The Young Farmer: Some Things He Should Know. Thomas Forsyth Hunt
German came to this country and settled in New Jersey, where he established a large orchard. In course of time his two sons grew into manhood. While, of course, requiring plenty of laborers, the orchardist did not need the sons in the management of his farm. He, therefore, established one of these sons in the commission business in Philadelphia, thus, at least, keeping the profits on the sale of the products of his orchard in the family. He also needed cold storage for his fruit. The other son started a cold storage plant, which plays an important part in the profitable management of the orchard. Thus both sons have independent employment requiring managerial ability and the orchard is much more profitable than it otherwise would be.
Our land laws, our traditions and our practices are based upon the idea that a farm is to provide activity and support for but one family. In order, therefore, that the son may marry and begin to develop his life in his own way, it is essential to reorganize in some manner the method of managing the farm or to enlarge or, perhaps, specialize its activities. This may be accomplished on a simple partnership basis, or it may be in some such line as outlined in the illustrations which have been given. In other occupations such co-operative effort is the rule rather than the exception. That it is more difficult to effect satisfactory arrangements in farming must be conceded, else they would be more common. Doubtless it will often tax the ingenuity of father and son to devise the plans best suited to meet their particular problem.
There still remains to consider another form of business relation as applied to farming which has become almost universal in trade and transportation. The following incident may illustrate and emphasize the problem better than abstract discussion: One day a man walked into an office and stated that a friend had a half million dollars to invest in farming, provided that he could be convinced that the money would be invested profitably.
Does your friend desire to buy land in any particular locality?
Yes, replied the promoter, he wishes to buy land near——. He has some sentiment about it. He was born in that neighborhood.
Well, that is a rather bad beginning. Farming on sentiment is dangerous, especially when the sentiment is in no way related to the business.
The facts were that the region indicated was recognized to be one of the most unpromising sections of the state.
If you undertake to invest a half million dollars in one neighborhood, continued the adviser, you will pretty certainly fail to earn interest on your investment.
Why? inquired the promoter.
Before you could possibly buy any considerable part of the land the owners of the farms you desire to buy would have doubled or perhaps trebled the price asked for their holdings. It is one thing to earn interest on an investment of $30 an acre and quite another to earn an equal per cent on $60 or $90 an acre.
In the second place, farmers are content to accept less per cent on their capital than they would if it was loaned at interest, because the farm furnishes a home as well as a business. When you buy up all these farms and convert them into a single enterprise you will destroy their home value. You cannot hope to compete with the man, who, because his farm furnishes him a home, is content with an otherwise small return on his investment.
There were other reasons, of course, why such an enterprise would fail, which the speaker did not stop to explain.
You are mistaken, challenged the promoter. I intend to meet both your objections. My plan is to form a corporation and issue both preferred and common stock. The preferred stock shall bear 5% and that will belong to my friend who furnishes the money. I will retain the common stock. Five per cent is all the owner of the money is entitled to, while if the business returns more than that amount, it will be due to my management. I, and those associated with me, are entitled to all that is made above five per cent. By retaining the common stock the surplus income will come to us. Neither will I destroy the home value, because I shall associate the former owners with me in the conduct of the estate and may give them some of the common stock, so that they will be interested with me in making a profitable return. If they wish to keep their money invested in the farm, they will be given preferred stock in place of cash for their farms.
It is needless to say that the promoter never convinced his friend that he could successfully invest for him a half million dollars along the lines indicated. Nevertheless the corporate plan is not without merit. For example, if a father should incorporate his farm, he could provide for the inheritance of the preferred stock, among the heirs, as he desires. He could give to the son who operates the farm all the common stock, together with what preferred stock he is entitled or the father may desire him to have. The common stock would provide the means by which the income from the farm, which was due to the sons skill and management, might go to him. As time went on the son could acquire additional preferred stock from the father or other heirs, or he could invest his earnings elsewhere, as might seem most expedient. On the death of the parents, the preferred stock would be distributed as inheritance or the will provided without in any way interfering with the continuity of the farm enterprise. If at any time the son desired to discontinue the management of the farm, all he would need to do would be to dispose of his interest in the common stock at whatever he might be able to secure from the man who succeeded to its management. He could sell or retain his preferred stock.
Farming is the one remaining great industry that has not been organized so that a single enterprise may have a continuous existence. A corporation never dies, but at least three generations of men occupy the farms of the United States each century.
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