Transactions of RHASS Volume 1940 - Page 038
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| Year | 1940 |
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64 SHORT~TERM AGRICULTURAL CREDIT. thus early, regards him as not ‘ credit worthy ’ ; more likely, however, he seeks temporary accommodation elsewhere, usually with more success. MERCHANT CREDIT. Agricultural merchants — seedsmen, feeding - stuffs and manure merchants, agricultural implement firms, millers, and tradesmen of various kinds—are, on the other hand, much more eaSy of approach to the farmer requiring temporary accommodation. Generally speaking, they give their customers every consideration, which springs from their first-hand knowledge of, and direct contact with, the industry, and a ready understanding of the problems and setbacks with which the farmer, perhaps through no fault of his own, is frequently faced. It would almost be true to say that the merchants ewpect to have to grant credit to the majority of their customers, even though it is well known that the man able to pay spot cash can generally drive a keener bargain than his less for- tunate fellows; in many cases tradesmen delay submitting their accounts for a considerable period—0.9., seedsmen may not send out their statements covering their customers’ purchases of grass seed, seed grain, &c., bought in the spring, until the following December, or even later, so that fully nine months must inevitably elapse before they can possibly receive payment. It would be extremely difficult to hazard a guess at the total amount of farmers’ indebtedness to their merchants ; it is quite likely that it exceeds the total of the bankers’ advances to their customers. Sometimes, especially during an agricultural depression, a merchant will ‘carry’ his customers for long periods in spite of rising indebtedness, in the hope that when things take a turn for the better he will ultimately be paid in full. Inevitably, merchant credit is sometimes subjected to very harsh criticisms. In the first place it is asserted that heavy rates of interest are charged on overdue accounts, the precise rate being unknown to the farmer. Actually there are great variations amongst merchants with regard to this matter; in some cases interest is only charged where accounts are very long overdue, in the hope that it will act as a lever to secure more prompt settlement of their accounts, and the rate charged may be well below 5 per cent per annum. It is further alleged that a farmer may find his credit cut short with very little notice by his merchant, and at a time inconvenient to the farmer; in these days of keen competition, however, most firms are only too anxious to do business with anyone, provided they think they will in due course be paid; only in extreme cases would they resort to such drastic action as cutting off a man’s supplies of raw materials. Hence the theoretical objec- SHORT-TERM AGRICULTURAL CREDIT. 65 tions raised against merchant credit are most difficult to uphold in practice. Undoubtedly agriculture is very dependent on the goodwill of its allied and ancillary industries. Sound, reputable firms of merchants—often family businesses with the traditions of generations behind them—are usually run by men with a wide knowledge of local agricultural practice; they can, as a rule, form a very shrewd opinion as to whether their customer is a ‘good farmer,’ deserving of every consideration from them, far more easily than the banker. And for that reason many a successful farmer of to-day has cause to be grateful to his merchant, who, at the outset of his farming career, undertook to ‘ see him all right ’ for his foodstuffs, manures, &c. AUCTIONEERs’ AGREEMENTS. Similarly, auctioneers advance considerable sums of money to farmers, particularly in connection with the purchase of store stock—6.9., store cattle required for indoor fattening in the courts, or hoggs for running on the foggage in autumn, or wmtering on turnips. Livestock auctioneers in Scotland readily grant credit facilities to those of their customers who are well known to them as being financially sound ; and any livestock purchased by such a customer is credited to an open account in the customer’s ledger; he is, in effect, ‘carried’ by the livestock auctioneer until the sale of the stock through the fat ring ultimately puts the customer in funds again. It is not unusual for the firm’s invoices to state that “Interest at Bank Overdraft Bates is charged on overdue accounts.” Where, on referring to his customer’s banker, the auctioneer finds that a farmer is not in a very sound financial position, the latter will be asked to complete what is known as an Auctwncer’s Agreement. Under this agreement the livestock covered by it remain in law the property of the auctioneer; they are carried by the farmer at so much per head per week during Winter, or at so much per head for the grazing season in summer; the farmer also may receive 75 per cent of the cost of any purchased foods, but he would be charged with interest on the cost of the cattle at 5 per cent per annum, the balance (either way, it is, unfortunately, necessary to add) being struck when the stock are sold. Such agreements make the legal position of the auctioneer very secure; moreover, the farmer takes all the risks of fluctuations of market prices. A farmer can thus obtain all the credit he needs for the purchase of store stock, although the auctioneers rather discourage the purchase of breeding stock on such terms. Actually, charging interest at current overdraft rates, the auctioneer is thus acting as intermediary between the banker and the farmer; in close contact with VOL. LII. E |
| Title | Transactions of RHASS Volume 1940 - Page 038 |
