FARMERS' FINANCE

Evening Post, Volume CV, Issue 141, 15 June 1923, Page 4

FARMERS' FINANCE

&UTSEOKEN CRITICISM

ROSSES MADE BY THE BANKS

i[ A!NS&NT?I-BOOM POLICY.

"i "MucK'^tirasm of the methods in svhich :^h'e;;:'lianks conduct their business has'einanated from those engaged in rural- pursuits. May Ibe pardoned for reminding: those critics that the results.'of. the-' working of their own organisations; have not been such as to convince 1 thinking people that they are qualinad?to' handle that most seriojus fcms'iofess r" of all—finance; a business whichj'.perhaps more than _ any other, ■calls ••'for an amount of judgment aiidv-%e that only those who have had': Ipng experience and sound training fare-, able to give to it."—Sir George 7 jilliot, chairman, at the Bank of Nevj'.'Ze,aland meeting to-day. :. Sir George-Elliot had a few things to Bay? to thej.proprietors of the Bank of Ne'iv Zealanc^'.to-day upon the relations between tHe farming community and its bankers. ~Se '■ .'not only (a3 above) reminded theft; of the unconvincing financial result^: achieved by certain farmers' ow| organisations, but Warned them of the'J.inroadV.being made by proprietary ancj". joint,stock" concerns into the business of co-operative companies, and which competition, he said, would continue, "unless the latter keep their finances on-a sound footing and conduci their affairs on business lines." Iti October of last year an Act was passed ; by,.tho- kte,Parliament, authoris-; ing lie'formation of rural ""credit associations,- with, the...idea ,of. enabling farmers to combine for the purpose of receiving deposits and borrowing other moneys, and then lending to the members of the'associations the.funds thus obtained, said Sir George Elliot, and \vfent on: "I believe that, so far, no associations have been formed under tliis Act, and it is understood ■ that.. a Bill is shortly to be introduced into Parliament to provide for the establishment . of: an agricultural- bank on -wider lines than those of the rural credit- associations authorised last year. .... ,; AGRICULTURAL BANK, ,<"I can only repeat what I said last June, that I see no objection to the measure, provided such banks rely on their own resources as other banks do, a&d, that they are subjeot to taxation. Nevertheless;-the fact that the activities o£ the Advances to Settlers Department have recently been. extended, renders quite unnecessary, in my opinion, the establishment of an agricultural bank.' When .the borrowers' needs cannot be met by the Government departments, the joint stock banks, ordinary lenders, •tEe various proprietary concerns whose bgsiness it is to lend on farm land and live-stock;-and'the various co-operative finance • organisations owned and controlled by farmers, the borrowers must be, in * bad way indeed. It is safe to Bay of the- majority of; those, farmers who are in difficulties, that.they have had too much credit, not too little." .'. THE BIGGEST BORROWERS. ■•The extent to which the Bank of New Zealand assisted the pastoral and agricultural industries ' would, .be ' realised, said the chairman, when he explained that over 10 millions of its advances in the Dominion at 31st March last were to customers engaged in those industries. The small Borrower had also been well catered for dace in point of number 56. par cent, of its advances were for amaunts of £300 or under j quite a large proportion indeed were under £100 each, aid many, of these (usually advances of a JtemporSfy nature) without' any security. The authorities of the bank were quite alive to the importance of" sup-* porting the pastoral and agricultural industries, and that its support had been more than generous was borne out by tn'e fact that, during the last few years, practically the whole of its bad debts— a,nd they had not been insignificanthad been' incurred on such advances. < . JBAD LEADERSHIP/^.,. ;, •During the period, 1895-1921—0f rising -prices—the -' co-operative moy/ement amongst"'?armers in the Dominion grew steadily. It was inaugurated on lines that, consistently • adhered to, • would have resulted in co-operative companies attaining to'a "sound 'financial "position. "Unfortunately, however, bad leadership has -in some instances brought about total loss of the sharehplders' funds, and in others a very--.ii?is6tind,:. state..of affairs. ■- *-.-f--' i;!>;--' v: ■;■■' Co-operative freezing]companies had been ithe", greatest, sufferer?. Certainly some s of their losses '-could not, even under tligf'Best of management, have been avoided,*.o-wing .to*the sudden and heavy JaH in.ith«Vvalu6;6f:meat; but -unlike pro: pri'etii^.'arid joint'; stock; coneei'ns, most co-ojjej'^ti.ire companies' mads' little or

