West Needs Understanding of Its Peculiar Financial Needs That Are Not the Needs of the East

M. D. GEDDES November 15 1922


West Needs Understanding of Its Peculiar Financial Needs That Are Not the Needs of the East

M. D. GEDDES November 15 1922



West Needs Understanding of Its Peculiar Financial Needs That Are Not the Needs of the East


PIONEERING in the West is entirely different from the pioneering days of Eastern Canada with which many of us are familiar. The West being largely a prairie country, which easily lends itself to rapid expansion and its period of development coming at the later dates, when mechanical power has made such wonderful strides, it is only natural that, for many years to come, the West will require financial assistance in a very large way. Those of us who are somewhat familiar, either through reading or personal contact, with conditions as they existed in Eastern Canada during pioneering days, know that many of our present flourishing eastern cities at that time, not only required extended loans, but were on the verge of bankruptcy. That day has passed and so too will it pass with the West.

At the outset let me say I have unlimited faith in the West, with its vast stretches of undeveloped black acres that hold within them such boundless reproductive possibilities; its climate and the temper and tenacity of its people. Think also of some of its other natural resources, coal for example. Geologists tell us that it is the world’s supply. This is but one of the many resources of that big portion of our country that we commonly look upon as purely agricultural.

Half the Agricultural Wealth

THE Canadian Bank of Commerce in one of their recent monthly letters gave the estimated gross agricultural wealth of Canada as $6,831,022,000 and of that huge sum the portion allotted to the four Western provinces was $3,238,772,000 or nearly one half.

A Western Canadian port to-day leads the world in grain storage capacity, for the Twin ports of Port Arthur and Fort William have now a capacity of 57,793,000 bushels in 33 elevators. Minneapolis and St. Paul rank second with 65 elevators with a combined capacity of 55,195,000 bushels. Most Easterners have a very hazy conception of the tremendous tonnage furnished by a Western crop. The latest estimate I have seen of the 1922 western wheat crop is placed at over 3/0,000,000 bushels with an estimate exportation surplus' of around 270,000,000 bushels. The oat crop is expected to yield over 410,000,000 bushels and in addition there are the other cereals. Some one fond of figuring tells us that 343,000,000 bushels, which is some 250,000,000 less than the present western wheat crop alone, would require 257,250 (40 ton) freight cars loaded to capacity, and these with the necessary 7,350 engines required to move them, if placed in line would total 2,260 miles or a distance exceeding from Montreal to the Alberta boundary. Then the cereal crop is only one part of the annual wealth produced by Western farmers, for it naturally does not include fodder crops, root crops, live stock, poultry or dairy products. This is one

Editor of the Farm and Rancit Review, Calgary

sidelight on why the West should require financial assistance.

Purchasing Power of Western Commodities

CENSUS figures show that approximately 30% of persons in America are engaged in agriculture to-day as against 87% in 1820. The latest Canadian figuresarenot available, but in 1901 62J^% of our population lived on farms, whereas in 1911 the percentage had dropped to 54F>% which is not a healthy sign in an agricultural country. Farming is not sufficiently attractive and there is a reason, a very valid one, which to many of us is quite alarming.

It is perhaps not generally known to the reading public that figures recently compiled by the Sanford Evans Statistical Bureau, Winnipeg, indicate that the purchasing power of wheat, oats, cattle and hogs, as compared with 1913, is low. The figures show that placing 100 as the average wheat and oat unit of purchase from September 1912 to August 1914, wheat last month had a purchasing power of 68.73 and oats of 78.2. Then take 100 for cattle and hogs as the average purchasing power unit for the calendar year of 1910, 1911 and 1912 and against that cattle in September 1922, had a purchasing value of 53.91 and hogs 86.56. And as if that was not enough, crop conditions in many localities, during recent years, were away below the average.

