert packer to come and pack same for me. He had considerable trouble with the farmers trying to put off any class of stuff on him just to get rid of it, and I consider this one of the hardest points to overcome. I took the two cars to Kansas City and spent two weeks right in the market. When my stuff commenced to arrive I was ashamed of it. I put it alongside California and Colorado stuff, which ca.me in there all separately wrapped and in a nice clean crate with nice labels, and looked very attractive, while my goods were not wrapped and my crates with no labels looked rough. Right here I found that the pack· ing had a great deal to do with the selling of same. The goods were put on the market side by side, and the fruit vender would come in and look the two packages over. If he saw a single cantaloupe in my packing that looked the least bit oft', he would refuse the crate, while he would feel one or two of the ones wrapped in the other crate, and if they were good he would pay from 25 to 75 cents per crate more for the wrapped goods. . As to the cantaloupes, you simply can't trust them to allow them to crate their own stuff at home, for there is always someone ready to put in a little bad stuff." "Before coming to Texas I was in the wholesale produce businoos for seventeen year,;; in Iowa, and I wish t-0 state in the beginning that the commission man is blamed for a great many things for which he is n.ot responsiblm the party with whom we contracted stating that the peaches were not up to specifications. We were completely at their mercy, the peaches were perishable, and we had to sell them, so we let them go to a Chicago firm, some bringing 9 cents, others bringing nothing. I became so disgusted that I traded my orchard off and came to this place to try trucking. I find there is some difficulty here along the same line, so I guess there is no use in running. If we could get reasonable rates and men could be placed along at the large stations to look after ship· ments as they pass through, we might be able to get our produce to the consumer and realize some profit from it; that is, if we could have rep­resentatives at the point of destination to see that the stuff was properly graded also." "Have had but little experience in shipping from this section, but will state what I did «>nce in shipping from my old home in Louisiana. I shipped five crates each of Elberta peaches to four different dealers in St. Louis, Mo., and the peaches were picked the same day, packed by the same packer, shipped the same day by express, arrivt>d the same day in St. Louis, were sold the same day, and the result was: I got net from the four firms I shipped to, and all charging the same commission: $1.47 net, $2.42 net, $4.87 net, and $5.00 net each for the five crates. Can you give a reason why? I can't, unless it was robbery." Most truck and fruit dealers and growers know that experi­ences similar to the above are ;rapidly disappearing where growers are organized and have their personal representatives at destina­tions. One of the most pressing problems in marketing is the great difference between what the producer gets and what the consumer pays. "Upon this difference hinges the whole question of limited Cooperation in Agriculture, Marketing, and Rural Credit 61 production because of a low price and limited consumption be­cause of a high price. Abundant evidence can be had of this en­hancement of price. 'l'he following are examples: "I own and operate a large irrigated farm and have beeh ra1smg Ber­muda onions, lettuce, beets, and <>ther truck which we can raise in larga quantities. However, on account of such poor prices obtained for our products we are now being forced to resort to other means for a livelihood. Season of 1913 I c<>uld not realize even 2 cents pe.r head for fine head lettuce, when at the same time such lettuce was being retailed in Dallas and other cities for 15 and 12! cents per head to consumers. It is quite obvious to me that we have to contend with entirely too many com­mission men throughout the entire United States." "The trouble with the truck is the distribution, as also with fruit. I will give <>ne example: In 1912, I was in a vineyard and the grapes were going to waste, and seventy-five miles from there the same quality sold at 12! and 15 cents per pound. You as:k why they were not shipped. Both places were on the railroad and the same system, but when a package was started there was no assurance it would get there." "Relating to some experience in 1912, I dumped several carloads of cucumbers, besides what was never picked from the field. The commission house could not sell them, cause given, market overstocked. By investi­gation at Chicago, I found that the retail price was not below 5 cents a piece, and thousands of people never will enjoy a cucumber at that price, and I know that to a consumer that is a prohibitive price and blocks the demand for them, which soon res11lts in an oversto,cked market. Cucum­bers at that price are at about the rate of $3.00 per Texas standard crate, and we were dumping them for want of demand (reported at any price), while 50 cents per crate delivered at Texas common points is a good price fur the cukes, which is less than 1 cent a piece. Allow another cent for freight and other expenses, there is no reason that the consumer should be taxed 3 cents more for a little cucumber." "In 1910 we formed a watermelon association, elected a business man­ager, and paid $80 for a 'Blue Book' to give us all the inside information in regard to produce dealers and commission firms. And shipped fourteen cars of watermelons to differmt parts of the North. They all praised us in regard to the loading <>f the cars and also the quality of the melons. One car sold in Kansas City for $10; not enough t<> pay freight and other expenses. One of our townsmen was in Kansas City the same day, and the class of melons we shipped was retailing for 60 cents a piece. That year's business left us to pay, at the least calculation,.$200, but the figures I haven't at hand. The trouble in this case seemed almost wholly with oomm1ss1<>n men. Our country is new and we haven't had much experience yet, but all that we have shipped out we have shipped at a loss. I am sending you a letter which will explain itself in regard to another load of watermelons." "I sold some tomatoea, thirty crates, by express. I received $8.40, and some I did not get anything for. I had in one car 590 pounds of cab9age. I did not get llut $5.80 from thirty bushels of potatoes, yet we will plant four a.cres to tomatoes again, hoping prices will be better." "I sold ten tons of watermelons to local dealers; eight care of sweet potatoea to local dealers, sacked and put in car: Two cars at 70 cents per bushel; one car at 60 cents per bushel; four cars at 55 cents per bushel; one car at 50 cents per bushel. Our potatoes went to Greenville, Farmersvi.Ue, McKinney, and Bardwell, and sold for $1.50 per bushel." "For instance, I sell a barrel of spinach or lettuce here. I get here at cash deal, $1.50, or somewhere in the neighborhood of it; when that reaches St. Louis it sells for about $5.00; commission on that is from 50 to 75 cents; express, $2.50; icing and barrel, 50 cents, which in all is $4.50 or $5.00. Consumer at that end of line pays at the rate of 5 