Indexes of net agricultural production, prices, and gross income 1 in the United States

1 Data from Division of Statistical and Historical Research.

This situation has resulted in some very serious price disparities. Farm prices have dropped, as I have said, around 60 per cent, while the prices paid for the things that the farmers buy have dropped only 29 per cent. The ratio of exchange value per unit of agricultural commodities for the commodities that the farmer buys in 1928 was 90 per cent of the pre-war basis. It dropped to 75 per cent in 1921, and then rose to 92 per cent of the pre-war basis in 1925. In June of this year it was 48 per cent of the pre-war level and in October, 52 per cent. That illustrates the impossible exchange relationship of agricultural commodities to the commodities that the farmer buys.

FARM MORTGAGE INDEBTEDNESS AND AGRICULTURAL LOANS

There is another disparity that is very important and exceedingly serious, and that is one that grows out of the indebtedness that has been built up in agriculture. Between 1914 and 1920, the farm mortgage indebtedness in the United States more than doubled, and by 1928 it was three times that of the pre-war level. The interest payments on that indebtedness have more than doubled since 1914. Mr. BUCHANAN. Have you the figures showing that indebtedness? Mr. OLSEN. We have the figures as to the indebtedness, and I will be glad to introduce them into the record.

Mr. BUCHANAN. We want those figures in the record.

Mr. OLSEN. Very well, I will supply them.

(The statement referred to is as follows:)

The total volume of outstanding farm-mortgage debt in the United States has been estimated at various dates as follows:

These totals of farm-mortgage indebtedness are shown by States and geographic divisions in Table I.

TABLE I.-Total farm mortgage debt in the United States January 1, 1910, 1920, 1925, 1928, and 1930 1

TABLE 1.-Total farm mortgage debt in the United States January 1, 1910, 1920, 1925, 1928, and 1930-Continued

In a study of farm mortgage indebtedness as of 1928, the amount and proportion of the total farm mortgage loans held by various lending agencies were determined as shown in Table II. This study is reported in full in United States Department of Agriculture Technical Bulletin No. 288, Farm Mortgage Credit, published February, 1932. It presents estimates of the amount of farm mortgage credit outstanding in the several States as of various dates since 1910, the percentages of the various tenure classes of farms that are mortgaged, the ratio of debt to value for mortgaged farms operated by tenants and for mortgaged farms operated by owners, the sources of mortgage credit, interest rates by sources and geographic divisions, and a discussion of the farmer's problem of credit manage

ment.

TABLE II.-Farm mortgages held by principal classes of lending agencies, January 1, 1928 1

Since January, 1930, the total volume of farm-mortgage debt has declined, but the exact amount of this decline has not yet been determined. A declining trend of total farm mortgage indebtedness, however, is suggested by data appearing in Table III, which shows the total agricultural loans outstanding by the Federal land banks, the joint stock land banks and 40 life insurance companies representing 82 per cent of the admitted assets of all legal reserve life insurance companies in the United States. These data are shown by months from January, 1930, to October, 1932. This table also shows the outstanding farm mortgage loans held by banks that are members of the Federal Reserve System, the last figure shown representing holdings as of June, 1932. Credit extended by the intermediate credit banks to farmers' cooperatives and to financing institutions is also shown. Investments by individuals are believed to have offset to a limited extent the declines indicated in the farm mortgage holdings of institutions. Inasmuch as approximately $1,500,000,000 in farm-mortgage loans matures each year, and most recent loaning operations have reflected the influence of

declining farm real-estate values, new and renewed loans have tended to represent smaller amounts than original amounts of credit extended. Current payments on amortization loans and gradual reductions provided for in many other farm mortgage loan contracts have further reduced the amount of outstanding principal. Meanwhile, the volume of new credit extended on farm land security has been much less in amount than in former years. Throughout the years 1930 to 1932, foreclosure and assignment of deed have continued to extinguish substantial amounts of farm mortgage credit outstanding at the beginning of the period.

1 End of the month.

2 These companies represent 82 per cent of the admitted assets of all legal-reserve life-insurance companies in the United States.

3 Does not include $53,000,000 owed Sept. 30, to 3 banks placed in receivership during 1932, in following months and amounts: $9,000,000, May; $14,000,000, June; $30,000,000, October.

RELATION OF TAXES TO AGRICULTURAL INCOME

Taxes represent another situation that has a bearing upon the burdens of agriculture. Between 1913 and 1921 taxes about doubled. By 1930, they were about two and a half times what they were before the war, and it is estimated that it requires at the present time around five times as many units of farm commodities as before the war to pay taxes. Now, let me illustrate that further, because that tax situation in relation to agricultural income is very vital: When looking at it from the point of view of farm income, here are some figures we arrived at: During the 5-year period from 1909 to 1913, about 71⁄2 per cent of the agricultural income was required for the payment of taxes, interest on capital, and the wages for management. That percentage, which taxes and mortgage interest together took of the income, rose until in 1932 it was 25 per cent.

Mr. BUCHANAN. Do you mean that it took 25 per cent of the farmer's income to pay those charges?

Mr. OLSEN. In 1932, it would take 25 per cent of the agricultural income for the payment of taxes and interest on capital, and the wages which the farmer gets for his management and for the labor of his family. Let us put that on a slightly different basis: In 1932, it took about 50 per cent of the net income available for interest on capital and for labor and management.

Mr. BUCHANAN. When you say interest on capital, do you mean interest on borrowed money?

Mr. OLSEN. No; I mean 50 per cent of that income available as a return for the farmers' own investment. That illustrates a disparity situation that is very serious indeed.

Mr. HART. The farmer does not have any income from which to pay interest on borrowed money, does he?

Mr. BUCHANAN. That is interest on debts.

Mr. HART. But he does not have any income to apply to that. He has not enough to pay taxes.

Mr. OLSEN. That is true of some farmers, but all farmers are not in debt to an equal degree. We have estimated the income of agriculture as a whole, and we have taken the debts and the taxes for the industry as a whole. I agree with you that in the case of many farmers, there is no income from which to pay interest or taxes.

Mr. HART. I was talking about any farmer. If he is earning taxes, he is doing very well, to say nothing about interest to apply to capital, or anything else. He is doing pretty well if he earns his taxes over and above his actual expenses.

Mr. OLSEN. That is true of farmers in some sections, but it is true that the farmers' income in some other sections is more than enough If you measure the total income of agriculture against the total taxes and interest on total debts of agriculture, you get those figures.

Mr. HART. I have talked with stockmen and with poultrymen, and I do not know of any who are making more than expenses and taxes.