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University of Wisconsin. College of Agriculture. Dept. of Agricultural Economics / Cooperation principles and practices: the application of cooperation to the assembling, processing and marketing of farm products, to the purchase of farm supplies and consumers' goods and to credit and insurance
([1937])

IV. Cooperative purchasing, insurance and credit associations,   pp. 28-39 PDF (3.4 MB)


Page 36


States. In January, 194 'there were nearly 5,006 farm loan associations In
operation. Lans are made for the purchase of land for agricultural use, tor
refinancing farm mortgag  and for general agricultural purposes. Loans are
made on the basis of 50 per cent or less ot the normaI appraisal value of
land,
plus 20 per cent of the value of the permanent insurable Improvements'thereon.
All loans are repaid op au amortized or gradual repayment plan extending
to
a maximum of forty years. The usual term runs from 20 to 8o years. The in-
terest rates early in 1986 were 4 per cent per annum on'theunpaid part of
the loan.
   If a farm loan is'made through-a national farmb loan association the bor-
rower must purchase stock in such association equal to 6 per cent of the
loan.
This association in turn takes stock in the Federal Land B*nk or an equiv-
alent amount. The stock is retired at par upon full repaynienftof the loan
if the capital of the association is, not impaired.
     The capittl of many of the national farm loan associations has been
im-
 paired during the depression and the loaning status of many of these associa-
 tions is not clear at present. Because of this impairment of capital, numerous
 loans are made direct to individual farmers by the Federal Land Bank rather
 than through these local associations. Stock is then taken in the Federal
 Land Bank.
     Nitensive efforts are being made to reorganize and consolidate many
of
 the farm loan associations and to place them on a more efficient and sounder
 financial basis. If this plan is carried out the number will probably be
reduced
 from 5,000 to about 2,000 associations.
     Production Credit Associstions-On September 30, 1985 approximately 560
 production credit associations were in operation in the United States under
the
 J Federal Farm Credit Administration. Their combined membership on that
 date'was fully 200,000 -and their loans for the fiscal year totaled about
 $157,000,000. These associations are mainly county units composed of farmers
 interested in short term credit for farm production purposes. The lending
 funds are obtained from discounting the farmers' notes with the Federal
In-
 termediate Credit Banks, one of which Is located in St. Paul, Minnesota.
      In order to borrow a farmer must become a member and purchase stock
to
  the extent of at least 5 per cent of his loan. The duration of a loan varies
  according to the production and marketing period of the product for which
  the loan is made, and In no case over two years. For example, crop loans
are
  made for the crop producing season and up to the time of sae of the crop
or
  animal products therefrom. The interest rate has been low for this type
of
  loan-4 per cent per annum since May 1934. The minimum loan is $50. Liens
  on crops, livestock, or other personal property are usually required as
security.
      There is some question whether thes associations, supervised and admin-
   istered by a government agency, should be considered strictly cooperative.
   They are included here because they possess important cooperative character-
   istics, and are operated on plans designed to develop them into member
   financed, controlled, and operated organizations.
       Credit Unlies,-Of the 4,800 credit unions in operation in 41 states
in the
   United States early in 1936, approximately three-fourths were organised
under
36


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