cents per pound, and sometimes 10 cents, which will retail at $8.00 and more a barrel (there is always from 150 to 200 pounds to a barrel) . I have seen lettuce sell at 15 cents a head that won't make a pound to a head. The farmer who raised it only got about 1 cent a head, and lots of times i cent; a man in a city who eats such vegetables must pay for some barrels at the rate of $10 to $15 a barrel, which makes too much profit for the middlemen who work at ·the business. When we ship through an asso· ciation we get $1.50 to $2.25 per barrel, and it sells at the same price as before, and the consumer gets it at a little less because they go direct to market men. What we need is a standard marketing plan through the government, the same as the postofilce." "Two years ago our potatoes were bringing 35 to 50 cents here in May, and were sold in retail stores in Joliet and Blue Island at $3.00 per bushel. As freight ie about 30 cents per bushel, the farmer of Caney evidently did not get a fair price. . . . Our potatoes are sacked, the average sack weighing 115 pounds, with an average of 220 sacks to the car. I shipped this year eight cars through the association. Their charge is 7 cents per hundredweight, or an average of $18.18 per car, plus $10 brokerage, bring· ing commissions to $28.18 per car. My point here is the unreasonable payment of two commissions by the farmer, though I averaged 42 cents per bushel. My net profit on thirty acres was $23.31. I know of several men who either had to pay freight charges or received two or three dollars. net for a car of spudR. These potatoes were shipped in June and July, through commis.sion men. I .believe a fair price to growers of early potatoes for Northern markets should be $1.00 per bushel F. O. B., at least, judging from five years' experience." During the coming year we shall make a study of the causes of Cooperation in Agriculture, Marketing, and Rural Oredtt 63 failure and success of cooperation in Texas. Many truckers• asso­ciations have either failed or are inactive. Dozens o~ others in different parts of the state are making money for their members. The success of these warrant us in advocating cooperative buying and selling. The following cases are cited merely to show what may cause the failure of local associations, what type of problems may be solved and how success may be attained. For the prin­ciples of cooperation, the reader is referred again to Chapter I. "We had a very good association here in 1912, and I acted as salefl manager. Most of our veget!llbles were sold through commission men, and although I still believe most of those people are honest, I must say I was sometimes very much disappointed with the returns received. We handled twelve cars of cucumbers, ten cars of Irish potat-0es, about twenty cars of yellow yams, besides various other small truck, all of which was sold to commission men. All of our stuff was put out as attractive as it was possible to make it, and we made it a point to send out excellent grades." "There were sixty-four solid car lots of tomatoes shipped fre>m here this season, 1913, and fully one-half as much express, bought and shipped by merchants, including all kinds of vegetables. There were some that had extra early and heavy yields per acre that did very well. We are not satisfied with the present prices, owing to the heavy expense of pro­ducing. The price for the first few crates is very satisfactory, but before we can get anything near half of our crop off, the price runs down so low that, as a. general rule. there is very little money in picking. The people are doing much better since they have-organized and hire their own sales­man. Crates cost from 3 to 4 cents less than before. Fertilizer, $8.00 to $10 less per t.on; seed and everything else in proportion. We pay our salesman 3 cents per crate for selling in car lots, he furnishing all his own help." The difference between what the producer gets and what the consumer pays can only be cut down by eliminating the people who get that difference. This can be done only by the process of cooperation on the part of producers and consumers. It is not sufficient that growers organize and then sell as an association to the same middleman to whom the individual producer might have sold. '!'his merely means a small increase in price for the pro­ducer, but the middleman will still control the situation entirely by maintaining the present high price to the consumer and thereby keeping the demand down to a minimum. Cooperation must do for perishable products on a larger scale what the parcels post has done for butter and eggs or could do for fruit and vege­tables in small amounts. Cooperation will succeed only when it proves itself more efficient than the middleman. Under present conditions there is a large and undeveloped mar­ket for perishable produce within the borders of our own state. Again there is the· possibility of the home canner and the saving of surplus stock. The following are given as examples of what may be done in this way: "I market plums, peaches, black and dewberries, tomatoes, melons, and a number of good hogs. My stuff is always well prepared for market and generally commands top prices. I always sell and buy as an individual. I have sold quite a lot of fruit and truck through a commission merchant in San Antonio very satisfactorily. I've never shipped anything when I could find a good market at home for my stuff. Prices with me are gen­erally satisfactory." "My best results were selling to grocery merchants in places some dis­tance from wholesale houses. I wrote to express agents at these places and got names of retail grocery merchants, and quoted them and sold direct. I was enabled to sell cabbage, for instance, at l! to 2 cents per pound, with no loss, as they accepted my weights; whereas, my neighbor shipped in carloads to wholesale houses and got from ! to i cent -per pound, after loss was taken out. He lo'aded in bulk." "We raise vegetables and strawberries in quantities large enough for shipment. We packed in one-third bushel boxes and crates, or bushel boxes. Some commission men dealt fair with us; ()thers too.k every advan­tage possible. I often shipped from forty to fifty crates of tomatoes daily at good prices, from 75 cents to $1.00 for one-third of a bushel. In Feb­ruary and March our strawberries brought $7.00 a crate. For some years we have shipped very little in our own name. We sell to a merchant in Rockport. When we have a fair idea how much we will have for the day we call him up and ask him what he is paying then, and when he wishes the stuff shipped. We find this far more satisfactory; then we run no risk and know just what we will get before we let it go out of the packing house. . . ." "A certain farmer had four acres of tomatoes. From these four acres he canned several thousand cans. Of the four products-figs, tomatoes, beans, and peas-he canned with a home canning outfit about thirty thou­sand cans. In this way he was able to fix his own price for his product. These canned goods were carried t-0 the Beaumont fair for exhibit pur­poses. The farmer sold all of these products, and could have sold more. The goods were sold to two retail dealers in Beaumont and to some private parties from different point.s. It was stated that he had tried to sell in bulk to a wholesaler. The wholesaler would not talk about the farmer's price, neither would the farmer consider the price offered by the Cooperation in Agriculture, Marketing, and Rural Credit 65 wholesaler, as it was about 55 cents less per case of two dozen two-pound cans; but when he got in touch with a retailer he sold at the price whiclt he asked of the wholesaler." "Last year I sold canned fruits and vegetables to the amount of $50. I advertised in a Dallas daily, and most of my customers were from that city. I received many orders without remittance for same, To these people I would send personal reference and state I could not ship goods without check for same. But I never received an order from anyone I refused to send goods to. However, many would send cash with order. 1 still have these customers this year. I find I receive very little money for my produce, as it costs so much to deliver. Express on small packages eats up the profit. But I find it equally as cheap as to deliver by parcels post. I have 200 bushels of sweet potatoes. They are rotting fast, but cannot find a market for them. My highest offer is 40 cents per bushel, sacked F. 0. B. at Mt. Pleasant. Sacks cost !J cents each, and to haul eight miles over rough roads, you see would leave me scarcely anything for my potatoes. :For this reason I am feeding them to my hogs. I have written several letters to Dallas houses, offering my potatoes at 80 cents per bushel. They say that the transportation will make the potatoes too costly." Cotton As stated on a previous page, three out of every fire farmers furnish information on the marketing of cotton before they pass to another subject. By far the greater majority are much dis­satisfied with present conditions. But there are those who from one reason or another have found the market either satisfactory or fairly so. We gives a few examples: "I raised and marketed at the local market twenty bales of cotton at an average of 13 cents per pound. I mar.keted my cotton very early. Later in the season the price was much lower." "I have marketed this year forty bales of cotton, which I received a good price for. I store away in a warehouse, watch the market reports and turn loose when a fair price prevails." "~Te prnduced through labor on our farm over fifteen hales of C'.otton, and in regard to prices we were very well satisfied, considering the season. We got a five months' drouth and ce>tton did not open till late, and pick­ing hard, and that run prices clown, and we got late rain that caused mildew. Prices were better here this year than heretofore. The first prices here on cotton were from 12~ to 14J cents." "Have been selling my cotton locally, but shipped last bale to --~­.! Co., Galveston. A neighb<>r has been making $3.00 to $4.00 net profit per bale by shipping his cotton to Galveston." "The price was satisfactory for us. .As we plant early, our products always are the first on the market; our cotton yielded an average price at 12! cents per pound. We need but 1400 pounds of seed cotton to make a bale of 550 pounds. The bale will bring $68.75; the seed of one bale averages to about $7.75, so the bale with seed and wool together yields $76.50; the expense for picking is about $11, so it leaves us $68.50 per bale." "I market cotton and cotton seed from 100 to 200 bales and from 50 to 100 tons of seed properly prepared for market. I grow it on my farm, sell at home when prices are satisfactory, consign when prices are below 10 cents per pound. When I consign I ship to the commission merchant, who sells when told to do so. I get market price, don't expect anything more; always know what the price is when I order sold, hence have no complaint to make. Transportation is satisfactory. Sometimes delays arise, but never unreasonable. I look after my shipments and require my commission merchant to look after them. I don't expect too much, hence have no complaint to make and am satisfied." As is too well known the difficulties of the marketing situation are nume1ous and the causes of dii;satisfaction various. The cot­ton market is the study of a life time. lt is hoped that our brief discussion and the material f1om which we draw it, will not only be of service to the growers but also to all those who are working on the problems connected with the South's greatest crop. One cause of dissatisfaction is the variation between local and central prices: for example, eleven and one-half cents in the small town and two cents above that in the city. This difference causes greatest vexation when the cotton is due the local dealer because of book accounts. In such a case the grower sometimes goes so far as to advocate a fixed price. If in any community the bankers, merchants and other creditors of the farmer date their obligations to be due at the height of the picking season, it appears self-evident that the cotton prorlucers will of nf'res~ity bear the market. This means loss to all. It would mean much to the financial status of the community if credit could be arranged to accomplish some of the things that the advocates of the warehouse system de~ire. Again it is reasoned by some that when the season first opens cotton is high, but after a few weeks the price nts per pound. This is only one instance where the farmer's products were underestimated. The same day of this transaction another farmer brought a bale of 'King's Improved' short staple cotton to the gin, tmd sold it at the price first offered (12~ cents), the one with the Jong staple. These conditions have existed for a Jong time, and will continue to do so until the farmers are organized, and sell direct to the manufacturers and consumers." In selling to a street buyer, there is sometimes a variation of one-half to one and one-half cents on the same grade, on the same day, in the same county. Here is another example: "I offered two bales of cotton for sale here this fall and was offered $10.25 for it. I refused to take it, and hauled it fourteen miles .to another town and received $12.80 fer the same cotton the same day." ''What I Jrn,ye, I have been in the habit of selling to local buyers at whatever price I could get. I find this so very unsatisfactory that I have most abandonP.d raising it. I have seldom gotten more than it cost to raise. I was raised on the farm under the old system of producing all you could of one or two commodities, and selling for what you could get. When I came to take up the work upon my own responsibility, I changed tactics. After studying conditions I selected the products that I could more or less control the prices of, and I find farming very pleasant and reasonably profitable." Instances are given of where one small town has as many as three buyers but they take turn about in their bidding. Advo­cates of the warehouse system call attention to the fact that under a proper system of holding, street buying and selling would be eliminated. It would also be eliminated by a system of coopen­tive marketing. The present system of handling cotton and the wastes incurred have received much attention, but little is being done to prevent great losses. Along this line we offer a few interesting examples : Cooperation in Agriculture, Marketing, and Ritral Credit 69 "In the year 1911 I visited the Southeast African Colonial Exposition in Cassel, Germany. This