FARMERS’ FINANCE.

Otago Witness, Issue 3614, 19 June 1923, Page 13

FARMERS’ FINANCE.

AGRICULTURAL BANKS. CO-OPERATIVE COMPANIES. Sir George Elliot, chairman of the Bank of New Zealand, referred on the 13th, at the annual meeting of that institution, to the proposed legislation to provide for the establishment of an Agricultural Bank on wider lines than those of the Rural Credit Associations authorised last year. He saw no objection to the measure, provided such banks relied on their own resources as Other banks do arid were subject to taxation. Nevertheless, the fact that the activities of the Advances to Settlers Department had recently been extended, rendered quite unnecessary, in his opinion,

the establishment of an Agricultural Bank. When the borrowers’ needs could not be met by the Government Departments, the joint stock banks, ordinary lenders, the various proprietary concerns whose business it was 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 a bad way indeed. It was safe to say of the majority of those farmers who were in difficulties, that they had had too much credit, not too little. Over 10 millions of the advances by the Bank of New Zealand in the dominion at March 31 last were to customers engaged in the pastoral and agricultural industries. Fifty-six per cent, of the number of the advances were for amounts of £3OO or under —quite a largo proportion, indeed, under £IOO each—and many of these (usually advances of a temporary nature) without any security. That its support of these industries had been more generous was borne out by the fact that, during the last few years, practically the whole of its bad debts and they had not been insignificant—had been incurved on such advances. Much criticism of the methods in which the banks conducted their business had emanated from those engaged in rural pursuits. The results of the working of these critics’ own organisations had not been such as to convince thinking people that they were qualified to handle the business of finance which, perhaps more than any other, called for an amount of judgment and care that only those who have had long experience and sound training were abie t£_giye it. During the period of rising prices, the co-operative movement amongst farmers in the dominion grew steadily. It was inaugurated on lines that, consistently adhered to, would have resulted in co-opera-tive companies attaining to a sound financial position. Unfortunately, however, bad leadership had in some instances brought about total loss of the shareholders’ funds, and in others a very unsound state of affairs. Co-operative freezing companies had been the greatest sufferers. Certainly some of their losses could not., even under the best of management, have been avoided, owing to the sudden and heavy fall in the value of meat; but most co-operative companies made little or no attempt in prosperous times to reduce their heavy liabilities or to make adequate provision for contingencies. Instead, they launched out on a most extravagant scale on borrowed money, so that when straitened times came several had to close up, whilst others were staggering along under a great burden of debt. In nearly all co-operative companies, the directorate consisted almost entirely of farmers, few of whom had 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 foreign 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 inadequate capital in shares in other co-operative companies, these shares being, from a creditor’s point of view, valueless as an asset. The principle of eo-Pperation had much to commend it and could be made of great value to our farmers, but only if sound financial principles are followed. Some of the dairy companies were in a thoroughly satisfactory position, having recognised the necessity for building up capital and reserves arid keeping down indebtedness. These companies had oome through the depression with ease, and it would be well if the example they had set were taken to heart by others. The serious and somewhat sudden drop during April and May in the value of dairyproduce and meat, once again illustrated the unwisdom of estimating the value of a season's output of produco on temporarily high prices. To-day wool was selling at satisfactory prices, and indications pointed to its being our most profitable product for the next few years; but it

| -would be imprudent indeed to base the value of sheep country on the present season’s prices for wool, iamb, arid mutton. I All experience suggested that sheep farmers must expect again to encounter periods of lower prices. Not only is rural land, as a rule, too highly valued, but the areas held, particularly in dairying districts, are in many instances far too large for maximum production, especially as they were often held by men with quite inadequate means. A great portion of the Waikato and Thames Valley districts could be subdivided into farms of about 100 acres, and that area, with adequate cultivation, would carry 60 cows. A moderate sized herd, by careful selection and handling, could, within seven or eight years, be brought up to a standard of 300U> of butter-fat per cow. Moreover, labour troubles, nowhere so exasperating as on a dairy farm, would be minimised on small holdings. We could not 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 for the labour of the farmer. The development of the dairying industry was a matter of such vital importance to the whole community that the Government would be well advised to give it every reasonable assistance One hundred thousand pounds devoted to the importation of first-class stud bulls would do far more for the ultimate good of the industry than some of the concessions dairymen were asking for. Any assistance the Government could render to the dairy industry with the object of increasing the yield of butter-fat per cow must have an immense effect on the financial position of the country.