Title: Are New Criteria Needed for Making Agricultural Loans?
Abstract: THE difficulties encountered in gaining control of the necessary resources for operating an adequate family farm business are increasing. The consumer wants quality products; the processor wants a uniform flow of material through his plant, and the retail merchant a dependable supply of goods on his shelves. These desires are forcing production toward quantity output on individual farms and concentration of supplies in relatively small areas. The small farmer with a diversity of enterprises has difficulty in meeting these requirements. Very few processors are interested in the volume and quality of products the unspecialized small producer has for sale. The bulk tank is replacing the milk can. The cream station has disappeared from most rural villages. The average price of eggs from small farm flocks does not meet production costs. A few bushels of tomatoes or apples in excess of the needs of a farm family are economic waste. The grower cannot afford to take them to a consuming market and there is no demand for them locally. In other words, a considerable volume of output is essential to a profitable business; and superior skill is required to set up and operate a farm business that will turn out this volume. The problem has many facets, but the discussion here will deal with the need for capital, and for new procedures in making it available to farmers. The investment in a general livestock farm in central Missouri that will return $4,500 a year to labor and management is about $61,500.1 A Missouri dairy business that will return $5,700 a year will require an investment of approximately $50,000.2 In the Cornbelt it is not unusual to have investments approaching $200,000 in commercial family farms. Satisfactory poultry businesses can be set up with less money than is required for dairy farms, but investments are fairly large regardless of type of major enterprise. If it is assumed that these investments represent normal values, the equities required to finance satisfactory businesses at conventional debt ratios vary from $20,500 to $82,000. In a general farming area, the business requiring $20,500 would be the smallest that could be considered adequate. A high percentage of farms do not come up to this standard.
Publication Year: 1958
Publication Date: 1958-12-01
Language: en
Type: article
Indexed In: ['crossref']
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