no attemjpt in prosperous times to reduce their heavy liabilities or to mako adequate provision for contingenciea. Instead, they launched out on a moat extravagant scale on borrowed money, so that when straitened times came several had to close up, whilst others were now staggering along under a great burden of debt. FOREIGN VENTURES. In nearly all co-operative companies the directorate consisted almost entirely of farmers, few of them have had any business training or experience. This deficiency did,'not matter much, in the case of dairy companies, content to carry on their legitimate business of manufacturing butter and cheese and to keep their operations within such a compass that they could competently control them. Sometimes, however", dairy companies had entered into ventures for- ' eign to their purpose and almost always results had been unsatisfactory. In addition to this, they had locked up far too great a proportion of their generally inadequatp capital in shares in other oooperatrve companies, these shares being, from a creditor's point of view, valueless as an asset. "The principle of co-operation has much to commend it," added the chairman; "it. can be madp, of great value to our farmers, but only if sound financial principles are followed. Some of the dairy companies are in a thoroughly satisfactory position, thanks to directorates that have recognised the necessity for building up capital and reserves and keeping down indebtedness. These companies have come through the depression with ease, and it will be well if the example they have set be taken to heart by others. The bank is most anxious to- see that co-operative' concerns are. conducted on right lines, and to that end the services of our officers are always available to advise on .the financial side of their operations." LAND. VALUES AND PRODUCE •"'■■•■ • PRICES. " Land'values, said the chairman, 'were still a constant source of controversy. Bankers'are not experts in valuing property-; but, if a banker is furnished with the balance-sheet of a farming customer and with profit and loss figures showing the result of the customer's working, during a series of years, he can usually form a pretty shrewd idea of 'the value of the land. The seriouß and somewhat sudden drop during April and May in the value of dairy produce and meat again illustrated the unwisdom of estimating the value of a season's output of produce on temporarily high prices. Today wool is selling at satisfactory prices, and indications point to its being our most profitable produce for the next few years; Hut it .would be imprudent indeed to base the value, of sheep 1 country on the present season's prices : for wool, lamb, and mutton. All experience suggests ' that,., as the years go by, sheepfarmers must expect again to encounter periods of lower prices. : ;:, HOLDINGS TOO LARGE. Not; only was rural land, as a role, top highly valuedj but the areas held, particularly in. dairying districts, were in many instances far too large for maximum production, especially as they were often held by men with quite inadequate means. The Waikato and Thames Valley districts were cases in point. "We are informed by practical farmers, said Sir George Elliot, "that a great portion of these districts could be subdivided into farms of about 100 acres, and that that area,, with adequate culti-. vation, would carry 60 cows. A moder-ate-sized, herd, by careful selection and handling, could, within seven or eight I years, be brought up to a standard of 3001b of butter-fat, per cow." More-. over, labour troubles, which probably are nowhere so exasperating as on a dairy farm, would be minimised on small holdings. "We cannot hope for a contented rural population until land values are based on. a reasonable scale, a scale that will show, a fair return, on the,, capital employed and adequate compensation fw the labour of the • fanner. So many instances of the evil effect of the recent boom in farm property come directly and indirectly under the notice of the bank that we .should, be callous indeed if we did not feel strongly on the point and do our best to prevent a repetition of the evil," the Chairman added. ; :.-THE GREAT DAIRY' INDUSTRY. The development of the dairying in..dustry of New Zealand country was a matter of such vital importance to the whole community that the Government would be well advised to give it every reasonable assistance, Sir George Elliot "continued. He suggested the importation of first-class stud bulls, so that dairy farmers of moderate means might hire the animals from the Government at a reasonable figure. With an improvement thus ensured in. the strain of herds it would be reasonable to expect within a few years an immense increase in-butter-fat production. . Advantage could be taken of farmers' organisations to carry, out the necessary administrative duties of such a scheme. £100,----000 devoted to the purpose mentioned would do far mora for the ultimate good

of the. industry than' some of the concessions dairymen are asking for. The figures in a recent statistical - report, although not guaranteed as being absolutely correct, may be taken as near enough for the purpose for. which they were prepared ; they show that the number- of cows dry and in milk in New Zealand on 31st January, 1922, totalled 1,137,000. After making an allowance for the number of cow 6 which are used ber of cows dry and in milk, in New it is estimated that the average production of butter-fat per cow' for the 1921----1922 seaeon was 168.421b. It is pointed out in this report that the season under_ review was- one of the best the Dominion had experienced for many years. When one remembers that in Denmark and in some parts of America the average per cow_ is 3501b, one must realise that any assistance the Government can render to the dairy industry with the object of increasing the yield of butterfat per cow must have an immense effect on the financial position of the country.