The information gained through this study does not bear conclusive evidence as to the true effects of the various credit arrangements on the economic conditions of the community. It does show however, the sources most commonly used by the various tenure groups. The majority of owners use bank credit. Cash and share-tenants use credit from private business. Croppers seldom use any credit other than that from the landlord. The furnish system is a common characteristic of croppers in the county.
Few farmers, owners and tenants alike, know that there are government agencies that will provide them with capital for the operation of their farms. Many are skeptical of borrowing money from the government sponsored agencies and banks. This might be a contributing factor to the slow rise of tenants up the agricultural ladder to ownership. This factor might also contribute to the inefficient operation of farms by owners.
Credit, although it has been misused, performs the essential and useful function of making possible the successful operation of farms by operators who are well qualified except for capital funds. Although the advantages of credit are generally accepted, the use of credit involves real dangers which are most apparent in areas where crop yields are highly variable and years when prices suffer severely declines.
Speaking broadly, there are probably almost as many farmers in Milam County who are suffering from too much as too little credit. Many of the farmers would be better off today if he had never had a chance to borrow money at all, or go into debt for the things which he bought. However, that is no reason why those farmers who do know how to use credit should not have it.
The largest single group among the farm mortgage lenders is the private individual, a group which holds approximately 45% of the farm mortgage debt. This group represents a wide range, the farm-owner who has taken a mortgage as part of the sale price of the farm, a relative of the farm buyer who lends a portion of the funds to buy the farm and is given a first or second mortgage as security, the professional man in the towns nearby who lends his savings to the farmer on farm mortgage security either directly or indirectly, and finally, the private investor who buys a farm mortgage as an investment from a bank or loan agency.
The tragedy of excessive debt and foreclosure had plagues so many farmers in Milam County that farmers may question whether or not they should use credit at all. Instead of borrowing, farmers do have the alternatives of saving until they can pay cash or of continuing indefinitely to rent the land and hire the equipment they need. If either policy is carried to the limit, no credit would be needed because all purchases would be for cash. It is reasonable to ask, therefore, whether it would not be wise for farmers to go on a cash-paying basis and abolish the use of agricultural credit.
Renting or hiring means escaping the risk of borrowing by contracting with the owners of land, livestock, and equipment to give them a share of the proceeds or a fixed cash rental for the use of the desire items for a limited time. The difference between owning and renting is largely a matter of time and credit. The owner with the use of credit purchases the right to use the land indefinitely; the renter purchases the right to use land for a short period. This policy of renting and hiring for short periods to avoid the use of credit has much to commend it, because agriculture has such a large element of crop and price risk beyond the control of the individual farmer. The young farmer who saves enough as a hired man to set himself up as a tenant insures himself against being forced out by debts he cannot pay.
Those who think it is impossible to get started without credit have overlooked opportunities which have proved successful in everyday life. True, it may take longer without credit, but there is compensation in the security and peace of mind which comes from the freedom of debt.
Croxton, Frederick E., and Cowden, Dudley J., Pratical (sic) Business Statistics, Prentice-Hall, Inc., New York, Second Edition, 1948.
Duggan, I. W. and Battles, Ralph U., Financing the Farm Business, 1950. John Wiley and Sons, Inc., New York, New York
Gee, Wilson, The Social Economics of Agricultures, 1954, Macmillian Co., New York, New York
Good, Carter V., and Scates, Douglas E., Methods of Research, 1954. Appleton-Century Craft, Inc., New York New York
Hopkins, John A. and Murray, W. G., Elements of Farm Management, Prentice-Hall, Inc., 1954, New York, New York
Robertson, Lynn S. and Woods, Ralph H., Farm Business Management, 1946. J.B. Lippincott co., Chicago, Philadelphia
Sparks, Earl S. History and Theory of Agricultural Credit in the United States, 1932. Thomas J. Crowell Company, New York, New York
Texas Almanac, Memorial Edition, Dallas Morning News Publisher, Dallas, Texas
Circulars and Reports:
Circular 3, Loans from Production Credit Associations, 1954, Farm Credit Administration, Washington, D.C.
Farm Credit Administration, American Institute of Banking, New York, New York, 1934
Report, Using Credit for Farm Adjustments in the South, Farm Credit Administration, Washington, D.C.
United States Bureau of Census, 1954 Census of Agriculture, Series AC54-1
We must say a special thank you to Gayle Clemons Newkirk of Lewisville, Texas, for typing the above thesis for use on the Milam County TXGenWeb site.
Created on 4 Nov 2004 and last revised on _________