More Sources of Revenue Needed

'T'HE greatest need of the West, as I see it to-day, is therefore not more credit, but more income and a greater variety of sources of revenue on most Western farms. Canada’s prosperity depends almost entirely on a prosperous agricultural population. When the farmer is handicapped general business ceases to function properly, and at present some markets that should be open to the Western farmer are artificially closed, hence his present day efforts are not recouping him financially as they should or building up our country to 100% of his capacity. The cattle men of the Wést to-day are truly at their wits’ end as figures previously quoted must show.

The combined circumstances prove conclusively that Western farmers, as a body, must of necessity be heavy borrowers, not only at present, but for years to come. The main question is then, are they being taken care of in such a manner that they can carry on, and ultimately do their full part in the upbuilding of their respective communities? No human system is perfect; the millennium is not here, but, by and large, I think truthfully it can be said that through the various channels, banks, rural credits, government farm loan bonds, and mortgage companies, farmers are receiving fairly satisfactory accommodation. The weakest link, in my judgment, is the lack of some form of more generous rural credit,

patterned, perhaps, after the New Zealand plan, Dominion-wide in scope, and operated as economically as possible in this common interest of more profitable agriculture.

The Canadian banking system is conceded to be excellent from the standpoint of meeting the requirements of induttry and bommeree, but it was not framed to meet the peculiar needs of a rapidly expanding agricultural country. On this account for years there was an unfitted gap between the various avenues of credit which the bank furnished and that taken care of by mortgage companies. Western provincial governments, realizing this weakness, have during more recent years, with a commendable measure of success, bridged the gap.

In discussing this phase of the situation with a very prominent eastern banker a few days ago he stated that the banks were alive to this weakness and were making arrangements to recommend a proposed change to the Canada Bank Act, when it comes up for revision next spring, the direct purpose being to provide more extended accommodation for Western farmers. He stated “bankers realize they cannot successfully accommodate some of the legitimate needs of intending live stock buyers, but hope some changes will be made in the Canada Bank Act, next spring that will permit the banks to furnish more extended loans.”

In 1917 the province of Manitoba passed the Rural Credits Act and the Farm Loans Association Act, the former for short term loans and the latter to provide long term or mortgage credit, and through these has loaned over $7,000,000 to Manitoba farmers.

The Province of Saskatchewan has no short term credit system but in 1917 formed the Saskatchewan Farm Loan Board to handle long term credits and this board up to the end of the last year, has made 3,692 loans totalling an outlay of $8,425,010.

Meeting the Need for Larger Credits

THE province of Alberta under the Live Stock Encouragement Act, has made provision whereby five or more farmers may form an association and receive government financial assistance as for the purchase of breedingstock. Alberta also has a co-operative Credit Act which provides short term credit for farmers and in 1917 passed the Alberta Farm Loan Act for long term credits, but the latter has not been put in operation.

Banks Would Improve Their Service

THE following is an extensive quotation from a letter recently received from one of Western Canada’s brainy bankers, a man well endowed with discerning foresight, and who has done and is doing, his level best in the upbuilding of Western agriculture:

“Taking into consideration the source from which the loanable funds of chartered banks are derived, it is a safe statement that they have, on the whole, given the agricultural community of Western Canada somewhat more than a square deal. Loans to ranchers have always appealed to the banks because of the liquid nature of the security to be obtained, with the result that the ranching business has always had all the credit it could properly use. The Loans to a farmer for development of his property and the extension of his operations, if they are to be kept liquid, must be held down to the margin between the out-ofpocket cost of his operations and the cash proceeds of the produce he has for

“It appears to me that most of the criticism levelled at the banks is due to a misunderstanding of this fundamental fact. If it is the case, as it quite probably is, that the farmers would benefit by the provision of some avenue of credit between what the chartered banks can give them and what they can obtain from the

mortage and loan companies, it must be ' provided by some form of loaning ini stitution which obtains its funds on difi ferent terms than do the chartered banks. .

