The twelve Federal Farm Land Banks are located in the following cities: Springfield, Mass.; Baltimore, Md.; Columbia, S. C.; Louisville, Ky.; New Orleans, La.; St. Louis, Mo.; St. Paul, Minn.; Omaha, Nebr.; Wichita, Kans.; Houston, Tex.; Berkeley, Calif.; Spokane, Wash.

There was also a provision in the Federal Farm Loan Act permitting joint-stock mortgage banks, such as were described in a previous paragraph, to come in under the Federal Farm Loan system by submitting to its general rules and regulations. A large number of such mortgage banks have taken advantage of this provision, there being twenty-five on February 15, 1921, with capital stock of $7,966,000, with bond issues aggregating something over $76,000,000, and with loans to farmers aggregating almost $78,000,000.

On December 31, 1920, the total capital stock of the twelve Farm Land Banks amounted to $24,591,515, held as follows: by the United States government, $6,832,680; by National Farm Loan Associations, $17,663,725; by borrowers through agents, $79,230; by individual subscribers, $15,880.

Total amounts loaned by the twelve Federal Land Banks up to November 30, 1920, were as follows:

In order to assure a sufficient amount of capital stock it was provided that in case the total $750,000 of capital stock

of any Federal Farm Land Bank should not have been subscribed within thirty days after the opening of the books, it should become the duty of the Secretary of the Treasury "to subscribe the balance thereof on behalf of the United States." Still further to assure the Farm Land Banks a working capital, in case the public should be slow to invest in the Farm Land Bonds, amendments were passed (January 18, 1918, and May 26, 1920) authorizing the Secretary of the Treasury to purchase $200,000,000 of such bonds during the years 1918, 1919, 1920, and 1921. On December 31, 1920, the United States government held $6,832,680 of the capital stock of the Farm Land Banks. On the same date the Treasury held their bonds to the amount of $182,235,000. The total amount of the bonds authorized and issued by them was $333,784,500.

Under the operation of this act and its amendments such moneys as are secured from the sale of bonds, either to the Secretary of the Treasury or to the investing public, are loaned by the Farm Land Bank to Farm Loan Associations within its district in return for mortgages given by individual farmers to these Farm Loan Associations. The course of the money is, therefore, as follows: first, from the investor to the Farm Land Bank in exchange for bonds; second, from the Farm Land Bank to the Farm Loan Association in exchange for a batch of mortgages; third, from the Farm Loan Association to the individual farmer in exchange for an individual mortgage. The securities, however, proceed in the opposite direction: first, a mortgage is given by the individual farmer to his local Farm Loan Association in exchange for money; second, this and other similar mortgages are transferred from the Farm Loan Association to the Farm Land Bank in exchange for money; third, the Farm Land Bank deposits these mortgages under the direction of the Federal Farm Loan Board and, on the basis of these as security, issues its own bonds and sells them to the investors for money.

Exemption of Farm Land Bonds from taxation. It was provided in the Farm Loan Act that the bonds of the Farm Land

Banks were to be exempt from taxation. The purpose of this exemption was to make such bonds so attractive to the general investor as to compensate for a low rate of interest. This low rate of interest on the bonds would then enable the Farm Land Banks to accept farm mortgage notes, paying a low rate of interest, and thus the farmer would be able to borrow his money at a lower rate than would be necessary if the Farm Land Bonds were subject to taxation. Those issued prior to May 1, 1920, paid 4 per cent. Subsequent issues pay 5 per cent.

This provision was bitterly attacked on the ground that it was class legislation, or discrimination in favor of farmers as against other classes. The matter was under litigation for many months, but finally, in February, 1921, the Supreme Court decided in favor of the constitutionality of the act. Pending this decision, the Farm Land Banks had been unable to function. The effect of this decision will undoubtedly be to release them and permit such a development as was anticipated by the framers of the plan. It is the belief of the supporters of the plan that the Farm Land Bonds provided for under this act will prove a popular form of investment and become, in fact, one of the leading securities on the investors' markets of the country.

CHAPTER XXIX

MARKETING

One very important topic under the general subject of exchange is that of marketing. This has to do with the actual process of finding buyers for that which has been produced, or, in more abstract terms, with the bridging of the gap which separates producer and consumer.

Essentials of successful marketing. There are four essentials to the easy and successful marketing of any commodity. In the first place, it must be of good quality; that is, of the quality which is desired by the buyers. In the second place, the product must be so graded or standardized that the buyer can purchase it without inspection. The buyer of a farm product, for example, who must inspect it in order to test its quality, must necessarily waste a great deal of time and energy in the process. Time and energy are expensive. In order to save his time and do a large business at the minimum labor cost, he must insist on buying such products as have been graded and standardized so that he can order by grade and without inspection. In the third place, the product must be in some way stamped or branded, and the stamp or brand must be safeguarded as carefully as a banker would safeguard his signature or the government its seal. Any individual or association which permits inferior or ungraded products to go under its stamp or brand must eventually suffer loss, for the reputation of the stamp or brand will be destroyed, and buyers will thereafter place no confidence in it. In the fourth place, the public must be educated as to the meaning of the grades and standards and the stamps, brands, or trade-marks, in order that it may be aware of the desirability of buying without inspection and of the possibilities in that direction.

Unless the producer himself will undertake to do these four things the consumer will never consent to buy any large proportion of the product directly. The consumer will insist on saving his time, even at the loss of some money in the way of higher prices. The producer will not be able to get the advantage of these higher prices, and there will be a considerable spread between the price which the producer gets and that which the consumer pays. This spread will be absorbed by those middlemen who buy the ungraded, nondescript products directly from the producers, in a form in which the consumers do not generally want them, and then put these products into such forms as will satisfy the consumers.

Special difficulties in marketing farm produce. The marketing of farm products is the least organized and probably the least efficient part of our whole marketing system. This is probably inherent in the very nature of agricultural production. From the standpoint of production the advantages appear to be very definitely on the side of the small producer. A small farmer, being able to produce more economically than the large farmer, continues to hold the field. But he is at a peculiar disadvantage in the marketing of his own products. Even if he were able to grade and standardize his products, the difficulty of educating the public to the meaning of his brand would be insuperable. He has so little to sell that the cost of advertising would eat up the profits. To put it in another way, the public would soon become bewildered if every one of the millions of farmers of this country tried to create a special market for his own individual products.

From the standpoint of marketing, the bonanza farmer has a great advantage. In some cases (that is, in the production of certain agricultural specialties, such as fancy fruits and vegetables, breeding-animals, and race horses) this advantage in marketing is so great as to more than balance the disadvantage in production. This is probably due to the nature of an agricultural specialty. The great staple crops, on which the world must in the main be fed, are not so difficult to market as are