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JUL 19 1928
HD
ADDRESS
:1923
OF THE
PRESIDENT OF THE
UNITED STATES
ON AGRICULTURE
TO BE DELIVERED
AT HUTCHINSON, KANS.
JUNE 23, 1923, AT 2 P. M.
Clippeux file
WASHINGTON
GOVERNMENT PRINTING OFFICE
1923

ADDRESS.
Fellow Citizens of Kansas and Fellow Americans All:
A half score of years or more ago, I was making a number of
addresses in your State, and had the good fortune to make a more
or less intimate survey of several thriving Kansan communities.
While driving in the outskirts of a county-seat town, not a hundred
miles from here, we noted in the distance a structure rather more
imposing than the average home, and I made inquiry as to its own-
ership. My host said: “ Well, sir, I'll have to apologize. That's the
county poorhouse, but it is out of commission. We discontinued its
public operation for we had no inmates.” “ Omit the apology," I
replied, " and make it a boast. I never saw an unoccupied almshouse
before. If this is a reflex of the life of Kansas, it is a glorious
chapter in human progress.”
My host had spoken truly. More interesting still, before my speak-
ing tour was finished, I saw two other county almshouses which had
been abandoned as public institutions, and made into eloquent monu-
ments to a community's good fortune. A civilization without a public
charge is not the supreme attainment in human progress, but it is a
lofty achievement, and I know there can not be very much wrong
with the fundamentals of the Government under which it is recorded.
Probably the fortunes of agricultural Kansas are not to-day
precisely what they were a dozen years ago, and agricultural fortunes
are invariably reflected in the fortunes of all others, because they
are so closely related and interdependent that there can be no good
or ill fortune of one without influencing the other. The whole
world has been in a social, industrial, financial, and political upheaval
since then. The very fabric of civilization has been sorely tested,
dynasties have fallen, monarchies have failed, revolution has reigned
in various sections of the world, and disasters have exacted their
toll nearly everywhere and in nearly every way.
The losses to American agriculture are universally admitted and
deplored, but it is not an experience peculiar to American agriculture
alone. Nor was the readjustment following war's inflations a burden
to agriculture alone. It came to the railroads, to bankers, to manu-
facturers, and to the mercantile world. The miracle is that we all
escaped with so relatively little of disaster. It is characteristic of
52019_231
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ADDRESS.
sh
vhich
human nature that we magnify our own ills and too little appraise the
ills of others, but the eyes of the Government are attracted to them
all. I hesitate to tell you how seriously vast interests, presumably
unendangered by the changing tides of business, were affected, and at
what sacrifices disasters were averted. Looking backward, I find my
confidence in the social and industrial fabric of this Republic
strengthened by our wonderful emergence from threatening disaster.
Ever since the earlier processes of deflation which began after the
World War we have been studying and talking about the rehabilita-
tion and the better oganization of our agricultural industries
I confess a very frank pride in the Government's part in bettering
a situation against which you justly complained and which all the peo-
ple of the Nation deplored. The cooperation of all the governmental
agencies, and with them the cooperation of the fine forces of leader-
ch the great national farm organizations have developed,
made it possible to secure a measure of helpful results in this depart-
ment of our endeavors, which has been especially gratifying. More-
over, it has found prompt reflection in the improved status of every
agricultural concern. We have been officially informed that owing
to improved conditions the farm products of the country for 1922
were worth $2,000,000,000 more than they were in 1921. Clearly,
we are through the worst of the depression and can reasonably expect
gradual improvement.
The balance within the industry, as between livestock and grain
production, has been restored. The disturbance of that equilibrium,
so highly important to a properly adjusted agriculture, had been
one of the unfortunate and unavoidable results of the war-time
necessities. Called to feed a world, American farmers had willingly
responded to the demand for special efforts in certain lines of pro-
duction. Relationships between supplies and demand for some
staples were badly disrupted and could not be instantly restored
when peace came. That was in considerable part responsible for
the violent fluctuations which imposed so much hardship on the
farmer. Along with this distortion of the production ratios went
an even more acute and difficult disturbance of the factors which
determine foreign demand.
While the war lasted there was no possibility of overproduction
of such staples as wheat and cotton, for example; and when peace
suddenly burst upon the world, the farmer had plans for a long
future which he could not readjust instantly. No human wisdom
could possibly have foretold the course that would be taken by sup-
plies and demand; and it is as futile as it is obvious to us now to say
that wisdom would have dictated at least a less precipitate policy in
removing the war-time restrictions and guidance in dealing with some
aspects of production and distribution.


ADDRESS.
When the present administration came into responsibility, agricul-
ture was in the lowest ebb of depression. The immediate need was
for measures to meet an emergency. There was urgent call to keep
open and so far as possible enlarge our foreign markets, and this was
accomplished by a prompt policy of placing necessary credits at the
disposal of those engaged in finding foreign markets for our food-
stuffs; by arresting and reversing the drastic deflation which had
the seeming, under the former administration, of being aimed es-
pecially at the destruction of agriculture's prosperity; by recalling
the War Finance Corporation from its state of suspended anima-
tion, giving it a credit of $1,000,000,000 in Government funds, and
recommissioning it to afford relief to the American farmer. The
wisdom of this action was demonstrated by results.
Four hundred million dollars have been loaned by this insti-
tution, three-fourths of it to the farming and live-stock interests.
same time the emergency tariff measure was passed, by which
to secure the farmer's home market against the flood of competing
articles from distant corners of the earth. During the war vast
quantities of farm products had been dammed up in countries so
distant that shortage of shipping made transportation to Europe im-
possible. With the seas again free, these sought, at whatever price
could be obtained, the one market where there was real buying ca-
pacity and cash to pay—the great market of the United States.
We took prompt measures to stop this movement; and the combina-
tion of effective protection, easier credits, and the operations of the
War Finance Corporation quickly arrested the downward trend
and started agriculture upon the upgrade once more.
It is only fair to pause a moment and emphasize the value of these
measures of agricultural relief so promptly put forward by the Con-
gress. The new tariff schedules saved for the American farmer a
vitally important and gravely menaced home market. The resump-
tion of the War Finance operations, backed by the resources of the
only Government on earth that was able to summon such a credit,
enabled the American farmer to compete for sales abroad.
Along with these measures, prompt steps were taken to put the
Federal Farm Loan Board back into business. Like the War Finance
Corporation, it had been in a state of suspended activity for want of
money to loan. It was given a credit of $50,000,000 and resumed
loaning on farm property. I
A bill to facilitate cooperative marketing of farm products was
passed. Legislation to prevent harmful gambling in agricultural
futures was passed, held by the courts to be unconstitutional, and
quickly repassed with the defects removed. The act for the control
and regulation of the meat packers was enacted. Important reduc-
ADDRESS.
tions of freight rates on agricultural products were effected. Cer-
tain restrictions upon the operation of the joint-stock land banks,
which had prevented them from doing their share in financing the
farm, were removed. The loan limit of $10,000 which had formerly
been imposed upon the Federal Land Banks was increased to
$25,000, a change which is certain greatly to increase the practicable
usefulness and range of operations of this system.
A measure of the utmost importance to farmers in those parts of
the country where irrigation is the very basis of agricultural life is
the act authorizing formation of irrigation districts, whereby the
water-using settlers are brought together in associations to conduct
their relations with the Federal Government. Formerly the settlers
had to adjust all differences of this kind as individuals, at great
expense and inconvenience to themselves. These water-users' or-
ganizations promise to become nuclei of highly useful cooperations
in assembling, shipping, and selling the products of the irrigation
districts. Further encouragement was extended to the irrigation
farmers by amending the farm loan act to provide terms on which
the land banks could make loans to farmers on the irrigation proj-
ects, whose conditions and necessities require special treatment. .
Yet another provision in behalf of this same community is made
by the new law which authorizes extending the time on payments
due from irrigation farmers to the Government. This measure has
given a new chance to thousands of farmers in the irrigation areas
who have fallen under the same misfortunes that have afflicted other
farmers, and who had been unable temporarily to meet their com-
mitments to the Government.
* If the recital of this long list of accomplishments in the farmer's
behalf shall have seemed to suggest that Washington has been devot-
ing itself with a special and perhaps a partial assiduity to the agri-
cultural interests, I shall reply that the farmer has received nothing
more than was coming to him; nothing more than he needed; nothing
miore than was good for him; and nothing that was not also good for
all of our national interests, bound up as they are in the nation-
reaching mutuality of dependence and interdependence. I tell you
frankly that I am proud to be able to come to you to-day and tell
you of what has been done, because in doing it we have served not
only the farmer but everybody else in this land.
But that is not all. I have reserved till the last what we may well
appraise the crowning achievement of the entire list. I refer to the
code of agricultural credit legislation known as the agricultural
credit act of 1923, which became law in the closing days of the last
Congress. It has not been possible yet to perfect machinery for
administering this act, but I do not hesitate to express confidence that


ADDRESS.
this scheme of agricultural credits, taken in connection with the other
enactments I have described, furnishes the basis for the most en-
lightened, modern, sound, and efficient scheme of agricultural finance
that has been set up in any country, and will enable the farmer in no
distant future to free himself from obstacles which have made it
difficult heretofore to conduct farm operations upon a sound, business-
like basis.
Before describing this program of advancement in agricultural
finance, permit me a word by way of bringing before our minds the
backgrounds of the agricultural problem. Farming is the oldest
of all industries. It has supported the community in peace, and
has been the most essential line of industrial defense in war; com-
monly, too, the first victim of war. In olden times the conqueror
distributed the subjugated lands to his favorites, and his prisoners
as slaves to till it. Thus land ownership became the mark of favor
and aristocracy. Later, the feudal régime substituted the some-
what less severe conditions of serfdom and villenage for those of
slavery on the soil. Then came the modern institution of an agri-
cultural peasantry, politically more free, but economically still held
in fetters of old tradition.
Merchants and manufacturers, in the Middle Ages, devised banks
to help them finance their ventures. Banking methods developed
which served their purposes, but were not adapted to the farmer.
The farmer's way of life made him an individualist. He could not
organize the great cooperations which we call corporations. The
banks did not furnish credit of the kind and on the terms he needed
it. The manufacturer and merchant, doing a large gross business in
proportion to capital, having a short turnover period, wanted to bor-
row working capital for short periods. The farmer, with a long
turnover period, wanted working capital on very different terms.
Now, the bank of deposit and discount is easily the most com-
pletely cooperative institution that human society has devised. But
it got started dealing primarily with industry and commerce, and
the farmer never quite caught up with it. The railroad or in-
dustrial corporation raises plant capital by selling bonds; the
farmer, by the essentially similar operation of selling a mortgage
on his land. Both still require at times, to supplement this capital,
by making less permanent loans to pay operating costs.
These loans the banks make out of the funds intrusted to them
by great communities of depositors. In order to keep their resources
as liquid as possible, against the possibility of heavy demands from
depositors, banks have preferred to loan for short periods, commonly
one, two, or three months. This precisely suited the commercial or
industrial borrower; it did not fit the farmer's case, because he re-
ADDRESS,
quires a full year to produce most crops; two or three years, even, in
case of livestock. net
So, as the ordinary banking practice did not meet the farmer's
needs, the idea arose of establishing intermediate credit institutions,
which should advance money for longer periods than the merchant
or manufacturer desired it, but yet not on the long-time basis of the
farmer's mortgage or the corporation's bond. Various forms have
been taken by these institutions in different countries and under
different conditions. But I doubt if there has ever before been set
up a system of intermediate farm credit so well adapted to serve
the needs of the farmers in America.