“While the banks make no claims to perfection, it is safe to say that no new country has ever had as good a banking service as has Western Canada Branch banks have been established in almost every second village and hamlet throughout the whole country. No other new land we have ever heard of has been developed with such free credit facilities and such cheap money; in fact, it might have been better had the farmers not been able to get credit so easily and so cheaply. Had it been harder and more costly to borrow,

Í they would have thought more highly of their credit and would not have accumulated the heavy debts which, in many cases, were their undoing. It seems to me i that what the country needs is greater I thrift and less borrowing rather than tinkering by amateur economists with the j powers of institutions which have been bestowed upon them in the light of the experience of years, in order to make credit easier to obtain.”

The following are extracts from letters received from other leading Western bankers who were written regarding their attitude towards the present situation and what their respective policies would be for the future. Each quotation is from a different prominent bank manager.

“We have had numerous past experiI enees of crop misfortunes, both general and local, and our policy invariably has been to stake and restake the deserving farmer, that is, the farmer whose farming is conducted along proper lines, who keeps a rational viewpoint in regard to his obligations, who retains his determination and confidence in ultimate success and who brings himself to the practice of economy in keeping with his financial condition. In such instances we have always been agreeable to a fair disbursement of what receipts are available and have, both in advice and financial assistance, lent the farmer the strongest helping hand that lay in our power. This, in substance, is our attitude in all hardluck cases at the present time.”

“We agree with the Provincial (Sask.) Government’s views that the Banks and other creditors of the farmers should endeavour to form a constructive plan for J the orderly marketing of the crop. Our j policy is to withhold pressure as long as we have reasonable assurance that no advantage will be taken of our leniency.

“The attitude of this Bank towards the borrowing public in the West is naturally one of co-operation. It is hardly necessary to add that the success of the farming industry in the Western Provinces means success for our business also. The debtor who adopts a straightforward and proper policy in regard to his obligations has had no cause to complain of the treatment re¡ ceived from this Bank.”

The next quotation represents two of the larger mortgage and trust companies operating under one heading: “The policy of both companies has been to extend every possible consideration to their individual borrowers so long as the borrower is doing his part—farming along right lines and making an honest effort to meet his payments. The number of cases in ! which our Companies have been obliged ! to foreclose have been very few, and forei closure is taken only as a last resort. It is unquestionably true that we have found that a policy of generous treatment and encouragement has solved more difficult cases than a course of drastic action; and I i think I am safe in saying that a majority of the other lending companies will agree I with this statement.”

The matter is presented in a very crisp way by the Manager of the Saskatchewan branch of a Life Assurance Company of national importance: “The attitude of

our Company with respect to investments in this Province is that if our borrowers are in a position to meet their payments we expect them to do so, but if they are in

financial difficulty we are always open to consider each case on its individual merits.”

The Outlook for the Future

TT WILL be noticed that the foregoing all deal with the present situation. Now touching upon the future, I am quoting from the same Life Assurance Company: “Our Company is steadily investing in first mortgages and I believe this policy will be continued unless this continual suggestion of a moratorium should materialize, which would undoubtedly mean a withdrawal from this field. We have invested in this Province during the past year quite as much as in any previous year.”

Here is another view along the same lines: “With regard to the question of further lending, we, in common with many other companies, have been lending very little for some months past, largely owing to the fact that funds were scarce, and comparatively few desirable applications were being received.

“We confidently expect, however, to reinvest the bulk of the funds received from our borrowers this fall—in fact if more favorable conditions existed we would probably get in further funds from our other Branches.”

And still another of the same nature: “In so far as future credit facilities are concerned, our policy is to accommodate our customers wherever possible, consistent with safety.”

Still another bank quotes: “In regard to future credit facilities, we may say that the confidence we have always shown in the West is as firm as ever and that our policy of the past will be maintained. We are prepared to extend the fullest measure of credit to our customers that can be shown to be necessary and is within the bounds of safety.”

Conditions are Heartening

THE following is an extract from Hon.

F. M. Black, now Provincial Treasurer of the United Grain Growers. The Hon. Mr. Black has lived for many years in Western Canada and during that time held numerous important financial positions, so is well prepared to advance a sane and important view. He says: “I don’t consider conditions disheartening; on the contrary I think it is quite heartening. This year’s crop ought to pay up the back debts of our farmers, and quite likely it will go a long way in the same direction with the other two provinces.”

