AGRICULTURAL BANKING.

Hawera Star, Volume XLVIII, 13 March 1925, Page 6

AGRICULTURAL BANKING.

METHOD OF OPERATION. SUCCESS IN OTHER COUNTRIES. In the course of his address at Manga toki last night, Mr. W. J. Poison, Dominion president of the New Zealand Farmers' Union, dealt at length with the subject of agricuiturai banks. Dealing with the agricultural bank proposal, Mr Poison eaid the man who had not given it due consideration might be apt to class it as a “wild cat” proposal, and to say that even were the bank established it would be impossible to obtain the necessary money. Further, the objector might contend that even if the money were obtained a much better system already operated through the State Advances Department. Such objections could be met. There were in the world 26 countries in which some such agricultural bank existed, and there were very few countries apart from New Zealand where the scheme H as not in operation or being contemplated. In Great Britain a movement for a similar establishment was afoot, and almost the whole of the countries in Europe excepting Russia had their agricultural banks. The speaker had conversed with Mr Sorensen, a native of Denmark, who was an ardent _advo-, cate of the system, and whose opinion could be relied upon when it was considered that he was his country’s representative in America. Mr Sorensen had ascribed th© big advance made in recent years, among primary producers to the benefit derived from the agricultural bank. Sixty years ago no country was poorer among its agricultural classes than Denmark, but to-day the rural population was four or five times the previous number, and it was by far the richest country in the world, showing bank deposits of more money per head than any other State. The advance was due to the working of the agricultural bank. Germany was another country which owed progress to a similar financial institution. Latin States in America had their agricultural banks. Mr Poison instanced the Argentine and Brazil, the latter having a population amounting to millions occupied on the land without significant failures. The United States had established the bank in the last five years, during which time it had advanced 5,000,000,000 dollars to farmers. It was evident, continued the speaker, that countries outside New Zealand knew' more of tlie scheme than was known in that country.

Inquirers would naturally ask how the money was to be raised. If other countries'were able to get sufficient capital for the operation of, their agricultural banks, surely New Zealand could do the same. Mr J. P. Howard, ex-president of the American Farm Bureau Federation, writing to the speaker, had been jubilant concerning the success of the bank there, and had said that agricultural bank bonds bearing interest at 5 per cent were at a premium of 103. Prior to the establishment of the banks. ex-President Taft had remarked on the poorness of the American farmer, -and had asked why it was that while farmers had to pay 8 per cent or 9 per cent for money, the big business concerns had to pay only 41 per cent. The answer lay in the question of organisation of the demand, and this had been realised through the agricultural bank. The benefit was shown in the fact that whereas the American farmer has previously been charged 9 per cent aFthe same time the New Zealand farmer was paying only 5 per cent, the former was now paying 5 per cent and the latter 7 per cent. Public confidence in the bank was shown by the premium quoted for its bonds, which were preferred even before the State bank. Danish agricultural bank bonds were also worth more than the State bonds bearing the same rate of interest.

As the primary products of New Zealand represented 97 per cent of its exports, it might be said that practically the whole wealth and prosperity of the country rested with its primary producers, who were fully justified in regarding their financial problems as a national question and in requesting the Government to give some form of guarantee to a producers’ bank which would assist in the development.of the country. Before making comparisons with the Advances to Settlers’ scheme, Mr Poison explained that in countries where agricultural banks operated the practice was to divide the country into areas and give each area a branch. Its whole success depended upon the valuation of land, computed on producing, not selling value. The practice was to set up a local valuation committee in each area. The committee valued the land .belonging to the applicant for loan, besides valuing his chances, of success as a farmer, and advances were made accordingly. Being local men, those on the committee were much better able to make a correct valuation than a so-called expert brought into the district for the occasion. Advised by the branches of the amount of loans approved, headquarters knew what amounts had to be provided for, the money being found through the sale of bank bonds backed by a limited Government guarantee. Loans could be had for 33 years, repayable at any time convenient to the mortgagor. • -''Land booms, continued Air. Poison, did not occur where agricultural banks set up by the valuation committees were in existence, as the land values left 3io iscope for the speculation, and wherever the banks were established values had remained practically steady compared with the very high and low fluctuations experienced in New Zealand during the boom period and it® consequent slump. The Advances to Settlers Department had admittedly done a great deal for settlers, but it could not operate with the same success or .show anything like the results which attended agricultural banking operations l throughout the world. Further, the agricultural bank in Denmark actually paid interest on. money deposited at call, whereas in New r Zealand the present banks paid interest only on fixed deposit, and as approximately only half the money left with the banks was on. fixed deposit, they were, allowing that they paid 4 per cent, getting the use of the. whole of the money deposited at a cost of about 2 per cent. Kxchiange charges were costing the country millions a year and presented another aspect in, which the agricultural bank could serve the producers. Another grave reason, which justified the establishment of the bank was that the producers’ bank, represented in a crude form by the Advances to Settlers Department, should not be owned by the State, ini stressing which Mr. Poison referred to Queensland’s unfortunate experiences. A repetition was certainly not desired in New Zealand. Illustrating further reasons, Mr. Poison said that producers in Denmark, were receiving 83 per cent of the price paid by the consumer, this being due to the co-operative system, and since the agricultural bank had arranged their finances people had gone back on to the land and the rural population on which, the country dene, ndedi was sound. In, New Zealand, However. the producer was getting 0n1y,4 per cent of the prices paid by the consumer. The drift from coun-

try to town should also be considered. Thirty years ago 60 per cent of New Zealand’s population had been rural and 40 per cent urban, but to-day those figures were reversed and the country was producing less wool ami less -meat than it bad' been, doing ten years ago. Cropping figures had also gone down. The only industry increasing was the. dairy industry.* but its advance was more than counterbalanced by the decline in others. If the country w<a,s to prosper it was essential, that its rural population should be kept strong, and this aim could be realised only by co-operative effort to secure the best possible conditions for the man on the land and also secure for him the highest possible return for the labour expended. Every section of the community wa« organised, said Mr. Poison, in conclusion, excepting the unfortunate primary producers, who were carrying all the others on their hacks, but he was glad to see. that the primary producers were waking up. and, realising that union was strength, that through co-operation. they could obtain results equal to those obtained in other countries, could benefit their position and be able to bestow a better heritage, on their children.