This legislation designed to furnish necessary intermediate credit
for production purposes, taken in connection with the Federal
Farm Loan system, which provides long time mortgage credit, and
with the new law making easy the organization and conduct of
cooperative associations, and with the amended Federal warehouse
act, provides what seems to be a complete, scientific and well-rounded,
efficient and workable system of agricultural finance. Quite possi-
bly experience may show the need of minor amendments here and
there to the credit act, but the principle underlying it is sound and
needed changes can readily be secured.
Under the agricultural credit act, which became law last March, two
classes of corporations are authorized. First come the Federal Inter-
mediate Credit Banks. They are 12 in number, just as there are 12
Federal Reserve Banks and 12 Federal Farm Loan Banks. Each
Intermediate Credit Bank is to have $5,000,000 capital, subscribed by
the Secretary of the Treasury in the name of the United States and
paid for from the Treasury. There is to be one of these banks in
connection with each Federal Farm Loan Bank, and they may be
under the same or separate managements.
The Federal Intermediate Credit Banks are to make loans to
banks, or to cooperative marketing associations of farmers, which
associations are carefully provided for. The loans are to be made
specifically for agricultural purposes.
Whenever the loans made from the original capital reach an aggre-
gate justifying it, the Farm Loan Board, which supervises the sys-
tem, may issue debenture bonds against the securities which the Inter-
mediate Credit Banks have taken. The sale of these debentures will
put the banks in funds once more for a new loaning campaign; and
so, in the revolving-fund fashion which has been made familiar
through the operations of the Farm Loan Board in real estate mort-
gages, the endless chain goes on and on, drawing in with each sale of
debentures a new supply of capital for loaning to the farmers.


ADDRESS.
The Intermediate Credit Banks are fundamentally different from
the Farm Loan Banks in this: that while the Farm Loan Banks
advance money only on real estate mortgage security, the Interme-
diate Credit institutions are to discount farmers' notes taken by
local banks and to loan on personal and chattel security--live stock,
farm equipment, growing crops, and the like. The debentures sold
by the Intermediate Credit Banks are tax-exempt precisely as are the
debentures of the Farm Loan Banks.
The debentures will be sold to the publie at a rate sufficiently below
that charged the original borrower, to insure that all expenses will
make loans on these debentures to the amount of ten times their
capital; that is, each bank may carry $50,000,000 of business, which
places the total for the system of twelve banks at $600,000,000.
Under the same law, another and entirely distinct set of corpora-
tions are provided for, called National Agricultural Credit Cor-
porations. These are to be set up, their capital furnished, and their
management controlled by private capital and enterprise, under the
general supervision of the Comptroller of the Currency. A National
Agricultural Credit Corporation may be formed with capital not less
tions to subscribe for stock in such corporations, in the aggregate not
exceeding 10 per cent of their capital and surplus. .
The National Agricultural Credit Corporation is authorized to
make loans for agricultural purposes on chattels, livestock, growing
in the case of breeding stock and dairy herds the period may be
extended to three years. They may issue debentures against the
securities they have received, and these may be marketed up to what-
ever amount may be determined by the regulations prescribed by the
comptroller.
To facilitate the marketing of the debentures issued by these corpo-
tion may subscribe up to 20 per cent of its stock to the capital of the
rediscount bank. A minimum of $1,000,000 paid-up capital must be
provided for a rediscount bank. The rediscount bank, on the re-
sponsibility of its own capitalization, will enter the general money
market, float the debentures that have been turned over to it by the
further investments. It is simply another application of the revolv-
*ing fund or endless credit chain idea which we found illustrated in
the case of the Intermediate Credit Banks.
The utmost care has been taken to surround these various institu-
tions with every possible safeguard that can be afforded through
ADDRESS.
skilled supervision, ample responsibility, and sound methods. It is
the judgment of financial experts that their debentures will find just
as ready an acceptance among investors as have those of the Federal
Farm Loan Board.
