s
a handicap to the industry in past years.

Credit Necessary from Seed
to Finished Product

In considering the raw cotton and the cloth market it was necessary to
include some account of the financial and banking processes involved in
the various commercial transactions undertaken. It is perhaps advisable,
however, even at the risk of some repetition, to give a quick survey of
the financial and credit aspects of the industry as a whole from the time
the cotton is placed in the ground up to the actual sale to the cutter-up
or the jobber.

The utilization of credit begins, as we have seen, with the very planting
of the crop. Many of the growers, even those who own their farms, are men
of limited means, and are not able to pay for the necessaries of life and
of labor during the long growing season. The country storekeeper,
accordingly, in return for a lien on the crop, allows them credit at his
store, usually charging interest based on the monthly statement of their
ledger accounts. He in turn receives the necessary accommodation for his
own purchases from the local bank, or from the local buyer or factor with
whom he is affiliated. The high prices prevailing during the past few
years have undoubtedly changed to some extent the small grower's
financial position.

Cash for the Grower
From the Local Bank

The larger growers, or the great corporations which let out cotton lands
to renters, usually operate the stores in their villages upon the same
basis, credit being advanced against the renter's share of the growing
crop. Even these large corporations are seldom able to meet the heavy
demands of the growing season without recourse to the credit service of
those to whom they sell their cotton, or to the local banks. The banks,
or buyers, in turn discount at least a proportion of the commercial paper
thus created with their correspondent banks in New York, Boston, or other
financial centers. This credit arrangement, it will be seen, is almost
entirely based on a moral risk, the lien being made upon the growing
cotton which cannot be liquidated until it is grown, picked, and ginned.

When the crop is picked, it is weighed by the merchant before it is
ginned, and the farmer is credited on the merchant's books with the
amount due him, the balance in his favor being given him in cash. His
concern with the cotton is thus ended. In the event that he is able to
finance himself through the season he takes the cotton direc