expression was held to show the German people what could be done in their southeastern possessions in Africa. There was a bale of cotton from Southeast Africa, from Egypt, from India, from Peru, and one from the United States. That was one time when I was ashamed to be an American. All the bales were neatly wrapped. No holes in them, no cotton exposed, and plenty of ties around them. The American bale looked like a tramp, full of holes, which had been patched up with a variety of materials, and cotton sticking out everywhere. I thought that this tramp-like looking bale had been selected purposely, but later I saw thousands like it in Bremen a.nd in Liverpool." "Cotton, I think, should be put up in better wrapping, sampled and weighed at the gins under bond, and not allowed cut away. I am weigher and classer here, and out of 3200 bales I have got eight bales 500 pounds each loose cotton and only took the samples that would have wasted. A burning sham<>. Every cotton market should have a weigher and sampler at the gin. And again, we should have government or standard types or class on hand all the t.ime during cotton season for comparison. I have a full set of government types, but some buyers say they are too full, others say they are too shy, all of which goes to prove that out of our present wasteful system and haphazard way of classing we should cer­tainly evolve some way that would make a middling bale of cotton be a middling bale anywhere." Because of limited space we have omitted from these pages most of the plans, schemes and ideas which have been proposed to us as sure cures for various ailments. But there is a preponder­ance of opinion when it comes to doctoring the cotton market. The following opinion speaks for dozens : "It would help some if the government would require every gin man to be qualified to grade cotton, and he should be put under bond, and from every bale of cotton that he gins he should retain a sample,. and number it, and also number the bale to correspond; hence, we could sell by the sample and never have to cut the bale. There must be something done." Again there are some who desire a Bureau of Information es­tablished by the government for the purpose of giving out sta­tistics of consumption every sixty days. Some avocate a govern­ment purchasing agent in every town. Others go no further than to advocate open telegraphic reports from the exchanges and a public exhibition of standard grades. It is quite generally believed that if the ginner were put under bond, his weight and grade would be accepted by all who handled ro Bulletin of the University of Texas the bale. This would do away with future cutting, sampling 11.nd robbing. Insurance rates would be lower as risk would be less. One party makes the interesting suggestion that those who 11.re able should follow the policy of former days by storing the crop in the seed and ginning as the spinners need it. This plan has the advantage of improving the lint, of making a more constant use of gins and labor, and having fewer gins. It would tend to remove the conditions of a glutted market and so equalize prices as to prevent the mistake of planting a great acreage on the strength of high spring prices. For other examples of success in handling cotton or other prod­ucts mentioned in this chapter, through cooperative action anti methods, the reader is again referred to that part of Chapter I which discusses "Types of Farmers' Organizatiom:." CHAPTER III RURAL CREDIT INTRODUCTION During the past few years, the subject of financing the farmer has been more widely discussed, perhaps, than any other subject -0onnected with rural life. It is not our intention to go into a discussion of the entire subject in this chapter. We expect rather to interest the farmers in the material which is now in print on this subject. In the back of this bulletin will be found a list of books and papers which may be obtained without difficulty. In their pages will be found information concerning every phase of rural credit and finance. The Division of Public Welfare will not only be glad to aid in securing these books and papers for all who apply for them, but will give personal assistance and aid in any case where a credit union is either contemplated, or is in process of formation. In spite of the fact that this subject has had wide discussion, there is yet need for a more extended campaign of education. Indeed, it is along the line of education, leadership, and personal service, rather than along the line of legislation, that there is the greatest need at the present time. Mr. Leonard G. Robinson, a leader of the Jewish farmers in America, has stated the situation very well: "What is needed is not a commission of study but <>ne of action. We have learned all that we are going to learn of the European credit systems without actually putting our hands to it. To my mind, in order to establish cooperative credit in the United States, we must have (1) legislation to facilitate the incorporation of such associations; (2) education to bring to the American farmer a true appreciation of the benefits of such asso­~iations; and (3) organization, that is, leadership to perform the actual task of organizing and starting these associations." The Nature of Oapi,tal A great many people have a wrong notion about capital. With 110me people it means only money, and, in many cases, a great deal of money. This is not the right idea. Capital is stored-up savings, and all capital is a result of saving. In order that capi­tal may be accumulated, somebody must produce more than they consumed. It is evident that if all of a workman's wages are spent, and used up as fast as made, that he will never have any saving. But as soon as he begins to save something, then he comes into a position to be a capitalist. If he uses his savings to produce Rornething else, he is then a capitalist. Whether he is a capitalist or not does not depend on the amount of his sav­ing. Of course, if he is to do much producing, he must have a considerable amount of capital. These savings may take any one of a greater number of forms. They do not need to be in money at all. Indeed, money is a respresentative or a measure of true capital goods. The farmer is just like the wage-earner is this respect. If he expects to be much of a producer, he must have capital. That capital must come either from his own savings or the savings of some one else. What the farmer really wants is not money, but implements, tools, live stock, and other things which help to pro­duce the crop. The only reason why he ought to want this capi­tal is because, after he has used it in producing his crop, he cannot only pay for the use of his capital, his land, and his labor, but have something left out of the crop that he has produced. What he has left becomes a part of his wealth, and if he uses it for further production, it becomes capital, whether it be large or small in amount. Why Shoitld Farmers Borrow? Farmers should borrow because they cannot save enough out of their own production to allow them to keep up with the amount of capital which they should use in their business. In other words, the safe and sane kind of borrowing is that which borrows :for a productive purpose only. Became, at the end of a certain time, if the loan has been used in the right way, it has produced enough to allow the borrower to repay the loan with its interest and have a surplus left. Just here is where we have some trouble. 