The pioneer-review. [volume] (Philip, Haakon County, S.D.) 1920-current, 1920-07-29
FINANCING THE 1920 GRAIN
CROP.

There was time when the ulti-
mate failure of the farmers CO.
operative elevators and shipping
associations in South Dakota, as
well as in other states was regard
ed inevitable by many, but now
the conditions are being reversed.
Looking over the list of failuref
during period of years prior TO
half dozen years ago, it is found
that they invariably resulted
from inefficient business manage
ment or lack of working capital.
Consequently they were heavy Dor
rowers at the banks, and often for
this same reason the banks USE
fulness to the community was
somewhat interfered with by a
centralizing of loaning power into
fewer hands. Also in former years
the selection of manager Of a
farmers elevator or shipping as
sociation seemed to be determined
by his remuneration rather than
by his business ability and fore
sight in analyzing market fuctua-
tions in the receiving and market
ing of grain. In other words,
they frequently hired clerks, in
stead of managers, and depended
upon the business running itself.
When time for annual settlement
came, the company, which had
mainly subsisted on borrowed capi-
tai, balanced off with the banks
and other expense accounts. and
the profits, if any, were absorbed
by the stockholders in the shape
of dividends, little consideration
being given to providing working
capital for the future, other than
renewing loans when the grain
again began to move to market.
If loss was shown at the time Of
annual settlement instead of a pro-
fit, it was extremely difficult to
induce many Of the stockholders
to absorb their proportion of the
loss. This often resulted in a
reorganization of the company and
a curtailment of the number of
stockholders and the placing of
the stock in fewer hands. As a
general thing these reorganizat-
ions proved beneficial and placed
the institutions on better foot
ing. These were the pioneer times
of the existence of farmers CO.
operative companies, and having
now passed that point the newer
organizations appear to be more
substantial, though, while provid-
ing small amount of working
capital, they are still heavy bor-
rowers at the banks.
Each year the financing of the
crop movement to market during
harvest and threshing time is a
serious problem with the banks,
since comparatively few farmers
elevator companies attempt to
completely finance themselves.
Some of them require loans of at
least $4,000, while others in more
productive localities might need
more than 100000 before the rush
of busy market season is over.
The banks loaning power is thus
concentrated in such manner
that it is sometimes difficult to
extend sufficient credit to other
legitimate industries, which suffer
in consequence. There would seem
to be necessary, since nine-tenths
of the farmers who are members
of these cooperative concerns have
large checking accounts that
carry from 3ia to per cent inter
est. This money on deposit might
well be put to work financing the
movement of farm products, in
stead of letting it lie idle. Most
of these cooperative elevator COM
panies are now paying from seven
to eight per cent on the money
borrowed from the banks; why,
then. should the farmers not make
their own money earn an equal
amount by using it to finance
their own enterprise? The risk is
no greater to them than it is to
the bank, and it opens a way to
get their surplus yielding a profit
much greater than could be ad-
vanced by other means.
Each year this grain is marketed
and settlements are made, expens-
es paid and profits or dividends de-
termined. Under the state bank
ing laws, the loaning power of the
state banks is limited to fixed
percent of it's paid-up capital and
surplus, so that when this is ex-
hausted other means must be de-
vised with which to furnish the
necessary money for financing
grain movements. The bulk of
their loaning power is still tied