It is particularly noteworthy that the opinions held are practically unanimous.

It has been my privilege to discuss the outlook of the West with many of our most prominent bankers, and I have yet to hear one of them, express any statement other than faith in the ultimate outcome. They have proven their faith by opening so many branches and buildings, such palatial offices in each of the larger western centers. And the wisdom of their faith is being justified in increased western business. The banking business has made steady growth in each of the four western provinces, having more than doubled in six years. Not having the 1921 figures available, I am quoting 1915 and 1920.

1915 1920

Manitoba $1,557,815,247 $3,057,452,633

Sask. 188,526,217 464,296,936

Alberta 308,837,076 805,818,885

B. C. 371,713,657 1,061,107,104

$2,426,892,197 $5,338,675,563

At present practically the entire world is suffering from lack of buying power together with lack of credit and loss of credit. This reflects heavily on the west, as it is dependent on other countries buying its large exportation surplus.

THE West needs financial assistance and needs it badly, and if part of it can be furnished in forms other than direct

cash so much the better. Cheaper freight rates, wider markets, well selected immigration, improved labor conditions, and well located and sanely operated suitable industries so as to build up a larger home market and save some of the long and costly freight hauls, which frequently take double toll from Western producers (in the form of taking raw material to far away markets and bringing back the finished product) it would go a long way to lessen the borrowing needs of the West.

I know the views of western farmers and feel I can safely say, with a few exceptions, they strongly endorse the expression of Sir George Paish, British economist, when he recently said: “Taking down the tariff barriers by nations and other trade restrictions would be the first steps necessary to a restoration of foreign exchange. It is to urge that these trade barriers be lowered and that the commerce of the world be restored to normal that I have come to this country at this time. It is the barriers that have dammed the currents of commerce. Once they are removed the peace and prosperity of the world will be again resumed.”


Question—What is your opinion of the Small Investments Ltd? It is a good investment?—G.L.G., tKenora, Ont.

Answer—The Small Investments

Limited of which Gideon Grant, K.C., is president and Tom Dalton manager, is a private fiscal company. The stock cannot be offered for public subscription and was created for the purpose of selling on commission the shares of the Realty Mortgages Limited, which is the client company. As the Small Investments is a private concern and a commission house without assets, we would not recommend the purchase of its stock as an investment.

Question:—Will you please give me the earnings of the Lake Shore mine for the first six months of the fiscal year ending May 31st? I have been advised to buy and these figures will help me to form an opinion.—D.L.H., Timmins, Ontario.

'Answer—During the first six months of the fiscal year ending May 31st. Lake Shore earned profit of $169,167, as compared with $51,723 for the entire period ending November 30th, 1921. The official report shows a debit balance of $90,293 handed over from the previous year and shows a credit balance as of June 1st of $78,878. The company’s cash amounts to $315,890, while fixed assets are placed at $415,569 as compared with $228,134 at the end of November

Question—During the last four weeks International Paper common has advanced to $51.75. As I am holding some of the stock and could sell at a profit, would you please advise me?—M.D.H., North Bay, Ontario.

Answer—The sharp rise 'in International Paper common to the present price is apparently based on the fact that this company is now producing slightly over a thousand tons of newsprint daily. This is the highest rate so far this year and the fact that the product has just been advanced $5 a ton to $75.00 a ton, has given the market price a slight boost. This indicates that the Corporation is in a position to show better profits. Last year it reported a deficit of nearly $9,000,000 as compared with a profit of over $10,000,000, equal to $52.00 a share of outstanding common stock in 1920. During the past ten years this company have averaged $15.74 a share annually in earnings applicable to the common, which has a book value of about $219.00 a share. We hesitate to give you an opinion regarding holding or selling the stock, it depends so much on your own personal situation. It is generally thought that the present price is good and if you can get off with a profit perhaps it would he advisable unless you are ready to take the chance of holding on for a higher price.