'l'he system of credit that so many thousands of farmers use is too well known to need any explanation here. At another time, we have said that the farmer who depends on one crop and runs a credit account with the guarantee that he would pay his debt Cooperation in Agric,ulture, Marketing, and Rural Ored·it 73 when that crop was produced, stood in a financial position which might be represented by the equation that the merchant plus his goods equals the farmer plus his crop. That when the time came to "settle up,'' it was usually found that the merchant plus his goods minus the farmer plus his crop equals nothing. This is not the fault of the merchant, although he may contribute to some of the trouble because in selling goods on credit, it is neces­sary to sell them for more than it is when they are sold for cash. The point that we want to notice here is, that if the farmer has nothing left at the end of each year for ten years, he is not any nearer to being a capitalist at the end, than he was in the begin­ning. In the present credit system, the farmer himself contrib­utes some trouble because he buys for two purposes; first, for a productive purpose, and, second, for consumption. By consump­tion, we may mean a number of things, but most of all, perhaps, food and clothing; unless, of course, he has enough credit to buy a consumptive good like an automobile, or anything else that he may want to use for his pleasure rather than to aid him in pro­duction. In a general way, buying or borrowing for consumption only, is to buy or to borrow something, and find out when it is used up and gone that it has not le.ft enough to repay what it cost. In many cases, the fact that a man did possess credit has been a detriment rather than an aid, for he has bought without asking the question as to whether what he was buying, when it was used up, would leave him in better condition than he is at the present time. Unless a man is possessed of the judgment which will en­ahle him to know when to enter into an obligation or incur a debt, for a productive purpose and when to incur a debt for a consumption purpose, the credit which he possesses with his mer­chant or banker, becomes, in his hands, a gun that he is sure is not loaded. The credit system that the country is now using is dangerous even in the hands of a person possessed of more than the ordinary or average degree of foresight, industry, business sense, imd management. This is due in a large measure to the extended time for which book accounts run. 'l'he day when the debt must be paid is so far in the future that it completely balances or over­balances the fact that we are buying something which is not needed. But when the clay to "settle up" comes, the cost price for it just as the cost price for the most useful article obtained must come out of the crop. A Low Interest Rate It has been suggested that the Federal Government loan to farmers "as a class" at a low rate. If the farmer is "the back­bone of the nation" he will resent the idea of any favor because he belongs to a class. This is not a question to be settled by paternalism. The low interest rates paid by the European farmer, about which so much is being said and written, did not begin in this way. The lowering of the rate began not with the government and it millions plus legislative enactment. It began with the folks and cooperative organization. Cooperation is a question not of the law but of the spirit. The German who belongs to the Landschaften as a mortgagor does not need to ask a favor from his government because his farmers' organization has sold its bonds on the money market above the bonds of his Imperial Government. The German farmer by private initiative went into the horn of plenty through the little end. It had but one other place where he could come out. Interest is that which is paid for the use of capital. We usually think of it in terms of money, and as a certain fraction of the principal, but there is no need for us to do this. We do not think of share rent in terms of money, although it is as much rent as is cash rent. The rate of interest is supposed to be regu­lated to a certain extent by law. In Texas it is unlawful to charge more than 10 per cent interest per annum. Every one who has had anything to do with borrowing or lending knows that this law is constantly violated. One of the most frequent ways in which the law is violated is to charge ten per cent interest and have the loan run for less than a year's time. If there is a loan at ten per cent, and it runs for only nine months, that is the same as thirteen and one-third per cent for a year. There is another law which has more to do with regulating the interest rate--it is the economic law of supply and demand. If there is a small amount of capital, an.d everybody wants it, then the interest rate will be high, and that is the situation in Tex35 at the present time. Why should there be a small amount of eapital? Be­ Oooperation in Agriculture, Marketing, and Rural G1·edit 7~ cause the majority of producers have consumed as fast as they produced and there has been no savings. Our State is yet young. If there are no savings there can be no lenders, but there will be a great number of borrowers. When there are a great number of borrowers, it will follow that they will bid for capital, and of course bid up the price which is the interest rate. Reverse the case, and have each farmer with a surplus of savings, and you will have the majority of people in a position to lend, and the lenders will be bidding the price of capital down, because the minority of the people want to use it. This is the situation in a number of the older countries. They have more lenders than bor­rowers, and, as a result, they have a lower interest rate, and it would be lower even than it is, if much of their capital was not sent away from home for purposes of investment. In Texas, of course, we would like to have such capital, and if we make the field attractive, it will come to us just the same as a piece of iron will fly to a magnet, but we should remember that when it come! in the form of money, it represents a certain amount of wealth that has been created and stored up in some other section ©f the world. Let us use the example of a manufacturer of farm ma­chinery; if out of his business, he saves ten thouSllnd dollars and by investing it, it finds its way into the State of Texas as a loan, and at the same time his farm machinery finds its way into the State of Texas, it would be quite possible to take his nioney loan and purchase one of his farm machines. Now, his money has gone back to him, and we have kept the machine. We continue to pay interest on the loan, but what we are really paying for is the use of the machine. When the machine is used up, it should have produced enough to have paid its original cost, for its use and lean a surplus. If this could be said of all capital used in farm production, it would not be long until the State of Texas would be independent of outside capital, and we would have at home more lenders than we have borrowers. At least, we could eut vut the wasteful method of borrowing for consumptive