Pueblo chieftain., 1921-10-31
HNL01XEEW WITCHERY

Concerning the ruling recently made
by the Federal Reserve Board to the
effect that growers drafts accepted
by cooperative marketing associa-
tons should be classed, II the pro-
ceeds are to be used for an agricul-
tural purpose, as agricultural paper
eligible for rediscount at Federal Re-
serve Banks Secretary of Agriculture
Henry c. Wallace said; 1T Is a rul-
ing of Importance and should result
in making bank credit more available
for farm use"
In the case which resulted In the
ruling being made. members of a to-
bacco growers cooperative market
ing association drew drafts upon the
association which was acting as their
agent only in the sale of their to-
bacco. The drafts were accepted by
the association and the Federal Re-
serve Board was then called upon TO
decide whether the drafts should be
classed as agricultural paper eligible
for rediscount as Federal Reserve
Banks with a maturity up to months
or should be classed as commercial
paper eligible for rediscount only when
its maturity date is not in excess of
90 days.
The board ruled that where the
drafts complied in other respects with
the requirements of the law. and the
boards regulations. that the drafts
should bc classed as agricultural paper
and as such would be eligible for re-
discount by a bank that was a mem
ber of the Federal Reserve System
with a Federal Reserve Bank for a
period not in excess of 6 months. II
the cooperative association had been
the purchaser of the tobacco instead
81 .f h. ,hara t,, tl,a
sale OF tho tobacco. the ruling would
have been otherwise, and the drafts
would have been classod as CONNER
cial paper, and as such would only
have been eligible for redscount with
a maturity not in excess of 80 days.
Before any association accepts any
drafts. Secretary Wallace pointed out.
1t should consult the local bankers and
obtain their opinion as to the per-
ccntage of the market value of the
products delivered for which these
drafts should be accepted. 1t is only
natural he said, that IL the drafts
arc drawn for a conservative per-
ccntagc of the value of the products
which tho farmer has delivered to the
association. that the bankers and
cven subsequent holders. will regard
the drafts as n much safer investment
than IL tho drafts represent high
percentage. This is especially true
during the present time when market
values arc so uncertain. Either notes.
drafts. or bills OF exchange. II should
be remembered, drawn or issued by
farmers for agricultural purposes and}
secured by Federal warehouse rcceipt{,
for readily marketable staples are e1a-
giblc for rediscount under the ! &
months rule"
Department specialists in farm fin
ancc believe that the method elm
ploycd b. the tobacco growers ash So
citation would be found of value Thy
other cooperative associations, (cs-
pecially when used in connection with
receipts fer agricultural products is
sued by warehouses; licensed up;dcr tho
Federal Warehouse Act. TForc is a
growing tendency on the : part of
bankers thruout the country to re-
qIrc Federal warehouse receipts
when making loans basefd on agri-
cultural products. Tho lprcsidcnt O
the New York Rankcrs'8 Associa ton,
in discussing the mattcA' of granting
credit on produce to farmers and the
Importance of warehouse receipt
recently said: