10.5 in South Carolina. The 6 per cent legal rate in North Carolina undoubtedly accounts for the low nominal figure reported for that state. Apparently the loan agencies of North Carolina make up in extra charges what they are not permitted to collect as interest.

In Alabama the average nominal rate is 10 per cent and the average total cost 12.4 per cent. Alabama illustrates a section of the country where credit conditions are partly to be explained by the prevalence of the system of advances to farmers by merchants, under which advancing system perhaps threefourths of the farmers of that state still operate.

Oklahoma appears to have the highest interest charge of any state, the average nominal rate being 12.5 per cent and the average total cost 15.1 per cent.

LOANS TO FARMERS ON PERSONAL SECURITY-AVERAGE RATES FOR INTEREST AND FOR TOTAL COST

LOANS TO FARMERS ON PERSONAL SECURITY-AVERAGE RATES FOR INTEREST AND FOR TOTAL COST-Continued

1 Average of estimated total cost, including "discounts, bonuses, commissions, and any other extra charges," as reported by correspondents.

Averages for interest charges and total cost have also been computed for subdivisions within states, following the plan of the bureau of crop estimates of dividing each state into 9 districts. This makes possible a comparison of loan conditions in the different parts of a given state. In Iowa the district averages for total cost for the 3 northern districts, reading from west to east are 7.9, 8.2, and 7.8; for the 3 central districts, 8.2, 7.4, and 7.4; and for the southern districts 8.7, 8.2 and 7.2. It will be seen that in general the lowest averages are found in the eastern districts, and the highest averages in those farthest west. The widest variation is from 7.2 to 8.7 or 1.5 per cent, as between the southeastern and southwestern districts. The higher rates of western Iowa conform to the general upward movement in interest charges as one goes from east to west across the country. The apparent exception noted in the northwestern part of the state, which is tributary to Sioux City, illustrates the tendency toward lower rates in the proximity of financial centers.

In Nebraska, the district averages are as follows: In the North (reading from west to east), 10.2, 10.4, and 8.8; in the

central districts, 10.6, 8.9, and 8.3; and in the South, 10.4, 9.9, and 8.3. Reading the eastern districts together we have (from north to south) 8.8, 8.3 and 8.3, while the western districts show 10.2, 10.6, and 10.4, the widest variation being from 8.3 to 10.6 or 2.3 per cent. Nebraska illustrates forcibly the effect of climatic conditions, especially rainfall, in relation to farming and to credit conditions. In Minnesota there is a variation in the district averages for total cost from 6.9 per cent in the southeastern district to 11.4 per cent in the north central part of the state. Such a comparison indicates clearly the effect of temperature and soil conditions on farming and credit conditions.

SHORT TIME LOANS TO FARMERS ON PERSONAL SECURITY-PER CENT DISTRIBUTION OF REPLIES RECEIVED ACCORDING TO INTEREST RATE REPORTED

SHORT TIME LOANS TO FARMERS ON PERSONAL SECURITY-PER CENT DISTRIBUTION OF REPLIES RECEIVED ACCORDING TO INTEREST RATE REPORTED-Continued

The reports on interest rates for each state have also been distributed so as to show the relative number of reports for each rate as indicated in exhibit 2. This illustrates in another way the degree of variation in interest charges within different states, also showing in each case the prevailing rate.

What Causes Variation in Interest Charges?

Let us now consider the more important factors which cause variations in interest charges, especially as between different localities or regions of the country.

These may be summarized as follows:

1. Climatic and soil conditions.

2. Character of farming and farm population.

3. Distance from financial centers.

4. Character of accessible financial agencies.

The effect of climatic conditions on interest rates is illustrated by the figures already shown for Eastern and Western Nebraska. The contrasts noted within that state apply gen

erally as between the sections of the corn belt having relatively adequate rainfall, and the semi-arid country farther west. The effect of differences in temperature and soil conditions on interest rates is shown in the comparison made between Southeastern and North Central Minnesota.

There is no factor affecting interest charges on farm loans which is of greater importance than the character of farming and farm population. The best credit will always be extended to those farming regions where the farmers are known to meet their obligations regularly and promptly. This means that the advantages will rest with agricultural areas where the character of the population is well established and where a regular farm income is assured from year to year. Preference will therefore be given to areas of a fairly stable as against a shifting or migratory population, since the dependability of borrowers can be most satisfactorily determined through experience and personal connections of long standing. Preference will also be given to areas of diversified agriculture as against onecrop territory, giving the "feed-food-and-cotton farmer" an advantage over the one-crop cotton farmer, and favoring the mixed grain and livestock farmer generally as against the wheat or other single grain crop farmer. Too much emphasis cannot be laid on the character of the farming population and on the importance of approved systems and methods of farming, yielding dependable incomes, as a necessary basis for favorable credit conditions, whether for personal or mortgage credit.

Distance from financial centers clearly affects charges on farm loans. The figures for interest rates show a definite upward tendency as one proceeds outward from any of the important financial centers. How to overcome in some measure the handicap that mere geographical distance thus imposes upon the more remote farming areas of our country is one of the most difficult problems in rural credits.

Another factor of far-reaching importance in its relation to the charges made on farm loans is the character of financial agencies supplying such loans. Let us note especially the part played by existing banks in this connection. Exhibit No. 3 shows the estimated total short time loans supplied to farmers in each state by existing banks; and also the amounts furnished by national banks and by banks other than national.