pur­pose.e. We pause here, for a moment, to remark that we h1ne no sym­pathy with the idea of the government issuing any kind of cur­rency to be used by the farmers at a low rate of interest. Capital is a J>roduct of land and labor, through 8aving, and not the pniduc·t 7u Bulletin of the University of Texas of a pri11ting press at the dictum of the government. For the individual farmer, going to town with a full wagon and going home with an empty one, will reduce the interest rate quicker than the unanimous dictum of all the solons gathered beneath the cilpitol dome. The rate of interest 'varies with the demand for and the supply of capital. The average farmer's dinner table is not overloaded but too often supplied from the commercial world. Bacon, meat, butter, canned goods, dried fruit, in fact everything bought, is capital until it reaches the consumer and when the farmer uses this capital from the commercial world he must expect to pay in­terest and commercial profits for the privilege. A good method to begin with to lower the interest rate would be "to live at home and board at the same place." When the farmer goes to town with· something to sell on each trip, he enters into commercial exchange where one form of capital is traded for another and there is no need for capital to carry the wasteful credit system which now exists. Hence, follows a less demand for capital and it is interpreted in terms of a lower interest rate. Farrn Loans in Texas Up to the present point, we have been considering the general financial situation and farm credit conditions. Let us now turn to a more definite examination of the financial situation in which the Texas farmer finds himself. The following remarks on short-time loans to farmers are based upon evidence gathered in 110 different cases in ten different counties. They cover the years 1912, 1913, and 1914. The total amount of the loan is $27,779.00 or an average of $252.54 each. The average rate of interest is 10 4/ 11 %. 'l'he average time of the loan is slightly over seven and two-fifths months. The small­est loan recorclehare­ holder neglects to pay monthly dues on the day the payment is due, there is assessed a fine of ten cents on each share for each month the dues remain unpaid. Shareholders in arrears cannot vote, and membership ceases when the monthly fines amount to the Slllll paid as dues and have not been paid on any share on which loans have not been made. Shares may be transferred for a fee of ten cents on each share of unincumbered stock, and a fee of twenty-five cents for each share of encumbered stock. The purchaser is held liable for such fees. The certificate of mem­bership is signed by the President and Secretary, and bears the seal of the Association. "Shareholders in good standing may bor­row ninety per cent of the paid-in value of their shares by trans­ferring their shares to the Association as security; paying six per cent interest, and continuing the payment of their monthly dues." Shareholders are entitled to loans upon three kinds of security: first, bond and first lien trust deed on farm land; second, the assignment to the Association of the certificate of membership to the extent of one share for each $100 borrowed; and, third, fire insurance policy for such sum as the Directors may require." Second or subsequent deeds of trust may be used as security if the prior mortgages are also held by the Association. Loans shall not be made in excess of two-thirds of the value of the property. A description of the property to be given as security must accom­pany an application for a loan. Loans are made only when the reports of the appraisers and the attorney who examines the title are approved. The interest commences on the day the loan is made, and is paid at the same time as the monthly dues. The borrower may cancel his obligation and obtain the collateral held by the Association as security after paying principal and interest, but thirty days' notice must be given, and the Board of Directors may waive such notice. In such cases, a release fee of twenty-five cents is collected on each share. In case the borrower fails to pay monthly dues for ninety days the Association may order the sale of the property. Proceeds are to be used in the payment of taxes and assessments; to defray expenses of selling; to pay amount due the Association as secured by the trust deed; and if any remains it is given to the member. Ninety days' written notice must be given to the Directors before the shareholder can withdraw his funds. At time of withdrawal the member receives Oooperation in AgricuUure, Marketing, and Rural Oredit 91 the monthly dues which he has paid in, minus charges against him. In case of death, the heirs, or regular representatives of the shareholder, may continue the payments on unredeemed shares and with the consent of the Directors, they may have the de­ceased's unredeemed shares cancelled. No amendment to the by­laws may be passed unless submitted in writing one month previ­ous to action and then only by a two-thirds vote of all the Di­rectors. We have gone into the above details concerning this one at­tempt at securing better credit for the southern farmer not be­cause of the proven success of the venture, but because the plan and system of organization and control cover in such a definite wiay so many of the problems which must be met in most any com­munity when the actual work of organization is attempted. The fact should not be lost sight of that loose control in bank­ing and monetary affairs in the past has cost different sections of the country years of tribulation. It is well therefore that in the future all details should be carefully thought out. How to Form a Oooperative Oredit Un4on Under the Te,xas Law Get together ten or more men of the community who have the welfare of the community at heart; men who have among other characteristics, thrift, honesty, and the ability to read and write. It is not necessary that they have any money. Elect a chairman, secretary, and treasurer; discuss the importance of knowing more about the problems of the community; plan for a series of meet­ings; get acquainted; learn to work together; don't talk about be­coming your own banker. Talk about cooperating with each other and becoming better farmers. Ask the Division of Public Welfare of the University of Texas to send you literature de6cribing the University Home and School League, and the various kinds of farmers' clubs that are doing effective work in other places. Ap­point a time for a meeting to discuss the provisions of the Rural Credit Union Law as it stands in Texas at the present time. Provide for the dues for your present association. Have the treasurer hold such dues as a fund belonging to the society. Let such monthly dues be an encouragement to saving. Study that part of the literature sent you by the University which tells of the places where farmers are organized to help each other save. If your community is one in which every cent must count, invest your fund which is accumulated from. such dues, when such funds are large enough, in some way so that they will continue to grow. For example, in a calf or pig, and permit the members to take turn about taking care of same. This may seem like too small a matter to begin with, but you must begin somewhere or never have