By Seaman A. Knapp, Farmers’ Co-operative Demonstration Work, Washington, D.C., as published in the 1909 issue of The Southern Planter
A Common Economic Error
For many years it has been the custom of Southern farmers to make their crop upon the “advance system.” While this has been regarded as an economic error on the side of the farmer, by many merchants it has been thought that was a very profitable way of buying cotton.
The farmer realized that as a matter of safety it was better to make the food consumed by his family and his stock upon the farm rather than to purchase it, and especially when he had to promise payment out of a crop which had not as yet been made. I have been watching this phase of country life in the South for many years and have come to the conclusion that the “advance system” is just as great a mistake on the part of the merchant as it is on the part of the farmer, for the following reasons:
First, the merchant takes great risks, which, of course, he tries to cover by increased charges. But even though these charges are increased the staples of life are not such articles as a high percent of profit will adhere to, and the merchant is practically trading gold for a promise to pay. If the crop fails, he is obliged to carry and carry and carry and possibly may ultimately, as in thousands of cases, be obliged to take the farm, for which he has no use, and under boll weevil conditions, is difficult to handle profitably upon a tenant system.
Under a cash system there will be a great reduction in the sales of some staple foods such as bacon, potatoes, beans, lard, vegetables, canned goods, hay, corn, etc., all articles that carry low profits. The farmer is rarely a hoarder of money and if he saves $200 or more by producing all his food supplies at home, he has that much more to spend when his crop is made, and it is cash.
Under a cash system the farmer will buy with his surplus more dry goods, clothing, shoes, furniture, etc., for his family; better teams, farm implements, wagons, buggies, etc., on which there is a much greater profit for the merchant than on staple articles of food. The merchant can turn his money in 30 days instead of a year. Ten per cent clear profit turned monthly is better than 120 per cent gain received annually. Some of the farmers increase income goes into permanent improvement to enable the farmer to produce more and spend more annually.
Again, there is something about raising cotton, tobacco, etc., to pay a debt, that saps the vitality of the farmer and affects the quality of his tillage. It really lowers the grade of farming. If upon the other hand the merchants will join with us in urging farmers to raise all their food supplies and try to produce by better tillage double the crop per acre they now produce, the results as it affects the merchant will be this:
All business will soon be on a cash basis and the volume will be three or four times as large from the farmers alone. The advent of more money will bring diversified industries among the farmers and eventually will attract manufacturers to the market towns.
If there are idle farms in the country, instead of calling meetings for the purpose of raising funds to secure immigration, call meetings to encourage the farmers who know the country and are loyal to it to universally adopt the following plan: First, provide their own food supplies from the farm. Second, double the average product on every acre under cultivation and let each worker on the farm by the use of better teams and tools till three times as many acres as at present, not in one crop, but in a variety of diversified and profitable crops. This would cause an immediate demand for more land and would provide the money to pay for it. This makes every man on the farm more than six times the industrial power he now is and gives him a love of the farm. This is better than to leave him in discouragement and secure immigrants to come and buy him out.
I should not speak so positively, only I have observed for a quarter of a century that were the Southern merchants have changed from an “advance system” to a cash system, they have prospered very much more than in former years and the number of failures is immensely less. Of course, it is not meant that there should be no credits, but practically there should be little necessity for them until the crop is actually ready for harvest, then trade becomes a cash transaction. Or, better still, the farmer can get his money from the bank and pay cash in all cases, if there is a lack of ready money.
The advance system bears down upon the cotton farmer with special hardship. His crop is either sold at once or is forced to the gin and the warehouse so as to secure loans. If the cotton farmer is not forced to sell to raise money or pay debts he will store his crop on his farm and market at his leisure, which is in the interests of all parties.
It appears to me, therefore, that the farmer will immeasurable gain when he produces what he has hitherto bought in the way of living. He is not compelled to sell his crop immediately upon the harvest. When he does sell, he trades for cash. The greater amount of money he has is very helpful to the family, but the stimulus to his self-respect is perhaps the most important items to be considered. The merchant prospers by the greater volume of business and by the quick return of his money. It seems to me that these points should be urged upon all the people.
--S.A. Knapp, Special Agent in Charge, Farmers’ Co-operative Demonstration Work