There is thus created at last a complete farm credit system which,
drawing together the aggregated responsibility of the greatest single
industry in the land, backed by the security of the land, and of live
stock, warehoused and growing crops, all kinds of agricultural equip-
ment; and, finally, by the character and high responsibility of the men
and women who constitute the great agricultural community, will
be capable of furnishing the American farmers, for the first time
in the history of agriculture in any country, adequate investment and
working capital on terms as favorable as those accorded to commerce
and industry.
- Many people have been inclined to be skeptical of benefits which
might follow the enactment of legislation to give the farmer a better
system of credit. They have said that the farmer needs better
prices for his crops and livestock, rather than easier ways to borrow
money. That is true, but these friends do not seem to understand
that prices of crops and livestock are directly influenced by credit
facilities.
In the past, farmers have been obliged to finance their productive
enterprises by borrowing money for short terms. When times are
good they have no difficulty in renewing these loans, but in periods
of financial stress too many farmers have found themselves under
the necessity of pushing their crops or their livestock on the market,
not infrequently before the latter is fully fitted for market, in or-
der to pay notes which they had expected to be able to renew,
thus at times flooding the market and seriously depressing prices.
Under a system of intermediate credit, administered with reference
to the farmers' seasonal requirements, they should be able to market
both their crops and livestock in a more orderly fashion, and this
in itself will be a potent influence in keeping prices more stable and
reasonable.
I thoroughly agree that what is needed is fair prices; and I very
well know that the farmer wants to get out of debt rather than to get
further into debt. But it is my opinion that both these ends will be
much more quickly accomplished through this new system of agri-
cultural credits.
The legislation enacted by Congress does not by any means measure
the attention Congress has given during the past two years to the
needs of agriculture. People who have not been familiar with what
has been going on in Congress can little appreciate the exhaustive
study which the appropriate committees of Congress have given to
our agricultural problems.


ADDRESS.
Day after day, and week after week, and month after month these
committees have held hearings. They have considered every conceiv-
able measure suggested for relief. They have listened patiently to
all who came to them. They enacted legislation which seemed to
promise real help. They did not enact nearly all the measures which
were suggested, because after the most exhaustive study they became
convinced that such measures would not only be of no help but might
aggravate an already bad situation.
Go back with me for just one glance, in conclusion, at the steps
which have marked the rise of agriculture to this, its new estate.
We need to go back but a very few generations to the time when the
title to land represented no more than the whim of a despot or the
shifting and uncertain fortunes of a military adventurer. The agri-
cultural worker was a serf, a mere human chattel, bound to the soil
on which he lived and to the service of the particular. adventurer
who at the moment, in the permutations of fortunes and of favor,
chanced to hold the land.
In the view of his masters, he had no rights which could command
respect, his political status was nil, and he was permitted the least
possible share in the fruits of his toil on which he could keep to-
gether his soul-if indeed it were conceded that he had a soul-and
his body, so as to perform the grueling toil of tasks that were re-
garded as utterly menial. All agricultural operations were crude,
inefficient, barbaric. The great light with which science and organi-
zation and efficient methods have illumined the art of agriculture
had not yet cast its first feeble rays over the desolate and dehuman-
ized landscape of the rural countryside. The old-time picture is one
to make women weep and men despair of their kind.
But somehow the life of the open places, under a sky which in-
spired always the longing for a fair chance; somehow the daily touch
with the mighty forces of mother nature in all her wondrous moods;
somehow the dim realization that there was yet something beyond
and above the squalor and misery of his immediate surroundings
somehow, through the centuries of his serfdom, these things kept the
farmer mindful of possibilities for better times and friendlier fates;
kept him longing for liberty; inspired him in the age-long struggle
to lift himself up to a wider vision of life; moved him to eternal
revolt against the fetters which bound; gave him courage for the
seemingly hopeless conflict with destiny.
- The centuries passed, and untold millions went to their graves
despairing. But other millions followed, to seize the torch and bear
it a little farther on the road. The slave became a villein, the
villein a peasant; and yet the grim struggle went on, with political
rights and economic emancipation as its twin goals. Painfully, dog-
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