anything saved, and it is better to begin in a small way than to come down to the close of life without anything. Begin on as large a scale as possible, but if you have nothing, begin any­way. In the mean time, the Commissioner of Insurance and Banking at Austin will furnish you witla a copy of the law which permits the incorporation of the Rural Credit Unions. Have a meeting to discuss the various features of the law. Don't be in a hurry to ask for a charter from the Commisf?ioner of Banking. The law won't provide any money for you. It merely explains how to conduct business. The law provides that the credit union shall have shares of $25 each. It may be before the credit union is ready for its charter that the fund of the association built up from the dues, or from the investment that has been made of them, will be a sufficient amount to pay the first installment of such shares. It may be even possible that since at least ten members are required, that your common fund belonging to the society may amount to $250, or enough to buy one share for each of the ten members. This takes for granted that you have found a treas­urer to whom you are willing to int:rust, without bond, at leMt $250 either in money or property. If out of ten men you cannot find such a treasurer, there is very little use to talk about a rural credit union, even if organized under the strongest law possible, for, 111! the famous :financier saig, "Character is the basis of credit." It might be added here that there are among those who have studied the rural credit institutions of Europe, where they have made such a marvelous success, those who would like to separate the :financial side from the moral side. It would seem decidedly unwise to do so, as badly as the farmer may need cheaper money, there are other things that must not be lost sight of. Among these are the personal characteristics of industry, intelligence, stability, and honesty. Upon these things as a basis the farmere Cooperation in Agriculture, Marketing, and Rural Credit 93 ef Europe have established their reputation for ability to provide themselves with funds in time of need. On this point note the following taken from an address by the Hon. Luigi Luzzatti, a leader of the Italian people : "The Rural Bank, for instance, which arose without capital, rich only in its invisible treasure of mutual trust and human solidarity, is the fruit of the modest, unrecognized virtues of the country folk, bound together by bonds of mutual affection, who assist and watch over each other with the subtle vigilance of neighbors. And, Jo and behold, these humble folk, void of eco­nomic lore, have accomplished a miracle,-due to the fact that a moral and not a material impulse guided their work-the miracle of creating capital out of nothing. They have succeeded in coin­ing their simple good faith and their honor, and in transforming into concrete credit,-so rebellious to all idealistic considera­tions,-promises of payment guaranteed only by their obscure immortal souls. And now in Germany and in all the other coun­tries which have followed in its footsteps, the business transacted by these banks, founded without capital, and which have labori­ously built up their own reserve funds, amounts to 10 billions each year, and they represent the billionaires of agrarian poverty." Some one may say that this is all right in Europe, but that it would not do in America. If this is true, then the American needs something else more than he needs money. Again it is said that cheap money for the American farmer is a dream which may be realized some time in the distant future. On this point we need only say that there are farmers who are getting cheap money, and there is no copyright on their methods which pro­hibits the Texas farmers from applying them right now. Neces­sity has driven some people to cooperation and necessity will drive other people to it. What we are asking for, is leadership with a vision clear enough and enthusiasm strong enough to bring about the benefits that have been secured by others without wait­ing until necessity forces us to do something. In the literature which you may secure from the Division of Public Welfare your association can study out all of these questions. Take up the Texas Rural Credit law and compare it to other laws. Study its provlBlons. Among them you will find that it takes at least ten people to form a Union; that shares sell for $25, but may be paid for in installments, and that the smallest savings may be applied toward this end. The law provides that members borrowing from the Association shall not be charged more than 6 per cent interest. Study its provisions of one man one vote, and note how you are studying an association of men rather than dollars. There is no limit to the amount of capital or the number of shares which you may own, except as you limit your own savings. Discuss in open meeting the provision which is laid down that loans shall be made only for productive purposes, or urgent needs. Discuss in open meeting past expel'iences as to length of time for which loans have been granted. You will see that the law providee that no member shall borrow an amount in excess of $200. Ex­amine the question as to whether you think this law would limit your action. You will find out when you compare it with other state laws or foreign laws, that it is not perfect. But it cer­tainly is wide enough and broad enough and good enough to allow a great beginning, and it can be changed at the next ses­sion of the Legislature. Above all things, remember that it ought to be far from your purpose to form any sort of organiza­tion for the express purpose of eliminating any landlord or mer­chant or banker. You are to be concerned with business and business principles and not personalities, and if it is not clear to you that there need be no conflict between you and the legitimate business that is done by the local merchants and bankers, or if it is not clear to the merchants and bankers, then there is lack of understanding of the situation, or the community at large is be­ing run at the present time by those who have an obscure vision and short-sighted business policies and abilities. It is to be hoped that what has been said above wiH make clear the fact that in some communities it will be best to have a tem­porary organization or society before the real chartered credit union is launched. In other places it may be possible to start such unions without much preliminary work. In either case it takes leadership before the work will start at all and up to date, June, 1914, the law has not been used. The preliminary work a.s suggested above will clear up many perplexities. To begin is the most difficult thing. In other places it has been surprising how people with surplus savings have become interested and invested in an institution when a group of farmers got together, pledged Cooperation in Agriculture, Marketing, and Rural Credit 95 their mutual aid and responsibility and vowed that they would go deeper into the study of their problems than they had before. However, not much can be reasonably expected from outside sources until the members of the association have demonstrated their earnestness of purpose and business ability. After the mem­bers concerned have proved this to themselves, then it is time to transfer from the preliminary organization into a regular char­tered and incorporated credit union, which can safely make loans as well as receive savings. BIBLIOGRAPHY General American Commission Reports on Agricultural Cooperation and Rural Credits in Europe: Evidence, Senate Doc. 214, 63 Cong., 1st Session. Observations, Senate Doc. 261, 63 Cong., 2nd Session. Minority Report, Senate Doc. 261, Part II, 63 Cong., 2nd Ses­sion. Bibliography, Senate Doc. 214, Part II, 63 Cong., 2nd Session. Cooperation in Agriculture. Henry W. Wolff. P. S. King & Son. London. Cooperation at Home and Abroad. C. R. Fay. P. S. King & Son. London. produce Markets and Marketing. Wm. T. Seibels, Chicago. Cooperation among Farmers. John Lee Coulter. Sturgis & Walton Co. Cooperation in New England. James Ford. Survey Associ­ates, Publishers for the Russell Sage Foundation. New York. Cooperation in Agriculture. G. Harold Powell. The Mac­millan Co. Marketing and Farm Credits. Report of the First National Conference on Marketing and Farm Credits, at Chicago, 1913. Cooperation Magazine, Minneapolis, Minn. Proceedings of the First Meeting of the Southern States Asso­ciation of Markets. Texas Department of Agriculture, Bulletin No. 36. Henry Exall Farm Book. Texas Industrial Congress, Dallas, Texas. Yearbooks of the United States Department of Agriculture, Washington, D. C. Mr;:rketing Yearbook of United States Department of Agriculture, 1909, p. 161. Yearbook, Ulll, p. 165. "Reduction of Waste in Marketing." Yearbook of United States Department of Agriculture, 1912, p. 285. Cooperation in Agricult·ure, Marketing, and Rural Credit 97 Annals of American Academy of Political and Social Science, July, 1913. A Terminal Market System. \Mrs. Elmer Blade, N. Y. (Dis­cusses City Markets). Third Annual Meeting of Texas Farmers' Institute, 1913, p. 73. 'l'exas Farmers' Congress, 1911, Texas Department of Agricul­ture, p. 40. Texas Farmers' Congress, 1913, Texas Department of Agricul­ture, p. 56. Country Gentleman. Selling Services Department in practi­cally all numbers of 1914. Country Gentleman. Oct. 4, 1913; Nov. 8, 1913; :Mar. 28, 1914. "Municipal Market." Harper's Weekly. Nov. 8, 1913. "Waste in Shipping of Food." Outlook. Feb. 1, 1913. 1"The Waste in Retailing." Marketing.-Schemes for Bettering Farm and Ranch. Nov. 2, 1912; Feb. 14, 1914 ; Mar. 28, 1914. "Sumner's Plan." .Farm and Ranch. May 24, 1913; June 28, 1913. "Harry Tracy's Plan." Farm and Ranch. Aug. 16, 1913. E. W. Kirkpatrick. Marketing.-Proper Packing and Preparation Country Gentleman. Feb. 7, 1914. "Boxes and Crates for Vegetables." Country Gentleman. April 12, 1913; Oct. 4, 1913; "\.pril 18', 1914. "Parcels Post." MARKETING Ol!' SPECIAL CROPS (Cooperative and Otherwise) A 1 ~ Tiood River. PP e_. Farmers' Bulletin Xo. 309. L Cattle Breeders. Wisconsin. Bulletin Xo. 184. Cotton. United States. Yearbook U. S. Department of Agri­culture, 1912. Cotton. United States. Yearbook U. S. Department of Agri­culture, 1911. Cotton. United States. Report of Southern Association of Markets. Cotton. United States. Senate Document No. 113, 63rd Con­ gress, 1st Session. Cotton. United States. Yearbook U. S. Department of Agri­ culture. "Marketing and Handling." Cotton. United States. Bulletin U. S. Department of Agri­ culture No. 35. "Cotton Studies in Oklahoma." Eggs. Minnesota. Farmers' Bulletin No. 445. Eggs. Farmers' Bulletin No. 405. Eggs. Farmers' Bulletin No. 517. Eggs. Farmers? Bulletin No. 112. Eggs. Yearbook Department of Agriculture, 1912, p. 345. Eggs. Yearbook Department of Agriculture, 1911, p. 467. Eggs. General. Yearbook of U. S. Department of Agricul­ ture, 1910, p. 461. Fruit. General. Yearbook of U. S. Department of Agricul­ture, 1909, p. 365. Fruit. General. Yearbook of U. S. Department of Agricul­ture, 1910, p. 437. Fruit. General. U. S. Department of Agriculture Bulletin No. 63. (Orange Shipping.) Purchase of Farm Supplies. Oregon. Oregon Agricultural College Bulletin No. 71. Poultry. General. Bulletin of U. S. Department of Agricul­ture No. 17. Truck and Vegetables. General. Yearbook of U. S. Depart­ment of Agriculture, 1912. Vegetables. General. Bulletin No. 144. Illinois Experiment Station. "Tomatoes for the Early Market." COOPEHATION AND FARMERS' ORGANIZATIONS Annals of American Academy of Political and Social Science. July, 1913. Oregon Agricultural College Bulletin No. 71. Senate Document 992. Notes by Maurice F. Egan, on Den­ mark. "Cooperation." A magazine published in Minneapolis. North American Review. June, 1913. Cooperation in Agriculture, Marketing, and Rural Credit 99 World's Work. Sept., 1912. (Wisconsin.) Metropolitan Magazine. Jan., 1914. (Denmark.) The Mission, History and Times of the Farmers' Union. Chas. S. Barrett. Senate Document 1071, 63rd Congress, 3rd Session. "The American Commission and Its Work." Quarterly Journal of Economics. May, 1913. "Renters' Union." American Society of Equity. "The Third Power." (J. A. Everitt, Indianapolis, Ind.) See Equity News, Published at Madison, Wis. Farmers' Fireside and Bulletin. (Farmers' Educational and Cooperative Union.) Published at Arlington, Texas. RURAL CREDITS Books Yearbook of the United States Department of Agriculture, 1912, p. 25. (Investigation of present credit conditions.) Yearbook of the United States Department of Agriculture, 1913, p. 257. Principles of Rural Economics. T. N. Carver, p. 275. Marketing and :Farm Credits. Cooperation Magazine, Minne­ apolis, Minn. People's Banks. H. W. Wolff. P. S. King & Son. London. Reports and Pamphlets Banking Laws of Texas, Digest, 1913. Has the text of the Texas Rural Credit Law. Send to the Commissioner of Insur­ ance and Banking. Credit Conditions in a Cotton State. L. H. Haney. Pub­ lished in American Economic Review, March, 1914. Also as a separate pamphlet. Report of the Agricultural Credit Commission of the Province of Saskatchewan, Canada, 1913. Senate Document 251, Part I, 63rd Congress, 2nd Session. "Needs of the American Farmer." Senate Document 260, 63rd Congress, 2nd Session. (Fred. J. Haskin.) Agricultural Credit and Cooperation in Germany. Report to the British Board of Agriculture and Fisheries, by J. R. Cahill, Published in the United States as Senate Document 17', 63rd Congress, 1st Session. Senate Document 380, Parts 1 and 2 ~ 63rd Congress, 2nd Ses­sion. Report on European system with ·suggested legislation for United States. Senate Document 865, 62nd Congress, 2nd Session; European systems modified to meet United States' conditions. Senate Document 141, 63rd Congress, 1st Session. Davis plan of Rural Banks. Hearings before the Sub-committee of the Committee on Bank­ing and Currency; House of Representatives, Parts 1-23-ready. Senate Document 1006; C. H. Davis; Rural Credit Plan for Virginia. Bulletin 289. University of Texas. Senate Document 158, 63rd Congress, 1st Session. Bill of Senator Fletcher on National Rural Banking System. Senate Document 260, 63rd Congress, 1st Session; David Lubin's addr.ess on Raiffeisen. Senate Document 380, Part III, 63rd Congress, 2nd Session; ~rsonal or Short-Time Credit. A Cooperative Plan to Provide 5% Money for Farmers. John Sprunt Hill, Durham, North Carolina. Magazine Articles Farm and Ranch, April 19, 1913. "Texas Rural Credit Law." Progressive Farmer, Dallas, Texas, Feb. 28, 1914. "Symposium on Rural Credits."